UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4646
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AXP CALIFORNIA TAX-EXEMPT TRUST
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(Exact name of registrant as specified in charter)
50606 AXP Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 6/30
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Date of reporting period: 6/30
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AXP(R) California Tax-Exempt Fund
AXP(R) Massachusetts Tax-Exempt Fund
AXP(R) Michigan Tax-Exempt Fund
AXP(R) Minnesota Tax-Exempt Fund
AXP(R) New York Tax-Exempt Fund
AXP(R) Ohio Tax-Exempt Fund
Annual Report
for the Period Ended
[pic] June 30, 2005
Each Fund seeks to provide
shareholders with a high level
of income generally exempt
from federal income tax as
well as from the respective
state and local income tax.
(This annual report is intended only for the information of shareholders or
those who have received the offering prospectus of the Funds, which contains
information about the Fund's objective, investment strategy, risks, sales
charges, fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
Table of Contents
Fund Snapshot 4-9
AXP California Tax-Exempt Fund 4
AXP Massachusetts Tax-Exempt Fund 5
AXP Michigan Tax-Exempt Fund 6
AXP Minnesota Tax-Exempt Fund 7
AXP New York Tax-Exempt Fund 8
AXP Ohio Tax-Exempt Fund 9
Performance Summary 10-15
AXP California Tax-Exempt Fund 10
AXP Massachusetts Tax-Exempt Fund 11
AXP Michigan Tax-Exempt Fund 12
AXP Minnesota Tax-Exempt Fund 13
AXP New York Tax-Exempt Fund 14
AXP Ohio Tax-Exempt Fund 15
Questions & Answers
with Portfolio Management 16
The Fund's Long-term Performance 24-35
AXP California Tax-Exempt Fund 24
AXP Massachusetts Tax-Exempt Fund 26
AXP Michigan Tax-Exempt Fund 28
AXP Minnesota Tax-Exempt Fund 30
AXP New York Tax-Exempt Fund 32
AXP Ohio Tax-Exempt Fund 34
Investments in Securities 36-74
AXP California Tax-Exempt Fund 36
AXP Massachusetts Tax-Exempt Fund 44
AXP Michigan Tax-Exempt Fund 49
AXP Minnesota Tax-Exempt Fund 54
AXP New York Tax-Exempt Fund 64
AXP Ohio Tax-Exempt Fund 70
Financial Statements 75
Notes to Financial Statements 82
Report of Independent Registered
Public Accounting Firm 112
Federal Income Tax Information 113
Fund Expense Examples 126
Board Members and Officers 133
Approval of Investment Management
Services Agreement 136
Proxy Voting 140
[DALBAR LOGO]
American Express(R) Funds' reports to shareholders have been awarded the
Communications Seal from Dalbar Inc., an independent financial services
research firm. The Seal recognizes communications demonstrating a level of
excellence in the industry.
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2 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company (American Express) announced plans
to pursue a spin off to American Express shareholders of its American
Express Financial Advisors division. The separation from American Express is
expected to be completed on or after Sept. 30, 2005, subject to certain
regulatory and other approvals, including final approval by the board of
directors of American Express. On Aug. 1, 2005, American Express Financial
Corporation and several of its companies, through which the products and
services of the American Express Financial Advisors division are offered,
changed their names in anticipation of their separation from American
Express. American Express Financial Corporation, which currently provides
investment management services for the American Express Funds, changed its
name to Ameriprise Financial, Inc. (Ameriprise Financial), the parent
company of the Ameriprise Financial family of companies. American Express
Financial Advisors Inc., which is currently the distributor of the American
Express Funds, changed its name to Ameriprise Financial Services, Inc., a
wholly owned subsidiary of Ameriprise Financial. Ameriprise Financial and
American Express will be independent companies, with separate public
ownership, boards of directors and management. No changes in the management
or operations of the funds or in the services provided to the funds are
anticipated in connection with the reorganization.
After the expected separation from American Express, Ameriprise Financial
and its subsidiaries will no longer be affiliated with American Express.
As part of a corporate reorganization, Ameriprise Financial will be
introducing the RiverSource(SM) brand which, with the approval of the
American Express Funds' Boards of Directors, will replace "American Express"
as the name of the fund family. The RiverSource brand will also be used for
certain subsidiaries of Ameriprise Financial that provide services to the
funds. The transition to the RiverSource name, which began on Aug. 1, 2005,
will be substantially completed in the fourth quarter 2005, and will be
subsequently communicated to shareholders.
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3 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP California Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For California investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective
state and local taxes.
Inception dates by class
A: 8/18/86 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: ICALX B: ACABX C: --
Total net assets $208.9 million
Number of holdings 107
Effective maturity(1) 15.8 years
Effective duration(2) 6.8 years
Weighted average bond rating(3) AA
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 57.7%
AA bonds 9.6
A bonds 20.7
BBB bonds 8.6
Non-investment grade bonds 3.4
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 4.4% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.74% B: 2.13% C: 2.12%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 10
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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4 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP Massachusetts Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For Massachusetts investors, this Fund seeks to provide a high level of
income generally exempt from federal income tax as well as from respective
state and local tax.
Inception dates by class
A: 7/2/87 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: IDMAX B: AXMBX C: --
Total net assets $75.0 million
Number of holdings 52
Effective maturity(1) 12.9 years
Effective duration(2) 6.6 years
Weighted average bond rating(3) AA+
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 69.7%
AA bonds 23.1
A bonds 1.5
BBB bonds 4.2
Non-investment grade bonds 1.5
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 2.8% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.69% B: 2.07% C: 2.08%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 11
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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5 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP Michigan Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For Michigan investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective
state and local tax.
Inception dates by class
A: 7/2/87 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: INMIX B: -- C: --
Total net assets $60.6 million
Number of holdings 60
Effective maturity(1) 12.9 years
Effective duration(2) 6.3 years
Weighted average bond rating(3) AA+
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 61.6%
AA bonds 27.4
A bonds 7.9
BBB bonds 2.2
Non-investment grade bonds 0.9
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 2.4% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.73% B: 2.11% C: 2.11%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 12
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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6 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP Minnesota Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For Minnesota investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective
state and local tax.
Inception dates by class
A: 8/18/86 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: IMNTX B: IDSMX C: --
Total net assets $399.1 million
Number of holdings 147
Effective maturity(1) 12.7 years
Effective duration(2) 6.5 years
Weighted average bond rating(3) AA+
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 67.1%
AA bonds 17.0
A bonds 5.5
BBB bonds 3.6
Non-investment grade bonds 6.8
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 6.8% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.85% B: 2.24% C: 2.24%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 13
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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7 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP New York Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For New York investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective
state and local taxes.
Inception dates by class
A: 8/18/86 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: INYKX B: -- C: --
Total net assets $84.9 million
Number of holdings 72
Effective maturity(1) 14.7 years
Effective duration(2) 6.8 years
Weighted average bond rating(3) AA
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 55.0%
AA bonds 24.3
A bonds 13.9
BBB bonds 2.9
Non-investment grade bonds 3.9
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 3.8% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.81% B: 2.20% C: 2.20%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 14
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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8 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Snapshot AT JUNE 30, 2005
AXP Ohio Tax-Exempt Fund
PORTFOLIO MANAGER <
Portfolio manager Since Years in industry
David Kerwin, CFA* 8/04 20
* The Fund is managed by a team of portfolio managers led by David Kerwin.
FUND OBJECTIVE <
For Ohio investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective
state and local taxes.
Inception dates by class
A: 7/2/87 B: 3/20/95 C: 6/26/00
Ticker symbols by class
A: IOHIX B: -- C: --
Total net assets $61.1 million
Number of holdings 58
Effective maturity(1) 12.9 years
Effective duration(2) 6.7 years
Weighted average bond rating(3) AA+
(1) Effective maturity measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) Effective duration measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) Weighted average bond rating represents the average credit quality of
the underlying bonds in the portfolio.
STYLE MATRIX <
Shading within the style matrix indicates areas in which the Fund generally
invests.
DURATION
SHORT INT. LONG
X X HIGH
X X MEDIUM QUALITY
LOW
CREDIT QUALITY SUMMARY <
Percentage of bond portfolio assets
AAA bonds 61.9%
AA bonds 31.8
A bonds 3.8
BBB bonds 2.3
Non-investment grade bonds 0.2
Individual security ratings are based on information from Standard & Poor's
Corp. and Moody's Investors Service. If a rating is unavailable, the rating
is determined through an internal analysis, if appropriate. 0.4% of the
portfolio rating above was determined through internal analysis.
SEC YIELDS <
At June 30, 2005 by class
A: 2.59% B: 1.97% C: 1.97%
The Securities and Exchange Commission (SEC) yield is calculated by dividing
anticipated net investment income during a 31-day period by the public
offering price (POP) per share on the last day of the period, and converting
the results to yearly figures. See Average Annual Total Returns on page 15
for additional performance information.
Certain income may be subject to the alternative minimum tax or state or
local tax.
Fund holdings are subject to change.
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9 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP California Tax-Exempt Fund
[bar chart]
AXP CALIFORNIA TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+8.53% +9.55% +9.21% +8.24% +8.91%
+8.53% = AXP California Tax-Exempt Fund Class A (excluding sales charge)
+9.55% = Lehman Brothers California 2 Plus Year Municipal Bond Index (unmanaged)
+9.21% = Lehman Brothers California Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+8.91% = Lipper California Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (8/18/86) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +8.53% +3.37% +7.72% +2.72% +7.71% +6.71%
3 years +5.28% +3.59% +4.49% +3.26% +4.48% +4.48%
5 years +5.89% +4.87% +5.10% +4.77% +5.14% +5.14%
10 years +5.49% +4.98% +4.70% +4.70% N/A N/A
Since inception +6.10% +5.83% +4.63% +4.63% +5.19% +5.19%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
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10 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP Massachusetts Tax-Exempt Fund
[bar chart]
AXP MASSACHUSETTS TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+7.42% +8.52% +7.94% +8.24% +7.97%
+7.42% = AXP Massachusetts Tax-Exempt Fund Class A (excluding sales charge)
+8.52% = Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond Index
(unmanaged)
+7.94% = Lehman Brothers Massachusetts Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+7.97% = Lipper Massachusetts Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (7/2/87) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +7.42% +2.33% +6.61% +1.61% +6.41% +5.41%
3 years +4.58% +2.90% +3.79% +2.54% +3.73% +3.73%
5 years +5.65% +4.63% +4.86% +4.53% +4.83% +4.83%
10 years +5.18% +4.67% +4.39% +4.39% N/A N/A
Since inception +6.04% +5.75% +4.36% +4.36% +4.88% +4.88%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
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11 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP Michigan Tax-Exempt Fund
[bar chart]
AXP MICHIGAN TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+6.80% +7.72% +8.24% +7.19%
+6.80% = AXP Michigan Tax-Exempt Fund Class A (excluding sales charge)
+7.72% = Lehman Brothers Michigan Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+7.19% = Lipper Michigan Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (7/2/87) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +6.80% +1.72% +5.99% +0.99% +5.99% +4.99%
3 years +4.94% +3.25% +4.15% +2.90% +4.14% +4.14%
5 years +5.90% +4.87% +5.10% +4.77% +5.09% +5.09%
10 years +5.23% +4.72% +4.44% +4.44% N/A N/A
Since inception +6.18% +5.90% +4.38% +4.38% +5.13% +5.13%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
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12 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP Minnesota Tax-Exempt Fund
[bar chart]
AXP MINNESOTA TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+6.73% +7.91% +7.42% +8.24% +7.39%
+6.73% = AXP Minnesota Tax-Exempt Fund Class A (excluding sales charge)
+7.91% = Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index
(unmanaged)
+7.42% = Lehman Brothers Minnesota Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+7.39% = Lipper Minnesota Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (8/18/86) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +6.73% +1.67% +5.94% +0.94% +5.94% +4.94%
3 years +4.89% +3.21% +4.11% +2.86% +4.10% +4.10%
5 years +5.86% +4.84% +5.07% +4.74% +5.07% +5.07%
10 years +5.44% +4.93% +4.65% +4.65% N/A N/A
Since inception +6.19% +5.92% +4.61% +4.61% +5.12% +5.12%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
- --------------------------------------------------------------------------------
13 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP New York Tax-Exempt Fund
[bar chart]
AXP NEW YORK TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+7.04% +9.07% +7.92% +8.24% +7.84%
+7.04% = AXP New York Tax-Exempt Fund Class A (excluding sales charge)
+9.07% = Lehman Brothers New York 4 Plus Year Municipal Bond Index (unmanaged)
+7.92% = Lehman Brothers New York Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+7.84% = Lipper New York Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (8/18/86) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +7.04% +1.96% +6.23% +1.23% +6.23% +5.23%
3 years +5.08% +3.40% +4.29% +3.05% +4.29% +4.29%
5 years +5.95% +4.92% +5.15% +4.82% +5.15% +5.15%
10 years +5.35% +4.84% +4.56% +4.56% N/A N/A
Since inception +5.96% +5.69% +4.46% +4.46% +5.20% +5.20%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
- --------------------------------------------------------------------------------
14 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Performance Summary
AXP Ohio Tax-Exempt Fund
[bar chart]
AXP OHIO TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the year ended June 30, 2005
+6.90% +8.64% +7.59% +8.24% +7.75%
+6.90% = AXP Ohio Tax-Exempt Fund Class A (excluding sales charge)
+8.64% = Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index
(unmanaged)
+7.59% = Lehman Brothers Ohio Municipal Bond Index (unmanaged)
+8.24% = Lehman Brothers Municipal Bond Index (unmanaged)
+7.75% = Lipper Ohio Municipal Debt Funds Index
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by calling
(800) 862-7919 or visiting www.ameriprise.com.
The 4.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
AVERAGE ANNUAL TOTAL RETURNS <
Class A Class B Class C
(Inception dates) (7/2/87) (3/20/95) (6/26/00)
NAV(1) POP(2) NAV(1) After CDSC(3) NAV(1) After CDSC(4)
at June 30, 2005
1 year +6.90% +1.83% +6.10% +1.10% +6.10% +5.10%
3 years +4.38% +2.69% +3.65% +2.39% +3.58% +3.58%
5 years +5.38% +4.36% +4.59% +4.25% +4.57% +4.57%
10 years +5.12% +4.61% +4.33% +4.33% N/A N/A
Since inception +6.01% +5.72% +4.26% +4.26% +4.62% +4.62%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 4.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
- --------------------------------------------------------------------------------
15 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager David Kerwin discusses the Funds' positioning and
results for the fiscal year. On Aug. 20, 2004, Mr. Kerwin assumed leadership
of the Funds' portfolio management team.
Q: How did the AXP State Tax-Exempt Funds perform for the fiscal year?
A: All Fund returns are for Class A shares, excluding sales charge. All
returns are for the 12 months ended June 30, 2005.
o AXP California Tax-Exempt Fund gained 8.53%, compared to the Lipper
California Municipal Debt Funds Index, which rose 8.91%. The Lehman
Brothers California 2 Plus Year Municipal Bond Index returned 9.55%.
The Lehman Brothers California Municipal Bond Index returned 9.21%
and the Lehman Brothers Municipal Bond Index returned 8.24% for the
same period.
o AXP Massachusetts Tax-Exempt Fund rose 7.42%, compared to the Lipper
Massachusetts Municipal Debt Funds Index, which also rose 7.97%. The
Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond
Index returned 8.52%. The Lehman Brothers Massachusetts Municipal
Bond Index returned 7.94% and the Lehman Brothers Municipal Bond
Index returned 8.24% for the same period.
o AXP Michigan Tax-Exempt Fund gained 6.80%, compared to the Lipper
Michigan Municipal Debt Funds Index, which produced a total return of
7.19%. The Lehman Brothers Michigan Municipal Bond Index and the
Lehman Brothers Municipal Bond Index returned 7.72% and 8.24%,
respectively, for the same period.
o AXP Minnesota Tax-Exempt Fund increased 6.73%, compared to the Lipper
Minnesota Municipal Debt Funds Index, which gained 7.39%. The Lehman
Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index returned
7.91%. The Lehman Brothers Minnesota Municipal Bond Index returned
7.42% and the Lehman Brothers Municipal Bond Index returned 8.24% for
the same period.
o AXP New York Tax-Exempt Fund advanced 7.04%, while the Lipper New
York Municipal Debt Funds Index increased 7.84%. The Lehman Brothers
New York 4 Plus Year Municipal Bond Index returned 9.07%. The Lehman
Brothers New York Municipal Bond Index returned 7.92% and the Lehman
Brothers Municipal Bond Index returned 8.24% for the same period.
- --------------------------------------------------------------------------------
16 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
[BEGIN CALLOUT QUOTE]> The Funds underperformed due primarily to their strong
exposure to the intermediate segment of the municipal yield curve.[END CALLOUT
QUOTE]
o AXP Ohio Tax-Exempt Fund rose 6.90%, while the Lipper Ohio Municipal
Debt Funds Index gained 7.75%. The Lehman Brothers Ohio 4 Plus Year
Enhanced Municipal Bond Index returned 8.64%. The Lehman Brothers
Ohio Municipal Bond Index returned 7.59% and the Lehman Brothers
Municipal Bond Index returned 8.24% for the same period.
Q: What factors most significantly affected performance during the annual
period?
A: Overall, the tax-exempt bond market had a relatively strong period,
despite seven additional interest rate hikes by the Federal Reserve
Board (the Fed) during the 12 months, following the initial rate hike of
this tightening cycle made on June 30, 2004. The tax-exempt bond market,
as measured by the Lehman Brothers Municipal Bond Index(1), provided an
8.24% return for the 12 months ended June 30, 2005, significantly
outperforming the taxable bond market, as measured by the Lehman
Brothers Aggregate Bond Index(2), which provided a 6.80% return for the
annual period.
The Funds underperformed due primarily to their strong exposure to the
intermediate segment of the municipal yield curve. As in the taxable
bond market, the municipal yield curve flattened, as the difference in
yields between short- and long-term securities narrowed. This flattening
of the yield curve had a greater positive price impact on the
longer-term bonds than on intermediate bonds.
(1) The Lehman Brothers Municipal Bond Index, an unmanaged index, is made up
of a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(2) The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up
of a representative list of government, corporate, asset-backed and
mortgage-backed securities. The index is frequently used as a general
measure of bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
- --------------------------------------------------------------------------------
17 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
Also detracting from performance was each Fund's duration positioning.
We had somewhat extended the duration of most of the Funds during the
period, but still maintained a duration shorter than that of their
respective indices in anticipation of rising rates. Instead, rates
across the municipal yield curve actually fell.
AXP California Tax-Exempt Fund and AXP New York Tax-Exempt Fund were
also hurt by their modest positions in non-enhanced municipal tobacco
bonds. While we had added exposure to this sector toward the end of 2004
and added to it through the period, non-enhanced municipal tobacco bonds
were among the best-performing sectors. Another factor detracting from
these two Funds' performance, as well as that of AXP Ohio Tax-Exempt
Fund, was a comparatively lower exposure to bonds rated BBB, which
overall outperformed higher quality bonds during the fiscal year.
On the positive side, each Fund's reduced exposure to shorter-term bonds
(i.e., five years and under) and its exposure mix on the front-end of
the yield curve helped returns. For example, we selectively added
"mandatory put bonds" and high-quality zero coupon bonds as substitutes
for the short-term bonds in order to increase yield without increasing
risk. Mandatory put bonds, sometimes known as mandatory tenders, contain
a provision that a holder of the security surrender the security to the
issuer or its agent for purchase, usually at par, at some date or dates
prior to the final stated maturity. Zero coupon municipal bonds are
securities that make no periodic interest payments but are sold at a
discount from their face value and mature at par. The accretion of the
bonds' price from a discount to par is usually considered as tax-exempt
income for the Funds.
The Funds were further buoyed by positions in select non-investment
grade or non-rated bonds. Also boosting the respective returns of each
of the Funds, with the exceptions of AXP Michigan Tax-Exempt Fund and
AXP California Tax-Exempt Fund, was exposure to bonds that were advance
refunded during the fiscal year. This is a procedure in which a bond
issuer floats a second bond at a lower interest rate, and the proceeds
from the sale of the second bond are safely invested, usually in
Treasury securities, which, in turn, are held in escrow collateralizing
the first bond. Given that the advance refunded bonds become,
essentially, fully tax-exempt U.S. Treasury securities and no longer
represent the credit risk profile of the original borrower, they often
increase in value -- sometimes significantly.
- --------------------------------------------------------------------------------
18 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
Significant positions in bonds rated BBB contributed positively to the
returns of AXP Massachusetts Tax-Exempt Fund and AXP Minnesota
Tax-Exempt Fund, for, as mentioned, these bonds overall outperformed
higher quality bonds during the fiscal year. Results of AXP California
Tax-Exempt Fund were further helped by its significant exposure to
uninsured California general obligation tax-exempt bonds. Similarly,
relative performance of AXP New York Tax-Exempt Fund was supported by
its significant exposure to New York City general obligation bonds.
Q: What changes did you make to the portfolios and how are they currently
positioned?
A: We made several strategic moves within the Funds during the annual
period. We increased several of the Funds' exposure to bonds rated BBB,
as we believe these bonds may continue to outperform in the coming
months. We reduced the Funds' positions in below investment grade
securities and non-rated securities and upgraded the quality of what we
call the Funds' "credit baskets" with bonds rated BBB and A that offer
enhanced liquidity and reduced risk.
We focused on further diversifying the portfolios by bond maturity,
coupon and call dates. We believe this disciplined approach to portfolio
diversification -- across multiple parameters -- should help reduce the
volatility and risks associated with interest rate movements and produce
more consistent returns for the Funds over the long term. Indeed, over
the second half of the fiscal year, the impact of the Funds' yield curve
positioning on its results was mitigated, as we moved from a
concentration in intermediate-term bonds to a more laddered structure,
whereby maturities are staggered so that bonds in the portfolios come
due periodically. At the same time, we sought opportunities to carry out
tactical strategies wherever and whenever possible.
Also, as indicated, we established a position in and then added exposure
to non-enhanced municipal tobacco bonds in AXP California Tax-Exempt
Fund and AXP New York Tax-Exempt Fund. While we did not move beyond a
neutral position in these bonds relative to their respective indices due
to concerns over lingering litigation risks, this municipal
- --------------------------------------------------------------------------------
19 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
fixed income sector offers significant yield currently. Furthermore,
this position should help us to reduce portfolio volatility to both the
Funds' benchmark indices and peer groups and to further diversify the
structural attributes of the portfolios. In AXP California Tax-Exempt
Fund, we reduced exposure to uninsured California general obligations,
and in AXP New York Tax-Exempt Fund, we reduced exposure to New York
City general obligations. We moved to more neutral positions, as these
bonds became fairly valued in our view.
In AXP Ohio Tax-Exempt Fund and AXP California Tax-Exempt Fund, we
sought opportunities to add some lower coupon bonds at the long-term end
of the curve. Often overlooked by the broad market, these lower coupon
bonds performed well and contributed positively to the Funds' relative
returns.
Finally we adjusted several of the Funds' duration somewhat. This
strategy was carried out as part of transitioning to new benchmarks that
were approved in April.
o AXP California Tax-Exempt Fund's comparative index is the Lehman
Brothers California 2 Plus Year Municipal Bond Index.
o AXP Massachusetts Tax-Exempt Fund's comparative index is the Lehman
Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond Index.
o AXP Minnesota Tax-Exempt Fund's comparative index is the Lehman
Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index.
o AXP New York Tax-Exempt Fund's comparative index is the Lehman
Brothers New York 4 Plus Year Municipal Bond Index.
o AXP Ohio Tax-Exempt Fund's comparative index is the Lehman Brothers
Ohio 4 Plus Year Enhanced Municipal Bond Index.
We feel that these new benchmarks more precisely reflect the actual
strategy of the Funds. AXP Michigan Tax-Exempt Fund is expected to
maintain its current benchmark index.
- --------------------------------------------------------------------------------
20 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
Q: How do you intend to manage the Funds in the coming months?
A: We intend to position the Funds for ongoing U.S. economic recovery and
still higher interest rates, as these themes are likely to continue to
weigh on the fixed income markets through the summer. Indeed, as nearly
all signs of any material slowdown in U.S. growth have reversed or been
revised away, we believe the market's focus will again return to our
long-held reasons why the Fed will continue to raise interest rates,
namely robust U.S. economic growth and building inflation pressures. In
addition, the Fed has signaled some concern over "frothy" housing
markets in certain regions. Thus, we believe the Fed is keenly aware
that excess monetary stimulus has fueled speculation in the housing
market and that its likely response is to raise rates until this market
cools noticeably. We anticipate that the yield curve may flatten a bit
more in the near term but that after an extended period of yield curve
flattening, the yield spread between short- and long-term maturities may
stabilize somewhat in the months ahead with more parallel shifts across
the yield curve.
Typically, rising rates are negative for the bond market. However,
municipal bonds have historically weathered this environment better than
taxable bonds. It is important to note that we do not make significant
Fund management decisions based on interest rate forecasts, but rather
stick to our discipline of staying fully invested to maintain a high
level of tax-exempt income and to diversify our portfolios.
Given this view, we plan to maintain the Funds' durations moderately
shorter than that of their respective Lehman benchmark index for the
near term. We also intend to maintain our focus on seeking
higher-quality securities with good structure and on further
diversifying the portfolios. Each Fund's emphasis continues to be on
generating a high level of income generally exempt from federal income
tax as well as from the respective state and local taxes.
- --------------------------------------------------------------------------------
21 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
AXP California Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.20 $-- $0.07 $0.27
June 30, 2004 0.21 -- 0.06 0.27
June 30, 2003 0.23 -- -- 0.23
June 30, 2002 0.24 -- -- 0.24
June 30, 2001 0.25 -- -- 0.25
AXP Massachusetts Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.17 $ -- $0.03 $0.20
June 30, 2004 0.18 0.06 -- 0.24
June 30, 2003 0.19 -- 0.02 0.21
June 30, 2002 0.22 -- -- 0.22
June 30, 2001 0.27 -- -- 0.27
AXP Michigan Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.18 $0.01 $0.02 $0.21
June 30, 2004 0.19 0.05 0.03 0.27
June 30, 2003 0.22 -- 0.05 0.27
June 30, 2002 0.24 -- -- 0.24
June 30, 2001 0.27 -- -- 0.27
- --------------------------------------------------------------------------------
22 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Questions & Answers
AXP Minnesota Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.18 $-- $0.02 $0.20
June 30, 2004 0.19 -- -- 0.19
June 30, 2003 0.22 -- -- 0.22
June 30, 2002 0.25 -- -- 0.25
June 30, 2001 0.28 -- -- 0.28
AXP New York Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.18 $ -- $0.06 $0.24
June 30, 2004 0.18 0.05 0.06 0.29
June 30, 2003 0.20 -- 0.02 0.22
June 30, 2002 0.22 -- -- 0.22
June 30, 2001 0.25 -- -- 0.25
AXP Ohio Tax-Exempt Fund
DISTRIBUTION SUMMARY
The table below details the Fund's income and capital gain distributions for
the fiscal years shown. More information on the other classes can be found
in the Financial Highlights section of this report's Notes to Financial
Statements.
Class A
----------------------------------------------
Short-term Long-term
Income capital gains capital gains Total
Fiscal year ended
June 30, 2005 $0.16 $ -- $ -- $0.16
June 30, 2004 0.17 0.06 0.01 0.24
June 30, 2003 0.18 -- 0.11 0.29
June 30, 2002 0.22 -- -- 0.22
June 30, 2001 0.27 -- -- 0.27
- --------------------------------------------------------------------------------
23 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP California Tax-Exempt Fund Class A shares (from
7/1/95 to 6/30/05) as compared to the performance of four widely cited
performance indices, the Lehman Brothers California 2 Plus Year Municipal
Bond Index, the Lehman Brothers California Municipal Bond Index, the Lehman
Brothers Municipal Bond Index and the Lipper California Municipal Debt Funds
Index. Recently, the Fund's investment manager recommended to the Fund that
the Fund change its comparative index from the Lehman Brothers California
Municipal Bond Index to the Lehman Brothers California 2 Plus Year Municipal
Bond Index. The investment manager made this recommendation because the new
index more closely represents the Fund's holdings. Both indices are shown in
this transition year. In the future, however, only the Lehman Brothers
California 2 Plus Year Municipal Bond Index will be included. In comparing
the Fund's Class A shares to these indices, you should take into account the
fact that the Fund's performance reflects the maximum sales charge of 4.75%,
while such charges are not reflected in the performance of the indices.
Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(5)
AXP California Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,337 $11,116 $12,684 $16,258 $29,125
Average annual total return +3.37% +3.59% +4.87% +4.98% +5.83%
Lehman Brothers California 2 Plus Year Municipal Bond Index(1)
Cumulative value of $10,000 $10,955 $11,998 $14,058 $19,090 N/A
Average annual total return +9.55% +6.26% +7.05% +6.68% N/A
Lehman Brothers California Municipal Bond Index(2)
Cumulative value of $10,000 $10,921 $11,930 $13,934 $18,881 N/A
Average annual total return +9.21% +6.06% +6.86% +6.56% N/A
Lehman Brothers Municipal Bond Index(3)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $36,664
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.11%
Lipper California Municipal Debt Funds Index(4)
Cumulative value of $10,000 $10,891 $11,789 $13,637 $17,838 $33,026
Average annual total return +8.91% +5.64% +6.40% +5.96% +6.52%
See footnotes to the Comparative Results table on facing page.
- --------------------------------------------------------------------------------
24 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP CALIFORNIA TAX-EXEMPT FUND
AXP California Tax-Exempt Fund Class A (includes sales charge) ($16,258)
$9,525 $10,097 $10,882 $11,731 $11,947 $12,209 $13,186 $13,932 $14,943 $14,980 $16,258
Lehman Brothers California 2 Plus Year Municipal Bond Index(1) ($19,090)
$10,000 $10,730 $11,667 $12,739 $13,126 $13,580 $14,838 $15,911 $17,213 $17,426 $19,090
Lehman Brothers California Municipal Bond Index(2) ($18,881)
$10,000 $10,724 $11,649 $12,703 $13,093 $13,545 $14,779 $15,822 $17,077 $17,289 $18,881
Lehman Brothers Municipal Bond Index(3) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper California Municipal Debt Funds Index(4) ($17,838)
$10,000 $10,652 $11,544 $12,567 $12,827 $13,080 $14,252 $15,130 $16,278 $16,379 $17,838
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Results for other share classes can be found on page 10.
(1) The Lehman Brothers California 2 Plus Year Municipal Bond Index, an
unmanaged index, is a market value-weighted index of California
investment-grade fixed-rate municipal bonds with maturities of two years
or more.
(2) The Lehman Brothers California Municipal Bond Index, an unmanaged index,
is a subset of the Lehman Brothers Municipal Bond Index. The index is made
up of investment-grade, tax-exempt, and fixed-rate bonds issued in the
state Of California. All securities have effective maturities greater
than one year and are selected from issues larger than $50 million.
(3) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to create
the index may not be representative of the bonds held in the Fund. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
(4) The Lipper California Municipal Debt Funds Index includes the 30 largest
municipal debt funds in California tracked by Lipper Inc. The index's
returns include net reinvested dividends.
(5) Fund data is from Aug. 18, 1986. Lehman Brothers Municipal Bond Index
and Lipper peer group data is from Sept. 1, 1986. The Fund began operating
before the inception of the Lehman Brothers California 2 Plus Year Municipal
Bond Index and Lehman Brothers California Municipal Bond Index.
- --------------------------------------------------------------------------------
25 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP Massachusetts Tax-Exempt Fund Class A shares (from
7/1/95 to 6/30/05) as compared to the performance of four widely cited
performance indices, the Lehman Brothers Massachusetts 3 Plus Year Enhanced
Municipal Bond Index, the Lehman Brothers Massachusetts Municipal Bond
Index, the Lehman Brothers Municipal Bond Index and the Lipper Massachusetts
Municipal Debt Funds Index. Recently, the Fund's investment manager
recommended to the Fund that the Fund change its comparative index from the
Lehman Brothers Massachusetts Municipal Bond Index to the Lehman Brothers
Massachusetts 3 Plus Year Enhanced Municipal Bond Index. The investment
manager made this recommendation because the new index more closely
represents the Fund's holdings. Both indices are shown in this transition
year. In the future, however, only the Lehman Brothers Massachusetts 3 Plus
Year Enhanced Municipal Bond Index will be included. In comparing the Fund's
Class A shares to these indices, you should take into account the fact that
the Fund's performance reflects the maximum sales charge of 4.75%, while
such charges are not reflected in the performance of the indices. Returns
for the Fund include the reinvestment of any distribution paid during each
period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(5)
AXP Massachusetts Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,233 $10,895 $12,540 $15,785 $27,351
Average annual total return +2.33% +2.90% +4.63% +4.67% +5.75%
Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond Index(1)
Cumulative value of $10,000 $10,852 $11,957 $14,223 N/A N/A
Average annual total return +8.52% +6.14% +7.30% N/A N/A
Lehman Brothers Massachusetts Municipal Bond Index(2)
Cumulative value of $10,000 $10,794 $11,823 $13,993 $18,557 N/A
Average annual total return +7.94% +5.74% +6.95% +6.38% N/A
Lehman Brothers Municipal Bond Index(3)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $35,249
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.25%
Lipper Massachusetts Municipal Debt Funds Index(4)
Cumulative value of $10,000 $10,797 $11,739 $13,707 $17,493 N/A
Average annual total return +7.97% +5.49% +6.51% +5.75% N/A
See footnotes to the Comparative Results table on facing page.
- --------------------------------------------------------------------------------
26 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP MASSACHUSETTS TAX-EXEMPT FUND
AXP Massachusetts Tax-Exempt Fund Class A (includes sales charge) ($15,785)
$9,525 $10,093 $10,881 $11,773 $11,986 $11,991 $13,027 $13,801 $14,730 $14,695 $15,785
Lehman Brothers Massachusetts Municipal Bond Index(2) ($18,557)
$10,000 $10,649 $11,529 $12,510 $12,832 $13,258 $14,638 $15,696 $17,113 $17,192 $18,557
Lehman Brothers Municipal Bond Index(3) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper Massachusetts Municipal Debt Funds Index(4) ($17,493)
$10,000 $10,612 $11,434 $12,390 $12,598 $12,764 $14,019 $14,902 $16,178 $16,202 $17,493
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Results for other share classes can be found on page 11.
(1) The Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond
Index, an unmanaged index, is a market value-weighted index of
Massachusetts investment-grade fixed-rate municipal bonds with
maturities of three years or more.
(2) The Lehman Brothers Massachusetts Municipal Bond Index, an unmanaged
index, is a subset of the Lehman Brothers Municipal Bond Index. The
index is made up of investment-grade, tax-exempt, and fixed-rate bonds
issued in the state of Massachusetts. All securities have effective
maturities greater than one year and are selected from issues larger
than $50 million.
(3) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(4) The Lipper Massachusetts Municipal Debt Funds Index includes the 10
largest municipal debt funds in Massachusetts tracked by Lipper Inc. The
index's returns include net reinvested dividends.
(5) Fund data is from July 2, 1987. Lehman Brothers Municipal Bond Index is
from July 1, 1987. The Fund began operating before the inception of the
Lehman Brothers Massachusetts 3 Plus Enhanced Municipal Bond Index,
Lehman Brothers Massachusetts Municipal Bond Index and Lipper peer
group.
- --------------------------------------------------------------------------------
27 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP Michigan Tax-Exempt Fund Class A shares (from
7/1/95 to 6/30/05) as compared to the performance of three widely cited
performance indices, the Lehman Brothers Michigan Municipal Bond Index, the
Lehman Brothers Municipal Bond Index and the Lipper Michigan Municipal Debt
Funds Index. In comparing the Fund's Class A shares to these indices, you
should take into account the fact that the Fund's performance reflects the
maximum sales charge of 4.75%, while such charges are not reflected in the
performance of the indices. Returns for the Fund include the reinvestment of
any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
- --------------------------------------------------------------------------------
28 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP MIGHIGAN TAX-EXEMPT FUND
AXP Michigan Tax-Exempt Fund Class A (includes sales charge) ($15,852)
$9,525 $10,131 $10,852 $11,692 $11,920 $11,903 $12,962 $13,718 $14,815 $14,843 $15,852
Lehman Brothers Michigan Municipal Bond Index(1) ($18,694)
$10,000 $10,702 $11,601 $12,632 $12,947 $13,335 $14,743 $15,779 $17,280 $17,354 $18,694
Lehman Brothers Municipal Bond Index(2) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper Michigan Municipal Debt Funds Index(3) ($16,901)
$10,000 $10,591 $11,383 $12,274 $12,461 $12,618 $13,804 $14,643 $15,800 $15,767 $16,901
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(4)
AXP Michigan Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,172 $11,007 $12,684 $15,852 $28,058
Average annual total return +1.72% +3.25% +4.87% +4.72% +5.90%
Lehman Brothers Michigan Municipal Bond Index(1)
Cumulative value of $10,000 $10,772 $11,850 $14,019 $18,694 N/A
Average annual total return +7.72% +5.82% +6.99% +6.46% N/A
Lehman Brothers Municipal Bond Index(2)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $35,249
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.25%
Lipper Michigan Municipal Debt Funds Index(3)
Cumulative value of $10,000 $10,719 $11,540 $13,395 $16,901 N/A
Average annual total return +7.19% +4.89% +6.02% +5.39% N/A
Results for other share classes can be found on page 12.
(1) The Lehman Brothers Michigan Municipal Bond Index, an unmanaged index,
is a subset of the Lehman Brothers Municipal Bond Index. The index is
made up of investment-grade, tax-exempt, and fixed-rate bonds issued in
the state of Michigan. All securities have effective maturities greater
than one year and are selected from issues larger than $50 million.
(2) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(3) The Lipper Michigan Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Michigan tracked by Lipper Inc. The index's
returns include net reinvested dividends.
(4) Fund data is from July 2, 1987. Lehman Brothers Municipal Bond Index is
from July 1, 1987. The Fund began operating before the inception of the
Lehman Brothers Michigan Municipal Bond Index and Lipper peer group.
- --------------------------------------------------------------------------------
29 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP Minnesota Tax-Exempt Fund Class A shares (from
7/1/95 to 6/30/05) as compared to the performance of four widely cited
performance indices, the Lehman Brothers Minnesota 3 Plus Year Enhanced
Municipal Bond Index, the Lehman Brothers Minnesota Municipal Bond Index,
the Lehman Brothers Municipal Bond Index and the Lipper Minnesota Municipal
Debt Funds Index. Recently, the Fund's investment manager recommended to the
Fund that the Fund change its comparative index from the Lehman Brothers
Minnesota Municipal Bond Index to the Lehman Brothers Minnesota 3 Plus Year
Enhanced Municipal Bond Index. The investment manager made this
recommendation because the new index more closely represents the Fund's
holdings. Both indices are shown in this transition year. In the future,
however, only the Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal
Bond Index will be included. In comparing the Fund's Class A shares to these
indices, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 4.75%, while such charges are not
reflected in the performance of the indices. Returns for the Fund include
the reinvestment of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(5)
AXP Minnesota Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,167 $10,994 $12,666 $16,180 $29,596
Average annual total return +1.67% +3.21% +4.84% +4.93% +5.92%
Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index(1)
Cumulative value of $10,000 $10,791 $11,876 $13,973 N/A N/A
Average annual total return +7.91% +5.90% +6.92% N/A N/A
Lehman Brothers Minnesota Municipal Bond Index(2)
Cumulative value of $10,000 $10,742 $11,749 $13,785 $18,115 N/A
Average annual total return +7.42% +5.52% +6.63% +6.12% N/A
Lehman Brothers Municipal Bond Index(3)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $36,664
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.11%
Lipper Minnesota Municipal Debt Funds Index(4)
Cumulative value of $10,000 $10,739 $11,696 $13,528 $17,000 N/A
Average annual total return +7.39% +5.36% +6.23% +5.45% N/A
See footnotes to the Comparative Results table on facing page.
- --------------------------------------------------------------------------------
30 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP MINNESOTA TAX-EXEMPT FUND
AXP Minnesota Tax-Exempt Fund Class A (includes sales charge) ($16,180)
$9,525 $10,096 $10,910 $11,787 $12,098 $12,171 $13,209 $14,021 $15,112 $15,160 $16,180
Lehman Brothers Minnesota Municipal Bond Index(2) ($18,115)
$10,000 $10,612 $11,454 $12,432 $12,765 $13,142 $14,459 $15,419 $16,717 $16,864 $18,115
Lehman Brothers Municipal Bond Index(3) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper Minnesota Municipal Debt Funds Index(4) ($17,000)
$10,000 $10,534 $11,307 $12,196 $12,470 $12,567 $13,703 $14,535 $15,701 $15,830 $17,000
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Results for other share classes can be found on page 13.
(1) The Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index,
an unmanaged index, is a market value-weighted index of Minnesota
investment-grade fixed-rate municipal bonds with maturities of three
years or more.
(2) The Lehman Brothers Minnesota Municipal Bond Index, an unmanaged index,
is a subset of the Lehman Brothers Municipal Bond Index. The index is
made up of investment-grade, tax-exempt, and fixed-rate bonds issued in
the state of Minnesota. All securities have effective maturities greater
than one year and are selected from issues larger than $50 million.
(3) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(4) The Lipper Minnesota Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Minnesota tracked by Lipper Inc. The index's
returns include net reinvested dividends.
(5) Fund data is from Aug. 18, 1986. Lehman Brothers Municipal Bond Index is
from Sept. 1, 1986. The Fund began operating before the inception of the
Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index,
Lehman Brothers Minnesota Municipal Bond Index and Lipper peer group.
- --------------------------------------------------------------------------------
31 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP New York Tax-Exempt Fund Class A shares (from
7/1/95 to 6/30/05) as compared to the performance of four widely cited
performance indices, the Lehman Brothers New York 4 Plus Year Municipal Bond
Index, the Lehman Brothers New York Municipal Bond Index, the Lehman
Brothers Municipal Bond Index and the Lipper New York Municipal Debt Funds
Index. Recently, the Fund's investment manager recommended to the Fund that
the Fund change its comparative index from the Lehman Brothers New York
Municipal Bond Index to the Lehman Brothers New York 4 Plus Year Municipal
Bond Index. The investment manager made this recommendation because the new
index more closely represents the Fund's holdings. Both indices are shown in
this transition year. In the future, however, only the Lehman Brothers New
York 4 Plus Year Municipal Bond Index will be included. In comparing the
Fund's Class A shares to these indices, you should take into account the
fact that the Fund's performance reflects the maximum sales charge of 4.75%,
while such charges are not reflected in the performance of the indices.
Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(5)
AXP New York Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,196 $11,055 $12,714 $16,046 $28,406
Average annual total return +1.96% +3.40% +4.92% +4.84% +5.69%
Lehman Brothers New York 4 Plus Year Municipal Bond Index(1)
Cumulative value of $10,000 $10,907 $12,046 $14,256 $19,392 N/A
Average annual total return +9.07% +6.40% +7.35% +6.85% N/A
Lehman Brothers New York Municipal Bond Index(2)
Cumulative value of $10,000 $10,792 $11,819 $13,882 $18,765 N/A
Average annual total return +7.92% +5.73% +6.78% +6.50% N/A
Lehman Brothers Municipal Bond Index(3)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $36,664
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.11%
Lipper New York Municipal Debt Funds Index(4)
Cumulative value of $10,000 $10,784 $11,682 $13,617 $17,246 $31,987
Average annual total return +7.84% +5.32% +6.37% +5.60% +6.34%
See footnotes to the Comparative Results table on facing page.
- --------------------------------------------------------------------------------
32 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP NEW YORK TAX-EXEMPT FUND
AXP New York Tax-Exempt Fund Class A (includes sales charge) ($16,046)
$9,525 $10,023 $10,785 $11,673 $11,929 $12,021 $13,137 $13,828 $14,994 $14,991 $16,046
Lehman Brothers New York 4 Plus Year Municipal Bond Index(1) ($19,392)
$10,000 $10,688 $11,696 $12,835 $13,170 $13,602 $15,091 $16,099 $17,648 $17,779 $19,392
Lehman Brothers New York Municipal Bond Index(2) ($18,765)
$10,000 $10,676 $11,636 $12,705 $13,068 $13,516 $14,911 $15,877 $17,260 $17,388 $18,765
Lehman Brothers Municipal Bond Index(3) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper New York Municipal Debt Funds Index(4) ($17,246)
$10,000 $10,552 $11,379 $12,358 $12,538 $12,668 $13,970 $14,763 $15,935 $15,992 $17,246
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Results for other share classes can be found on page 14.
(1) The Lehman Brothers New York 4 Plus Year Municipal Bond Index, an
unmanaged index, is a market value-weighted index of New York
investment-grade fixed-rate municipal bonds with maturities of four
years or more.
(2) The Lehman Brothers New York Municipal Bond Index, an unmanaged index,
is a subset of the Lehman Brothers Municipal Bond Index. The index is
made up of investment-grade, tax-exempt, and fixed-rate bonds issued in
the state of New York. All securities have effective maturities greater
than one year and are selected from issues larger than $50 million.
(3) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(4) The Lipper New York Municipal Debt Funds Index includes the 30 largest
municipal debt funds in New York tracked by Lipper Inc. The index's
returns include net reinvested dividends.
(5) Fund data is from Aug. 18, 1986. Lehman Brothers Municipal Bond Index
and Lipper peer group is from Sept. 1, 1986. The Fund began operating
before the inception of the Lehman Brothers New York 4 Plus Year
Municipal Bond Index and Lehman Brothers New York Municipal Bond Index.
- --------------------------------------------------------------------------------
33 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Fund's Long-term Performance
The chart on the facing page illustrates the total value of an assumed
$10,000 investment in AXP Ohio Tax-Exempt Fund Class A shares (from 7/1/95
to 6/30/05) as compared to the performance of four widely cited performance
indices, the Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index,
the Lehman Brothers Ohio Municipal Bond Index, the Lehman Brothers Municipal
Bond Index and the Lipper Ohio Municipal Debt Funds Index. Recently, the
Fund's investment manager recommended to the Fund that the Fund change its
comparative index from the Lehman Brothers Ohio Municipal Bond Index to the
Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index. The
investment manager made this recommendation because the new index more
closely represents the Fund's holdings. Both indices are shown in this
transition year. In the future, however, only the Lehman Brothers Ohio 4
Plus Year Enhanced Municipal Bond Index will be included. In comparing the
Fund's Class A shares to these indices, you should take into account the
fact that the Fund's performance reflects the maximum sales charge of 4.75%,
while such charges are not reflected in the performance of the indices.
Returns for the Fund include the reinvestment of any distribution paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The value of your investment and returns will
fluctuate so that your shares, when redeemed, may be worth more or less than
their original cost. Returns do not reflect taxes payable on distributions
and redemptions. Current performance may be lower or higher than the
performance information shown. You may obtain performance information
current to the most recent month-end by calling (800) 862-7919 or visiting
www.ameriprise.com. Also see "Past Performance" in the Fund's current
prospectus.
COMPARATIVE RESULTS
Results at June 30, 2005
Since
1 year 3 years 5 years 10 years inception(5)
AXP Ohio Tax-Exempt Fund (includes sales charge)
Class A Cumulative value of $10,000 $10,183 $10,829 $12,379 $15,694 $27,212
Average annual total return +1.83% +2.69% +4.36% +4.61% +5.72%
Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index(1)
Cumulative value of $10,000 $10,864 $11,971 $14,157 N/A N/A
Average annual total return +8.64% +6.18% +7.20% N/A N/A
Lehman Brothers Ohio Municipal Bond Index(2)
Cumulative value of $10,000 $10,759 $11,749 $13,804 $18,015 N/A
Average annual total return +7.59% +5.52% +6.66% +6.06% N/A
Lehman Brothers Municipal Bond Index(3)
Cumulative value of $10,000 $10,824 $11,860 $13,947 $18,560 $35,249
Average annual total return +8.24% +5.85% +6.88% +6.38% +7.25%
Lipper Ohio Municipal Debt Funds Index(4)
Cumulative value of $10,000 $10,775 $11,666 $13,566 $17,256 N/A
Average annual total return +7.75% +5.27% +6.29% +5.61% N/A
See footnotes to the Comparative Results table on facing page.
- --------------------------------------------------------------------------------
34 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
[LINE CHART]
VALUE OF HYPOTHETICAL $10,000 IN AXP OHIO TAX-EXEMPT FUND
AXP Ohio Tax-Exempt Fund Class A (includes sales charge) ($15,694)
$9,525 $10,074 $10,821 $11,673 $11,969 $12,078 $13,038 $13,803 $14,780 $14,681 $15,694
Lehman Brothers Ohio Municipal Bond Index(2) ($18,015)
$10,000 $10,622 $11,411 $12,304 $12,639 $13,049 $14,319 $15,331 $16,671 $16,744 $18,015
Lehman Brothers Municipal Bond Index(3) ($18,560)
$10,000 $10,664 $11,544 $12,544 $12,890 $13,309 $14,637 $15,650 $17,018 $17,147 $18,560
Lipper Ohio Municipal Debt Funds Index(4) ($17,256)
$10,000 $10,585 $11,383 $12,294 $12,535 $12,718 $13,924 $14,790 $15,978 $16,015 $17,256
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Results for other share classes can be found on page 15.
(1) The Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index, an
unmanaged index, is a market value-weighted index of Ohio
investment-grade fixed-rate municipal bonds with maturities of four
years or more.
(2) The Lehman Brothers Ohio Municipal Bond Index, an unmanaged index, is a
subset of the Lehman Brothers Municipal Bond Index. The index is made up
of investment-grade, tax-exempt, and fixed-rate bonds issued in the
state of Ohio. All securities have effective maturities greater than one
year and are selected from issues larger than $50 million.
(3) Lehman Brothers Municipal Bond Index, an unmanaged index, is made up of
a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
Fund. The index reflects reinvestment of all distributions and changes
in market prices, but excludes brokerage commissions or other fees.
(4) The Lipper Ohio Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Ohio tracked by Lipper Inc. The index's returns
include net reinvested dividends.
(5) Fund data is from July 2, 1987. Lehman Brothers Municipal Bond Index is
from July 1, 1987. The Fund began operating before the inception of the
Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index, Lehman
Brothers Ohio Municipal Bond Index and Lipper peer group.
- --------------------------------------------------------------------------------
35 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP California Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (96.0%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Abag Finance Authority for Nonprofit Corporations
Certificate of Participation
National Center for International Schools Project
Series 1996
05-01-26 7.38% $2,200,000 $2,267,826
Abag Finance Authority for Nonprofit Corporations
Revenue Bonds
San Diego Hospital Association
Series 2001A
08-15-20 6.13 2,500,000 2,764,525
Alhambra City Elementary School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (FSA)
09-01-22 5.95 1,055,000(f) 489,288
Anaheim Union High School District
Pre-refunded Unlimited General Obligation Bonds
Series 2002A (FSA)
08-01-16 5.38 1,550,000 1,764,908
Beaumont Financing Authority
Revenue Bonds
Series 2000A
09-01-32 7.38 1,955,000 2,093,160
Beverly Hills Public Financing Authority
Revenue Bonds
Capital Improvements Project
Series 1998A
06-01-23 5.00 3,000,000 3,112,260
California Educational Facilities Authority
Revenue Bonds
Stanford University
Series 1997N
12-01-27 5.20 1,000,000 1,049,440
California Educational Facilities Authority
Revenue Bonds
University of Southern California
Series 2003A
10-01-33 5.00 2,000,000 2,119,540
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
California Health Facilities Financing Authority
Revenue Bonds
Catholic Healthcare West
Series 2004G
07-01-23 5.25% $3,500,000 $3,700,199
California Health Facilities Financing Authority
Revenue Bonds
Sutter Health
Series 1999A (MBIA)
08-15-28 5.35 2,500,000 2,669,650
California Pollution Control Financing Authority
Revenue Bonds
Waste Management Project
Series 2005A-1 A.M.T.
04-01-25 4.70 1,000,000 1,029,180
California Rural Home Mortgage Finance Authority
Revenue Bonds
Mortgage-backed Securities Program
Series 1997A-2 (GNMA/FNMA/FHLMC) A.M.T.
09-01-29 7.00 110,000 110,814
California Rural Home Mortgage Finance Authority Revenue Bonds
Mortgage-backed Securities Program
Series 1998B-5 (GNMA/FNMA/FHLMC) A.M.T.
12-01-29 6.35 95,000 96,432
California State Department of Water Resources
Revenue Bonds
Series 2002A (MBIA)
05-01-09 5.25 3,200,000 3,462,687
05-01-10 5.25 3,000,000 3,289,380
05-01-15 6.00 2,000,000 2,311,400
California State Public Works Board
Revenue Bonds
Department of General Services
Capital East End
Series 2002A
12-01-06 5.00 1,000,000 1,029,050
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
36 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
California Statewide Communities Development Authority
Revenue Bonds
Daughters of Charity Health
Series 2005A
07-01-39 5.00% $2,250,000 $2,306,903
California Statewide Communities Development Authority
Revenue Bonds
Daughters of Charity Health
Series 2005G
07-01-13 5.25 200,000 217,516
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2004E
04-01-32 3.88 750,000 760,838
California Statewide Communities Development Authority
Revenue Bonds
Thomas Jefferson School of Law Project
Series 2001
10-01-31 7.75 2,500,000 2,761,600
City of San Jose
Unlimited General Obligation Bonds
Libraries & Public Safety Project
Series 2005 (MBIA)
09-01-35 4.50 2,000,000 1,990,080
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2001 (FSA)
07-01-16 5.50 2,000,000(c) 2,358,220
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2004A
07-01-24 5.00 1,000,000(c) 1,059,360
Contra Costa County
Revenue Bonds
Cypress Meadows Project
Series 1998E A.M.T.
09-01-28 7.00 236,638(b,h) 47,337
Contra Costa Water District
Refunding Revenue Bonds
Series 2003M (FSA)
10-01-16 5.00 1,500,000 1,651,815
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
County of Riverside
Certificate of Participation
Series 1998 (MBIA)
12-01-21 5.00% $1,530,000 $1,609,514
County of San Diego
Certificate of Participation
Series 1993 Inverse Floater (AMBAC)
09-01-07 8.52 3,200,000(i) 3,588,671
Desert Sands Unified School District
Refunding Certificate of Participation
Series 2003 (MBIA)
03-01-17 5.25 1,135,000 1,268,090
Encinitas Union School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1996 (MBIA)
08-01-15 5.85 2,500,000(f) 1,667,900
Fontana Unified School District
Unlimited General Obligation Bonds
Convertible Capital Appreciation
Series 1997D (FGIC)
05-01-22 5.75 2,000,000 2,216,560
Golden State Tobacco Securitization Corporation
Revenue Bonds
Enhanced Asset-backed
Series 2003B (FGIC)
06-01-28 5.38 2,500,000 2,659,575
Golden State Tobacco Securitization Corporation
Revenue Bonds
Series 2003A-1
06-01-33 6.25 2,490,000 2,713,328
06-01-39 6.75 1,250,000 1,407,113
06-01-40 6.63 600,000 670,530
Grossmont-Cuyamaca Community College District
Unlimited General Obligation Bonds
Election of 2002
Series 2005B (FGIC)
08-01-26 5.00 3,000,000 3,238,830
Inglewood Redevelopment Agency
Refunding Tax Allocation Bonds
Merged Redevelopment Project
Series 1998A (AMBAC)
05-01-23 5.25 1,100,000 1,263,713
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
37 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Lake Elsinore Public Financing Authority
Revenue Bonds
Series 1997F
09-01-20 7.10% $815,000 $880,665
Lancaster Redevelopment Agency
Refunding Tax Allocation Bonds
Combined Redevelopment Project Areas
Series 2003 (MBIA)
08-01-17 5.13 1,840,000 2,085,658
Los Angeles County Public Works Financing Authority
Pre-refunded Revenue Bonds
Multiple Capital Facilities Project
Series 1997V-B (AMBAC)
12-01-29 5.13 1,000,000 1,067,820
Los Angeles County Sanitation Districts Financing Authority
Revenue Bonds
Capital Project
Series 2003A (FSA)
10-01-13 5.00 2,000,000 2,234,180
Los Angeles Department of Water & Power
Revenue Bonds
Power System
Series 2003B (FSA)
07-01-16 5.13 1,460,000 1,621,899
07-01-17 5.13 2,315,000 2,559,834
Los Angeles Harbor Department
Revenue Bonds
Series 1988 Escrowed to Maturity
10-01-18 7.60 965,000 1,224,508
Los Angeles Unified School District
Certificate of Participation
Multiple Properties Project
Series 2002B (FSA)
10-01-08 5.00 1,000,000 1,067,890
Los Angeles Unified School District
Certificate of Participation
Multiple Properties Project
Series 2002B Escrowed to Maturity (FSA)
10-01-06 5.00 1,000,000 1,029,340
Los Angeles Unified School District
Unlimited General Obligation Bonds
Series 1997A (FGIC)
07-01-21 5.00 2,000,000 2,126,880
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Menlo Park
Unlimited General Obligation Bonds
Series 2002
08-01-32 5.30% $1,900,000 $2,066,326
Metropolitan Water District of Southern California
Pre-refunded Revenue Bonds
Series 1997A
07-01-26 5.00 3,000,000 3,195,870
Mountain View Los Altos Union High School District
Pre-refunded Unlimited General Obligation Bonds
Series 1995A
08-01-15 5.75 1,200,000 1,226,736
Oxnard School District
Unlimited General Obligation Refunding Bonds
Series 2001A (MBIA)
08-01-30 5.75 2,575,000 3,121,673
Palomar Pomerado Health
Unlimited General Obligation Bonds
Election of 2004
Series 2005A (AMBAC)
08-01-29 4.50 2,500,000(g) 2,485,375
Pittsburg Redevelopment Agency
Tax Allocation Bonds
Los Medanos Community Development Project
Zero Coupon
Series 1999 (AMBAC)
08-01-24 6.05 2,100,000(f) 864,318
Port of Oakland
Revenue Bonds
Series 1997G (MBIA) A.M.T.
11-01-25 5.38 3,080,000 3,248,661
Port of Oakland
Revenue Bonds
Series 2000K (FGIC) A.M.T.
11-01-18 5.63 1,000,000 1,077,340
Puerto Rico Public Finance Corporation
Revenue Bonds
Commonwealth Appropriation
Series 2004A (MBIA)
08-01-29 5.25 1,000,000(c) 1,111,180
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
38 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Sacramento Cogeneration Authority
Pre-refunded Revenue Bonds
Procter & Gamble Project
Series 1995
07-01-10 6.38% $500,000 $510,000
Sacramento Municipal Utility District
Refunding Revenue Bonds
Series 2003S (FSA)
11-15-10 5.00 2,500,000 2,748,300
San Diego Public Water Facilities Financing Authority
Revenue Bonds
Series 2002 (MBIA)
08-01-26 5.00 2,500,000 2,639,950
San Diego Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (FGIC)
07-01-12 3.70 3,420,000(f) 2,661,820
San Francisco Bay Area Transit Financing Authority
Revenue Bonds
Series 2001 (AMBAC)
07-01-36 5.13 2,000,000 2,103,500
San Francisco City & County Airports Commission
Refunding Revenue Bonds
2nd Series 2001B-27 (FGIC)
05-01-16 5.25 2,170,000 2,383,854
San Francisco State Building Authority
Revenue Bonds
San Francisco Civic Center Complex
Series 1996A (AMBAC)
12-01-16 5.25 2,000,000 2,104,500
San Juan Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999 (FSA)
08-01-21 5.68 820,000(f) 402,989
08-01-24 5.70 1,810,000(f) 756,146
San Mateo County Community College District
Unlimited General Obligation Bonds
Election of 2001
Series 2002A (FGIC)
09-01-18 5.38 1,000,000 1,121,720
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Santa Maria Joint Union High School District
Unlimited General Obligation Bonds
Election of 2000
Series 2003B (FSA)
08-01-27 5.00% $3,000,000 $3,236,250
South Tahoe Joint Powers Financing Authority
Refunding Revenue Bonds
Redevelopment Project Area #1
Series 1995B
10-01-20 6.25 2,700,000 2,776,869
Southern California Public Power Authority
Refunding Revenue Bonds
San Juan Power Project
Series 2005A (FSA)
01-01-15 5.00 2,000,000 2,225,020
State of California
Unlimited General Obligation Bonds
Series 2000
05-01-19 5.63 3,000,000 3,332,490
10-01-25 5.38 2,500,000 2,688,900
State of California
Unlimited General Obligation Bonds
Series 2000 (MBIA)
09-01-13 5.25 1,500,000 1,655,445
State of California
Unlimited General Obligation Bonds
Series 2001
06-01-11 5.50 2,825,000 3,150,949
03-01-31 5.13 2,500,000 2,640,900
06-01-31 5.13 2,500,000 2,646,475
State of California
Unlimited General Obligation Bonds
Series 2002
02-01-15 6.00 1,000,000 1,181,250
State of California
Unlimited General Obligation Bonds
Series 2003
02-01-10 5.00 1,000,000 1,075,490
02-01-21 5.25 2,500,000 2,733,475
02-01-29 5.25 2,500,000 2,680,350
02-01-32 5.00 2,500,000 2,625,125
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
39 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
State of California
Unlimited General Obligation Bonds
Series 2003 (FGIC)
11-01-20 5.25% $1,000,000 $1,104,790
State of California
Unlimited General Obligation Bonds
Series 2004
03-01-14 5.25 2,000,000 2,248,140
02-01-33 5.00 1,000,000 1,052,630
State of California
Unlimited General Obligation Bonds
Series 2004 (FGIC)
02-01-33 5.00 2,500,000 2,655,550
State of California
Unlimited General Obligation Bonds
Series 2004A
01-01-11 5.25 5,000,000 5,509,299
State of California
Unlimited General Obligation Bonds
Series 2004A (FGIC)
07-01-17 5.00 2,000,000 2,161,860
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2003
11-01-22 5.00 2,000,000 2,127,140
11-01-23 5.13 2,500,000 2,689,900
11-01-24 5.13 2,000,000 2,146,080
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2004 (FSA)
12-01-22 5.25 1,500,000 1,648,650
State of California
Unlimited General Obligation Bonds
Veterans
Series 2000B A.M.T.
12-01-12 4.95 2,250,000 2,341,890
12-01-13 5.05 1,435,000 1,493,419
12-01-14 5.15 2,535,000 2,637,845
Stockton
Revenue Bonds
Mortgage-backed Securities Program
Series 1990A (GNMA/FNMA/FHLMC) A.M.T.
02-01-23 7.50 30,000 30,867
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Tobacco Securitization Authority of Southern California
Revenue Bonds
Asset-backed Bonds
Series 2002A
06-01-43 5.63% $1,000,000 $1,027,170
University of California
Revenue Bonds
Multiple Purpose
Series 2000K (FGIC)
09-01-20 5.00 1,010,000 1,068,833
University of California
Revenue Bonds
Multiple Purpose Projects
Series 2003Q (FSA)
09-01-18 5.00 2,000,000 2,158,920
University of California
Revenue Bonds
Series 2003B (AMBAC)
05-15-16 5.25 1,500,000 1,676,730
Walnut Energy Center Authority
Revenue Bonds
Series 2004A (AMBAC)
01-01-29 5.00 2,500,000 2,658,025
01-01-34 5.00 1,000,000 1,061,010
West Contra Costa Unified School District
Unlimited General Obligation Bonds
Election of 2000
Series 2003C (FGIC)
08-01-06 3.00 1,985,000 1,994,131
Western Hills Water District
Special Tax Bonds
Diablo Grande Community Facilities #1
Series 2001
09-01-31 6.88 1,000,000 1,056,740
Whittier Union High School District
Unlimited General Obligation Bonds
Election of 1999
Series 2003D (FSA)
08-01-28 5.00 2,615,000 2,775,221
- ------------------------------------------------------
Total municipal bonds
(Cost: $191,241,354) $200,519,992
- ------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
40 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Municipal notes (3.9%)
Issue(d,e,j) Effective Amount Value(a)
yield payable at
maturity
Abag Finance Authority for Nonprofit Corporations
Revenue Bonds
Jewish Community Center Project
V.R.D.N. Series 2002 (Allied Irish Bank)
11-15-31 2.22% $2,700,000 $2,700,000
California Infrastructure & Economic Development Bank
Revenue Bonds
Rand Corporation
V.R.D.N. Series 2002B (JP Morgan Chase Bank) AMBAC
04-01-42 2.15 1,800,000 1,800,000
California State Department of Water Resources
Revenue Bonds
V.R.D.N. Series 2002B-3 (Bank of New York)
05-01-22 2.15 800,000 800,000
Municipal notes (continued)
Issue(d,e,j) Effective Amount Value(a)
yield payable at
maturity
California Statewide Communities Development Authority
Refunding Revenue Bonds
University Retirement Community at Davis
V.R.D.N. Series 2003 (Bank of America)
Radian Group Financial Guaranty
11-15-30 2.23% $2,900,000 $2,900,000
- ------------------------------------------------------
Total municipal notes
(Cost: $8,200,000) $8,200,000
- ------------------------------------------------------
Total investments in securities
(Cost: $199,441,354)(k) $208,719,992
======================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
41 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is
in default as to payment of interest and/or principal.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
2.2% of net assets at June 30, 2005.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At June 30, 2005, the value of
securities subject to alternative minimum tax represented
5.8% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(g) At June 30, 2005, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$2,481,250.
(h) Identifies issues considered to be illiquid as to their marketability
(see Note 1 to the financial statements). These securities are valued at
fair value according to methods selected in good faith by the Fund's
Board of Directors. Information concerning such security holdings at
June 30, 2005, is as follows:
Security Acquisition Cost
date
------------------------------------------------------------------------
Contra Costa County
Revenue Bonds
Cypress Meadows Project
Series 1998E A.M.T.
7.00% 2028 09-21-98 $236,638
(i) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a
decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 2005. At June 30, 2005, the value of
inverse floaters represented 1.7% of net assets.
- --------------------------------------------------------------------------------
42 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Notes to investments in securities (continued)
(j) The Fund is entitled to receive principal and interest from the party
within parentheses after a day or a week's notice or upon maturity. The
maturity date disclosed represents the final maturity. Interest rate
varies to reflect current market conditions; rate shown is the effective
rate on June 30, 2005.
(k) At June 30, 2005, the cost of securities for federal income tax purposes
was $199,418,806 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $9,632,315
Unrealized depreciation (331,129)
-------------------------------------------------------------------------
Net unrealized appreciation $9,301,186
-------------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
43 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP Massachusetts Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (93.6%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Boston Metropolitan District
Unlimited General Obligation Refunding Bonds
Series 2002A
12-01-11 5.13% $2,050,000 $2,261,786
City of Boston
Revenue Bonds
Series 2004A
11-01-22 5.00 1,000,000 1,080,340
City of Boston
Unlimited General Obligation Bonds
Series 2005A
01-01-14 5.00 1,000,000 1,114,740
City of Boston
Unlimited General Obligation Refunding Bonds
Series 2003A (MBIA)
02-01-23 5.00 1,000,000 1,081,790
City of Springfield
Limited General Obligation Bonds
State Qualified
Series 2003 (MBIA)
01-15-20 5.25 1,405,000 1,551,738
Commonwealth of Massachusetts
Limited General Obligation Bonds
Consolidated Loan
Series 2002C (FSA)
11-01-15 5.50 2,500,000 2,901,599
Commonwealth of Massachusetts
Limited General Obligation Bonds
Consolidated Loan
Series 2002E
01-01-10 5.50 3,000,000 3,298,049
Commonwealth of Massachusetts
Limited General Obligation Refunding Bonds
Series 1997A (AMBAC)
08-01-10 5.75 2,185,000 2,452,466
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Commonwealth of Massachusetts
Pre-refunded Limited General Obligation Bonds
Consolidated Loan
Series 2002A (FGIC)
01-01-14 5.00% $2,500,000 $2,664,325
Commonwealth of Massachusetts
Pre-refunded Limited General Obligation Bonds
Consolidated Loan
Series 2002C
11-01-30 5.25 2,000,000 2,222,820
Commonwealth of Massachusetts
Pre-refunded Unlimited General Obligation Bonds
Consolidated Loan
Series 2003D
10-01-22 5.25 1,000,000 1,122,700
Commonwealth of Massachusetts
Revenue Bonds
Grant Anticipation Notes
Series 1998A (FSA)
06-15-09 5.25 1,500,000 1,621,035
Commonwealth of Massachusetts
Special Obligation Bonds Refunding Notes
Federal Highway Grant Anticipation
Series 2003A (FSA)
12-15-14 5.00 1,000,000 1,103,620
Commonwealth of Massachusetts
Unlimited General Obligation Bonds
Consolidated Loan
Series 2005A
03-01-16 5.00 750,000 827,865
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2001 (FSA)
07-01-16 5.50 500,000(c) 589,555
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
44 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Freetown Lakeville Regional School District
Unlimited General Obligation Bonds
Series 2003 (MBIA)
01-01-13 5.00% $1,865,000 $2,073,768
Massachusetts Bay Transportation Authority
Refunding Revenue Bonds
Series 1992B
03-01-16 6.20 1,500,000 1,780,155
Massachusetts Development Finance Agency
Pre-refunded Revenue Bonds
Briarwood
Series 2001B
12-01-30 8.25 750,000 940,283
Massachusetts Development Finance Agency
Revenue Bonds
1st Mortgage Berkshire Retirement
Series 1999
07-01-29 5.63 1,250,000 1,261,088
Massachusetts Development Finance Agency
Revenue Bonds
Boston University
Series 1999P
05-15-29 6.00 1,400,000 1,654,814
Massachusetts Development Finance Agency
Revenue Bonds
Devens Electric System
Series 2001
12-01-30 6.00 1,000,000 1,086,740
Massachusetts Development Finance Agency
Revenue Bonds
May Institute
Series 1999 (Radian Group Financial Guaranty)
09-01-29 5.75 1,000,000 1,072,890
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Boston College
Series 2003N
06-01-21 5.25 1,000,000 1,101,740
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Harvard University
Series 2001DD
07-15-35 5.00% $1,000,000 $1,046,520
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Harvard University
Series 2002FF
07-15-37 5.13 3,000,000 3,184,139
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Massachusetts Institute of Technology
Series 2003L
07-01-13 5.00 1,000,000 1,115,520
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Massachusetts Institute of Technology
Series 2004M
07-01-25 5.25 1,000,000 1,167,860
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
New England Medical Center Hospital
Series 2002H (FGIC)
05-15-08 5.00 1,655,000 1,748,690
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Williams College
Series 2003H
07-01-33 5.00 1,750,000 1,845,358
Massachusetts Housing Finance Agency
Revenue Bonds
Single Family
Series 2003-98 A.M.T.
06-01-23 4.88 985,000 989,827
Massachusetts Industrial Finance Agency
Revenue Bonds
TNG Marina Bay LLC Project
Series 1997 A.M.T.
12-01-27 7.50 1,000,000 1,037,750
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
45 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Massachusetts Industrial Finance Agency
Revenue Bonds
Tufts University
Series 1998H (MBIA)
02-15-28 4.75% $1,000,000 $1,016,860
Massachusetts Municipal Wholesale Electric Company
Revenue Bonds
Nuclear Project #5
Series 2001A (MBIA)
07-01-10 5.00 1,000,000 1,081,870
Massachusetts Port Authority
Revenue Bonds
Series 2003A (MBIA)
07-01-18 5.00 1,000,000 1,081,270
Massachusetts State College Building Authority
Refunding Revenue Bonds
Series 2003B (XLCA)
05-01-08 5.00 1,130,000 1,192,184
Massachusetts State Water Pollution Abatement
Pre-refunded Revenue Bonds
Pool Program
Series 2002-8
08-01-20 5.00 1,475,000 1,620,214
Massachusetts State Water Pollution Abatement
Revenue Bonds
Pool Program
Series 2004-10
08-01-34 5.00 1,000,000 1,059,020
Massachusetts State Water Pollution Abatement
Un-refunded Revenue Bonds
Pool Program
Series 2002-8
08-01-20 5.00 25,000 26,844
Massachusetts Water Resources Authority
Refunding Revenue Bonds
Series 1998B (FSA)
08-01-11 5.50 1,930,000 2,165,151
Massachusetts Water Resources Authority
Revenue Bonds
Series 1992A (FGIC)
07-15-19 6.50 2,000,000 2,474,660
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Massachusetts Water Resources Authority
Revenue Bonds
Series 2004D (MBIA)
08-01-27 4.75% $1,000,000 $1,035,900
Puerto Rico Electric Power Authority
Revenue Bonds
Series 1998DD (FSA)
07-01-13 5.13 1,000,000(c) 1,084,170
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2002A Inverse Floater (MBIA)
07-01-17 8.63 1,500,000(b,c) 2,047,710
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2004J (AMBAC)
07-01-36 5.00 625,000(c) 688,756
University of Massachusetts Building Authority
Refunding Revenue Bonds
Series 2003-1 (AMBAC)
11-01-21 5.25 1,000,000 1,113,100
University of Massachusetts Building Authority
Revenue Bonds
Series 1976 Escrowed to Maturity
05-01-11 7.50 60,000 68,305
Westfield
Limited General Obligation Refunding Bonds
Series 2003 (MBIA)
09-01-17 5.00 940,000 1,025,230
Woods Hole Martha's Vineyard & Nantucket Steamship
Authority
Revenue Bonds
Series 2004B
03-01-20 5.00 750,000 816,428
Worcester
Limited General Obligation Bonds
Series 2001A (FGIC)
08-15-12 5.50 1,400,000 1,567,440
- ------------------------------------------------------
Total municipal bonds
(Cost: $67,349,539) $70,166,682
- ------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
46 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Municipal notes (4.9%)
Issue(d,e,f) Effective Amount Value(a)
yield payable at
maturity
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Capital Asset Program
V.R.D.N. Series 1985B MBIA
07-01-10 2.29% $1,200,000 $1,200,000
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Capital Asset Program
V.R.D.N. Series 1985C MBIA
07-01-10 2.29 1,700,000 1,700,000
Municipal notes (continued)
Issue(d,e,f) Effective Amount Value(a)
yield payable at
maturity
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Capital Asset Program
V.R.D.N. Series 1985E (Fleet National Bank)
01-01-35 2.25% $760,000 $760,000
- ------------------------------------------------------
Total municipal notes
(Cost: $3,660,000) $3,660,000
- ------------------------------------------------------
Total investments in securities
(Cost: $71,009,539)(g) $73,826,682
======================================================
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a
decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 2005. At June 30, 2005, the value of
inverse floaters represented 2.7% of net assets.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
5.9% of net assets at June 30, 2005.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
- --------------------------------------------------------------------------------
47 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Notes to investments in securities (continued)
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At June 30, 2005, the value of
securities subject to alternative minimum tax represented
2.7% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party
within parentheses after a day or a week's notice or upon maturity. The
maturity date disclosed represents the final maturity. Interest rate
varies to reflect current market conditions; rate shown is the effective
rate on June 30, 2005.
(g) At June 30, 2005, the cost of securities for federal income tax purposes
was $71,007,429 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $2,869,627
Unrealized depreciation (50,374)
-------------------------------------------------------------------------
Net unrealized appreciation $2,819,253
-------------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
48 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP Michigan Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (97.1%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Allen Park Public School District
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-12 5.00% $1,000,000 $1,098,520
05-01-18 5.00 1,000,000 1,081,170
Anchor Bay School District
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-29 5.00 1,000,000 1,052,750
Chippewa Valley Schools
Unlimited General Obligation Refunding Bonds
Series 2003
(Qualified School Bond Loan Fund)
05-01-21 5.00 745,000 797,657
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2001 (FSA)
07-01-16 5.50 500,000(c) 589,555
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2004A
07-01-24 5.00 500,000(c) 529,680
Detroit
Revenue Bonds
Senior Lien
Series 2003A (MBIA)
07-01-34 5.00 1,375,000 1,453,746
Detroit
Revenue Bonds
Series 2003B (MBIA)
07-01-32 5.25 1,500,000 1,616,459
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Detroit
Unlimited General Obligation Bonds
Series 2001A-1 (MBIA)
04-01-15 5.38% $1,000,000 $1,112,460
Detroit City School District
Unlimited General Obligation Bonds
School Building & Site Improvement
Series 2003B (FGIC)
(Qualified School Bond Loan Fund)
05-01-11 5.25 1,000,000 1,109,140
Dickinson County Economic Development Corporation
Refunding Revenue Bonds
International Paper Company Projects
Series 2004A
11-01-18 4.80 500,000 512,815
Eastern Michigan University
Refunding Revenue Bonds
Series 2003A (FGIC)
06-01-28 5.00 1,000,000 1,056,730
Genesee County
Pre-refunded Limited General Obligation Bonds
Sewer Disposal System #3
Series 1996A (AMBAC)
04-01-15 5.40 1,000,000 1,040,020
Goodrich Area School District
Unlimited General Obligation Bonds
Series 2003B
(Qualified School Bond Loan Fund)
05-01-27 5.00 1,000,000 1,057,060
Grand Rapids Building Authority
Revenue Bonds
Series 2002A (AMBAC)
10-01-17 5.50 1,270,000 1,436,256
Howell Public Schools
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-29 5.00 1,000,000 1,052,750
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
49 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Hudsonville Public Schools
Unlimited General Obligation Refunding Bonds
Series 1997 (FGIC)
(Qualified School Bond Loan Fund)
05-01-27 5.15% $1,000,000 $1,031,390
Jackson
Limited General Obligation Bonds
Capital Appreciation
Downtown Development
Zero Coupon
Series 2001 (FSA)
06-01-21 5.58 1,450,000(b) 723,478
L'Anse Creuse Public Schools
Unlimited General Obligation Refunding Bonds
Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-11 4.00 1,000,000 1,039,440
Lansing Community College
Limited General Obligation Bonds
Series 2002 (FGIC)
05-01-12 5.00 1,000,000 1,103,650
Lawton Community Schools
Unlimited General Obligation Bonds
Series 2001
(Qualified School Bond Loan Fund)
05-01-31 5.00 1,000,000 1,037,760
Lincoln Park School District
Pre-refunded Unlimited General Obligation Bonds
Series 1996 (FGIC)
(Qualified School Bond Loan Fund)
05-01-26 5.90 1,000,000 1,036,500
Manchester Community Schools
Unlimited General Obligation Refunding Bonds
Building & Site
Series 2001
(Qualified School Bond Loan Fund)
05-01-26 5.00 1,400,000 1,466,780
Michigan Municipal Bond Authority
Revenue Bonds
Clean Water State Revolving Fund
Series 2001
10-01-14 5.00 500,000 545,765
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Michigan Municipal Bond Authority
Revenue Bonds
Clean Water State Revolving Fund
Series 2002
10-01-07 5.25% $1,000,000 $1,054,930
10-01-20 5.38 1,000,000 1,114,150
10-01-21 5.38 1,000,000 1,113,480
Michigan Municipal Bond Authority
Revenue Bonds
State Revolving Fund
Series 1997
10-01-14 5.25 250,000 264,183
10-01-15 5.25 250,000 264,183
Michigan Public Power Agency
Refunding Revenue Bonds
Belle River Project
Series 2002A (MBIA)
01-01-09 5.25 2,000,000 2,151,319
01-01-14 5.25 500,000 562,980
Michigan State Building Authority
Refunding Revenue Bonds
Facilities Program
Series 2003 II (MBIA)
10-15-29 5.00 1,000,000 1,058,240
Michigan State Building Authority
Revenue Bonds
Facilities Program
Series 2000 I
10-15-16 5.25 1,000,000 1,086,080
Michigan State Building Authority
Revenue Bonds
Facilities Program
Series 2001 I Escrowed to Maturity
10-15-08 5.50 500,000 539,990
Michigan State Building Authority
Revenue Bonds
State Police Communications System
Series 2002 Escrowed to Maturity
10-01-07 4.00 1,000,000 1,026,900
Michigan State Hospital Finance Authority
Revenue Bonds
McLaren Health Care
Series 2005C
08-01-35 5.00 1,000,000 1,029,480
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
50 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Michigan State Hospital Finance Authority
Revenue Bonds
Oakwood Obligated Group
Series 2003
11-01-18 5.50% $1,000,000 $1,090,060
Michigan State South Central Power Agency
Refunding Revenue Bonds
Series 2002 (AMBAC)
11-01-10 5.00 2,000,000 2,180,839
Michigan Strategic Fund
Refunding Revenue Bonds
Detroit Edison
Series 1990BB (MBIA)
07-15-08 7.00 1,000,000 1,115,150
Michigan Strategic Fund
Refunding Revenue Bonds
The Oxford Institute
Series 1987A Escrowed to Maturity
08-15-05 7.88 25,000 25,151
Plymouth-Canton Community School District
Unlimited General Obligation Refunding Bonds
Series 2003
(Qualified School Bond Loan Fund)
05-01-15 5.25 600,000 671,256
Pontiac Tax Increment Finance Authority
Refunding Revenue Bonds
Tax Increment
Development Area #2
Series 2002 (ACA)
06-01-22 5.63 1,000,000 1,069,130
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2002C (XLCA)
07-01-13 5.50 1,000,000(c) 1,154,100
Saline Area Schools
Unlimited General Obligation Bonds
Series 2000A
(Qualified School Bond Loan Fund)
05-01-09 4.75 1,000,000 1,062,670
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
South Lyon Community Schools
Unlimited General Obligation Bonds
School Building & Site
Series 2003 (FGIC)
05-01-28 5.00% $1,000,000 $1,056,360
Southfield Public Schools
Unlimited General Obligation Bonds
School Building & Site
Series 2003A
(Qualified School Bond Loan Fund)
05-01-22 5.25 1,025,000 1,121,043
State of Michigan
Certificate of Participation
Series 2004A (MBIA)
09-01-31 4.25 750,000 781,710
State of Michigan
Unlimited General Obligation Bonds
Environmental Programs
Series 2003A
05-01-10 5.00 1,000,000 1,086,740
Summit Academy
Certificate of Participation
Series 1998
08-01-18 7.00 500,000 500,915
Summit Academy North Public School Academy
Certificate of Participation
Series 2001
07-01-30 7.38 750,000 791,333
Van Buren Township Downtown Development Authority
Tax Allocation Bonds
Series 1994
10-01-16 8.40 920,000 936,670
Warren Consolidated School District
Unlimited General Obligation Bonds
School Building & Site
Series 2003 (FGIC)
05-01-13 5.00 875,000 972,283
Waverly Community School
Pre-refunded Unlimited General Obligation Bonds
Series 2000 (FGIC)
05-01-17 5.25 1,000,000 1,099,750
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
51 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d)
Wayne State University
Revenue Bonds
Series 1999 (FGIC)
11-15-19 5.25% $1,000,000 $1,077,040
Western Michigan University
Refunding Revenue Bonds
Series 2003 (MBIA)
11-15-23 4.25 1,000,000 1,009,070
Western Township Utilities Authority
Limited General Obligation Bonds
Series 2002 (FGIC)
01-01-08 5.00 1,500,000 1,579,080
Williamston Community School District
Unlimited General Obligation Bonds
Series 1996 (MBIA)
(Qualified School Bond Loan Fund)
05-01-25 5.50 1,000,000 1,202,350
Wyandotte City School District
Unlimited General Obligation Refunding Bonds
Building & Site
Series 2002
(Qualified School Bond Loan Fund)
05-01-14 5.38 1,250,000 1,391,025
- ------------------------------------------------------
Total municipal bonds
(Cost: $56,641,910) $58,821,171
- ------------------------------------------------------
Municipal notes (1.7%)
Issue(d,e,f) Effective Amount Value(a)
yield payable at
maturity
Detroit
Revenue Bonds
Senior Lien
V.R.D.N. Series 2003B (Dexia Credit Local) FSA
07-01-33 2.25% $600,000 $600,000
University of Michigan
Refunding Revenue Bonds
University of Michigan Hospitals
V.R.D.N. Series 1992A
12-01-19 2.25 450,000 450,000
- ------------------------------------------------------
Total municipal notes
(Cost: $1,050,000) $1,050,000
- ------------------------------------------------------
Total investments in securities
(Cost: $57,691,910)(g) $59,871,171
======================================================
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(c) Municipal obligations include debt obligations issued by or on behalf
of states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities
represented 3.8% of net assets at June 30, 2005.
- --------------------------------------------------------------------------------
52 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Notes to investments in securities (continued)
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party
within parentheses after a day or a week's notice or upon maturity. The
maturity date disclosed represents the final maturity. Interest rate
varies to reflect current market conditions; rate shown is the effective
rate on June 30, 2005.
(g) At June 30, 2005, the cost of securities for federal income tax purposes
was $57,691,910 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $2,191,735
Unrealized depreciation (12,474)
------------------------------------------------------------------------
Net unrealized appreciation $2,179,261
------------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
53 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP Minnesota Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (97.2%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Anoka County Housing & Redevelopment Authority
Revenue Bonds
Epiphany Assisted Living LLC Project
Series 1999
12-01-29 7.40% $3,560,000(i) $3,252,238
Anoka County Housing & Redevelopment Authority
Unlimited General Obligation Bonds
Housing Development
Series 2004 (AMBAC)
02-01-34 5.00 1,355,000 1,428,306
Anoka-Hennepin Independent School District #11
Unlimited General Obligation Bonds
Series 2001A
(School District Credit Enhancement Program)
02-01-09 5.00 2,415,000 2,582,360
02-01-10 5.00 1,000,000 1,081,680
02-01-13 5.00 4,175,000 4,506,829
02-01-15 5.00 1,990,000 2,137,738
02-01-16 5.00 2,000,000 2,147,420
Austin Housing & Redevelopment Authority
Revenue Bonds
Courtyard Residence Project
Series 2000A
01-01-32 7.25 2,000,000 2,135,820
Bloomington Independent School District #271
Unlimited General Obligation Bonds
Building
Series 1999B
(School District Credit Enhancement Program)
02-01-15 5.00 1,500,000 1,600,740
Bloomington Independent School District #271
Unlimited General Obligation Bonds
Series 2001A (FSA)
(School District Credit Enhancement Program)
02-01-24 5.13 2,000,000 2,139,540
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
City of Breckenridge
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00% $4,000,000 $4,209,480
City of Brooklyn Center
Refunding Revenue Bonds
Four Courts Apartments Project
Series 1995B A.M.T.
06-15-09 7.58 1,745,000 1,738,735
City of Chaska
Refunding Revenue Bonds
Generating Facilities
Series 2005A
10-01-30 5.00 2,000,000 2,086,180
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2002B (MBIA)
05-15-14 5.50 2,050,000 2,327,550
05-15-15 5.50 2,160,000 2,448,187
05-15-16 5.50 2,200,000 2,483,470
05-15-17 5.50 1,295,000 1,455,956
City of Minneapolis
Unlimited General Obligation Bonds
Convention Center
Series 2002
12-01-12 5.00 1,500,000 1,625,970
City of Minneapolis
Unlimited General Obligation Bonds
Convention Center
Series 2002A
12-01-08 5.00 4,315,000 4,618,042
City of Minneapolis
Unlimited General Obligation Bonds
Various Purpose
Series 2001
12-01-11 5.00 3,035,000 3,352,613
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
54 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
City of Sartell
Revenue Bonds
Foundation for Health Care Project
Series 1999A
09-01-29 6.63% $1,000,000 $1,036,970
City of Sartell
Revenue Bonds
Foundation for Health Care Project
Series 2001A
09-01-30 8.00 1,000,000 1,079,580
City of St. Paul
Refunding Revenue Bonds
Series 2003D (AMBAC)
12-01-08 4.00 3,500,000 3,624,985
City of St. Paul
Unlimited General Obligation Bonds
Capital Improvement
Series 2003A
03-01-09 3.50 1,875,000 1,910,419
City of Vadnais Heights
Refunding Revenue Bonds
Cottages of Vadnais Heights
Series 1997 A.M.T.
07-15-09 7.00 1,080,000 1,085,238
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2001 (FSA)
07-01-16 5.50 1,500,000(c) 1,768,665
County of Anoka
Limited General Obligation Refunding Bonds
Capital Improvement
Series 2001C (MBIA)
02-01-09 4.60 2,960,000 3,128,365
County of Ramsey
Unlimited General Obligation Refunding Bonds
Capital Improvement Plan
Series 2002B
02-01-10 5.25 2,150,000 2,357,970
02-01-13 5.25 3,560,000 3,900,977
02-01-14 5.25 3,840,000 4,193,510
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
County of Washington
Unlimited General Obligation Bonds
Capital Improvement Plan
Series 2000A
02-01-20 5.50% $1,000,000 $1,097,560
Eden Prairie
Refunding Revenue Bonds
Sterling Ponds Project
Series 1999A A.M.T.
12-01-29 6.25 5,240,000(i) 4,970,140
Eden Prairie
Refunding Revenue Bonds
Sterling Ponds Project
Series 1999B A.M.T.
12-01-29 6.25 505,000(i) 478,993
Edina Independent School District #273
Unlimited General Obligation Bonds
Series 2004
02-01-12 4.00 3,700,000 3,860,654
02-01-22 4.25 3,000,000 3,028,950
02-01-23 4.50 3,000,000 3,087,180
02-01-24 4.50 3,400,000 3,512,234
Elk River Independent School District #728
Unlimited General Obligation Bonds
Series 2002 II Inverse Floater (FSA)
(School District Credit Enhancement Program)
02-01-18 10.88 1,200,000(h) 1,597,980
02-01-19 10.88 1,150,000(h) 1,516,942
02-01-20 10.88 950,000(h) 1,239,247
02-01-21 10.91 1,285,000(h) 1,661,222
Elk River Independent School District #728
Unlimited General Obligation Bonds
Series 2002A (FSA)
(School District Credit Enhancement Program)
02-01-16 5.00 3,000,000 3,290,640
Hennepin County
Unlimited General Obligation Bonds
Series 2003
12-01-06 4.00 2,000,000 2,037,740
12-01-23 4.75 2,000,000 2,083,920
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
55 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Hopkins Independent School District #270
Unlimited General Obligation Refunding Bonds
Series 2002B
(School District Credit Enhancement Program)
02-01-09 4.00% $2,925,000 $3,029,276
02-01-14 5.25 3,680,000 4,030,520
Lake Superior Independent School District #381
Unlimited General Obligation Bonds
Building
Series 2002A (FSA)
(School District Credit Enhancement Program)
04-01-13 5.00 1,795,000 1,990,117
Lakeville Independent School District #194
Unlimited General Obligation Bonds
Series 1997A
(School District Credit Enhancement Program)
02-01-22 5.13 2,400,000 2,528,208
Maplewood
Revenue Bonds
Care Institute
Series 1994
01-01-24 7.75 3,775,000(b,i) 2,265,000
Marshall Independent School District #413
Unlimited General Obligation Bonds
Series 2003A (FSA)
(School District Credit Enhancement Program)
02-01-19 4.13 1,560,000 1,581,918
Metropolitan Council Minneapolis-St. Paul
Metropolitan Area
Unlimited General Obligation Bonds
Transportation
Series 2002C
02-01-08 5.00 3,240,000 3,420,403
02-01-09 5.00 3,240,000 3,474,770
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2003
12-01-12 5.25 1,000,000 1,088,050
12-01-15 5.13 1,500,000 1,597,320
12-01-16 5.25 1,250,000 1,340,238
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
HealthSpan
Series 1993A (AMBAC)
11-15-18 4.75% $10,500,000 $10,588,934
Minneapolis & St. Paul
Metropolitan Airports Commission
Revenue Bonds
Series 1998A (AMBAC)
01-01-24 5.20 4,000,000 4,202,120
Minneapolis & St. Paul
Metropolitan Airports Commission
Revenue Bonds
Series 1999B (FGIC) A.M.T.
01-01-16 5.63 2,920,000 3,152,841
Minneapolis & St. Paul
Metropolitan Airports Commission
Revenue Bonds
Series 2001B (FGIC) A.M.T.
01-01-16 5.75 4,875,000 5,341,733
Minneapolis & St. Paul
Metropolitan Airports Commission
Revenue Bonds
Series 2001C (FGIC)
01-01-18 5.50 2,000,000 2,212,800
01-01-32 5.25 7,000,000 7,430,709
Minneapolis & St. Paul
Metropolitan Airports Commission
Subordinated Refunding Revenue Bonds
Series 2005C (FGIC)
01-01-25 5.00 4,000,000 4,270,840
01-01-26 5.00 4,000,000 4,270,840
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 1996-1
06-01-11 6.00 980,000 1,004,990
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 1997A-7
06-01-12 5.50 250,000 263,425
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
56 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 2001A-2 A.M.T.
06-01-19 5.88% $1,000,000 $1,086,720
Minneapolis Special School District #1
Certificate of Participation
Series 1998B
(School District Credit Enhancement Program)
02-01-07 4.10 1,000,000 1,021,820
Minneapolis Special School District #1
Refunding Revenue Bonds
Certificate of Participation
Series 2002B (FSA)
(School District Credit Enhancement Program)
02-01-10 5.00 1,000,000 1,080,790
02-01-11 5.00 1,040,000 1,134,224
Minneapolis Special School District #1
Unlimited General Obligation Bonds
Series 2001 (FSA)
(School District Credit Enhancement Program)
02-01-09 5.00 1,325,000 1,418,214
Minneapolis Special School District #1
Unlimited General Obligation Refunding Bonds
Series 2003 (FSA)
(School District Credit Enhancement Program)
02-01-07 3.00 2,000,000 2,010,980
Minnesota Agricultural & Economic Development Board
Pre-refunded Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38 4,845,000 5,661,092
11-15-29 6.38 2,910,000 3,400,160
Minnesota Agricultural & Economic Development Board
Revenue Bonds
Health Care System - Benedictine Health
Series 1999A (MBIA)
02-15-16 4.75 1,000,000 1,054,700
Minnesota Agricultural & Economic Development Board
Un-refunded Balance Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38 155,000 175,604
11-15-29 6.38 90,000 101,823
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Minnesota Business Academy
Taxable Capital Appreciation Note
Zero Coupon
Series 2002
06-30-07 6.00% $292,000(b,g,i) $58,400
Minnesota Higher Education Facilities Authority
Revenue Bonds
Macalester College
6th Series 2004B
03-01-17 5.00 2,395,000 2,619,914
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
5th Series 2004Y
10-01-34 5.25 2,800,000 2,998,604
Minnesota Housing Finance Agency
Revenue Bonds
Series 2002R II Inverse Floater A.M.T.
07-01-33 11.68 1,430,000(h) 1,566,880
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1996J A.M.T.
07-01-21 5.60 125,000 128,384
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1997K A.M.T.
01-01-26 5.75 1,205,000 1,235,101
Minnesota Public Facilities Authority
Revenue Bonds
Series 1998A
03-01-11 5.00 2,500,000 2,631,075
Minnesota Public Facilities Authority
Revenue Bonds
Series 2001A
03-01-08 5.00 3,000,000 3,166,710
03-01-20 5.00 4,000,000 4,248,320
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
57 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Minnesota Public Facilities Authority
Revenue Bonds
Series 2002B
03-01-10 5.00% $2,500,000 $2,714,400
03-01-13 5.25 2,500,000 2,825,400
03-01-14 5.25 2,500,000 2,840,050
Minnesota State Municipal Power Agency
Revenue Bonds
Series 2004A
10-01-29 5.13 3,500,000 3,717,945
Monticello Big Lake Community Hospital District
Revenue Bonds
Health Care Facilities
Series 1998A
(Radian Group Financial Guaranty)
12-01-19 5.75 1,600,000 1,738,176
Northern Municipal Power Agency
Refunding Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1989A (AMBAC)
01-01-10 3.80 2,000,000(g) 1,713,220
Northern Municipal Power Agency
Refunding Revenue Bonds
Series 1998B (AMBAC)
01-01-20 4.75 5,000,000 5,179,600
Northern Municipal Power Agency
Revenue Bonds
Series 1997 (FSA)
01-01-08 5.50 1,250,000 1,328,025
Northern Municipal Power Agency
Revenue Bonds
Series 1998 (FSA)
01-01-14 5.38 1,100,000 1,200,309
Osseo Independent School District #279
Unlimited General Obligation Bonds
School Building
Series 2000A
(School District Credit Enhancement Program)
02-01-13 5.75 3,200,000 3,585,344
02-01-14 5.75 1,100,000 1,231,373
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Osseo Independent School District #279
Unlimited General Obligation Bonds
Series 2002A (FSA)
(School District Credit Enhancement Program)
02-01-11 5.00% $1,570,000 $1,716,434
02-01-12 5.00 3,455,000 3,807,859
02-01-15 5.25 3,585,000 3,976,912
Osseo Independent School District #279
Unlimited General Obligation Refunding Bonds
Series 2001B
(School District Credit Enhancement Program)
02-01-09 5.00 2,860,000 3,058,198
Puerto Rico Electric Power Authority
Revenue Bonds
Series 1998DD (FSA)
07-01-13 5.13 3,000,000(c) 3,252,510
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2003NN (MBIA)
07-01-32 5.00 2,820,000(c) 3,003,215
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 2,250,000(c) 2,508,075
Puerto Rico Public Finance Corporation
Revenue Bonds
Commonwealth Appropriation
Series 2004A (MBIA)
08-01-29 5.25 2,000,000(c) 2,222,360
Richfield
Refunding Revenue Bonds
Richfield Senior Housing Project
Series 2004A
12-01-39 6.63 1,650,000 1,688,907
Shakopee
Revenue Bonds
St. Francis Regional Medical Center Series 2004
09-01-25 5.10 3,300,000 3,439,458
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
58 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Southern Minnesota Municipal Power Agency
Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1994A (MBIA)
01-01-19 6.67% $17,000,000(g) $9,603,129
Southern Minnesota Municipal Power Agency
Revenue Bonds
Series 2002A (AMBAC)
01-01-17 5.25 6,000,000 6,851,699
Southern Minnesota Municipal Power Agency
Revenue Bonds
Series 2003A (MBIA)
01-01-11 5.00 5,500,000 6,000,279
St. Cloud Housing & Redevelopment Authority
Revenue Bonds
State University Foundation Project
Series 2002
05-01-18 5.13 3,000,000 3,253,530
St. Paul Housing & Redevelopment Authority
Refunding Revenue Bonds
FNMA Mortgage-backed Securities Program
Series 1995 (FNMA)
03-01-28 6.80 310,000 317,115
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Community of Peace Academy Project
Series 2001A
12-01-30 7.88 2,390,000 2,595,014
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Lyngblomsten Care Center Housing Project
Series 1993
11-01-06 7.13 380,000 382,212
11-01-17 7.13 1,545,000 1,557,206
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Minnesota Business Academy Project
Series 2000
03-01-30 8.00 3,675,000(b,i) 2,900,751
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Rental - Lyngblomsten Housing Project
Series 1993
11-01-24 7.00% $1,720,000 $1,724,678
St. Paul Port Authority
Revenue Bonds
Office Building at Cedar Street
Series 2003
12-01-23 5.00 5,000,000 5,342,600
12-01-27 5.13 5,350,000 5,720,595
State of Minnesota
Unlimited General Obligation Bonds
Series 2001
10-01-10 5.00 5,000,000 5,470,850
10-01-14 5.00 4,000,000 4,377,880
10-01-15 5.00 4,455,000 4,841,872
State of Minnesota
Unlimited General Obligation Bonds
Series 2002
08-01-06 5.00 5,000,000 5,125,650
08-01-10 5.00 4,075,000 4,451,530
11-01-15 5.25 3,575,000 4,022,376
State of Minnesota
Unlimited General Obligation Refunding Bonds
Various Purpose
Series 1998
11-01-08 5.00 1,170,000 1,251,011
Steele County
Revenue Bonds
Elderly Housing Project
Series 2000
06-01-30 6.88 2,205,000 2,432,975
Stillwater
Revenue Bonds
Health System Obligation Group
Series 2005
06-01-25 5.00 1,750,000 1,833,475
06-01-35 5.00 3,595,000 3,716,871
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
59 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
Todd Morrison Cass & Wadena Counties
United Hospital District
Unlimited General Obligation Bonds
Health Care Facilities-Lakewood
Series 2004
12-01-34 5.00% $2,500,000 $2,567,850
University of Minnesota
Revenue Bonds
Residual
Inverse Floater Series 2002
07-01-21 11.67 2,830,000(h) 4,334,088
University of Minnesota
Revenue Bonds
Series 1996A
07-01-13 5.75 2,000,000 2,324,760
Virginia Housing & Redevelopment Authority
Revenue Bonds
Series 2005
10-01-20 5.13 1,350,000 1,402,772
Western Minnesota Municipal Power Agency
Refunding Revenue Bonds
Series 1996A (AMBAC)
01-01-06 6.25 1,285,000 1,307,629
Western Minnesota Municipal Power Agency
Revenue Bonds
Series 2003A (MBIA)
01-01-26 5.00 7,250,000 7,690,944
01-01-30 5.00 5,000,000 5,271,050
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
School Building
Series 2002C (FSA)
(School District Credit Enhancement Program)
02-01-08 5.00 1,310,000 1,380,609
02-01-09 5.00 1,375,000 1,471,731
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(d,e)
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
Series 2002B (FGIC)
(School District Credit Enhancement Program)
02-01-13 5.00% $1,405,000 $1,541,524
02-01-14 5.00 1,480,000 1,613,777
Willmar
Unlimited General Obligation Bonds
Rice Memorial Hospital Project
Series 2002 (FSA)
02-01-11 5.00 1,025,000 1,116,779
02-01-12 5.00 1,120,000 1,229,525
02-01-13 5.00 1,200,000 1,326,324
- ------------------------------------------------------
Total municipal bonds
(Cost: $373,274,435) $387,893,932
- ------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
60 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Municipal notes (1.3%)
Issue(d,e,f) Effective Amount Value(a)
yield payable at
maturity
Cohasset
Refunding Revenue Bonds
Minnesota Power & Light Company Project
V.R.D.N. Series 1997A
(ABN Amro Bank)
06-01-20 2.30% $1,300,000 $1,300,000
Cohasset
Refunding Revenue Bonds
Minnesota Power & Light Company Project
V.R.D.N. Series 1997D
(ABN Amro Bank)
12-01-07 2.30 210,000 210,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2000H (Harris Trust & Savings Bank)
10-01-30 2.27 900,000 900,000
Municipal notes (continued)
Issue(d,e,f) Effective Amount Value(a)
yield payable at
maturity
Robbinsdale
Revenue Bonds
North Memorial Healthcare
V.R.D.N Series 2003 AMBAC
05-15-33 2.70% $1,950,000 $1,950,000
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Minnesota Public Radio Project
V.R.D.N. Series 2005 (Allied Irish Bank)
10-01-25 2.30 770,000 770,000
- ------------------------------------------------------
Total municipal notes
(Cost: $5,130,000) $5,130,000
- ------------------------------------------------------
Total investments in securities
(Cost: $378,404,435)(j) $393,023,932
======================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
61 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is
in default as to payment of interest and/or principal.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
3.2% of net assets at June 30, 2005.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At June 30, 2005, the value of
securities subject to alternative minimum tax represented
5.2% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party
within parentheses after a day or a week's notice or upon maturity. The
maturity date disclosed represents the final maturity. Interest rate
varies to reflect current market conditions; rate shown is the effective
rate on June 30, 2005.
(g) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(h) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a
decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 2005. At June 30, 2005, the value of
inverse floaters represented 3.0% of net assets.
(i) Identifies issues considered to be illiquid as to their marketability.
Information concerning such security holdings at June 30, 2005, is as
follows:
Security Acquisition Cost
dates
---------------------------------------------------------------------------------------
Anoka County Housing & Redevelopment Authority
Revenue Bonds
Epiphany Assisted Living LLC Project
Series 1999
7.40% 2029 11-22-99 $3,520,070
- --------------------------------------------------------------------------------
62 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Notes to investments in securities (continued)
Security Acquisition Cost
dates
---------------------------------------------------------------------------------------
Eden Prairie
Refunding Revenue Bonds
Sterling Ponds Project
Series 1999A A.M.T.
6.25% 2029 04-27-99 thru 12-02-04 $5,240,000
Eden Prairie
Refunding Revenue Bonds
Sterling Ponds Project
Series 1999B A.M.T.
6.25% 2029 04-27-99 505,000
Maplewood
Revenue Bonds
Care Institute
Series 1994
7.75% 2024 03-02-94 3,677,432
Minnesota Business Academy
Taxable Capital Appreciation Note
Zero Coupon Series 2002
6.00% 2007 09-30-02 258,394
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Minnesota Business Academy Project
Series 2000
8.00% 2030 03-09-00 3,581,001
(j) At June 30, 2005, the cost of securities for federal income tax purposes
was $378,022,067 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $18,168,201
Unrealized depreciation (3,166,336)
-------------------------------------------------------------------------
Net unrealized appreciation $15,001,865
-------------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
63 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP New York Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (97.7%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Albany Municipal Water Finance Authority
Revenue Bonds
Series 2003A (MBIA)
12-01-14 5.00% $2,550,000 $2,681,987
Battery Park City Authority
Revenue Bonds
Series 2003A
11-01-22 5.25 1,000,000 1,101,040
City of New York
Unlimited General Obligation Bonds
Series 2000II Inverse Floater (FGIC)
05-15-16 12.82 830,000(g) 1,178,285
City of New York
Unlimited General Obligation Bonds
Series 2002C (XLCA)
03-15-12 5.00 1,000,000 1,091,870
City of New York
Unlimited General Obligation Bonds
Series 2002E
08-01-16 5.75 2,000,000 2,250,280
City of New York
Unlimited General Obligation Bonds
Series 2003I
03-01-27 5.38 2,000,000 2,175,520
City of New York
Unlimited General Obligation Bonds
Series 2003J
06-01-18 5.50 2,000,000 2,214,320
06-01-20 5.50 2,000,000 2,204,320
City of New York
Unlimited General Obligation Bonds
Series 2004D
11-01-34 5.00 1,000,000 1,054,010
City of New York
Unlimited General Obligation Bonds
Series 2004E (FSA)
11-01-22 5.00 750,000 811,470
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2004A
07-01-24 5.00% $500,000(d) $529,680
County of Erie
Unlimited General Obligation Bonds
Series 1995B (FGIC)
06-15-25 5.50 700,000 718,907
County of Monroe
Unlimited General Obligation
Refunding Bonds
Public Improvement
Series 1996 (MBIA)
03-01-15 6.00 1,250,000 1,487,113
Erie County Water Authority
Refunding Revenue Bonds
Series 1990A Escrowed to Maturity
(AMBAC)
12-01-08 6.00 1,765,000 1,874,889
Long Island Power Authority
Revenue Bonds
Series 1998-8 (AMBAC)
04-01-09 5.25 1,000,000 1,079,280
Metropolitan Transportation Authority
Pre-refunded Revenue Bonds
Series 1998A (FGIC)
04-01-28 4.75 1,000,000 1,103,090
Metropolitan Transportation Authority
Refunding Revenue Bonds
Series 2002A
01-01-16 5.75 500,000 585,095
Metropolitan Transportation Authority
Refunding Revenue Bonds
Series 2002A (AMBAC)
11-15-19 5.50 1,000,000 1,126,640
Metropolitan Transportation Authority
Revenue Bonds
Series 2002A (FSA)
11-15-26 5.50 1,500,000 1,672,470
See accompanying notes to investments in securities.
- -------------------------------------------------------------------------------
64 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
New York City Housing Development
Revenue Bonds
Capital Fund New York City Housing
Authority Program
Series 2005A (FGIC)
07-01-25 5.00% $1,500,000 $1,608,435
New York City Municipal Water Finance Authority
Revenue Bonds
Refunded Balance
Series 1996B (MBIA)
06-15-26 5.75 320,000 331,853
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2002A
06-15-29 5.00 1,000,000 1,050,790
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2004A
06-15-39 5.00 1,000,000 1,058,330
New York City Transitional Finance Authority
Pre-refunded Revenue Bonds
Future Tax Secured
Series 1999C
05-01-25 5.50 440,000 485,844
New York City Transitional Finance Authority
Revenue Bonds
Future Tax Secured
Series 2003D
02-01-31 5.00 1,000,000 1,052,050
New York City Transitional Finance Authority
Revenue Bonds
Future Tax Secured
Series 2004C
02-01-33 5.00 1,000,000 1,056,310
New York City Transitional Finance Authority
Un-refunded Revenue Bonds
Future Tax
Series 1999C
05-01-25 5.50 560,000 608,787
New York City Trust for Cultural Resources
Revenue Bonds
Museum of American Folk Art
Series 2000 (ACA)
07-01-22 6.00 1,000,000 1,104,000
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
New York Counties Tobacco Trust II
Revenue Bonds
Tobacco Settlement Pass Thru Bonds
Series 2001
06-01-35 5.63% $500,000 $519,475
New York Local Government Assistance Corporation
Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1993C (MBIA)
04-01-14 3.65 1,000,000(f) 721,600
New York Mortgage Agency
Revenue Bonds
Series II 2002B
Inverse Floater A.M.T.
04-01-32 11.28 1,000,000(g) 1,071,430
New York Power Authority
Revenue Bonds
Series 2000A
11-15-30 5.25 1,000,000 1,066,160
New York State Dormitory Authority
Pre-refunded Revenue Bonds
Series 1990B
05-15-11 7.50 415,000 488,040
New York State Dormitory Authority
Revenue Bonds
Brooklyn Law School
Series 2003B (XLCA)
07-01-30 5.13 1,000,000 1,069,200
New York State Dormitory Authority
Revenue Bonds
Catholic Health L.I. Obligation Group
Series 2004
07-01-27 5.00 1,000,000 1,032,140
New York State Dormitory Authority
Revenue Bonds
City University System Consolidated
4th Generation
Series 2003A (MBIA)
07-01-09 5.25 1,500,000 1,629,435
New York State Dormitory Authority
Revenue Bonds
City University System Consolidated
Series 1993A
07-01-13 5.75 3,000,000 3,390,869
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
65 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
New York State Dormitory Authority
Revenue Bonds
Hospital Insured Mortgage
Series 2004A (FHA/FSA)
02-15-13 5.25% $500,000 $559,045
08-15-13 5.25 500,000 562,415
New York State Dormitory Authority
Revenue Bonds
Memorial Sloan-Kettering Center
Series 2003-1 (MBIA)
07-01-21 5.00 1,000,000 1,075,570
New York State Dormitory Authority
Revenue Bonds
Montefiore Hospital
Series 2004 (FGIC/FHA)
08-01-19 5.00 735,000 802,723
New York State Dormitory Authority
Revenue Bonds
Pratt Institute
Series 1999
(Radian Group Financial Guaranty)
07-01-20 6.00 1,500,000 1,675,245
New York State Dormitory Authority
Revenue Bonds
Series 2002B (AMBAC)
11-15-26 5.25 1,000,000 1,107,120
New York State Dormitory Authority
Un-refunded Revenue Bonds
Series 1990B
05-15-11 7.50 1,200,000 1,369,320
New York State Energy Research & Development Authority
Revenue Bonds
New York State Electric & Gas
Series 1985B (MBIA)
10-15-15 4.00 1,000,000 1,015,170
New York State Energy Research & Development Authority
Revenue Bonds
Residual Certificates
Series 2000-379 Inverse Floater (MBIA)
01-01-21 11.70 330,000(g) 362,541
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
New York State Environmental Facilities Corporation
Revenue Bonds
New York City Municipal Water Financing Project
2nd Series 2004
06-15-26 5.00% $1,000,000 $1,078,430
New York State Environmental Facilities Corporation
Revenue Bonds
Revolving Funds
New York City Municipal Water Project
Series 2002B
06-15-31 5.00 1,000,000 1,054,490
New York State Environmental Facilities Corporation
Revenue Bonds
Revolving Funds
New York City Municipal Water Project
Series 2002K
06-15-28 5.00 1,000,000 1,060,070
New York State Environmental Facilities Corporation
Revenue Bonds
Revolving Funds
Series 2003
06-15-32 5.00 1,000,000 1,063,940
New York State Thruway Authority
Revenue Bonds
2nd Generation
Series 2003B (FSA)
04-01-21 4.75 835,000 879,105
New York State Thruway Authority
Revenue Bonds
2nd Generation
Series 2004A (MBIA)
04-01-19 5.00 1,000,000 1,089,220
New York State Thruway Authority
Revenue Bonds
Transportation
Series 2003A (MBIA)
03-15-22 5.00 1,000,000 1,072,440
New York State Urban Development Corporation
Refunding Revenue Bonds
Service Contract
Series 2005 (FSA)
01-01-17 5.00 1,000,000 1,111,240
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
66 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
New York State Urban Development Corporation
Revenue Bonds
Personal Income Tax
Series 2002C-1
03-15-11 5.25% $1,000,000 $1,101,480
New York State Urban Development Corporation
Revenue Bonds
Series 2002A (XLCA)
01-01-11 5.25 1,000,000 1,104,510
New York State Urban Development Corporation
Revenue Bonds
Series 2002C (XLCA)
01-01-09 4.00 1,545,000 1,601,485
Niagara Falls Public Water Authority
Revenue Bonds
Series 2003A (MBIA)
07-15-28 5.50 1,000,000 1,027,090
Port Authority of New York & New Jersey
Revenue Bonds 5th Installment
Special Project Series 1996-4 A.M.T.
10-01-19 6.75 1,500,000 1,584,840
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 134th
Series 2004
07-15-34 5.00 1,000,000 1,063,100
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 1,000,000(d) 1,114,700
Puerto Rico Public Finance Corporation
Revenue Bonds
Commonwealth Appropriation
Series 2004A (MBIA)
08-01-29 5.25 1,000,000(d) 1,111,180
Sales Tax Asset Receivables Corporation
Revenue Bonds
Series 2004A (MBIA)
10-15-23 5.00 750,000 816,698
Suffolk County Industrial Development Agency
Revenue Bonds
1st Mortgage Jeffersons Ferry
Series 1999A
11-01-28 7.25 1,500,000 1,627,995
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Tobacco Settlement Financing Authority
Asset-backed Revenue Bonds
Series 2003A-1
06-01-16 5.50% $500,000 $543,035
Tobacco Settlement Financing Authority
Revenue Bonds
Series 2003C-1
06-01-14 5.50 500,000 536,735
06-01-15 5.50 1,000,000 1,087,000
Triborough Bridge & Tunnel Authority
Refunding Revenue Bonds
General Purpose
Series 2002B
11-15-10 5.00 2,000,000 2,180,020
11-15-29 5.13 1,000,000 1,064,490
Triborough Bridge & Tunnel Authority
Revenue Bonds
Convention Center Project
Series 1990E
01-01-11 6.00 1,145,000 1,296,518
Westchester Tobacco Asset Securitization
Revenue Bonds
Series 2005
06-01-26 5.00 875,000 877,258
- ------------------------------------------------------
Total municipal bonds
(Cost: $78,787,018) $82,961,232
- ------------------------------------------------------
Municipal note (1.1%)
Issue(b,e) Effective Amount Value(a)
yield payable at
maturity
City of New York
Unlimited General Obligation Bond
Series 1994B-2 (Bank of Nova Scotia) MBIA
08-15-11 2.18% $900,000 $900,000
- ------------------------------------------------------
Total municipal note
(Cost: $900,000) $900,000
- ------------------------------------------------------
Total investments in securities
(Cost: $79,687,018)(h) $83,861,232
======================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
67 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At June 30, 2005, the value of
securities subject to alternative minimum tax represented
3.1% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(d) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
3.2% of net assets at June 30, 2005.
(e) The Fund is entitled to receive principal and interest from the party
within parentheses after a day or a week's notice or upon maturity. The
maturity date disclosed represents the final maturity.
(f) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(g) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a
decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 2005. At June 30, 2005, the value of
inverse floaters represented 3.1% of net assets.
- --------------------------------------------------------------------------------
68 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Notes to investments in securities (continued)
(h) At June 30, 2005, the cost of securities for federal income tax purposes
was $79,677,832 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $4,191,316
Unrealized depreciation (7,916)
-----------------------------------------------------------------------
Net unrealized appreciation $4,183,400
-----------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
69 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Investments in Securities
AXP Ohio Tax-Exempt Fund
June 30, 2005
(Percentages represent value of investments compared to net assets)
Municipal bonds (98.6%)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Bowling Green State University
Revenue Bonds
Series 2003 (AMBAC)
06-01-12 5.00% $1,145,000 $1,264,996
Brookville Local School District
Unlimited General Obligation Bonds
Series 2003 (FSA)
12-01-18 5.25 1,000,000 1,114,090
Cincinnati City School District
Limited General Obligation Bonds
School Improvement
Series 2002 (FSA)
06-01-09 5.00 1,355,000 1,456,652
06-01-21 5.25 2,600,000 2,853,499
City of Cincinnati
Unlimited General Obligation
Refunding Bonds
Police & Fire Pension
Series 2005C
12-01-30 4.50 500,000(d) 499,980
12-01-35 4.50 500,000(d) 498,335
City of Cincinnati
Unlimited General Obligation Bonds
Series 2000
12-01-16 5.25 1,000,000 1,098,860
City of Cleveland
Revenue Bonds
Series 2002K (FGIC)
01-01-10 5.00 2,000,000 2,163,219
City of Hamilton
Refunding Revenue Bonds
Series 2002A (FSA)
10-15-25 4.70 1,500,000 1,552,320
Cleveland State University
Revenue Bonds
Series 2003A (FGIC)
06-01-15 5.00 1,000,000 1,098,400
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Cleveland State University
Revenue Bonds
Series 2004 (FGIC)
06-01-24 5.25% $500,000 $546,410
Columbus
Pre-refunded Unlimited General Obligation Bonds
Series 1999-2
06-15-15 5.75 1,000,000 1,133,550
Columbus City School District
Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2003 (FGIC)
12-01-11 5.00 1,000,000 1,101,610
Commonwealth of Puerto Rico
Unlimited General Obligation Bonds
Public Improvement
Series 2001 (FSA)
07-01-16 5.50 500,000(e) 589,555
County of Coshocton
Refunding Revenue Bonds
Smurfit-Stone Container
Series 2005
08-01-13 5.13 100,000 101,298
County of Cuyahoga
Limited General Obligation Bonds
Series 1993
05-15-13 5.60 500,000 547,540
County of Cuyahoga
Refunding Revenue Bonds
Judson Retirement Community
Series 1996A
11-15-18 7.25 250,000 266,118
County of Cuyahoga
Refunding Revenue Bonds
Series 2003A
01-01-17 6.00 1,000,000 1,160,020
01-01-32 6.00 1,000,000 1,117,460
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
70 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
County of Cuyahoga
Revenue Bonds
Canton Project
Series 2000
01-01-30 7.50% $1,000,000 $1,130,620
County of Montgomery
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00 750,000 783,668
05-01-32 5.00 500,000 521,705
Dayton City School District
Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2003A (FGIC)
12-01-27 5.00 1,250,000 1,326,975
12-01-31 5.00 1,000,000 1,056,040
Dayton City School District
Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2003D (FGIC)
12-01-17 5.00 1,000,000 1,089,060
Franklin County
Refunding Revenue Bonds
OhioHealth Corporation
Series 2003C
05-15-24 5.25 1,000,000 1,074,460
Hamilton County Convention Facilities Authority
Revenue Bonds
First Lien
Series 2004 (FGIC)
12-01-33 5.00 1,000,000 1,056,590
Jackson
Pre-refunded Revenue Bonds
Consolidated Health System - Jackson Hospital
Series 1999
(Radian Group Financial Guaranty)
10-01-20 6.13 1,000,000 1,133,060
Kenston Local School District
Unlimited General Obligation Bonds
School Improvement
Series 2003 (MBIA)
12-01-16 5.00 1,000,000 1,094,080
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Lakewood
Limited General Obligation Bonds
Series 2003
12-01-19 5.00% $1,515,000 $1,623,641
Licking Heights Local School District
Unlimited General Obligation Bonds
Series 2004 (FGIC)
12-01-28 5.00 1,000,000 1,066,530
Miami University
Refunding Revenue Bonds
Series 2005 (AMBAC)
09-01-23 4.75 500,000 530,155
Ohio Municipal Electric Generation Agency
Refunding Revenue Bonds
Joint Venture 5 Certificates
Series 2004 (AMBAC)
02-15-24 4.75 750,000 783,923
Ohio State Building Authority
Pre-refunded Revenue Bonds
State Facilities Adult Correctional
Series 1999A
10-01-16 5.50 1,000,000 1,108,360
Ohio State Building Authority
Refunding Revenue Bonds
State Facilities Adult Correction
Series 2001A (FSA)
10-01-14 5.50 1,000,000 1,117,650
Ohio State Building Authority
Revenue Bonds
Juvenile Correctional Building
Series 2003
04-01-08 4.00 1,580,000 1,628,285
Ohio State Building Authority
Revenue Bonds
State Facilities Administration
Building Fund Projects
Series 1993A
10-01-07 5.60 1,500,000 1,593,375
Ohio State Building Authority
Revenue Bonds
State Facilities Adult Correction
Series 2005A (FSA)
04-01-22 5.00 750,000 813,098
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
71 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
Ohio State Higher Educational Facility Commission
Revenue Bonds
Oberlin College Series 1999
10-01-29 5.00% $1,000,000 $1,041,960
Ohio State Water Development Authority
Revenue Bonds
Water Quality
Series 2004
12-01-16 5.00 750,000 829,350
Puerto Rico Electric Power Authority
Revenue Bonds
Series 1998DD (FSA)
07-01-13 5.13 1,000,000(e) 1,084,170
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 750,000(e) 836,025
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2004J (AMBAC)
07-01-36 5.00 500,000(e) 551,005
State of Ohio
Revenue Bonds
Case Western Reserve University Project
Series 2004A (AMBAC)
12-01-27 5.00 1,000,000 1,069,260
State of Ohio
Unlimited General Obligation Bonds
Common Schools
Series 2003C
03-15-10 5.00 1,000,000 1,084,600
State of Ohio
Unlimited General Obligation Bonds
Common Schools Capital Facilities
Series 2001A
06-15-13 5.00 1,500,000 1,623,195
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
State of Ohio
Unlimited General Obligation Bonds
Common Schools Capital Facilities
Series 2001B
09-15-20 5.00% $1,000,000 $1,074,730
State of Ohio
Unlimited General Obligation Bonds
Conservation Projects
Series 2002A
09-01-09 4.00 1,115,000 1,159,076
State of Ohio
Unlimited General Obligation Bonds
Higher Education
Series 2003A
05-01-11 5.00 1,000,000 1,095,400
State of Ohio
Unlimited General Obligation Bonds
Highway Capital Improvement
Series 2002G
05-01-12 5.25 750,000 838,133
State of Ohio
Unlimited General Obligation Bonds
Highway Capital Improvement
Series 2005I
05-01-14 5.00 1,000,000 1,120,180
Summit County
Limited General Obligation Bonds
Series 2003
12-01-18 5.25 1,490,000 1,682,985
Toledo City School District
Unlimited General Obligation Bonds
School Facilities Improvement
Series 2003 (FSA)
(School District Credit Enhancement Program)
12-01-15 5.00 1,000,000 1,103,750
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
72 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Municipal bonds (continued)
Name of Coupon Principal Value(a)
issuer and rate amount
title of
issue(b,c)
University of Akron
Revenue Bonds
Series 2003A (AMBAC)
01-01-22 5.00% $1,595,000 $1,707,957
University of Cincinnati
Revenue Bonds
Series 2001A (FGIC)
06-01-14 5.50 1,000,000 1,117,910
Warren County
Limited General Obligation Bonds
Series 1992
12-01-12 6.10 500,000 558,265
- ------------------------------------------------------
Total municipal bonds
(Cost: $58,474,282) $60,273,138
- ------------------------------------------------------
Municipal notes (2.1%)
Issue(c,f) Effective Amount Value(a)
yield payable at
maturity
State of Ohio
Refunding Revenue Bonds
Sohio Air Project
V.R.D.N. Series 1995
05-01-22 2.29% $1,100,000 $1,100,000
State of Ohio
Revenue Bonds
BP Exploration & Oil Project
V.R.D.N. Series 2001 A.M.T.
08-01-34 2.36 200,000 200,000
- ------------------------------------------------------
Total municipal notes
(Cost: $1,300,000) $1,300,000
- ------------------------------------------------------
Total investments in securities
(Cost: $59,774,282)(g) $61,573,138
======================================================
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
- --------------------------------------------------------------------------------
73 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Notes to investments in securities (continued)
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At June 30, 2005, the value of
securities subject to alternative minimum tax represented
0.3% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(d) At June 30, 2005, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$998,750.
(e) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
5.0% of net assets at June 30, 2005.
(f) Interest rate varies either based on a predetermined schedule or to
reflect current market conditions; rate shown is the effective rate on
June 30, 2005.
(g) At June 30, 2005, the cost of securities for federal income tax purposes
was $59,774,282 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $1,816,998
Unrealized depreciation (18,142)
------------------------------------------------------------------------
Net unrealized appreciation $1,798,856
------------------------------------------------------------------------
How to find information about the Fund's portfolio holdings
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.ameriprise.com.
- --------------------------------------------------------------------------------
74 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Financial Statements
Statements of assets and liabilities
AXP State Tax-Exempt Funds
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
June 30, 2005 Fund Fund Fund
Assets
Investments in securities, at value (Note 1)
(identified cost $199,441,354, $71,009,539
and $57,691,910) $208,719,992 $73,826,682 $59,871,171
Cash in bank on demand deposit 87,662 30,539 81,779
Capital shares receivable 26,808 500 11,592
Accrued interest receivable 2,673,031 1,176,926 703,695
- ------------------------------------------------------------------------------------------------------------------
Total assets 211,507,493 75,034,647 60,668,237
- ------------------------------------------------------------------------------------------------------------------
Liabilities
Dividends payable to shareholders 19,553 6,223 5,325
Capital shares payable 11,133 1,816 12,317
Payable for investment securities purchased 2,481,250 -- --
Accrued investment management services fee 2,682 964 778
Accrued distribution fee 49,164 17,920 14,280
Accrued transfer agency fee 248 67 101
Accrued administrative services fee 228 82 66
Other accrued expenses 42,801 38,875 43,274
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 2,607,059 65,947 76,141
- ------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $208,900,434 $74,968,700 $60,592,096
==================================================================================================================
Represented by
Shares of beneficial interest -- $.01 par value (Note 1) $ 396,426 $ 137,653 $ 113,221
Additional paid-in capital 197,523,084 71,828,392 58,153,483
Undistributed net investment income 30,957 94,283 --
Accumulated net realized gain (loss) 1,671,329 91,229 146,131
Unrealized appreciation (depreciation) on investments 9,278,638 2,817,143 2,179,261
- ------------------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding shares $208,900,434 $74,968,700 $60,592,096
==================================================================================================================
Net assets applicable to outstanding shares: Class A $189,684,740 $56,077,745 $53,273,688
Class B $ 16,159,650 $17,522,009 $ 5,477,255
Class C $ 3,056,044 $ 1,368,946 $ 1,841,153
Outstanding shares of beneficial interest: Class A shares 35,995,218 10,296,587 9,955,048
Class B shares 3,068,100 3,217,293 1,023,070
Class C shares 579,245 251,459 343,994
Net asset value per share: Class A $ 5.27 $ 5.45 $ 5.35
Class B $ 5.27 $ 5.45 $ 5.35
Class C $ 5.28 $ 5.44 $ 5.35
- ------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
75 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of assets and liabilities
AXP State Tax-Exempt Funds
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
June 30, 2005 Fund Fund Fund
Assets
Investments in securities, at value (Note 1)
(identified cost $378,404,435, $79,687,018
and $59,774,282) $393,023,932 $83,861,232 $61,573,138
Cash in bank on demand deposit -- 28,288 16,810
Capital shares receivable 51,780 96 1,380
Accrued interest receivable 6,014,032 1,066,294 576,642
Receivable for investment securities sold 824,967 -- --
- ------------------------------------------------------------------------------------------------------------------
Total assets 399,914,711 84,955,910 62,167,970
- ------------------------------------------------------------------------------------------------------------------
Liabilities
Disbursements in excess of cash on demand deposit 189,187 -- --
Dividends payable to shareholders 35,073 8,664 4,922
Capital shares payable 89,699 18,605 6,121
Payable for investment securities purchased 372,313 -- 998,750
Accrued investment management services fee 5,024 1,089 785
Accrued distribution fee 94,151 20,186 14,473
Accrued transfer agency fee 600 149 109
Accrued administrative services fee 416 93 67
Other accrued expenses 70,221 35,448 33,522
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 856,684 84,234 1,058,749
- ------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $399,058,027 $84,871,676 $61,109,221
==================================================================================================================
Represented by
Shares of beneficial interest -- $.01 par value (Note 1) $ 745,331 $ 163,844 $ 114,290
Additional paid-in capital 382,647,349 80,291,289 59,249,232
Undistributed net investment income 382,387 9,181 40,206
Accumulated net realized gain (loss) 663,463 233,148 (93,363)
Unrealized appreciation (depreciation) on investments 14,619,497 4,174,214 1,798,856
- ------------------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding shares $399,058,027 $84,871,676 $61,109,221
==================================================================================================================
Net assets applicable to outstanding shares: Class A $341,393,866 $72,589,870 $51,047,773
Class B $ 48,659,135 $10,908,968 $ 8,148,165
Class C $ 9,005,026 $ 1,372,838 $ 1,913,283
Outstanding shares of beneficial interest: Class A shares 63,764,004 14,013,395 9,547,336
Class B shares 9,087,318 2,105,995 1,523,978
Class C shares 1,681,783 265,013 357,731
Net asset value per share: Class A $ 5.35 $ 5.18 $ 5.35
Class B $ 5.35 $ 5.18 $ 5.35
Class C $ 5.35 $ 5.18 $ 5.35
- ------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
76 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of operations
AXP State Tax-Exempt Funds
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Year ended June 30, 2005 Fund Fund Fund
Investment income
Income:
Interest $ 9,826,257 $3,214,702 $2,709,443
- ------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 1,010,591 372,649 294,025
Distribution fee
Class A 483,557 147,943 136,742
Class B 182,416 186,463 59,822
Class C 33,536 14,622 18,779
Transfer agency fee 81,792 47,716 33,540
Incremental transfer agency fee
Class A 7,348 3,706 2,886
Class B 1,561 1,805 688
Class C 506 274 322
Administrative services fees and expenses 87,771 30,362 23,283
Compensation of board members 9,206 9,206 9,206
Custodian fees 20,645 11,067 8,835
Printing and postage 31,303 15,065 11,463
Registration fees 35,757 32,846 34,663
Audit fees 20,500 19,000 19,000
Other 6,676 6,359 5,302
- ------------------------------------------------------------------------------------------------------------------
Total expenses 2,013,165 899,083 658,556
Expenses waived/reimbursed by
Ameriprise Financial (formerly AEFC) (Note 2) -- (47,331) (47,447)
- ------------------------------------------------------------------------------------------------------------------
2,013,165 851,752 611,109
Earnings credits on cash balances (Note 2) (7,647) (3,100) (4,290)
- ------------------------------------------------------------------------------------------------------------------
Total net expenses 2,005,518 848,652 606,819
- ------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 7,820,739 2,366,050 2,102,624
- ------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 2,843,277 522,273 545,582
Net change in unrealized appreciation (depreciation) on investments 6,675,883 2,650,326 1,522,358
- ------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 9,519,160 3,172,599 2,067,940
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $17,339,899 $5,538,649 $4,170,564
==================================================================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
77 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of operations
AXP State Tax-Exempt Funds
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Year ended June 30, 2005 Fund Fund Fund
Investment income
Income:
Interest $17,388,342 $4,018,928 $2,585,287
- ------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 1,895,714 434,449 307,214
Distribution fee
Class A 877,625 196,842 136,871
Class B 517,111 120,762 84,836
Class C 92,150 16,217 21,311
Transfer agency fee 197,783 49,903 36,427
Incremental transfer agency fee
Class A 17,007 4,290 2,998
Class B 4,803 1,297 921
Class C 1,329 260 378
Administrative services fees and expenses 163,503 36,031 24,486
Compensation of board members 10,673 9,206 9,206
Custodian fees 31,044 12,105 10,380
Printing and postage 75,405 15,335 11,290
Registration fees 33,391 31,840 30,080
Audit fees 22,000 19,500 19,000
Other 17,277 5,456 4,758
- ------------------------------------------------------------------------------------------------------------------
Total expenses 3,956,815 953,493 700,156
Expenses waived/reimbursed by
Ameriprise Financial (formerly AEFC) (Note 2) -- (34,613) (43,339)
- ------------------------------------------------------------------------------------------------------------------
3,956,815 918,880 656,817
Earnings credits on cash balances (Note 2) (28,254) (3,884) (3,019)
- ------------------------------------------------------------------------------------------------------------------
Total net expenses 3,928,561 914,996 653,798
- ------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 13,459,781 3,103,932 1,931,489
- ------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 1,307,808 571,057 618,488
Net change in unrealized appreciation (depreciation) on investments 11,874,424 2,623,197 1,820,601
- ------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 13,182,232 3,194,254 2,439,089
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $26,642,013 $6,298,186 $4,370,578
==================================================================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
78 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP State Tax-Exempt Funds
California Tax-Exempt Fund Massachusetts Tax-Exempt Fund
Year ended June 30, 2005 2004 2005 2004
Operations and distributions
Investment income (loss) -- net $ 7,820,739 $ 9,492,210 $ 2,366,050 $ 2,864,585
Net realized gain (loss) on investments 2,843,277 4,271,954 522,273 118,188
Net change in unrealized appreciation
(depreciation) on investments 6,675,883 (13,639,192) 2,650,326 (3,402,425)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 17,339,899 124,972 5,538,649 (419,652)
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (7,236,425) (8,492,465) (1,880,881) (2,172,737)
Class B (544,611) (769,181) (449,620) (567,432)
Class C (100,096) (139,214) (35,315) (44,866)
Net realized gain
Class A (2,650,310) (2,563,129) (266,380) (758,405)
Class B (248,451) (291,280) (82,558) (259,092)
Class C (42,061) (48,764) (6,105) (20,647)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (10,821,954) (12,304,033) (2,720,859) (3,823,179)
- --------------------------------------------------------------------------------------------------------------------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 18,129,921 15,901,451 5,250,331 6,412,052
Class B shares 964,281 1,083,627 643,022 1,359,509
Class C shares 755,510 1,207,521 265,254 674,999
Reinvestment of distributions at net asset value
Class A shares 7,334,232 8,050,801 1,789,144 2,473,261
Class B shares 670,599 873,630 419,010 680,143
Class C shares 132,696 177,893 38,737 61,014
Payments for redemptions
Class A shares (35,789,588) (56,069,227) (12,453,873) (19,003,431)
Class B shares (Note 2) (7,417,183) (6,190,835) (4,843,199) (4,718,999)
Class C shares (Note 2) (1,664,249) (2,345,662) (600,562) (824,274)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
share transactions (16,883,781) (37,310,801) (9,492,136) (12,885,726)
- --------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (10,365,836) (49,489,862) (6,674,346) (17,128,557)
Net assets at beginning of year 219,266,270 268,756,132 81,643,046 98,771,603
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $208,900,434 $219,266,270 $ 74,968,700 $ 81,643,046
====================================================================================================================
Undistributed net investment income $ 30,957 $ 91,350 $ 94,283 $ 94,049
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
79 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP State Tax-Exempt Funds
Michigan Tax-Exempt Fund Minnesota Tax-Exempt Fund
Year ended June 30, 2005 2004 2005 2004
Operations and distributions
Investment income (loss) -- net $ 2,102,624 $ 2,515,023 $ 13,459,781 $ 15,515,294
Net realized gain (loss) on investments 545,582 119,015 1,307,808 2,656,487
Net change in unrealized appreciation
(depreciation) on investments 1,522,358 (2,736,651) 11,874,424 (16,925,059)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,170,564 (102,613) 26,642,013 1,246,722
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,891,829) (2,226,533) (11,812,371) (13,145,714)
Class B (159,945) (231,859) (1,350,479) (1,780,915)
Class C (50,776) (56,704) (240,632) (262,576)
Net realized gain
Class A (261,330) (939,726) (1,142,029) --
Class B (28,921) (124,142) (166,188) --
Class C (9,068) (28,159) (29,796) --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (2,401,869) (3,607,123) (14,741,495) (15,189,205)
- --------------------------------------------------------------------------------------------------------------------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 5,810,522 3,929,167 40,052,864 31,708,550
Class B shares 294,638 465,780 2,238,758 3,586,678
Class C shares 335,521 626,081 2,013,530 3,068,043
Reinvestment of distributions at net asset value
Class A shares 1,756,355 2,623,733 10,737,021 10,715,648
Class B shares 131,427 261,994 1,294,698 1,489,197
Class C shares 53,472 73,298 234,993 228,169
Payments for redemptions
Class A shares (11,580,469) (17,160,945) (66,760,048) (76,911,886)
Class B shares (Note 2) (2,230,452) (2,429,975) (15,765,912) (11,748,894)
Class C shares (Note 2) (559,800) (819,029) (2,730,362) (3,005,495)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from share transactions (5,988,786) (12,429,896) (28,684,458) (40,869,990)
- --------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,220,091) (16,139,632) (16,783,940) (54,812,473)
Net assets at beginning of year 64,812,187 80,951,819 415,841,967 470,654,440
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 60,592,096 $ 64,812,187 $399,058,027 $415,841,967
====================================================================================================================
Undistributed (excess of distributions over)
net investment income $ -- $ (74) $ 382,387 $ 326,088
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
80 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Statements of changes in net assets
AXP State Tax-Exempt Funds
New York Tax-Exempt Fund Ohio Tax-Exempt Fund
Year ended June 30, 2005 2004 2005 2004
Operations and distributions
Investment income (loss) -- net $ 3,103,932 $ 3,491,957 $ 1,931,489 $ 2,294,258
Net realized gain (loss) on investments 571,057 1,237,352 618,488 (246,174)
Net change in unrealized appreciation
(depreciation) on investments 2,623,197 (5,118,869) 1,820,601 (2,801,314)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 6,298,186 (389,560) 4,370,578 (753,230)
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (2,732,716) (2,982,840) (1,682,964) (1,917,434)
Class B (325,543) (443,612) (196,329) (277,749)
Class C (43,807) (58,190) (49,329) (61,732)
Net realized gain
Class A (958,527) (1,792,067) -- (822,499)
Class B (144,685) (349,327) -- (159,181)
Class C (18,926) (45,440) -- (35,511)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (4,224,204) (5,671,476) (1,928,622) (3,274,106)
- --------------------------------------------------------------------------------------------------------------------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 6,562,422 5,308,394 3,342,352 5,179,041
Class B shares 609,622 1,490,534 444,801 915,169
Class C shares 300,146 860,606 251,354 463,974
Reinvestment of distributions at net asset value
Class A shares 3,143,127 4,083,913 1,306,745 2,178,569
Class B shares 374,395 611,810 152,859 347,672
Class C shares 61,961 97,082 47,057 94,195
Payments for redemptions
Class A shares (17,872,425) (22,699,309) (12,063,570) (14,186,759)
Class B shares (Note 2) (5,445,727) (3,905,116) (2,673,642) (3,712,886)
Class C shares (Note 2) (999,298) (1,130,447) (755,439) (1,192,556)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from share transactions (13,265,777) (15,282,533) (9,947,483) (9,913,581)
- --------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (11,191,795) (21,343,569) (7,505,527) (13,940,917)
Net assets at beginning of year 96,063,471 117,407,040 68,614,748 82,555,665
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 84,871,676 $ 96,063,471 $ 61,109,221 $ 68,614,748
====================================================================================================================
Undistributed net investment income $ 9,181 $ 7,315 $ 40,206 $ 37,339
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
81 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Notes to Financial Statements
AXP State Tax-Exempt Funds
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AXP California Tax-Exempt Trust and AXP Special Tax-Exempt Series Trust were
organized as Massachusetts business trusts. AXP California Tax-Exempt Trust
includes only AXP California Tax-Exempt Fund. AXP Special Tax-Exempt Series
Trust is a "series fund" that is currently composed of individual state
tax-exempt funds and one insured national tax-exempt fund, including AXP
Massachusetts Tax-Exempt Fund, AXP Michigan Tax-Exempt Fund, AXP Minnesota
Tax-Exempt Fund, AXP New York Tax-Exempt Fund and AXP Ohio Tax-Exempt Fund
(the Funds). The Funds are non-diversified, open-end management investment
companies as defined in the Investment Company Act of 1940 (as amended).
Each Fund has unlimited authorized shares of beneficial interest.
Each Fund's goal is to provide a high level of income generally exempt from
federal income tax as well as from the respective state and local income
tax. A portion of each Fund's assets may be invested in bonds whose interest
is subject to the alternative minimum tax computation. The Funds concentrate
their investments in a single state and therefore may have more credit risk
related to the economic conditions of the respective state than Funds that
have a broader geographical diversification.
Each Fund offers Class A, Class B and Class C shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee and transfer agency fees (class specific
expenses) differ among classes. Income, expenses (other than class-specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Each Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
- --------------------------------------------------------------------------------
82 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sale price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Securities for which market quotations are not
readily available are valued at fair value according to methods selected in
good faith by the board. Short-term securities maturing in more than 60 days
from the valuation date are valued at the market price or approximate market
value based on current interest rates; those maturing in 60 days or less are
valued at amortized cost.
Illiquid securities
At June 30, 2005, investments in securities for California Tax-Exempt Fund
and Minnesota Tax-Exempt Fund include issues that are illiquid which the
Funds currently limit to 10% of net assets, at market value, at the time of
purchase. The aggregate value of such securities at June 30, 2005, was
$47,337 and $13,925,522 representing 0.02% and 3.49% of net assets for
California Tax-Exempt Fund and Minnesota Tax-Exempt Fund, respectively.
These securities are valued at fair value according to methods selected in
good faith by the board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or
disposed of in the ordinary course of business within seven days at
approximately the value at which the asset is valued by the Fund.
Securities purchased on a forward-commitment basis
Delivery and payment for securities that have been purchased by the Funds on
a forward-commitment basis, including when-issued securities and other
forward-commitments, can take place one month or more after the transaction
date. During this period, such securities are subject to market
fluctuations, and they may affect each Fund's net assets the same as owned
securities. The Funds designate cash or liquid securities at least equal to
the amount of its forward-commitments. At June 30, 2005, the outstanding
forward-commitments for the Funds are as follows:
When-issued Other
Fund securities forward-commitments
- -------------------------------------------------------------------------------------------
California Tax-Exempt Fund $2,481,250 $--
Ohio Tax-Exempt Fund 998,750 --
- --------------------------------------------------------------------------------
83 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Option transactions
To produce incremental earnings, protect gains and facilitate buying and
selling of securities for investments, the Funds may buy and sell put and
call options and write covered call options on portfolio securities as well
as write cash-secured put options. The risk in writing a call option is that
the Funds give up the opportunity for profit if the market price of the
security increases. The risk in writing a put option is that the Funds may
incur a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Funds pay a premium
whether or not the option is exercised. The Funds also have the additional
risk of being unable to enter into a closing transaction if a liquid
secondary market does not exist. The Funds also may write over-the-counter
options where completing the obligation depends upon the credit standing of
the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Funds
will realize a gain or loss when the option transaction expires or closes.
When options on debt securities or futures are exercised, the Funds will
realize a gain or loss. When other options are exercised, the proceeds on
sales for a written call option, the purchase cost for a written put option
or the cost of a security for a purchased put or call option is adjusted by
the amount of the premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Funds may buy
and sell financial futures contracts. Risks of entering into futures
contracts and related options include the possibility of an illiquid market
and that a change in the value of the contract or option may not correlate
with changes in the value of the underlying securities.
Upon entering into a futures contract, the Funds are required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Funds each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Funds recognize a realized gain or loss
when the contract is closed or expires.
Swap transactions
To produce incremental earnings, to gain exposure to or protect itself from
market changes, the Funds may enter into swap agreements. Swaps are an
agreement between two parties to exchange periodic cash flows based on a
specified amount of principal. The net cash flow is generally the difference
between a floating market interest rate versus a fixed interest rate. The
Funds may employ swaps to synthetically add or subtract principal exposure
to the municipal market.
Risks of entering into a swap include a lack of correlation between swaps
and the portfolio of municipal bonds the swaps are designed to hedge or
replicate. A lack of correlation may cause the swap to experience adverse
changes in value relative to expectations. In addition, swaps are subject to
the risk of default of a counterparty, and the risk of adverse movements in
market interest rates relative to the swap positions entered.
- --------------------------------------------------------------------------------
84 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Swaps are valued daily and unrealized appreciation and depreciation is
recorded. The Funds will realize a gain or a loss when the swap is
terminated. The Funds did not enter into any swap agreements for the year
ended June 30, 2005.
Guarantees and indemnifications
Under each Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to each Fund. In addition, certain of each Fund's contracts
with its service providers contain general indemnification clauses. Each
Fund's maximum exposure under these arrangements is unknown since the amount
of any future claims that may be made against each Fund cannot be determined
and each Fund has no historical basis for predicting the likelihood of any
such claims.
Federal taxes
Each Fund's policy is to comply with all sections of the Internal Revenue
Code that apply to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. No provision for
income or excise taxes is thus required. Each Fund is treated as a separate
entity for federal income tax purposes.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts and losses deferred due to "wash sale"
transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were
recorded by the Funds.
The tax character of distributions paid for the years indicated is as
follows:
Year ended June 30, 2005 2004
- -------------------------------------------------------------------------------------------
California Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(a) $7,236,561 $8,492,465
Long-term capital gain 2,650,174 2,563,129
Class B
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(a) 544,611 769,181
Long-term capital gain 248,451 291,280
Class C
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(a) 99,960 139,214
Long-term capital gain 42,197 48,764
(a) Tax-exempt distributions were 98.70% and 98.76% for the years ended 2005
and 2004, respectively.
- --------------------------------------------------------------------------------
85 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Year ended June 30, 2005 2004
- -------------------------------------------------------------------------------------------
Massachusetts Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(b) $1,880,881 $2,888,124
Long-term capital gain 266,380 43,018
Class B
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(b) 449,620 811,827
Long-term capital gain 82,558 14,697
Class C
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(b) 35,315 64,342
Long-term capital gain 6,105 1,171
(b) Tax-exempt distributions were 97.10% and 74.21% for the years ended 2005
and 2004, respectively.
Michigan Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(c) $1,950,028 $2,833,949
Long-term capital gain 203,131 332,310
Class B
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(c) 166,262 312,118
Long-term capital gain 22,604 43,883
Class C
Distributions paid from:
Ordinary income -- tax-exempt interest distributions(c) 52,795 74,909
Long-term capital gain 7,049 9,954
(c) Tax-exempt distributions were 95.09% and 78.22% for the years ended 2005
and 2004, respectively.
Minnesota Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt distributions(d) $11,812,371 $13,145,714
Long-term capital gain 1,142,029 --
Class B
Distributions paid from:
Ordinary income -- tax-exempt distributions(d) 1,350,479 1,780,915
Long-term capital gain 166,188 --
Class C
Distributions paid from:
Ordinary income -- tax-exempt distributions(d) 240,632 262,576
Long-term capital gain 29,796 --
(d) Tax-exempt distributions were 100% and 99.97% for the years ended 2005
and 2004, respectively.
- --------------------------------------------------------------------------------
86 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Year ended June 30, 2005 2004
- -------------------------------------------------------------------------------------------
New York Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt distributions(e) $2,774,686 $3,845,797
Long-term capital gain 916,557 929,110
Class B
Distributions paid from:
Ordinary income -- tax-exempt distributions(e) 331,878 611,845
Long-term capital gain 138,350 181,094
Class C
Distributions paid from:
Ordinary income -- tax-exempt distributions(e) 44,636 80,074
Long-term capital gain 18,097 23,556
(e) Tax-exempt distributions were 97.38% and 75.85% for the years ended 2005
and 2004, respectively.
Ohio Tax-Exempt Fund
Class A
Distributions paid from:
Ordinary income -- tax-exempt distributions(f) $1,682,964 $2,567,342
Long-term capital gain -- 172,591
Class B
Distributions paid from:
Ordinary income -- tax-exempt distributions(f) 196,329 403,527
Long-term capital gain -- 33,403
Class C
Distributions paid from:
Ordinary income -- tax-exempt distributions(f) 49,329 89,791
Long-term capital gain -- 7,452
(f) Tax-exempt distributions were 98.41% and 73.82% for the years ended 2005
and 2004, respectively.
At June 30, 2005, the components of distributable earnings on a tax basis
for each Fund are as follows:
Accumulated Unrealized
Undistributed long-term appreciation
Fund income gain (loss) (depreciation)
- -------------------------------------------------------------------------------------------
California Tax-Exempt Fund $124,056 $1,768,843 $ 9,107,578
Massachusetts Tax-Exempt Fund 98,396 173,109 2,737,373
Michigan Tax-Exempt Fund 48,928 235,959 2,045,830
Minnesota Tax-Exempt Fund 35,092 726,191 14,939,137
New York Tax-Exempt Fund 43,695 404,358 3,977,154
Ohio Tax-Exempt Fund 45,129 (87,465) 1,792,957
Dividends to shareholders
Dividends from net investment income, declared daily and paid monthly, are
reinvested in additional shares of each Fund at net asset value or payable
in cash. Capital gains, when available, are distributed along with the last
income dividend of the calendar year.
- --------------------------------------------------------------------------------
87 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Other
Security transactions are accounted for on the date securities are purchased
or sold. Interest income, including amortization of premium, market discount
and original issue discount using the effective interest method, is accrued
daily.
2. EXPENSES AND SALES CHARGES
Each Fund has agreements with Ameriprise Financial, Inc. (formerly American
Express Financial Corporation) to manage its portfolio and provide
administrative services. Under an Investment Management Services Agreement,
Ameriprise Financial (the Investment Manager) determines which securities
will be purchased, held or sold. The management fee is a percentage of each
Fund's average daily net assets that declines from 0.47% to 0.38% annually
as each Fund's assets increase.
Under the current Administrative Services Agreement, each Fund pays
Ameriprise Financial a fee for administration and accounting services at a
percentage of each Fund's average daily net assets that declines from 0.04%
to 0.02% annually as each Fund's assets increase. It is expected that the
fee schedule to the agreement will be revised effective Oct. 1, 2005. Under
the new agreement, the fee percentage of each Fund's average daily net
assets will decline from 0.07% to 0.04% annually as each Fund's assets
increase. A minor portion of additional administrative service expenses paid
by the Funds are consultants' fees and fund office expenses. Under this
agreement, the Funds also pay taxes, audit and certain legal fees,
registration fees for shares, compensation of board members, corporate
filing fees and any other expenses properly payable by the Funds and
approved by the board.
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of each Fund or
other American Express mutual funds. Each Fund's liability for these amounts
is adjusted for market value changes and remains in each Fund until
distributed in accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(formerly American Express Client Service Corporation) (the Transfer Agent)
maintains shareholder accounts and records. Each Fund pays the Transfer
Agent an annual fee per shareholder account for this service as follows:
o Class A $20.50
o Class B $21.50
o Class C $21.00
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the base fee of $18.50.
Beginning May 20, 2005, the Transfer Agent implemented an annual closed
account fee of $5 per inactive account, charged on a pro rata basis for 12
months from the date the account becomes inactive. These fees were
insignificant for the year ended June 30, 2005 and are included in the
transfer agency fees on the statement of operations.
- --------------------------------------------------------------------------------
88 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Each Fund has agreements with Ameriprise Financial Services, Inc. (formerly
American Express Financial Advisors Inc.) (the Distributor) for distribution
and shareholder services. Under a Plan and Agreement of Distribution
pursuant to Rule 12b-1, each Fund pays a fee at an annual rate up to 0.25%
of each Fund's average daily net assets attributable to Class A shares and
up to 1.00% for Class B and Class C shares.
For the year ended June 30, 2005, Ameriprise Financial and its affiliates
waived certain fees and expenses as follows:
Fund Class A Class B Class C
- -------------------------------------------------------------------------------------------
Massachusetts Tax-Exempt Fund 0.88% 1.64% 1.64%
Michigan Tax-Exempt Fund 0.88 1.64 1.64
New York Tax-Exempt Fund 0.88 1.64 1.64
Ohio Tax-Exempt Fund 0.88 1.64 1.64
Of these waived fees and expenses, the transfer agency fees waived are as
follows:
Fund Amount
- -----------------------------------------------------------------------------------------
Massachusetts Tax-Exempt Fund
Class A $27,257
Class B 7,159
Class C 694
The management fees waived at the Fund level were $12,221.
Michigan Tax-Exempt Fund
Class A 21,065
Class B 2,012
Class C 738
The management fees waived at the Fund level were $23,632.
New York Tax-Exempt Fund
Class A 30,198
Class B 3,805
Class C 610
Ohio Tax-Exempt Fund
Class A 22,346
Class B 2,981
Class C 894
The management fees waived at the Fund level were $17,118.
In addition, Ameriprise Financial and its affiliates have agreed to extend
the current agreement to waive certain fees and expenses through Sept. 30,
2005. It is expected that a new agreement to waive certain fees and expenses
will be effective on Oct. 1, 2005 until June 30, 2006, such that net
expenses will not exceed 0.79% for Class A, 1.55% for Class B and 1.55% for
Class C of the Fund's average daily net assets for Massachusetts Tax-Exempt
Fund, Michigan Tax-Exempt Fund, New York Tax-Exempt Fund and Ohio Tax-Exempt
Fund.
It is expected that a new agreement to waive certain fees and expenses will
be effective on Oct. 1, 2005 until June 30, 2006, such that net expenses
will not exceed 0.79% for Class A, 1.55% for Class B and 1.55% for Class C
of the Fund's average daily net assets for California Tax-Exempt Fund and
Minnesota Tax-Exempt Fund.
- --------------------------------------------------------------------------------
89 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Sales charges received by the Distributor for distributing the Funds' shares
for the year ended June 30, 2005, are as follows:
Fund Class A Class B Class C
- ----------------------------------------------------------------------------------------
California Tax-Exempt Fund $192,743 $23,790 $ 961
Massachusetts Tax-Exempt Fund 63,249 31,698 365
Michigan Tax-Exempt Fund 53,701 12,868 1,135
Minnesota Tax-Exempt Fund 407,587 49,706 1,798
New York Tax-Exempt Fund 102,178 28,142 2,370
Ohio Tax-Exempt Fund 40,732 13,998 277
During the year ended June 30, 2005, the Funds' custodian and transfer
agency fees were reduced as a result of earnings credits from overnight cash
balances as follows:
Fund Reduction
- ----------------------------------------------------------------------------------------
California Tax-Exempt Fund $ 7,647
Massachusetts Tax-Exempt Fund 3,100
Michigan Tax-Exempt Fund 4,290
Minnesota Tax-Exempt Fund 28,254
New York Tax-Exempt Fund 3,884
Ohio Tax-Exempt Fund 3,019
3. SECURITIES TRANSACTIONS
For the year ended June 30, 2005, cost of purchases and proceeds from sales
(other than short-term obligations) aggregated for each Fund are as follows:
Fund Purchases Proceeds
- ----------------------------------------------------------------------------------------
California Tax-Exempt Fund $56,071,475 $68,644,654
Massachusetts Tax-Exempt Fund 6,519,907 18,234,372
Michigan Tax-Exempt Fund 5,734,389 12,730,258
Minnesota Tax-Exempt Fund 58,169,766 77,796,976
New York Tax-Exempt Fund 26,769,142 37,536,557
Ohio Tax-Exempt Fund 20,997,983 29,538,824
Realized gains and losses are determined on an identified cost basis.
- --------------------------------------------------------------------------------
90 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
4. SHARE TRANSACTIONS
Transactions in shares for each Fund for the years indicated are as follows:
California Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 3,470,204 184,660 144,458
Issued for reinvested distributions 1,403,867 128,452 25,370
Redeemed (6,850,880) (1,423,411) (317,324)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,976,809) (1,110,299) (147,496)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 3,033,671 206,871 230,075
Issued for reinvested distributions 1,537,634 166,830 33,943
Redeemed (10,732,762) (1,184,067) (449,095)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (6,161,457) (810,366) (185,077)
- -------------------------------------------------------------------------------------------
Massachusetts Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 973,442 118,798 49,187
Issued for reinvested distributions 330,855 77,493 7,167
Redeemed (2,306,644) (898,813) (111,173)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,002,347) (702,522) (54,819)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 1,191,577 251,911 124,956
Issued for reinvested distributions 459,165 126,234 11,326
Redeemed (3,531,720) (876,712) (154,180)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,880,978) (498,567) (17,898)
- -------------------------------------------------------------------------------------------
Michigan Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 1,092,631 55,503 63,091
Issued for reinvested distributions 329,971 24,678 10,044
Redeemed (2,177,836) (420,994) (105,325)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (755,234) (340,813) (32,190)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 736,955 87,977 117,722
Issued for reinvested distributions 492,872 49,175 13,759
Redeemed (3,227,509) (459,337) (153,247)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,997,682) (322,185) (21,766)
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
91 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Minnesota Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 7,546,438 419,686 378,689
Issued for reinvested distributions 2,015,244 243,032 44,107
Redeemed (12,549,607) (2,978,564) (513,275)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (2,987,925) (2,315,846) (90,479)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 5,989,136 678,333 581,550
Issued for reinvested distributions 2,028,244 281,844 43,186
Redeemed (14,563,010) (2,227,995) (570,516)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (6,545,630) (1,267,818) 54,220
- -------------------------------------------------------------------------------------------
New York Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 1,273,990 118,256 58,049
Issued for reinvested distributions 609,569 72,640 12,015
Redeemed (3,468,592) (1,058,818) (193,383)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,585,033) (867,922) (123,319)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 1,018,559 285,671 164,025
Issued for reinvested distributions 784,799 117,555 18,658
Redeemed (4,372,625) (752,175) (218,063)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (2,569,267) (348,949) (35,380)
- -------------------------------------------------------------------------------------------
Ohio Tax-Exempt Fund
Year ended June 30, 2005
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 634,596 83,991 47,441
Issued for reinvested distributions 246,552 28,844 8,876
Redeemed (2,278,127) (509,146) (142,885)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,396,979) (396,311) (86,568)
- -------------------------------------------------------------------------------------------
Year ended June 30, 2004
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Sold 974,625 172,274 87,413
Issued for reinvested distributions 411,677 65,666 17,779
Redeemed (2,689,966) (708,242) (225,894)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (1,303,664) (470,302) (120,702)
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
92 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
5. BANK BORROWINGS
Each Fund has a revolving credit agreement with a syndicate of banks headed
by The Bank of New York, whereby each Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency
purposes. The agreement went into effect Sept. 21, 2004. Each Fund must
maintain asset coverage for borrowings of at least 300%. The agreement,
which enables each Fund to participate with other American Express mutual
funds, permits borrowings up to $500 million, collectively. Interest is
charged to each Fund based on its borrowings at a rate equal to either the
higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending
Rate. Borrowings are payable within 60 days after such loan is executed.
Each Fund also pays a commitment fee equal to its pro rata share of the
amount of the credit facility at a rate of 0.09% per annum. Prior to this
agreement, each Fund had a revolving credit agreement that permitted
borrowings up to $500 million with Deutsche Bank. Each Fund had no
borrowings outstanding during the year ended June 30, 2005.
6. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, capital loss carry-overs at June 30, 2005
are as follows:
Fund Carry-over Expiration date
- -------------------------------------------------------------------------------------------
Ohio Tax-Exempt Fund $87,465 2013
It is unlikely the board will authorize a distribution of any net realized
capital gains for a Fund until the respective capital loss carry-over has
been offset or expires.
- --------------------------------------------------------------------------------
93 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
7. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
each Fund's results.
AXP California Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.11 $5.37 $5.23 $5.18 $5.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .20 .21 .23 .24 .25
Net gains (losses) (both realized and unrealized) .23 (.20) .14 .05 .15
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .43 .01 .37 .29 .40
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.20) (.21) (.23) (.24) (.25)
Distributions from realized gains (.07) (.06) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.27) (.23) (.24) (.25)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.27 $5.11 $5.37 $5.23 $5.18
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $190 $194 $237 $234 $231
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .86% .86% .85% .84% .85%
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.71% 4.03% 4.34% 4.56% 4.79%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 30% 95% 16% 11%
- ------------------------------------------------------------------------------------------------------------------
Total return(c) 8.53% .25% 7.26% 5.66% 8.00%
- ------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
94 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.11 $5.37 $5.23 $5.17 $5.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .16 .17 .19 .20 .21
Net gains (losses) (both realized and unrealized) .23 (.20) .14 .06 .14
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 (.03) .33 .26 .35
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.16) (.17) (.19) (.20) (.21)
Distributions from realized gains (.07) (.06) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.23) (.19) (.20) (.21)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.27 $5.11 $5.37 $5.23 $5.17
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $16 $21 $27 $27 $24
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.61% 1.61% 1.60% 1.59% 1.60%
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.95% 3.28% 3.58% 3.81% 3.99%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 30% 95% 16% 11%
- ------------------------------------------------------------------------------------------------------------------
Total return(c) 7.72% (.50%) 6.44% 5.07% 6.98%
- ------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
95 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.12 $5.38 $5.24 $5.18 $5.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .16 .17 .19 .20 .21
Net gains (losses) (both realized and unrealized) .23 (.20) .14 .06 .15
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 (.03) .33 .26 .36
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.16) (.17) (.19) (.20) (.21)
Distributions from realized gains (.07) (.06) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.23) (.19) (.20) (.21)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.28 $5.12 $5.38 $5.24 $5.18
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $3 $4 $5 $3 $1
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.62% 1.62% 1.61% 1.60% 1.60%
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.94% 3.27% 3.56% 3.86% 4.04%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 30% 95% 16% 11%
- ------------------------------------------------------------------------------------------------------------------
Total return(c) 7.71% (.50%) 6.43% 5.07% 7.20%
- ------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
96 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.26 $5.51 $5.37 $5.28 $5.11
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .17 .18 .19 .22 .27
Net gains (losses) (both realized and unrealized) .22 (.19) .16 .09 .17
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 (.01) .35 .31 .44
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.17) (.18) (.19) (.22) (.27)
Distributions from realized gains (.03) (.06) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.24) (.21) (.22) (.27)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.45 $5.26 $5.51 $5.37 $5.28
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $56 $59 $73 $66 $65
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .88%(c) .88%(c) .88%(c) .91% .95%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.17% 3.35% 3.57% 4.11% 5.04%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 14% 141% 53% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 7.42% (.24%) 6.73% 5.94% 8.64%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class A would have been 0.94%, 0.93% and 0.92% for the years ended
June 30, 2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
97 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.26 $5.51 $5.37 $5.28 $5.11
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .13 .14 .15 .18 .23
Net gains (losses) (both realized and unrealized) .22 (.19) .16 .09 .17
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 (.05) .31 .27 .40
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.13) (.14) (.15) (.18) (.23)
Distributions from realized gains (.03) (.06) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.20) (.17) (.18) (.23)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.45 $5.26 $5.51 $5.37 $5.28
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $18 $21 $24 $24 $18
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.64%(c) 1.63%(c) 1.66% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.41% 2.59% 2.81% 3.34% 4.28%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 14% 141% 53% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.61% (.99%) 5.92% 5.15% 7.83%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class B would have been 1.69%, 1.69% and 1.68% for the years ended June
30, 2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
98 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.26 $5.51 $5.37 $5.28 $5.11
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .13 .14 .15 .18 .23
Net gains (losses) (both realized and unrealized) .21 (.19) .16 .09 .17
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .34 (.05) .31 .27 .40
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.13) (.14) (.15) (.18) (.23)
Distributions from realized gains (.03) (.06) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.20) (.17) (.18) (.23)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.44 $5.26 $5.51 $5.37 $5.28
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $1 $2 $2 $2 $1
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.64%(c) 1.64%(c) 1.66% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.41% 2.58% 2.88% 3.32% 4.30%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 14% 141% 53% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.41% (.97%) 5.91% 5.16% 7.84%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class C would have been 1.70%, 1.69% and 1.68% for the years ended June
30, 2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
99 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.21 $5.47 $5.33 $5.27 $5.09
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .18 .19 .22 .24 .27
Net gains (losses) (both realized and unrealized) .17 (.18) .19 .06 .18
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 .01 .41 .30 .45
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.18) (.19) (.22) (.24) (.27)
Distributions from realized gains (.03) (.08) (.05) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.27) (.27) (.24) (.27)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.21 $5.47 $5.33 $5.27
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $53 $56 $70 $70 $67
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .88%(c) .88%(c) .88%(c) .92% .95%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.45% 3.55% 4.06% 4.57% 5.09%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 32% 113% 33% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.80% .19% 8.00% 5.83% 8.90%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class A would have been 0.96%, 0.94% and 0.93% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
100 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.21 $5.47 $5.33 $5.27 $5.09
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .15 .18 .20 .23
Net gains (losses) (both realized and unrealized) .17 (.18) .19 .06 .18
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.03) .37 .26 .41
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.15) (.18) (.20) (.23)
Distributions from realized gains (.03) (.08) (.05) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.23) (.23) (.20) (.23)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.21 $5.47 $5.33 $5.27
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $5 $7 $9 $8 $6
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.63%(c) 1.63%(c) 1.67% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.69% 2.79% 3.28% 3.82% 4.34%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 32% 113% 33% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 5.99% (.56%) 7.18% 5.04% 8.09%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class B would have been 1.71%, 1.70% and 1.69% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
101 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.21 $5.47 $5.33 $5.27 $5.09
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .15 .18 .20 .22
Net gains (losses) (both realized and unrealized) .17 (.18) .19 .06 .18
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.03) .37 .26 .40
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.15) (.18) (.20) (.22)
Distributions from realized gains (.03) (.08) (.05) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.23) (.23) (.20) (.22)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.21 $5.47 $5.33 $5.27
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $2 $2 $2 $1 $--
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.64%(c) 1.63%(c) 1.66% 1.70%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.70% 2.80% 3.27% 3.80% 4.36%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 9% 32% 113% 33% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 5.99% (.57%) 7.18% 5.05% 8.02%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class C would have been 1.72%, 1.70% and 1.69% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
102 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.20 $5.37 $5.20 $5.14 $5.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .18 .19 .22 .25 .28
Net gains (losses) (both realized and unrealized) .17 (.17) .17 .06 .14
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 .02 .39 .31 .42
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.18) (.19) (.22) (.25) (.28)
Distributions from realized gains (.02) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.19) (.22) (.25) (.28)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.20 $5.37 $5.20 $5.14
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in millions) $341 $347 $393 $375 $357
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .85% .84% .84% .83% .84%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.37% 3.60% 4.26% 4.82% 5.45%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 15% 23% 73% 36% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(c) 6.73% .32% 7.78% 6.15% 8.53%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
103 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.20 $5.37 $5.20 $5.14 $5.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .15 .18 .21 .24
Net gains (losses) (both realized and unrealized) .17 (.17) .17 .06 .14
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.02) .35 .27 .38
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.15) (.18) (.21) (.24)
Distributions from realized gains (.02) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.15) (.18) (.21) (.24)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.20 $5.37 $5.20 $5.14
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $49 $59 $68 $64 $53
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.60% 1.59% 1.59% 1.59% 1.60%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.62% 2.85% 3.48% 4.02% 4.70%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 15% 23% 73% 36% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(c) 5.94% (.44%) 6.97% 5.36% 7.72%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
104 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.20 $5.37 $5.20 $5.14 $5.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .15 .18 .21 .24
Net gains (losses) (both realized and unrealized) .17 (.17) .17 .06 .14
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.02) .35 .27 .38
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.15) (.18) (.21) (.24)
Distributions from realized gains (.02) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.15) (.18) (.21) (.24)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.20 $5.37 $5.20 $5.14
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $9 $9 $9 $5 $2
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.61% 1.60% 1.60% 1.59% 1.59%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.62% 2.84% 3.44% 4.04% 4.74%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 15% 23% 73% 36% 4%
- --------------------------------------------------------------------------------------------------------------------------
Total return(c) 5.94% (.44%) 6.96% 5.36% 7.75%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
105 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.07 $5.36 $5.16 $5.12 $4.92
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .18 .18 .20 .22 .25
Net gains (losses) (both realized and unrealized) .17 (.18) .22 .04 .20
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 -- .42 .26 .45
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.18) (.18) (.20) (.22) (.25)
Distributions from realized gains (.06) (.11) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.29) (.22) (.22) (.25)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.18 $5.07 $5.36 $5.16 $5.12
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $73 $79 $97 $92 $88
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .88%(c) .88%(c) .88%(c) .90% .91%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.47% 3.44% 3.88% 4.38% 4.90%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 30% 36% 91% 44% 13%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 7.04% (.02%) 8.43% 5.26% 9.28%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class A would have been 0.92%, 0.93% and 0.90% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
106 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.07 $5.36 $5.16 $5.12 $4.92
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .14 .16 .19 .21
Net gains (losses) (both realized and unrealized) .17 (.18) .22 .04 .20
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.04) .38 .23 .41
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.14) (.16) (.19) (.21)
Distributions from realized gains (.06) (.11) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.25) (.18) (.19) (.21)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.18 $5.07 $5.36 $5.16 $5.12
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $11 $15 $18 $18 $16
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.63%(c) 1.63%(c) 1.65% 1.66%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.70% 2.69% 3.13% 3.60% 4.14%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 30% 36% 91% 44% 13%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.23% (.78%) 7.61% 4.48% 8.47%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class B would have been 1.67%, 1.69% and 1.66% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
107 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.07 $5.36 $5.16 $5.11 $4.92
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .14 .14 .16 .19 .21
Net gains (losses) (both realized and unrealized) .17 (.18) .22 .05 .19
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.04) .38 .24 .40
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.14) (.14) (.16) (.19) (.21)
Distributions from realized gains (.06) (.11) (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.25) (.18) (.19) (.21)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.18 $5.07 $5.36 $5.16 $5.11
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $1 $2 $2 $1 $--
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.63%(c) 1.64%(c) 1.66% 1.66%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.70% 2.68% 3.07% 3.69% 4.09%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 30% 36% 91% 44% 13%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.23% (.78%) 7.60% 4.68% 8.26%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class C would have been 1.68%, 1.69% and 1.66% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
108 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Class A
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.16 $5.43 $5.35 $5.27 $5.13
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .16 .17 .18 .22 .27
Net gains (losses) (both realized and unrealized) .19 (.20) .19 .08 .14
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 (.03) .37 .30 .41
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.16) (.17) (.18) (.22) (.27)
Distributions from realized gains -- (.07) (.11) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.24) (.29) (.22) (.27)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.16 $5.43 $5.35 $5.27
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $51 $56 $67 $69 $67
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .88%(c) .88%(c) .88%(c) .91% .93%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 3.07% 3.13% 3.40% 4.22% 4.98%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 33% 17% 194% 33% 3%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.90% (.67%) 7.08% 5.87% 7.95%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class A would have been 0.95%, 0.95% and 0.92% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
109 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Class B
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.16 $5.43 $5.34 $5.27 $5.13
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .12 .13 .14 .18 .23
Net gains (losses) (both realized and unrealized) .19 (.20) .20 .07 .14
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.07) .34 .25 .37
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.12) (.13) (.14) (.18) (.23)
Distributions from realized gains -- (.07) (.11) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.20) (.25) (.18) (.23)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.16 $5.43 $5.34 $5.27
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $8 $10 $13 $12 $8
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.63%(c) 1.63%(c) 1.66% 1.68%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.31% 2.38% 2.62% 3.46% 4.23%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 33% 17% 194% 33% 3%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.10% (1.43%) 6.47% 4.89% 7.15%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class B would have been 1.70%, 1.71% and 1.68% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
110 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Class C
Per share income and capital changes(a)
Fiscal period ended June 30, 2005 2004 2003 2002 2001
Net asset value, beginning of period $5.16 $5.43 $5.35 $5.28 $5.13
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .12 .13 .14 .18 .22
Net gains (losses) (both realized and unrealized) .19 (.20) .19 .07 .15
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .31 (.07) .33 .25 .37
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (.12) (.13) (.14) (.18) (.22)
Distributions from realized gains -- (.07) (.11) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.20) (.25) (.18) (.22)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.35 $5.16 $5.43 $5.35 $5.28
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of period (in millions) $2 $2 $3 $1 $1
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.64%(c) 1.63%(c) 1.63%(c) 1.66% 1.68%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 2.31% 2.38% 2.54% 3.45% 4.26%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 33% 17% 194% 33% 3%
- --------------------------------------------------------------------------------------------------------------------------
Total return(d) 6.10% (1.44%) 6.26% 4.89% 7.27%
- --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Ameriprise Financial waived/reimbursed the Fund for certain expenses.
Had Ameriprise Financial not done so, the annual ratios of expenses for
Class C would have been 1.71%, 1.71% and 1.68% for the years ended June 30,
2005, 2004 and 2003, respectively.
(d) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
111 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Report of Independent
Registered Public Accounting Firm
THE BOARD AND SHAREHOLDERS
AXP CALIFORNIA TAX-EXEMPT TRUST
AXP SPECIAL TAX-EXEMPT SERIES TRUST
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of AXP California
Tax-Exempt Fund (a fund within AXP California Tax-Exempt Trust) and AXP
Massachusetts Tax-Exempt Fund, AXP Michigan Tax-Exempt Fund, AXP Minnesota
Tax-Exempt Fund, AXP New York Tax-Exempt Fund and AXP Ohio Tax-Exempt Fund
(funds within AXP Special Tax-Exempt Series Trust) as of June 30, 2005, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period ended
June 30, 2005, and the financial highlights for each of the years in the
five-year period ended June 30, 2005. These financial statements and the
financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and the 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 June 30,
2005, by correspondence with the custodian and brokers or by other
appropriate auditing procedures. 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
AXP California Tax-Exempt Fund, AXP Massachusetts Tax-Exempt Fund, AXP
Michigan Tax-Exempt Fund, AXP Minnesota Tax-Exempt Fund, AXP New York
Tax-Exempt Fund and AXP Ohio Tax-Exempt Fund as of June 30, 2005, and the
results of their operations, changes in their net assets and the financial
highlights for each of the periods stated in the first paragraph above, in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
August 22, 2005
- --------------------------------------------------------------------------------
112 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Federal Income Tax Information
(UNAUDITED)
Each Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its
fiscal year. The dividends listed below are reported to you on your year-end
statement.
AXP California Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 98.70% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01585
Aug. 25, 2004 0.01517
Sept. 24, 2004 0.01700
Oct. 25, 2004 0.01623
Nov. 24, 2004 0.01562
Dec. 22, 2004 0.01465
Jan. 27, 2005 0.01891
Feb. 24, 2005 0.01507
March 30, 2005 0.01950
April 28, 2005 0.01527
May 26, 2005 0.01584
June 29, 2005 0.01825
Total $0.19736
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.07212
Total distributions $0.26948
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113 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class B
Income distributions -- 98.70% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01251
Aug. 25, 2004 0.01227
Sept. 24, 2004 0.01375
Oct. 25, 2004 0.01286
Nov. 24, 2004 0.01235
Dec. 22, 2004 0.01160
Jan. 27, 2005 0.01503
Feb. 24, 2005 0.01201
March 30, 2005 0.01583
April 28, 2005 0.01214
May 26, 2005 0.01291
June 29, 2005 0.01454
Total $0.15780
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.07212
Total distributions $0.22992
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114 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 98.70% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01254
Aug. 25, 2004 0.01226
Sept. 24, 2004 0.01375
Oct. 25, 2004 0.01285
Nov. 24, 2004 0.01235
Dec. 22, 2004 0.01158
Jan. 27, 2005 0.01504
Feb. 24, 2005 0.01200
March 30, 2005 0.01584
April 28, 2005 0.01214
May 26, 2005 0.01290
June 29, 2005 0.01453
Total $0.15778
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.07212
Total distributions $0.22990
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 8.09%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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115 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 97.10% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01422
Aug. 25, 2004 0.01421
Sept. 24, 2004 0.01397
Oct. 25, 2004 0.01435
Nov. 24, 2004 0.01409
Dec. 22, 2004 0.01326
Jan. 27, 2005 0.01676
Feb. 24, 2005 0.01322
March 30, 2005 0.01601
April 28, 2005 0.01358
May 26, 2005 0.01319
June 29, 2005 0.01636
Total $0.17322
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.02410
Total distributions $0.19732
Class B
Income distributions -- 97.10% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01084
Aug. 25, 2004 0.01060
Sept. 24, 2004 0.01060
Oct. 25, 2004 0.01085
Nov. 24, 2004 0.01071
Dec. 22, 2004 0.01010
Jan. 27, 2005 0.01264
Feb. 24, 2005 0.01004
March 30, 2005 0.01222
April 28, 2005 0.01033
May 26, 2005 0.01015
June 29, 2005 0.01251
Total $0.13159
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.02410
Total distributions $0.15569
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116 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 97.10% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01124
Aug. 25, 2004 0.01061
Sept. 24, 2004 0.01062
Oct. 25, 2004 0.01085
Nov. 24, 2004 0.01068
Dec. 22, 2004 0.01009
Jan. 27, 2005 0.01266
Feb. 24, 2005 0.01003
March 30, 2005 0.01219
April 28, 2005 0.01033
May 26, 2005 0.01014
June 29, 2005 0.01251
Total $0.13195
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.02410
Total distributions $0.15605
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 4.83%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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117 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 95.09% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01582
Aug. 25, 2004 0.01540
Sept. 24, 2004 0.01509
Oct. 25, 2004 0.01572
Nov. 24, 2004 0.01513
Dec. 22, 2004 0.01999
Jan. 27, 2005 0.01826
Feb. 24, 2005 0.01421
March 30, 2005 0.01716
April 28, 2005 0.01450
May 26, 2005 0.01366
June 29, 2005 0.01658
Total $0.19152
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01986
Total distributions $0.21138
Class B
Income distributions -- 95.09% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01235
Aug. 25, 2004 0.01204
Sept. 24, 2004 0.01177
Oct. 25, 2004 0.01228
Nov. 24, 2004 0.01183
Dec. 22, 2004 0.01689
Jan. 27, 2005 0.01419
Feb. 24, 2005 0.01109
March 30, 2005 0.01341
April 28, 2005 0.01132
May 26, 2005 0.01056
June 29, 2005 0.01280
Total $0.15053
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01986
Total distributions $0.17039
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118 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 95.09% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01231
Aug. 25, 2004 0.01203
Sept. 24, 2004 0.01178
Oct. 25, 2004 0.01228
Nov. 24, 2004 0.01181
Dec. 22, 2004 0.01690
Jan. 27, 2005 0.01420
Feb. 24, 2005 0.01109
March 30, 2005 0.01338
April 28, 2005 0.01131
May 26, 2005 0.01056
June 29, 2005 0.01280
Total $0.15045
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01986
Total distributions $0.17031
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 0%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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119 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 100% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01541
Aug. 25,2004 0.01458
Sept. 24, 2004 0.01462
Oct. 25, 2004 0.01517
Nov. 24, 2005 0.01452
Dec. 22, 2004 0.01372
Jan. 27, 2005 0.01776
Feb. 24, 2005 0.01388
March 30, 2005 0.01707
April 28, 2005 0.01410
May 26, 2005 0.01403
June 29, 2005 0.01606
Total $0.18092
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01719
Total distributions $0.19811
Class B
Income distributions -- 100% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01201
Aug. 25,2004 0.01163
Sept. 24, 2004 0.01133
Oct. 25, 2004 0.01176
Nov. 24, 2005 0.01122
Dec. 22, 2004 0.01063
Jan. 27, 2005 0.01379
Feb. 24, 2005 0.01077
March 30, 2005 0.01335
April 28, 2005 0.01092
May 26, 2005 0.01094
June 29, 2005 0.01230
Total $0.14065
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01719
Total distributions $0.15784
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120 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 100% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01203
Aug. 25,2004 0.01161
Sept. 24, 2004 0.01131
Oct. 25, 2004 0.01174
Nov. 24, 2005 0.01119
Dec. 22, 2004 0.01061
Jan. 27, 2005 0.01377
Feb. 24, 2005 0.01075
March 30, 2005 0.01333
April 28, 2005 0.01090
May 26, 2005 0.01093
June 29, 2005 0.01227
Total $0.14044
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.01719
Total distributions $0.15763
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 7.00%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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121 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 97.38% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01482
Aug. 25, 2004 0.01461
Sept. 24, 2004 0.01389
Oct. 25, 2004 0.01500
Nov. 24, 2004 0.01465
Dec. 22, 2004 0.01680
Jan. 27, 2005 0.01737
Feb. 24, 2005 0.01386
March 30, 2005 0.01703
April 28, 2005 0.01412
May 26, 2005 0.01407
June 29, 2005 0.01757
Total $0.18379
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.05940
Total distributions $0.24319
Class B
Income distributions -- 97.38% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01147
Aug. 25, 2004 0.01130
Sept. 24, 2004 0.01073
Oct. 25, 2004 0.01164
Nov. 24, 2004 0.01141
Dec. 22, 2004 0.01380
Jan. 27, 2005 0.01354
Feb. 24, 2005 0.01073
March 30, 2005 0.01334
April 28, 2005 0.01102
May 26, 2005 0.01097
June 29, 2005 0.01392
Total $0.14387
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.05940
Total distributions $0.20327
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122 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 97.38% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01152
Aug. 25, 2004 0.01126
Sept. 24, 2004 0.01073
Oct. 25, 2004 0.01165
Nov. 24, 2004 0.01145
Dec. 22, 2004 0.01376
Jan. 27, 2005 0.01350
Feb. 24, 2005 0.01078
March 30, 2005 0.01344
April 28, 2005 0.01104
May 26, 2005 0.01097
June 29, 2005 0.01392
Total $0.14402
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 2004 $0.05940
Total distributions $0.20342
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 5.33%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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123 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Fiscal year ended June 30, 2005
Class A
Income distributions -- 98.41% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01453
Aug. 25, 2004 0.01360
Sept. 24, 2004 0.01357
Oct. 25, 2004 0.01379
Nov. 24, 2004 0.01337
Dec. 22, 2004 0.01264
Jan. 27, 2005 0.01622
Feb. 24, 2005 0.01233
March 30, 2005 0.01452
April 28, 2005 0.01240
May 26, 2005 0.01243
June 29, 2005 0.01528
Total distributions $0.16468
Class B
Income distributions -- 98.41% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01044
Aug. 25, 2004 0.01029
Sept. 24, 2004 0.01028
Oct. 25, 2004 0.01038
Nov. 24, 2004 0.01029
Dec. 22, 2004 0.00957
Jan. 27, 2005 0.01219
Feb. 24, 2005 0.00920
March 30, 2005 0.01082
April 28, 2005 0.00921
May 26, 2005 0.00933
June 29, 2005 0.01150
Total distributions $0.12350
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124 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Class C
Income distributions -- 98.41% are tax-exempt.
Payable date Per share
July 26, 2004 $0.01052
Aug. 25, 2004 0.01032
Sept. 24, 2004 0.01026
Oct. 25, 2004 0.01037
Nov. 24, 2004 0.01029
Dec. 22, 2004 0.00955
Jan. 27, 2005 0.01218
Feb. 24, 2005 0.00921
March 30, 2005 0.01081
April 28, 2005 0.00922
May 26, 2005 0.00933
June 29, 2005 0.01150
Total distributions $0.12356
Source of distributions
For dividends paid by the Fund to be tax-exempt, the Fund must have at least
50% of its assets in tax-exempt obligations at the end of each fiscal
quarter.
Federal taxation
Tax-exempt distributions are exempt from federal income taxes and should not
be included in shareholders' gross income. The income from this Fund is
subject to the alternative minimum tax (AMT). The AMT percentage at June 30,
2005 was 1.26%.
Other taxation
Tax-exempt distributions may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
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125 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Fund Expense Examples
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in each Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the
beginning of the period and held for the six months ended June 30, 2005.
Actual Expenses
The first line of each table provides information about actual account
values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading titled "Expenses
paid during the period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The second line of each table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare the ongoing
costs of investing in the Fund and other funds. To do so, compare each 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in each table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads). Therefore, the second line of each table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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126 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP California Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,030.80 $4.38(c) .87%
Hypothetical (5% return before expenses) $1,000 $1,020.48 $4.36(c) .87%
Class B
Actual(b) $1,000 $1,027.00 $8.14(c) 1.62%
Hypothetical (5% return before expenses) $1,000 $1,016.76 $8.10(c) 1.62%
Class C
Actual(b) $1,000 $1,028.90 $8.20(c) 1.63%
Hypothetical (5% return before expenses) $1,000 $1,016.71 $8.15(c) 1.63%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+3.08% for Class A, +2.70% for Class B and +2.89% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
is expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.98 for Class A, $7.79 for Class
B and $7.80 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
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127 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Massachusetts Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,023.40 $4.41(c) .88%
Hypothetical (5% return before expenses) $1,000 $1,020.43 $4.41(c) .88%
Class B
Actual(b) $1,000 $1,019.60 $8.21(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
Class C
Actual(b) $1,000 $1,017.70 $8.20(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+2.34% for Class A, +1.96% for Class B, and +1.77% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.96 for Class A, $7.76 for Class
B and $7.75 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
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128 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Michigan Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,022.80 $4.41(c) .88%
Hypothetical (5% return before expenses) $1,000 $1,020.43 $4.41(c) .88%
Class B
Actual(b) $1,000 $1,019.00 $8.21(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
Class C
Actual(b) $1,000 $1,018.90 $8.21(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+2.28% for Class A, +1.90% for Class B and +1.89% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
is expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.96 for Class A, $7.76 for Class
B and $7.76 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
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129 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Minnesota Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,020.60 $4.21(c) .84%
Hypothetical (5% return before expenses) $1,000 $1,020.63 $4.21(c) .84%
Class B
Actual(b) $1,000 $1,016.80 $7.95(c) 1.59%
Hypothetical (5% return before expenses) $1,000 $1,016.91 $7.95(c) 1.59%
Class C
Actual(b) $1,000 $1,016.80 $8.00(c) 1.60%
Hypothetical (5% return before expenses) $1,000 $1,016.86 $8.00(c) 1.60%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+2.06% for Class A, +1.68% for Class B and +1.68% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
is expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.96 for Class A, $7.75 for Class
B and $7.75 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
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130 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP New York Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,025.60 $4.42(c) .88%
Hypothetical (5% return before expenses) $1,000 $1,020.43 $4.41(c) .88%
Class B
Actual(b) $1,000 $1,021.70 $8.22(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
Class C
Actual(b) $1,000 $1,021.70 $8.22(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+2.56% for Class A, +2.17% for Class B and +2.17% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
is expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.97 for Class A, $7.77 for Class
B and $7.77 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
- --------------------------------------------------------------------------------
131 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
AXP Ohio Tax-Exempt Fund
Beginning Ending Expenses
account value account value paid during Annualized
Jan. 1, 2005 June 30, 2005 the period(a) expense ratio
Class A
Actual(b) $1,000 $1,022.70 $4.41(c) .88%
Hypothetical (5% return before expenses) $1,000 $1,020.43 $4.41(c) .88%
Class B
Actual(b) $1,000 $1,018.90 $8.21(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
Class C
Actual(b) $1,000 $1,018.80 $8.21(c) 1.64%
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20(c) 1.64%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2005:
+2.27% for Class A, +1.89% for Class B, and +1.88% for Class C.
(c) Pending final approval from the Fund's Board of Directors (Board), it
is expected that, effective Oct. 1, 2005, the fee schedule under the
Administrative Services Agreement between Ameriprise Financial and the
Fund will be revised. It is also expected that Ameriprise Financial and
its affiliates will contractually agree to waive certain fees and to
absorb certain expenses until June 30, 2006, unless sooner terminated
at the discretion of the Board. Under this expense cap/fee waiver
agreement, net expenses will not exceed 0.79% for Class A; 1.55% for
Class B and 1.55% for Class C. If the revised fee schedule under the
Administrative Services Agreement and the cap/waiver agreement had been
in place for the entire six-month period ended June 30, 2005, the
actual expenses paid would have been $3.96 for Class A, $7.76 for Class
B and $7.76 for Class C; the hypothetical expenses paid would have been
$3.96 for Class A, $7.75 for Class B and $7.75 for Class C.
- --------------------------------------------------------------------------------
132 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Board Members and Officers
Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions
based on policies set by the board.
The following is a list of the Fund's board members. Each member oversees 14
Master Trust portfolios and 90 American Express mutual funds. Board members
serve until the next regular shareholders' meeting or until he or she
reaches the mandatory retirement age established by the board.
Independent Board Members
Name, Position held
address, with Fund and Principal occupation
age length of service during past five years Other directorships
- ----------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, Board Services
901 S. Marquette Ave. since 1999 Corporation (provides
Minneapolis, MN 55402 administrative services
Age 70 to boards). Former
Governor of Minnesota
- ----------------------------------------------------------------------------------------------------------------
Philip J. Carroll, Jr. Board member Retired Chairman and Scottish Power PLC,
901 S. Marquette Ave. since 2002 CEO, Fluor Corporation Vulcan Materials Company,
Minneapolis, MN 55402 (engineering and Inc. (construction
Age 67 construction) since 1998 materials/chemicals)
- ----------------------------------------------------------------------------------------------------------------
Livio D. DeSimone Board member Retired Chair of the Cargill, Incorporated
30 Seventh Street East since 2001 Board and Chief (commodity merchants and
Suite 3050 Executive Officer, processors), General
St. Paul, MN 55101-4901 Minnesota Mining and Mills, Inc. (consumer
Age 71 Manufacturing (3M) foods), Vulcan Materials
Company (construction
materials/ chemicals),
Milliken & Company
(textiles and chemicals),
and Nexia
Biotechnologies, Inc.
- ----------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of BostonFed Bancorp, Inc.
901 S. Marquette Ave. since 2004 Economics and (holding company) and its
Minneapolis, MN 55402 Management, Bentley subsidiary Boston Federal
Age 54 College since 2002; Savings Bank
former Dean, McCallum
Graduate School of
Business, Bentley
College from 1999
to 2002
- ----------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 70
- ----------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member Retired President and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 66
- ----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
133 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Independent Board Members (continued)
Name, Position held
address, with Fund and Principal occupation
age length of service during past five years Other directorships
- -------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member Director, Enterprise Strategic Distribution,
901 S. Marquette Ave. since 2004 Asset Management, Inc. Inc. (transportation,
Minneapolis, MN 55402 (private real estate and distribution and
Age 52 asset management company) logistics consultants)
since 1999
- -------------------------------------------------------------------------------------------------------------
Alan K. Simpson Board member Former three-term United
1201 Sunshine Ave. since 1997 States Senator for Wyoming
Cody, WY 82414
Age 73
- -------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc.
901 S. Marquette Ave. since 2002 Executive Officer, (biotechnology)
Minneapolis, MN 55402 RiboNovix, Inc. since
Age 61 2004; President, Forester
Biotech since 2000; prior
to that, President and
CEO, Aquila
Biopharmaceuticals, Inc.
- -------------------------------------------------------------------------------------------------------------
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)*
Name, Position held
address, with Fund and Principal occupation
age length of service during past five years Other directorships
- -------------------------------------------------------------------------------------------------------------
William F. Truscott Board member Senior Vice President -
53600 Ameriprise Financial Center since 2001, Chief Investment Officer
Minneapolis, MN 55474 Vice President of Ameriprise Financial,
Age 44 since 2002 Inc. and RiverSource
Investments, LLC since
2001. Former Chief
Investment Officer and
Managing Director, Zurich
Scudder Investments
- ------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director and/or employee
of Ameriprise Financial, Inc. (formerly American Express Financial
Corporation) or of RiverSource Investments, LLC, its wholly owned
subsidiary.
- --------------------------------------------------------------------------------
134 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the board. In addition to Mr. Truscott, who is vice president,
the Fund's other officers are:
Other Officers
Name, Position held
address, with Fund and Principal occupation
age length of service during past five years Other directorships
- -----------------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer Vice President - Investment
105 Ameriprise Financial Center since 2002 Accounting, Ameriprise Financial,
Minneapolis, MN 55474 Inc., since 2002; Vice President -
Age 50 Finance, American Express Company,
2000-2002; Vice President -
Corporate Controller, Ameriprise
Financial, Inc., 1996-2000
- -----------------------------------------------------------------------------------------------------------------
Paula R. Meyer President Senior Vice President and General
596 Ameriprise Financial Center since 2002 Manager - Mutual Funds, Ameriprise
Minneapolis, MN 55474 Financial, Inc. since 2002; Vice
Age 51 President and Managing Director -
American Express Funds, Ameriprise
Financial, Inc. 2000-2002; Vice
President, Ameriprise Financial,
Inc. 1998-2000
- -----------------------------------------------------------------------------------------------------------------
Leslie L. Ogg Vice President, President of Board Services
901 S. Marquette Ave. General Counsel, Corporation
Minneapolis, MN 55402 and Secretary
Age 66 since 1978
- -----------------------------------------------------------------------------------------------------------------
Beth E. Weimer Chief Compliance Vice President and Chief
172 Ameriprise Financial Center Officer since 2004 Compliance Officer, Ameriprise
Minneapolis, MN 55474 Financial, Inc. since 2001; Vice
Age 52 President and Chief Compliance
Officer, Ameriprise Financial
Services, Inc. (formerly American
Express Financial Advisors),
2001-2005; Partner, Arthur
Andersen Regulatory Risk Services,
1998-2001
- -----------------------------------------------------------------------------------------------------------------
The SAI has additional information about the Fund's directors and is
available, without charge, upon request by calling (800) 862-7919.
- --------------------------------------------------------------------------------
135 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Approval of Investment Management Services Agreement
AXP California Tax-Exempt Fund
AXP Massachusetts Tax-Exempt Fund
AXP Michigan Tax-Exempt Fund
AXP Minnesota Tax-Exempt Fund
AXP New York Tax-Exempt Fund
AXP Ohio Tax-Exempt Fund
Ameriprise Financial, Inc. (formerly American Express Financial Corporation
or AEFC), (the investment manager), is a wholly-owned subsidiary of American
Express Company. Under an Investment Management Services Agreement (the
Agreement), the investment manager provides investment advice and other
services to the Fund. Throughout the year, the Funds' Board of Trustees and
the Board's Investment Review Committee monitor these services.
Each year the Board determines whether to continue the Agreement by
evaluating the quality and level of service received and the costs
associated with those services. The investment manager prepares detailed
reports for the Board and its Contracts Committee in March and April and
provides data prepared by independent organizations to assist the Board in
making this determination. The Board gives considerable weight to the work,
deliberations and conclusions of the Contracts and Investment Review
Committees in determining whether to continue the Agreement.
On February 1, 2005, American Express Company announced its intention to
pursue a spin-off of AEFC by distributing shares of the common stock of AEFC
to shareholders of American Express Company. At a meeting held in person on
April 14, 2005, the Board, including a majority of the independent members,
approved the continuation of the Agreement for an interim period, not to
exceed one year, ending on the later of (i) the effective date of the
spin-off or (ii) the approval by the Fund's shareholders of a new investment
management services agreement with the investment manager (the Interim
Period). The spin-off will not result in an "assignment" of the Agreement
under the Investment Company Act of 1940 and, therefore, will not cause the
termination of the Agreement according to its terms. In connection with the
spin-off the investment manager has proposed that going forward, services
under the Agreement be provided by an affiliate, RiverSource Investments,
LLC (RiverSource). Independent counsel advised the Board that it would be
prudent, in connection with the spin-off, to consider a new agreement with
RiverSource and to seek shareholder approval of that agreement as soon as
practical thereafter.
Investment performance is a major factor in the evaluation process, and the
Board reviewed the Fund's performance over a range of different periods by
comparing its performance to relevant Lipper and broader market indices.
For AXP California Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above the median for a peer group of funds with similar investment goals
and noted that the Fund's investment performance in 2004 approximated the
median.
- --------------------------------------------------------------------------------
136 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
For AXP Massachusetts Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 was below median. The
Board also considered the fact that Ameriprise Financial has implemented a
new fixed income sector team approach to managing the Fund and performance
has begun to improve.
For AXP Michigan Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above the median for a peer group of funds with similar investment goals
and noted that the Fund's investment performance in 2004 exceeded the
median.
For AXP Minnesota Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 was below median. The
Board also considered the fact that Ameriprise Financial has implemented a
new fixed income sector team approach to managing the Fund and performance
has begun to improve.
For AXP New York Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 approximated the
median. The Board also considered the fact that Ameriprise Financial has
implemented a new fixed income sector team approach to managing the Fund and
performance has begun to improve.
For AXP Ohio Tax-Exempt Fund
The Board considered that over time the Fund's investment performance should
be above median for a peer group of funds with similar investment goals and
noted that the Fund's investment performance in 2004 was below median. The
Board also considered the fact that Ameriprise Financial has implemented a
new fixed income sector team approach to managing the Fund and performance
has begun to improve.
The Board noted that, in addition to portfolio management and investment
research, the investment manager provides portfolio trading, daily net asset
value calculation, management of cash flow, product development,
administration of its compliance and legal departments, access to
distribution, accounting and recordkeeping, and reporting to the Board and
shareholders. To evaluate these services, the Board referred to surveys and
benchmarks established by commercial providers, trade associations and the
investment manager's internal processes. The Board concluded that the
services provided were consistent with services provided by investment
managers to comparable mutual funds.
- --------------------------------------------------------------------------------
137 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Board also evaluated the price paid for the services provided by the
investment manager, noting the existence of a pricing philosophy,
established by the Board and the investment manager, that seeks to maintain
total Fund expenses within a range of the median expenses charged to
comparable funds sold through financial advisors. The Board considered
detailed information set forth in an annual report on fees and expenses,
including, among other things, data showing a comparison of the Fund's
expenses with median expenses paid by funds in its comparison group and data
showing the Fund's contribution to the investment manager's profitability.
For AXP California Tax-Exempt Fund
The Board determined that while the Fund's expenses are slightly higher than
the median for its comparison group, a fee waiver has been added to be
consistent with other AXP state tax-exempt funds.
For AXP Massachusetts Tax-Exempt Fund
The Board determined that the total expense ratio of the Fund is below
median of its comparison group. However, the fee waiver has been increased
to be consistent with other AXP state tax-exempt funds.
For AXP Michigan Tax-Exempt Fund
The Board determined that while the Fund's expenses are somewhat higher than
the median for its comparison group, the fee waiver has been increased to be
consistent with other AXP state tax-exempt funds.
For AXP Minnesota Tax-Exempt Fund
The Board determined that the total expense ratio of the Fund is below the
median of its comparison group. Subsequent to the Board's consideration of
the annual renewal of the Agreement, Ameriprise Financial proposed a fee
waiver that would be consistent with other AXP state tax-exempt funds.
For AXP New York Tax-Exempt Fund
The Board determined that while the Fund's expenses are slightly higher than
the median for its comparison group, the existing fee waiver has been
increased to reduce further the expenses the Fund will pay.
For AXP Ohio Tax-Exempt Fund
The Board determined that while the Fund's expenses are relatively high for
its comparison group, the existing fee waiver has been increased to reduce
further the expenses the Fund will pay.
The Board considered the economies of scale that might be realized by the
investment manager as the Fund grew and took note of the extent to which
Fund shareholders also might benefit from such growth. The Board considered
that the Agreement provided for lower fees as assets increase at
pre-established breakpoints and concluded that the Agreement satisfactorily
provided for sharing these economies of scale.
- --------------------------------------------------------------------------------
138 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
The Board took into account the Contracts Committee's discussion comparing
the fees the investment manager charges to the Fund with those it charges to
institutional clients, noting that the relatively higher fees paid by the
Fund were principally attributable to the additional services required to
manage a regulated mutual fund, like the Fund, and the operation of a large
mutual fund family. The Board also considered the profitability realized by
the investment manager and its affiliates from its relationship with the
Fund. The Board took into account the services acquired by the investment
manager through the use of commission dollars paid by the Fund on portfolio
transactions. The Board concluded that the investment manager's overall
costs and profitability were appropriate, although profitability may be too
low on an ongoing basis.
The Board noted that the fees paid by the Fund should permit the investment
manager to offer competitive compensation to its personnel, make necessary
investments in its business and earn an appropriate profit. Based on the
foregoing, the Board concluded that the fees paid to the investment manager
under the Agreement were fair and reasonable and determined to approve
renewal of the Agreement for the Interim Period.
- --------------------------------------------------------------------------------
139 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
Proxy Voting
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling (800) 862-7919; by looking at the website
www.ameriprise.com; or by searching the website of the Securities and
Exchange Commission http://www.sec.gov. You may view the Fund's voting
record for all portfolio companies whose shareholders meetings were
completed the previous quarter on www.ameriprise.com or obtain a copy by
calling the Fund's administrator, Board Services Corporation, collect at
(612) 330-9283. In addition, information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month
period ended June 30 is available at http://www.sec.gov.
- --------------------------------------------------------------------------------
140 -- AXP STATE TAX-EXEMPT FUNDS -- 2005 ANNUAL REPORT
American Express Funds
70100 Ameriprise Financial Center
Minneapolis, MN 55474
This report must be accompanied or preceded by the Fund's current
prospectus. Distributed by Ameriprise Financial Services, Inc. (formerly
known as American Express Financial Advisors Inc.). Member NASD. American
Express Company is separate from Ameriprise Financial Services, Inc. and is
not a broker-dealer.
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Livio D. DeSimone and Anne P. Jones, each qualify as audit
committee financial experts.
Item 4. Principal Accountant Fees and Services
Fund - Related Fees*
(a) Audit Fees. The fees paid for the years ended June 30, to KPMG LLP for
professional services rendered for the audits of the annual financial
statements for AXP California Tax-Exempt Trust were as follows:
2005 - $19,500; 2004 - $18,029
(b) Audit - Related Fees. The fees paid for the years ended June 30, to
KPMG LLP for additional professional services rendered in connection
with the registrant's security count pursuant to Rule 17f-2 for AXP
California Tax-Exempt Trust were as follows:
2005 - $50; 2004 - $49
(c) Tax Fees. The fees paid for the years ended June 30, to KPMG LLP for
tax compliance related services for AXP California Tax-Exempt Trust
were as follows:
2005 - $2,550; 2004 - $2,275
(d) All Other Fees. The fees paid for the years ended June 30, to KPMG LLP
for additional professional services rendered for AXP California
Tax-Exempt Trust were as follows:
2005 - $40; 2004 - None
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by KPMG LLP for
the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
must be pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above
during 2005 and 2004 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees paid for the years ended June 30, by the
registrant for non-audit services to KPMG LLP were as follows:
2005 - None; 2004 - None
The fees paid for the years ended June 30, to KPMG LLP by the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant were as follows:
2005 - $75,900; 2004 - $71,000
(h) 100% of the services performed for item (g) above during 2005 and 2004
were pre-approved by the audit committee.
*2004 represents bills paid 7/1/03 - 6/30/04
2005 represents bills paid 7/1/04 - 6/30/05
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's Principal Financial
Officer and Principal Executive Officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal
executive officer and principal financial officer, as required to be
disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AXP California Tax-Exempt Trust
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date September 1, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date September 1, 2005
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date September 1, 2005