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
RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 8/31
Date of reporting period: 2/28
Semiannual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND
RIVERSOURCE MINNESOTA TAX-EXEMPT FUND
RIVERSOURCE NEW YORK TAX-EXEMPT FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
FEBRUARY 28, 2010
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.
(SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance........................ 2
RiverSource California Tax-Exempt Fund..... 2
RiverSource Minnesota Tax-Exempt Fund...... 7
RiverSource New York Tax-Exempt Fund....... 12
Fund Expenses Examples....................... 17
Portfolios of Investments.................... 21
Statements of Assets and Liabilities......... 49
Statements of Operations..................... 51
Statements of Changes in Net Assets.......... 52
Financial Highlights......................... 55
Notes to Financial Statements................ 67
Proxy Voting................................. 84
</Table>
RiverSource California Tax-Exempt Fund, RiverSource Minnesota Tax-Exempt Fund
and RiverSource New York Tax-Exempt Fund are, singularly and collectively,
where the context requires, referred to as either "the Fund," "each Fund" or
"the Funds."
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource California Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource California Tax-Exempt Fund's Class A shares, excluding sales
charge, rose 4.51% for the six months ended Feb. 28, 2010.
> The Fund outperformed the Barclays Capital Municipal Bond California 2 Plus
Year Index which advanced 3.83% for the same period.
> The Fund underperformed the Lipper California Municipal Debt Funds Index,
which gained 5.38% for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index was up 4.13% for the same six month period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------
RiverSource California Tax-
Exempt Fund Class A
(excluding sales charge) +4.51% +11.51% +2.88% +3.46% +4.87%
- ----------------------------------------------------------------------------
Barclays Capital Municipal
Bond California 2 Plus
Year Index(1) (unmanaged) +3.83% +9.89% +3.60% +4.13% +5.75%
- ----------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83%
- ----------------------------------------------------------------------------
Lipper California Municipal
Debt Funds Index(3) +5.38% +12.64% +2.15% +3.15% +4.92%
- ----------------------------------------------------------------------------
</Table>
* Not annualized.
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 contacting your financial intermediary,
visiting riversource.com/funds or calling 1(800) 221-2450.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
- --------------------------------------------------------------------------------
2 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
performance of other classes may vary from that shown because of differences in
fees and expenses. The Fund's returns reflect the effect of fee waivers/expense
reimbursements, if any. Without such waivers/reimbursements, the Fund's returns
would be lower. See the Average Annual Total Returns table for performance of
other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Barclays Capital Municipal Bond California 2 Plus Year 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 Barclays Capital 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.
The Barclays Capital indices reflect reinvestment of all distributions and
changes in market prices.
(3) The Lipper California Municipal Debt Funds Index includes the 30 largest
municipal debt funds in California tracked by Lipper Inc. The Lipper index's
returns include net reinvested dividends.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource California Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2010
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) +4.51% +11.51% +2.88% +3.46% +4.87% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +3.92% +10.46% +2.04% +2.65% +4.07% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +4.13% +10.45% +2.04% +2.65% N/A +3.84%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -0.46% +6.21% +1.22% +2.46% +4.36% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -1.08% +5.46% +1.12% +2.30% +4.07% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.13% +9.45% +2.04% +2.65% N/A +3.84%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 4.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase.
*Not annualized.
**For class with less than 10 years performance.
- --------------------------------------------------------------------------------
4 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------
<Table>
Weighted average life(1) 19.5 years
- --------------------------------------
Effective duration(2) 8.0 years
- --------------------------------------
Weighted average bond
rating(3) A+
- --------------------------------------
</Table>
(1) WEIGHTED AVERAGE LIFE 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.
There are risks associated with an investment in a municipal bond fund,
including credit risk, interest rate risk, prepayment and extension risk, and
geographic concentration risk. See the Fund's prospectus for information on
these and other risks associated with the Fund. In general, bond prices rise
when interest rates fall and vice versa. This effect is more pronounced for
longer-term securities. Non-investment grade securities, commonly called "high-
yield" or "junk" bonds, generally have more volatile prices and carry more risk
to principal and income than investment grade securities.
Because the Fund concentrates its investments in municipal securities issued by
a single state and its municipalities, specific events or factors affecting a
particular state can cause more volatility in the Fund than a fund that is more
geographically diversified. Income from tax-exempt funds may be subject to state
and local taxes and a portion of income may be subject to the federal and/or
state alternative minimum tax for certain investors. Federal income tax rules
will apply to any capital gains distribution.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource California Tax-Exempt Fund
QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1)
(at Feb. 28, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
AAA rating 7.4%
- ------------------------------------------------
AA rating 32.4%
- ------------------------------------------------
A rating 43.0%
- ------------------------------------------------
BBB rating 13.3%
- ------------------------------------------------
Non-investment grade 2.6%
- ------------------------------------------------
Non-rated 1.3%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total fixed income securities
(excluding Cash & Cash Equivalents).
Ratings apply to the underlying holdings of the Fund and not the Fund itself.
Whenever possible, the Standard and Poor's rating is used to determine the
credit quality of a security. Standard and Poor's rates the creditworthiness of
corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest).
Ratings from AA to CCC may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories. If
Standard and Poor's doesn't rate a security, then Moody's rating is used.
RiverSource Investments, LLC (the Investment Manager) rates a security using an
internal rating system when Moody's doesn't provide a rating. Ratings for 4.6%
of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
6 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource Minnesota Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Minnesota Tax-Exempt Fund's Class A shares, excluding sales
charge, gained 4.80% for the six months ended Feb. 28, 2010.
> The Fund outperformed the Barclays Capital Municipal Bond Minnesota 3 Plus
Year Enhanced Index which rose 3.98%.
> The Fund also outperformed the Lipper Minnesota Municipal Debt Funds Index,
which was up 4.62%, for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index was up 4.13% for the same six month period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
RiverSource Minnesota Tax-
Exempt Fund Class A
(excluding sales charge) +4.80% +11.37% +4.19% +3.96% +5.03%
- -----------------------------------------------------------------------------
Barclays Capital Municipal
Bond Minnesota 3 Plus Year
Enhanced Index(1)
(unmanaged) +3.98% +8.81% +5.40% +4.95% +6.10%
- -----------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83%
- -----------------------------------------------------------------------------
Lipper Minnesota Municipal
Debt Funds Index(3) +4.62% +10.99% +3.80% +3.89% +5.14%
- -----------------------------------------------------------------------------
</Table>
* Not annualized.
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 contacting your financial intermediary,
visiting riversource.com/funds or calling 1(800) 221-2450.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 7
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
in fees and expenses. The Fund's returns reflect the effect of fee
waivers/expense reimbursements, if any. Without such waivers/reimbursements, the
Fund's returns would be lower. See the Average Annual Total Returns table for
performance of other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Barclays Capital Municipal Bond Minnesota 3 Plus Year Enhanced 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 Barclays Capital 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.
The Barclays Capital indices reflect reinvestment of all distributions and
changes in market prices.
(3) The Lipper Minnesota Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Minnesota tracked by Lipper Inc. The Lipper index's
returns include net reinvested dividends.
- --------------------------------------------------------------------------------
8 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2010
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) +4.80% +11.37% +4.19% +3.96% +5.03% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +4.41% +10.54% +3.41% +3.18% +4.25% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +4.41% +10.55% +3.41% +3.18% N/A +4.12%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -0.17% +6.09% +2.52% +2.95% +4.52% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -0.59% +5.54% +2.47% +2.82% +4.25% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.41% +9.55% +3.41% +3.18% N/A +4.12%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 4.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase.
*Not annualized.
**For classes with less than 10 years performance.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 9
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
QUALITY
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Weighted average life(1) 16.3 years
- --------------------------------------
Effective duration(2) 6.8 years
- --------------------------------------
Weighted average bond
rating(3) AA-
- --------------------------------------
</Table>
(1) WEIGHTED AVERAGE LIFE 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.
- --------------------------------------------------------------------------------
10 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1)
(at Feb. 28, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
AAA rating 22.6%
- ------------------------------------------------
AA rating 18.8%
- ------------------------------------------------
A rating 41.3%
- ------------------------------------------------
BBB rating 10.7%
- ------------------------------------------------
Non-investment grade 4.9%
- ------------------------------------------------
Non-rated 1.7%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total fixed income securities
(excluding Cash & Cash Equivalents).
Ratings apply to the underlying holdings of the Fund and not the Fund itself.
Whenever possible, the Standard and Poor's rating is used to determine the
credit quality of a security. Standard and Poor's rates the creditworthiness of
corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest).
Ratings from AA to CCC may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories. If
Standard and Poor's doesn't rate a security, then Moody's rating is used.
RiverSource Investments, LLC (the Investment Manager) rates a security using an
internal rating system when Moody's doesn't provide a rating. Ratings for 7.3%
of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 11
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource New York Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource New York Tax-Exempt Fund's Class A shares, excluding sales charge,
advanced 4.55% for the six months ended Feb. 28, 2010.
> The Fund slightly underperformed the Barclays Capital Municipal Bond New York
4 Plus Year Index which rose 4.58% for the same period.
> The Fund also underperformed the Lipper New York Municipal Debt Funds Index,
which gained 4.99% for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index was up 4.13% for the same six month period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
RiverSource New York Tax-
Exempt Fund Class A
(excluding sales charge) +4.55% +11.87% +3.55% +3.63% +4.92%
- -----------------------------------------------------------------------------
Barclays Capital Municipal
Bond New York 4 Plus Year
Index(1) (unmanaged) +4.58% +11.09% +4.83% +4.75% +6.23%
- -----------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83%
- -----------------------------------------------------------------------------
Lipper New York Municipal
Debt Funds Index(3) +4.99% +12.91% +3.23% +3.65% +5.15%
- -----------------------------------------------------------------------------
</Table>
* Not annualized.
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 contacting your financial intermediary,
visiting riversource.com/funds or calling 1(800) 221-2450.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences
- --------------------------------------------------------------------------------
12 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
in fees and expenses. The Fund's returns reflect the effect of fee
waivers/expense reimbursements, if any. Without such waivers/reimbursements, the
Fund's returns would be lower. See the Average Annual Total Returns table for
performance of other share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes. It is not possible to invest directly in an index.
(1) The Barclays Capital Municipal Bond New York 4 Plus Year 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 Barclays Capital 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.
The Barclays Capital indices reflect reinvestment of all distributions and
changes in market prices.
(3) The Lipper New York Municipal Debt Funds Index includes the 30 largest
municipal debt funds in New York tracked by Lipper Inc. The Lipper index's
returns include net reinvested dividends.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 13
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource New York Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2010
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) +4.55% +11.87% +3.55% +3.63% +4.92% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +4.16% +11.03% +2.78% +2.86% +4.13% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.96% +10.81% +2.71% +2.82% N/A +3.96%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -0.41% +6.56% +1.89% +2.63% +4.41% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -0.84% +6.03% +1.84% +2.51% +4.13% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +2.96% +9.81% +2.71% +2.82% N/A +3.96%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum initial sales charge of 4.75%.
Class B share performance reflects a contingent deferred sales charge (CDSC)
applied as follows: first year 5%; second year 4%; third and fourth years 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be
subject to a 1% CDSC if shares are sold within one year after purchase.
*Not annualized.
**For classes with less than 10 years performance.
- --------------------------------------------------------------------------------
14 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
QUALITY
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO STATISTICS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Weighted average life(1) 18.3 years
- --------------------------------------
Effective duration(2) 6.3 years
- --------------------------------------
Weighted average bond
rating(3) AA-
- --------------------------------------
</Table>
(1) WEIGHTED AVERAGE LIFE 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.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 15
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource New York Tax-Exempt Fund
QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1)
(at Feb. 28, 2010)
- ---------------------------------------------------------------------
<Table>
<Caption>
AAA rating 20.4%
- ------------------------------------------------
AA rating 44.2%
- ------------------------------------------------
A rating 17.1%
- ------------------------------------------------
BBB rating 8.3%
- ------------------------------------------------
Non-investment grade 10.0%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total fixed income securities
(excluding Cash & Cash Equivalents).
Ratings apply to the underlying holdings of the Fund and not the Fund itself.
Whenever possible, the Standard and Poor's rating is used to determine the
credit quality of a security. Standard and Poor's rates the creditworthiness of
corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest).
Ratings from AA to CCC may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories. If
Standard and Poor's doesn't rate a security, then Moody's rating is used.
RiverSource Investments, LLC (the Investment Manager) rates a security using an
internal rating system when Moody's doesn't provide a rating. Ratings for 1.5%
of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
16 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
FUND EXPENSES 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, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and 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.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
These examples are based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended Feb. 28, 2010
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.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 17
FUND EXPENSES EXAMPLES (continued) ---------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,045.10 $3.96 .79%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.65 $3.91 .79%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,039.20 $7.70 1.54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $7.62 1.54%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,041.30 $7.71 1.54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $7.62 1.54%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2010: +4.51%
for Class A, +3.92% for Class B and +4.13% for Class C.
- --------------------------------------------------------------------------------
18 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,048.00 $3.97 .79%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.65 $3.91 .79%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,044.10 $7.77 1.55%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.92 $7.67 1.55%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,044.10 $7.72 1.54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $7.62 1.54%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2010: +4.80%
for Class A, +4.41% for Class B and +4.41% for Class C.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 19
FUND EXPENSES EXAMPLES (continued) ---------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,045.50 $3.96 .79%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.65 $3.91 .79%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,041.60 $7.71 1.54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $7.62 1.54%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,039.60 $7.70 1.54%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $7.62 1.54%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the annualized expense ratio for each class as
indicated above, multiplied by the average account value over the period,
multiplied by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2010: +4.55%
for Class A, +4.16% for Class B and +3.96% for Class C.
- --------------------------------------------------------------------------------
20 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
RiverSource California Tax-Exempt Fund
FEB. 28, 2010 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (94.7%)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
ADVANCED REFUNDED (0.6%)
Los Angeles Harbor Department
Revenue Bonds
Series 1988 Escrowed to Maturity
10-01-18 7.60% $725,000 $885,515
- -------------------------------------------------------------------------------------
AIRPORT (1.4%)
County of Sacramento
Revenue Bonds
Series 2009B
07-01-39 5.75 2,000,000 2,137,780
- -------------------------------------------------------------------------------------
CITY (1.0%)
City of Martinez
Unlimited General Obligation Bonds
Election of 2008
Series 2009A
08-01-34 5.00 1,560,000 1,606,051
- -------------------------------------------------------------------------------------
COLLEGE (12.2%)
California Municipal Finance Authority
Revenue Bonds
Biola University
Series 2008
10-01-28 5.80 2,000,000 2,055,760
California Municipal Finance Authority
Revenue Bonds
Loma Linda University
Series 2007
04-01-32 4.75 2,300,000 2,142,013
California State University
Revenue Bonds
Systemwide
Series 2009A
11-01-29 5.25 3,000,000 3,133,051
Chabot-Las Positas Community College District
Unlimited General Obligation Bonds
Capital Appreciation Election of 2004
Zero Coupon
Series 2006B (AMBAC)
08-01-19 4.75 1,000,000(b) 639,460
Los Angeles Community College District
Unlimited General Obligation Bonds
Election of 2001
Series 2008E-1
08-01-28 5.00 2,000,000 2,086,560
Merced Community College District
Refunding Revenue Bonds
School Facilities Financing Authority
Series 2006 (NPFGC)
08-01-21 5.00 700,000 787,514
San Bernardino Community College District
Unlimited General Obligation Bonds
Election of 2002
Series 2008A
08-01-33 6.25 1,000,000 1,118,640
San Diego Community College District
Unlimited General Obligation Bonds
Election of 2006
Series 2007 (AGM)
08-01-30 5.00 2,500,000 2,567,000
San Mateo County Community College District
Unlimited General Obligation Bonds
Election of 2001
Series 2002A (NPFGC/FGIC)
09-01-18 5.38 1,000,000 1,096,030
University of California
Revenue Bonds
Series 2008D
05-15-27 5.00 1,500,000 1,553,175
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
COLLEGE (CONT.)
University of California
Revenue Bonds
Series 2009Q
05-15-34 5.00% $1,750,000 $1,820,420
---------------
Total 18,999,623
- -------------------------------------------------------------------------------------
COUNTY (0.7%)
California Statewide Communities Development Authority
Revenue Bonds
Thomas Jefferson School of Law
Series 2008A
10-01-38 7.25 1,000,000 1,021,990
- -------------------------------------------------------------------------------------
ELECTRIC (4.1%)
California State Department of Water Resources
Revenue Bonds
Power Supply
Series 2008H
05-01-22 5.00 2,000,000 2,193,820
City of Vernon
Revenue Bonds
Series 2009A
08-01-21 5.13 1,500,000 1,582,320
Walnut Energy Center Authority
Revenue Bonds
Series 2004A (AMBAC)
01-01-29 5.00 2,500,000 2,511,125
---------------
Total 6,287,265
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (21.5%)
California Health Facilities Financing Authority
Refunding Revenue Bonds
Cedars-Sinai Medical Center
Series 2005
11-15-34 5.00 1,525,000 1,434,263
California Health Facilities Financing Authority
Revenue Bonds
Adventist Health System West
Series 2009A
09-01-39 5.75 3,000,000 3,041,640
California Health Facilities Financing Authority
Revenue Bonds
Cedars-Sinai Medical Center
Series 2009
08-15-39 5.00 1,500,000 1,403,595
California Health Facilities Financing Authority
Revenue Bonds
Providence Health & Services
Series 2008C
10-01-28 6.25 500,000 567,510
10-01-38 6.50 1,500,000 1,693,590
California Health Facilities Financing Authority
Revenue Bonds
Providence Health & Services
Series 2009B
10-01-39 5.50 3,200,000 3,350,432
California Health Facilities Financing Authority
Revenue Bonds
Scripps Health
Series 2008A
10-01-22 5.00 3,250,000 3,426,280
California Health Facilities Financing Authority
Revenue Bonds
Sutter Health
Series 2008A
08-15-30 5.00 2,500,000 2,403,925
California Municipal Finance Authority
Revenue Bonds
Community Hospital Center
Series 2009
02-01-39 5.50 3,250,000 2,847,065
California Statewide Communities Development Authority
Revenue Bonds
Catholic Healthcare West
Series 2008B
07-01-30 5.50 1,975,000 2,004,625
California Statewide Communities Development Authority
Revenue Bonds
Daughters of Charity Health
Series 2005A
07-01-30 5.25 3,015,000 2,744,464
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
California Statewide Communities Development Authority
Revenue Bonds
John Muir Health
Series 2006A
08-15-32 5.00% $2,450,000 $2,347,884
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2006B
03-01-45 5.25 1,000,000 955,370
City of Turlock
Certificate of Participation
Emanuel Medical Center
Series 2007A
10-15-31 5.13 3,930,000 3,314,680
Sierra View Local Health Care District
Revenue Bonds
Series 2007
07-01-37 5.25 2,000,000 1,797,000
---------------
Total 33,332,323
- -------------------------------------------------------------------------------------
HOUSING -- OTHER (1.0%)
California Statewide Communities Development Authority
Revenue Bonds
CHF -- Irvine LLC -- UCI East Campus
Series 2008
05-15-32 5.75 1,500,000 1,497,975
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (1.4%)
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006H (FGIC) A.M.T.
08-01-30 5.75 1,255,000 1,346,677
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006K A.M.T.
02-01-42 5.50 720,000 764,626
---------------
Total 2,111,303
- -------------------------------------------------------------------------------------
LEASE (3.2%)
Eastern Municipal Water District
Certificate of Participation
Series 2008H
07-01-33 5.00 1,000,000 1,010,820
Los Angeles Municipal Improvement Corporation
Revenue Bonds
Series 2008B
09-01-38 5.00 3,000,000 2,881,140
San Mateo County Board of Education
Refunding Certificate of Participation
Series 2009
06-01-35 5.25 1,000,000 1,007,210
---------------
Total 4,899,170
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (5.9%)
California Infrastructure & Economic Development Bank
Revenue Bonds
Walt Disney Family Museum
Series 2008
02-01-33 5.25 2,600,000 2,630,160
Golden State Tobacco Securitization Corporation
Asset-backed Revenue Bonds
Series 2007A-1
06-01-47 5.13 6,000,000 4,014,179
Golden State Tobacco Securitization Corporation
Prerefunded Revenue Bonds
Series 2003A-1
06-01-40 6.63 750,000 880,358
Oakley Redevelopment Agency
Subordinated Revenue Bonds
Oakley Redevelopment Project Area
Series 2008A (AMBAC)
09-01-38 5.00 1,750,000 1,505,998
---------------
Total 9,030,695
- -------------------------------------------------------------------------------------
PORT DISTRICT (0.7%)
Port of Oakland
Refunding Revenue Bonds
Series 2000K (NPFGC/FGIC) A.M.T.
11-01-18 5.63 1,000,000 1,001,570
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
SCHOOL (11.2%)
Alhambra Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (AGM)
09-01-22 5.95% $1,055,000(b) $534,189
California Statewide Communities Development Authority
Revenue Bonds
Polytechnic School
Series 2009
12-01-34 5.00 500,000 490,215
Centinela Valley Union High School District
Unlimited General Obligation Bonds
Series 2002A (NPFGC)
08-01-31 5.25 2,000,000 2,005,040
Encinitas Union School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1996 (NPFGC)
08-01-15 5.85 2,500,000(b) 2,083,524
Lakeside Union Elementary School District
Unlimited General Obligation Bonds
Series 2009
08-01-33 5.00 1,750,000 1,765,663
Lammersville School District #2002 Community Facilities
Special Tax Bonds
Mountain House
Series 2006
09-01-35 5.13 1,000,000 762,040
Los Angeles Unified School District
Unlimited General Obligation Bonds
Election of 2002
Series 2007B (AMBAC)
07-01-22 5.00 1,395,000 1,495,831
Menifee Union School District
Unlimited General Obligation Bonds
Election of 2008
Series 2008A
08-01-33 5.50 3,125,000 3,281,718
San Juan Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999 (AGM)
08-01-21 5.68 820,000(b) 444,875
08-01-24 5.70 1,810,000(b) 803,676
Simi Valley School Financing Authority
Refunding Revenue Bonds
Unified School District
Series 2007 (AGM)
08-01-23 5.00 1,500,000 1,651,890
Twin Rivers Unified School District
Unlimited General Obligation Bonds
Election of 2006
Series 2008 (AGM)
08-01-25 5.00 1,000,000 1,057,000
Western Placer Unified School District
Certificate of Participation
Series 2008 (Assured Guaranty)
08-01-32 4.75 1,000,000 943,310
---------------
Total 17,318,971
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- ASSESSMENT (1.9%)
Palmdale Civic Authority
Refunding Revenue Bonds
Redevelopment Project #1
Series 2009A
07-01-27 6.00 2,780,000 2,905,100
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (4.2%)
Anaheim Community Facilities District #06-2
Special Tax Bonds
Stadium Lofts
Series 2007
09-01-37 5.00 1,000,000 767,220
Beaumont Financing Authority
Prerefunded Revenue Bonds
Series 2000A
09-01-32 7.38 1,955,000 2,064,519
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
24 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
SPECIAL DISTRICT -- SPECIAL TAX (CONT.)
Orange Unified School District #2005-2 Community Facilities
Special Tax Bonds
Del Rio School Facilities
Series 2007
09-01-37 5.00% $1,000,000 $752,430
Pittsburg Redevelopment Agency
Tax Allocation Bonds
Los Medanos Community Development Project
Zero Coupon
Series 1999 (AMBAC)
08-01-24 6.05 2,100,000(b) 857,262
Rancho Cucamonga Redevelopment Agency
Tax Allocation Bonds
Housing Set Aside
Series 2007A (NPFGC)
09-01-34 5.00 2,200,000 1,963,346
---------------
Total 6,404,777
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- TAX ALLOCATION (3.6%)
Bakersfield Redevelopment Agency
Tax Allocation Bonds
Old Town Kern Pioneer
Series 2009A
08-01-29 7.50 1,650,000 1,625,036
Bakersfield Redevelopment Agency
Tax Allocation Bonds
Southeast Bakersfield
Series 2009B
08-01-29 7.25 740,000 744,958
Folsom Redevelopment Agency
Tax Allocation Bonds
Central Folsom Redevelopment Project
Series 2009
08-01-29 5.13 800,000 775,568
08-01-36 5.50 800,000 780,384
Inglewood Redevelopment Agency
Refunding Tax Allocation Bonds
Merged Redevelopment Project
Series 1998A (AMBAC)
05-01-23 5.25 1,100,000 1,087,361
San Francisco City & County Redevelopment Agency
Tax Allocation Bonds
Mission Bay South Redevelopment
Series 2009D
08-01-29 6.38 500,000 522,110
---------------
Total 5,535,417
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- TAX INCREMENT (1.7%)
San Francisco City & County Redevelopment Agency
Tax Allocation Bonds
Mission Bay North Redevelopment
Series 2009C
08-01-29 6.00 500,000 513,370
08-01-39 6.50 1,625,000 1,707,858
San Francisco City & County Redevelopment Agency
Tax Allocation Bonds
Redevelopment Projects
Series 2009B
08-01-28 6.13 310,000 327,128
---------------
Total 2,548,356
- -------------------------------------------------------------------------------------
STATE (9.9%)
State of California
Refunding Unlimited General Obligation Bonds
Series 2007
08-01-30 4.50 3,340,000 2,863,349
State of California
Unlimited General Obligation Bonds
Series 2002
02-01-15 6.00 1,000,000 1,149,420
State of California
Unlimited General Obligation Bonds
Series 2003
02-01-21 5.00 3,000,000 3,077,099
State of California
Unlimited General Obligation Bonds
Series 2004
02-01-22 5.00 1,000,000 1,020,900
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
STATE (CONT.)
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2003
11-01-24 5.13% $2,000,000 $2,024,240
State of California
Unlimited General Obligation Bonds
Veterans
Series 2000BJ-RMKT A.M.T.
12-01-12 4.95 1,000,000 1,022,900
12-01-13 5.05 1,435,000 1,464,389
12-01-14 5.15 2,535,000 2,585,751
State of California
Unrefunded Unlimited General Obligation Bonds
Series 2004
04-01-29 5.30 2,000 1,986
---------------
Total 15,210,034
- -------------------------------------------------------------------------------------
WATER & SEWER (8.5%)
Anaheim Public Financing Authority
Revenue Bonds
Series 2007 (NPFGC)
02-01-33 4.75 3,500,000 3,461,324
Eastern Municipal Water District
Special Tax Bonds
District #2004-27 Cottonwood
Series 2006
09-01-27 5.00 200,000 165,072
09-01-36 5.00 500,000 378,730
Los Angeles Department of Water & Power
Revenue Bonds
Series 2009A
07-01-34 5.38 2,495,000 2,694,326
Rowland Water District
Certificate of Participation
Recycled Water Project
Series 2008
12-01-39 6.25 2,235,000 2,411,342
Semitropic Improvement District
Revenue Bonds
Series 2004A (XLCA)
12-01-28 5.00 2,000,000 2,033,740
Turlock Public Financing Authority
Revenue Bonds
Series 2008
05-01-32 4.75 2,000,000 1,959,560
---------------
Total 13,104,094
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $143,999,561) $145,838,009
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (1.2%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE DESCRIPTION (c,d,e) YIELD MATURITY VALUE(a)
City of Irvine
Limited Obligation Special Assessment Bonds
District #93-14
V.R.D.N. Series 2000 (Bank of America)
09-02-25 0.12% $1,900,000 $1,900,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $1,900,000) $1,900,000
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (1.1%)
SHARES VALUE(a)
JPMorgan Tax-Free Money Market Fund 1,710,850 $1,710,850
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,710,850) $1,710,850
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $147,610,411)(f) $149,448,859
=====================================================================================
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
26 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) For zero coupons, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(c) The Fund is entitled to receive principal and interest from the party, if
indicated in 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 Feb. 28, 2010.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AGM -- Assured Guaranty Municipal Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
BNY -- Bank of New York
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
MGIC -- Mortgage Guaranty Insurance Corporation
NPFGC -- National Public Finance Guarantee Corporation
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance
</Table>
(e) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value
of securities subject to alternative minimum tax
represented 5.32% 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
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(f) At Feb. 28, 2010, the cost of securities for federal income tax purposes
was approximately $147,610,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $5,550,000
Unrealized depreciation (3,711,000)
----------------------------------------------------------
Net unrealized appreciation $1,839,000
----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
28 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date.
Valuation adjustments are not applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as Level 3 investments due to lack
of market transparency and corroboration to support these quoted prices.
Additionally, valuation models may be used as the pricing source for any
remaining investments classified as Level 3. These models rely on one or more
significant unobservable
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 29
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
FAIR VALUE MEASUREMENTS (CONTINUED)
inputs and/or significant assumptions by the Fund Administrator. Inputs used in
a valuation model may include, but are not limited to, financial statement
analysis, discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2010:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2010
----------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ---------------------------------------------------------------------------------------------
Bonds
Municipal Bonds $-- $145,838,009 $-- $145,838,009
- ---------------------------------------------------------------------------------------------
Total Bonds -- 145,838,009 -- 145,838,009
- ---------------------------------------------------------------------------------------------
Other
Municipal Notes -- 1,900,000 -- 1,900,000
Unaffiliated Money
Market Fund(a) 1,710,850 -- -- 1,710,850
- ---------------------------------------------------------------------------------------------
Total Other 1,710,850 1,900,000 -- 3,610,850
- ---------------------------------------------------------------------------------------------
Investments in Securities $1,710,850 $147,738,009 $-- $149,448,859
- ---------------------------------------------------------------------------------------------
</Table>
(a) Money market fund that is a sweep investment for cash balances in the Fund
at Feb. 28, 2010.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
30 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
FEB. 28, 2010 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (96.3%)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
AIRPORT (0.7%)
Minneapolis-St. Paul Metropolitan Airports Commission
Refunding Revenue Bonds
Series 2009B A.M.T.
01-01-22 5.00% $2,200,000 $2,244,000
- -------------------------------------------------------------------------------------
COLLEGE (12.1%)
Minnesota Higher Education Facilities Authority
Revenue Bonds
Bethel University
6th Series 2007R
05-01-37 5.50 6,000,000 5,630,220
Minnesota Higher Education Facilities Authority
Revenue Bonds
Carleton College
6th Series 2008T
01-01-28 5.00 3,000,000 3,177,390
Minnesota Higher Education Facilities Authority
Revenue Bonds
Macalester College
6th Series 2004B
03-01-17 5.00 2,395,000 2,613,113
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Benedict College
Series 2008V
03-01-18 5.00 500,000 537,895
03-01-23 4.75 800,000 810,104
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. John's University
6th Series 2005G
10-01-22 5.00 3,000,000 3,155,910
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. John's University
6th Series 2008U
10-01-28 4.75 1,000,000 1,013,350
10-01-33 4.75 825,000 802,139
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
6th Series 2008W
10-01-30 6.00 3,625,000 3,874,654
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
6th Series 2009X
04-01-39 5.25 4,900,000 4,986,828
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
Series 2009-7A
10-01-39 5.00 3,000,000 3,015,750
University of Minnesota
Revenue Bonds
Series 1996A Escrowed to Maturity
07-01-21 5.50 8,500,000 10,036,630
University of Minnesota
Revenue Bonds
Series 2009A
04-01-34 5.13 1,000,000 1,066,340
---------------
Total 40,720,323
- -------------------------------------------------------------------------------------
COUNTY (5.1%)
County of Hennepin
Prerefunded Unlimited General Obligation Bonds
Series 2003
12-01-23 4.75 2,000,000 2,146,860
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 31
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
COUNTY (CONT.)
County of Hennepin
Unlimited General Obligation Bonds
Series 2008D
12-01-28 5.00% $9,355,000 $10,117,057
County of Ramsey
Unlimited General Obligation Bonds
Capital Improvement Plan
Series 2007A
02-01-21 5.00 1,035,000 1,173,266
02-01-22 5.00 1,080,000 1,216,609
02-01-23 5.00 1,125,000 1,260,158
02-01-24 5.00 1,170,000 1,302,374
---------------
Total 17,216,324
- -------------------------------------------------------------------------------------
ELECTRIC (18.6%)
City of Chaska
Refunding Revenue Bonds
Generating Facilities
Series 2005A
10-01-20 5.25 1,165,000 1,245,164
10-01-30 5.00 3,800,000 3,877,862
Minnesota Municipal Power Agency
Revenue Bonds
Series 2004A
10-01-29 5.13 5,500,000 5,627,325
Minnesota Municipal Power Agency
Revenue Bonds
Series 2005
10-01-30 5.00 3,000,000 3,051,090
Minnesota Municipal Power Agency
Revenue Bonds
Series 2007
10-01-32 4.75 3,000,000 3,015,060
Northern Municipal Power Agency
Refunding Revenue Bonds
Series 1998B (AMBAC)
01-01-20 4.75 5,000,000 5,013,850
Northern Municipal Power Agency
Revenue Bonds
Series 2007A (AMBAC)
01-01-26 5.00 2,500,000 2,628,975
Northern Municipal Power Agency
Revenue Bonds
Series 2008A (Assured Guaranty)
01-01-21 5.00 2,500,000 2,715,925
Puerto Rico Electric Power Authority
Prerefunded Revenue Bonds
Series 2003NN (NPFGC)
07-01-32 5.00 2,820,000(b) 3,190,378
Southern Minnesota Municipal Power Agency
Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1994A (NPFGC)
01-01-19 6.67 17,000,000(c) 12,216,369
01-01-26 5.19 12,500,000(c) 6,042,500
Southern Minnesota Municipal Power Agency
Revenue Bonds
Series 2002A (AMBAC)
01-01-17 5.25 6,000,000 6,825,780
Western Minnesota Municipal Power Agency
Revenue Bonds
Series 2003A (NPFGC)
01-01-26 5.00 7,250,000 7,401,090
---------------
Total 62,851,368
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (25.5%)
City of Breckenridge
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00 4,300,000 4,385,742
City of Maple Grove
Revenue Bonds
Maple Grove Hospital Corporation
Series 2007
05-01-20 5.00 1,000,000 1,043,420
05-01-21 5.00 1,500,000 1,559,490
05-01-37 5.25 4,715,000 4,454,213
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
32 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2002B (NPFGC)
05-15-15 5.50% $2,160,000 $2,288,412
05-15-16 5.50 2,200,000 2,312,200
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2008A
11-15-32 6.75 5,240,000 5,826,356
City of Shakopee
Revenue Bonds
St. Francis Regional Medical Center
Series 2004
09-01-25 5.10 6,300,000 6,075,531
City of St. Cloud
Revenue Bonds
Centracare Health System
Series 2010A
05-01-30 5.13 4,000,000 3,967,400
City of St. Louis Park
Refunding Revenue Bonds
Park Nicollet Health Services
Series 2009
07-01-39 5.75 3,000,000 2,991,300
City of Winona
Refunding Revenue Bonds
Winona Health Obligation Group
Series 2007
07-01-31 5.15 2,000,000 1,785,680
County of Chippewa
Revenue Bonds
Montevideo Hospital Project
Series 2007
03-01-20 5.38 1,940,000 1,965,414
03-01-21 5.38 1,045,000 1,052,576
County of Meeker
Revenue Bonds
Memorial Hospital Project
Series 2007
11-01-27 5.75 1,000,000 1,000,520
11-01-37 5.75 2,250,000 2,156,738
Minnesota Agricultural & Economic Development Board
Prerefunded Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38 4,845,000 5,106,678
Minnesota Agricultural & Economic Development Board
Unrefunded Revenue Bonds
Benedictine Health System
Series 1999A (NPFGC)
02-15-16 4.75 755,000 762,490
Northfield
Revenue Bonds
Series 2006
11-01-31 5.38 1,500,000 1,385,280
St. Louis Park
Revenue Bonds
Park Nicollet Health Services
Series 2008C
07-01-26 5.63 3,000,000 3,093,420
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Allina Health Systems
Series 2007A (NPFGC)
11-15-22 5.00 3,000,000 3,053,610
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Allina Health Systems
Series 2009A-1
11-15-29 5.25 5,750,000 5,742,525
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Gillette Children's Specialty
Series 2009
02-01-27 5.00 6,145,000 6,000,777
02-01-29 5.00 2,475,000 2,398,349
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 33
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Healtheast Project
Series 2005
11-15-25 6.00% $2,000,000 $1,942,400
11-15-35 6.00 1,500,000 1,365,060
St. Paul Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2006
05-15-23 5.25 1,000,000 1,000,480
05-15-26 5.25 1,000,000 977,820
05-15-36 5.25 7,500,000 6,871,575
Staples United Hospital District
Unlimited General Obligation Bonds
Health Care Facilities-Lakewood
Series 2004
12-01-34 5.00 3,525,000 3,572,411
---------------
Total 86,137,867
- -------------------------------------------------------------------------------------
HEALTH CARE -- LIFE CARE CENTER (0.5%)
City of Stillwater
Revenue Bonds
Health System Obligation Group
Series 2005
06-01-25 5.00 1,750,000 1,754,848
- -------------------------------------------------------------------------------------
HEALTH CARE -- NURSING HOME (2.1%)
Annandale Economic Development Authority
Revenue Bonds
Annandale Care Center Project
Series 2007A
11-01-37 5.90 3,385,000 2,980,357
City of North Oaks
Revenue Bonds
Presbyterian Homes
Series 2007
10-01-27 6.00 1,250,000 1,235,213
10-01-33 6.00 3,000,000 2,958,840
---------------
Total 7,174,410
- -------------------------------------------------------------------------------------
HOUSING -- MULTI-FAMILY (2.2%)
Austin Housing & Redevelopment Authority
Revenue Bonds
Courtyard Residence Project
Series 2000A
01-01-32 7.25 2,000,000 2,000,960
City of Rochester
Refunding Revenue Bonds
Madonna Towers Incorporated Project
Series 2007A
11-01-28 5.88 2,050,000 1,730,508
Duluth Housing & Redevelopment Authority
Revenue Bonds
Benedictine Health Center Project
Series 2007
11-01-33 5.88 1,500,000 1,388,175
Steele County
Revenue Bonds
Elderly Housing Project
Series 2000
06-01-30 6.88 2,205,000 2,238,052
---------------
Total 7,357,695
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (5.4%)
Minneapolis/St. Paul Housing Finance Board
Revenue Bonds
Mortgage-backed City Living
Series 2006A-5 (GNMA/FNMA/FHLMC)
04-01-27 5.45 1,765,886 1,832,689
Minneapolis/St. Paul Housing Finance Board
Revenue Bonds
Single Family Housing
Series 2005A-4 (GNMA/FNMA/FHLMC) A.M.T.
12-01-37 4.70 91,737 89,215
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2002B A.M.T.
07-01-33 5.65 2,120,000 2,135,116
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
34 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
HOUSING -- SINGLE FAMILY (CONT.)
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006B A.M.T.
07-01-26 4.75% $1,890,000 $1,864,523
07-01-31 4.85 2,555,000 2,482,029
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006I A.M.T.
07-01-26 5.05 3,510,000 3,541,590
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006M A.M.T.
01-01-37 5.75 2,540,000 2,742,540
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2007D A.M.T.
01-01-38 5.50 3,310,000 3,518,431
---------------
Total 18,206,133
- -------------------------------------------------------------------------------------
LEASE (4.9%)
St. Paul Port Authority
Revenue Bonds
Office Building at Cedar Street
Series 2003-12
12-01-23 5.00 5,000,000 5,242,650
12-01-27 5.13 10,815,000 11,239,381
---------------
Total 16,482,031
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (2.8%)
City of Minneapolis
Limited Tax Revenue Bonds
Common Bond Fund
Series 2007-2A A.M.T.
06-01-22 5.13 1,035,000 1,033,520
06-01-28 5.00 1,500,000 1,407,540
Minneapolis Community Planning & Economic Development Department
Limited Tax Revenue Bonds
Common Bond Fund
Series 1996-1
06-01-11 6.00 450,000 455,121
Minneapolis Community Planning & Economic Development Department
Prerefunded Limited Tax Revenue Bonds
Common Bond Fund
Series 2001-2A A.M.T.
06-01-19 5.88 1,000,000 1,065,780
St. Cloud Housing & Redevelopment Authority
Revenue Bonds
State University Foundation Project
Series 2002
05-01-18 5.13 3,000,000 3,138,690
St. Paul Port Authority
Tax Allocation Bonds
River Bend Project Lot 1
Series 2007-5
02-01-32 6.38 2,660,000 2,483,296
---------------
Total 9,583,947
- -------------------------------------------------------------------------------------
SALES OR USE TAX (2.8%)
County of Hennepin
Revenue Bonds
2nd Lien Ballpark Project
Series 2008B
12-15-27 4.75 4,205,000 4,437,452
12-15-29 5.00 1,825,000 1,953,754
County of Hennepin
Revenue Bonds
Sales Tax
Series 2007
12-15-33 4.75 3,000,000 3,072,510
---------------
Total 9,463,716
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 35
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
SCHOOL (9.1%)
City of Maple Grove
Revenue Bonds
North Memorial Health Care
Series 2005
09-01-35 5.00% $2,500,000 $2,269,250
Duluth Independent School District #709 Certificate of Participation
Series 2008B
(School District Credit Enhancement Program)
02-01-26 4.75 4,000,000 4,211,040
Edina Independent School District #273
Unlimited General Obligation Bonds
Series 2004
02-01-24 4.50 3,400,000 3,494,622
Lake Superior Independent School District #381
Prerefunded Unlimited General Obligation Bonds
Building
Series 2002A (AGM)
(School District Credit Enhancement Program)
04-01-13 5.00 65,000 73,079
Lake Superior Independent School District #381
Unrefunded Unlimited General Obligation Bonds
Building
Series 2002A (AGM)
(School District Credit Enhancement Program)
04-01-13 5.00 1,730,000 1,946,717
Rocori Area Schools Independent School District #750
Unlimited General Obligation Bonds
School Building
Series 2009B
(School District Credit Enhancement Program)
02-01-34 4.75 9,200,000 9,462,752
St. Paul Housing & Redevelopment Authority
Prerefunded Revenue Bonds
Community of Peace Academy Project
Series 2001A
12-01-30 7.88 2,390,000 2,574,556
St. Paul Housing & Redevelopment Authority
Refunding Revenue Bonds
St. Paul Academy & Summit School
Series 2007
10-01-24 5.00 5,000,000 5,241,100
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
Series 2002B (NPFGC/FGIC)
(School District Credit Enhancement Program)
02-01-14 5.00 1,480,000 1,592,643
---------------
Total 30,865,759
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (1.2%)
City of Lakeville
Revenue Bonds
Series 2007
02-01-22 5.00 175,000 155,300
02-01-27 5.00 225,000 204,840
Territory of Guam
Revenue Bonds
Section 30
Series 2009A
12-01-34 5.75 3,500,000(b) 3,543,995
---------------
Total 3,904,135
- -------------------------------------------------------------------------------------
SPECIAL PURPOSE CERTIFICATES -- GENERAL OBLIGATIONS (--%)
Minneapolis Community Planning & Economic Development Department
Limited Tax Revenue Bonds
Common Bond Fund
Series 1997-7A
06-01-12 5.50 135,000 136,158
- -------------------------------------------------------------------------------------
STATE (3.3%)
State of Minnesota
Unlimited General Obligation Bonds
Series 2002
11-01-15 5.25 3,575,000 3,937,398
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
36 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a)
STATE (CONT.)
State of Minnesota
Unlimited General Obligation Refunding Bonds
Various Purpose
Series 2009F
08-01-21 5.00% $6,105,000 $7,284,242
---------------
Total 11,221,640
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $312,681,712) $325,320,354
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (1.9%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE DESCRIPTION (d,e,f) YIELD MATURITY VALUE(a)
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
Allina Health Systems
V.R.D.N. Series 2009B-1 (JP Morgan Chase Bank)
11-15-35 0.13% $4,100,000 $4,100,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2000H (Harris Trust & Savings Bank)
10-01-30 0.14 1,700,000 1,700,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2002M1 (Harris)
10-01-32 0.14 500,000 500,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $6,300,000) $6,300,000
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (0.7%)
SHARES VALUE(a)
JPMorgan Tax-Free Money Market Fund 2,333,049 $2,333,049
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $2,333,049) $2,333,049
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $321,314,761)(g) $333,953,403
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) 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. Municipal securities of
territories, possessions, or sovereign nations within the territorial
boundaries of the United States represented 1.99% of net assets at Feb. 28,
2010.
(c) For zero coupons, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 37
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AGM -- Assured Guaranty Municipal Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
BNY -- Bank of New York
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
MGIC -- Mortgage Guaranty Insurance Corporation
NPFGC -- National Public Finance Guarantee Corporation
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance
</Table>
(e) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value
of securities subject to alternative minimum tax
represented 6.55% 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
</Table>
(f) The Fund is entitled to receive principal and interest from the party, if
indicated in 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 Feb. 28, 2010.
(g) At Feb. 28, 2010, the cost of securities for federal income tax purposes
was approximately $321,315,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $14,848,000
Unrealized depreciation (2,210,000)
-----------------------------------------------------------
Net unrealized appreciation $12,638,000
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
38 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date.
Valuation adjustments are not applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as Level 3 investments due to lack
of market transparency and corroboration to support these quoted prices.
Additionally, valuation models may be used as the pricing source for any
remaining investments classified as Level 3. These models rely on one or more
significant unobservable
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 39
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
FAIR VALUE MEASUREMENTS (CONTINUED)
inputs and/or significant assumptions by the Fund Administrator. Inputs used in
a valuation model may include, but are not limited to, financial statement
analysis, discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2010:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2010
----------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ---------------------------------------------------------------------------------------------
Bonds
Municipal Bonds $-- $325,320,354 $-- $325,320,354
- ---------------------------------------------------------------------------------------------
Total Bonds -- 325,320,354 -- 325,320,354
- ---------------------------------------------------------------------------------------------
Other
Municipal Notes -- 6,300,000 -- 6,300,000
Unaffiliated Money
Market Fund(a) 2,333,049 -- -- 2,333,049
- ---------------------------------------------------------------------------------------------
Total Other 2,333,049 6,300,000 -- 8,633,049
- ---------------------------------------------------------------------------------------------
Total $2,333,049 $331,620,354 $-- $333,953,403
- ---------------------------------------------------------------------------------------------
</Table>
(a) Money market fund that is a sweep investment for cash balances in the Fund
at Feb. 28, 2010.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
40 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
RiverSource New York Tax-Exempt Fund
FEB. 28, 2010 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENT IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (97.7%)
COUPON PRINCIPAL
ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a)
ADVANCED REFUNDED (2.6%)
Metropolitan Transportation Authority
Prerefunded Revenue Bonds
Series 1998A (FGIC)
04-01-28 4.75% $1,000,000 $1,166,530
New York State Dormitory Authority
Prerefunded Revenue Bonds
Series 1990B
05-15-11 7.50 230,000 233,379
---------------
Total 1,399,909
- -------------------------------------------------------------------------------------
CITY (2.0%)
City of New York
Unrefunded Unlimited General Obligation Bonds
Series 2002E
08-01-16 5.75 1,000,000 1,098,830
- -------------------------------------------------------------------------------------
COLLEGE (26.2%)
Dutchess County Industrial Development Agency
Refunding Revenue Bonds
Bard College Civic Facilities
Series 2007-A1
08-01-22 5.00 500,000 507,105
Nassau County Industrial Development Agency
Refunding Revenue Bonds
New York Institute of Technology Project
Series 2010A
03-01-26 4.75 485,000(e) 478,574
New York State Dormitory Authority
Revenue Bonds
Brooklyn Law School
Series 2003B (XLCA)
07-01-30 5.13 1,000,000 1,000,690
New York State Dormitory Authority
Revenue Bonds
Columbia University
Series 2007C
07-01-29 5.00 1,250,000 1,351,974
New York State Dormitory Authority
Revenue Bonds
Cornell University
Series 2006A
07-01-26 5.00 1,000,000 1,079,350
07-01-31 5.00 1,000,000 1,053,800
New York State Dormitory Authority
Revenue Bonds
Education
Series 2008B
03-15-38 5.25 1,000,000 1,061,350
New York State Dormitory Authority
Revenue Bonds
Manhattan Marymount College
Series 2009
07-01-29 5.25 500,000 499,360
New York State Dormitory Authority
Revenue Bonds
North Shore-Long Island Jewish Health System
Series 2009A
05-01-37 5.50 750,000 758,558
New York State Dormitory Authority
Revenue Bonds
Rochester Institute of Technology
Series 2008A
07-01-33 6.00 1,000,000 1,098,250
New York State Dormitory Authority
Revenue Bonds
Rockefeller University
Series 2009C
07-01-40 5.00 1,000,000 1,049,430
New York State Dormitory Authority
Revenue Bonds
Teacher's College
Series 2009
03-01-39 5.50 500,000 520,535
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 41
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a)
COLLEGE (CONT.)
New York State Dormitory Authority
Revenue Bonds
University of Rochester
Series 2009A
07-01-39 5.13% $900,000 $929,295
New York State Dormitory Authority
Revenue Bonds
Yeshiva University
Series 2009
09-01-38 5.00 1,500,000 1,530,734
Seneca County Industrial Development Agency
Revenue Bonds
New York Chiropractic College
Series 2007
10-01-27 5.00 750,000 667,628
Town of Hempstead Local Development Corporation
Revenue Bonds
Molloy College Project
Series 2009
07-01-39 5.75 800,000 802,224
---------------
Total 14,388,857
- -------------------------------------------------------------------------------------
COUNTY (2.7%)
County of Monroe
Unlimited General Obligation
Refunding & Public Improvement Bonds
Series 1996 (NPFGC)
03-01-15 6.00 1,250,000 1,457,400
- -------------------------------------------------------------------------------------
ELECTRIC (1.5%)
Long Island Power Authority
Revenue Bonds
Series 2009A
04-01-23 5.00 750,000 803,033
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (8.5%)
Albany Industrial Development Agency
Revenue Bonds
St. Peters Hospital Project
Series 2008A
11-15-27 5.25 1,000,000 972,940
New York State Dormitory Authority
Revenue Bonds
New York University Hospital Center
Series 2007B
07-01-24 5.25 690,000 683,783
New York State Dormitory Authority
Revenue Bonds
Orange Regional Medical Center
Series 2008
12-01-29 6.13 1,250,000 1,178,250
New York State Dormitory Authority
Revenue Bonds
Sloan-Kettering Memorial Center
Series 2006-1
07-01-35 5.00 1,000,000 1,017,890
Ulster County Industrial Development Agency
Revenue Bonds
Series 2007A
09-15-42 6.00 1,000,000 796,070
---------------
Total 4,648,933
- -------------------------------------------------------------------------------------
HOUSING -- MULTI-FAMILY (0.9%)
New York City Housing Development Corporation
Revenue Bonds
Series 2009M
11-01-45 5.15 500,000 501,775
- -------------------------------------------------------------------------------------
HOUSING -- OTHER (1.9%)
New York State Dormitory Authority
Revenue Bonds
Consolidated City University System
5th General Resolution
Series 2008B
07-01-27 5.00 1,000,000 1,051,470
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (4.3%)
New York Mortgage Agency
Revenue Bonds
Series 2002-101 A.M.T.
04-01-32 5.40 1,200,000 1,204,848
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
42 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a)
HOUSING -- SINGLE FAMILY (CONT.)
New York Mortgage Agency
Revenue Bonds
Series 2007-140 A.M.T.
10-01-21 4.60% $500,000 $501,485
New York Mortgage Agency
Revenue Bonds
Series 2007-143 A.M.T.
10-01-27 4.85 675,000 650,963
---------------
Total 2,357,296
- -------------------------------------------------------------------------------------
LEASE (9.0%)
New York City Industrial Development Agency
Revenue Bonds
Terminal One Group Association Project
Series 2005 A.M.T.
01-01-24 5.50 500,000 508,450
New York State Dormitory Authority
Revenue Bonds
Consolidated City University System
Series 1993A
07-01-13 5.75 3,000,000 3,234,810
New York State Dormitory Authority
Revenue Bonds
New York University Hospital Center
Series 2006A
07-01-20 5.00 500,000 504,025
New York State Dormitory Authority
Unrefunded Revenue Bonds
Series 1990B
05-15-11 7.50 645,000 696,361
---------------
Total 4,943,646
- -------------------------------------------------------------------------------------
MISCELLANEOUS (3.2%)
New York City Trust for Cultural Resources
Revenue Bonds
Lincoln Center
Series 2008C
12-01-18 5.25 750,000 852,345
New York State Dormitory Authority
Revenue Bonds
Mt. Sinai School of Medicine
New York University
Series 2007 (NPFGC)
07-01-37 4.50 1,000,000 888,260
---------------
Total 1,740,605
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (9.4%)
Metropolitan Transportation Authority
Revenue Bonds
Series 2006A
11-15-22 5.00 750,000 806,160
Metropolitan Transportation Authority
Revenue Bonds
Series 2009A
11-15-26 5.30 700,000 775,082
New York City Industrial Development Agency
Revenue Bonds
Queens Baseball Stadium Pilot
Series 2006 (AMBAC)
01-01-24 5.00 500,000 496,025
New York City Industrial Development Agency
Revenue Bonds
Yankee Stadium Pilot
Series 2009 (Assured Guaranty)
03-01-49 7.00 250,000 287,413
New York City Trust for Cultural Resources
Revenue Bonds
Julliard School
Series 2009A
01-01-34 5.00 1,000,000 1,054,770
New York State Thruway Authority
Revenue Bonds
Transportation
Series 2008A
03-15-28 5.00 1,000,000 1,074,810
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 43
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a)
MISCELLANEOUS REVENUE (CONT.)
Seneca Nation Indians Capital Improvements Authority
Revenue Bonds
Series 2007A
12-01-16 5.25% $500,000(d) $469,925
12-01-23 5.00 250,000(d) 206,775
---------------
Total 5,170,960
- -------------------------------------------------------------------------------------
PORT DISTRICT (3.7%)
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 143rd
Series 2006 (AGM) A.M.T.
10-01-21 5.00 1,000,000 1,024,650
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 146th
Series 2006 (AGM) A.M.T.
12-01-23 4.50 500,000 494,410
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 147th
Series 2007 (NPFGC/FGIC) A.M.T.
10-15-26 5.00 500,000 504,750
---------------
Total 2,023,810
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (5.2%)
Metropolitan Transportation Authority
Revenue Bonds
Series 2009B
11-15-34 5.00 1,500,000 1,560,810
New York City Transitional Finance Authority
Revenue Bonds
Series 2009S-5
01-15-32 5.00 1,000,000 1,033,280
New York State Dormitory Authority
Revenue Bonds
Education
Series 2005F
03-15-23 5.00 250,000 267,415
---------------
Total 2,861,505
- -------------------------------------------------------------------------------------
TOLL ROAD (6.2%)
Metropolitan Transportation Authority
Revenue Bonds
Series 2005F
11-15-35 5.00 500,000 501,935
New York State Thruway Authority
Revenue Bonds
Series 2007H (NPFGC/FGIC)
01-01-23 5.00 500,000 539,305
New York State Thruway Authority
Revenue Bonds
Series 2009A-1
04-01-29 5.00 1,000,000 1,058,380
Triborough Bridge & Tunnel Authority
Refunding Revenue Bonds
Series 2002B
11-15-29 5.13 1,000,000 1,038,470
Triborough Bridge & Tunnel Authority
Revenue Bonds
Series 2008C
11-15-38 5.00 250,000 259,465
---------------
Total 3,397,555
- -------------------------------------------------------------------------------------
WATER & SEWER (10.4%)
Erie County Water Authority
Revenue Bonds
4th Resolution
Series 2007 (NPFGC)
12-01-34 4.75 500,000 504,490
New York City Municipal Water Finance Authority
Revenue Bonds
Fiscal 2009
Series 2008A
06-15-40 5.75 1,000,000 1,118,790
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2008CC
06-15-34 5.00 1,500,000 1,553,490
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2008DD
06-15-38 4.50 500,000 489,000
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
44 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a)
WATER & SEWER (CONT.)
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 $1,020,630
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 1,025,500
---------------
Total 5,711,900
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $51,453,219) $53,557,484
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (0.4%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE DESCRIPTION (B,C,F) YIELD MATURITY VALUE(a)
City of New York
Unlimited General Obligation Bonds
V.R.D.N. Sub Series 2005E-2 (Bank of America)
08-01-34 0.14% $200,000 $200,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $200,000) $200,000
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (1.6%)
SHARES VALUE(a)
JPMorgan Tax-Free Money Market Fund 893,570 $893,570
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $893,570) $893,570
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $52,546,789)(g) $54,651,054
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AGM -- Assured Guaranty Municipal Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
BNY -- Bank of New York
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
MGIC -- Mortgage Guaranty Insurance Corporation
NPFGC -- National Public Finance Guarantee Corporation
TCRS -- Transferable Custodial Receipts
XLCA -- XL Capital Assurance
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 45
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource New York Tax-Exempt Fund
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(c) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value
of securities subject to alternative minimum tax
represented 8.92% 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
</Table>
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
may be determined to be liquid under guidelines established by the Fund's
Board of Trustees. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At Feb. 28,
2010, the value of these securities amounted to $676,700 or 1.23% of net
assets.
(e) At Feb. 28, 2010, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$474,364. See Note 2 to the financial statements.
(f) The Fund is entitled to receive principal and interest from the party, if
indicated in 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 Feb. 28, 2010.
(g) At Feb. 28, 2010, the cost of securities for federal income tax purposes
was approximately $52,547,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $2,727,000
Unrealized depreciation (623,000)
----------------------------------------------------------
Net unrealized appreciation $2,104,000
----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
46 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Generally accepted accounting principles (GAAP) require disclosure regarding the
inputs and valuation techniques used to measure fair value and any changes in
valuation inputs or techniques. In addition, investments shall be disclosed by
major category.
The Fund categorizes its fair value measurements according to a three-level
hierarchy that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in
pricing an investment based on market data obtained from sources independent of
the reporting entity. Unobservable inputs are those that reflect the Fund's
assumptions about the information market participants would use in pricing an
investment. An investment's level within the fair value hierarchy is based on
the lowest level of any input that is deemed significant to the asset or
liability's fair value measurement. The input levels are not necessarily an
indication of the risk or liquidity associated with investments at that level.
For example, certain U.S. government securities are generally high quality and
liquid, however, they are reflected as Level 2 because the inputs used to
determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in the three broad levels listed below:
- Level 1 -- Valuations based on quoted prices for investments in active
markets that the Fund has the ability to access at the measurement date.
Valuation adjustments are not applied to Level 1 investments.
- Level 2 -- Valuations based on other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment speeds, credit risks, etc.).
- Level 3 -- Valuations based on significant unobservable inputs (including
the Fund's own assumptions and judgment in determining the fair value of
investments).
Inputs that are used in determining fair value of an investment may include
price information, credit data, volatility statistics, and other factors. These
inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as
the type of investment, and the volume and level of activity for that investment
or similar investments in the marketplace. The inputs will be considered by the
Fund Administrator, along with any other relevant factors in the calculation of
an investment's fair value. The Fund uses prices and inputs that are current as
of the measurement date, which may include periods of market dislocations.
During these periods, the availability of prices and inputs may be reduced for
many investments. This condition could cause an investment to be reclassified
between the various levels within the hierarchy.
Investments falling into the Level 3 category are primarily supported by quoted
prices from brokers and dealers participating in the market for those
investments. However, these may be classified as Level 3 investments due to lack
of market transparency and corroboration to support these quoted prices.
Additionally, valuation models may be used as the pricing source for any
remaining investments classified as Level 3. These models rely on one or more
significant unobservable
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 47
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource New York Tax-Exempt Fund
FAIR VALUE MEASUREMENTS (CONTINUED)
inputs and/or significant assumptions by the Fund Administrator. Inputs used in
a valuation model may include, but are not limited to, financial statement
analysis, discount rates and estimated cash flows, and comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2010:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2010
--------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- --------------------------------------------------------------------------------------------
Bonds
Municipal Bonds $-- $53,557,484 $-- $53,557,484
- --------------------------------------------------------------------------------------------
Total Bonds -- 53,557,484 -- 53,557,484
- --------------------------------------------------------------------------------------------
Other
Municipal Notes -- 200,000 -- 200,000
Unaffiliated Money
Market Fund(a) 893,570 -- -- 893,570
- --------------------------------------------------------------------------------------------
Total Other 893,570 200,000 -- 1,093,570
- --------------------------------------------------------------------------------------------
Total Investment in
Securities $893,570 $53,757,484 $-- $54,651,054
- --------------------------------------------------------------------------------------------
</Table>
(a) Money market fund that is a sweep investment for cash balances in the Fund
at Feb. 28, 2010.
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 filed on Form N-Q,
can be obtained without charge, upon request, by calling the RiverSource
Family of Funds at 1(800) 221-2450.
- --------------------------------------------------------------------------------
48 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
STATEMENTS OF ASSETS AND LIABILITIES -------------------------------------------
<Table>
<Caption>
RIVERSOURCE RIVERSOURCE RIVERSOURCE
CALIFORNIA MINNESOTA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2010 (UNAUDITED) FUND FUND FUND
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $145,899,561,
$318,981,712 and $51,653,219) $147,738,009 $331,620,354 $53,757,484
Money market fund (identified cost $1,710,850, $2,333,049 and
$893,570) 1,710,850 2,333,049 893,570
- ----------------------------------------------------------------------------------------------------------
Total investments in securities (identified cost $147,610,411,
$321,314,761 and $52,546,789) 149,448,859 333,953,403 54,651,054
Capital shares receivable 6,135 201,096 12,342
Accrued interest receivable 1,756,880 3,936,940 722,085
Receivable for investment securities sold 5,243,078 -- --
- ----------------------------------------------------------------------------------------------------------
Total assets 156,454,952 338,091,439 55,385,481
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable to shareholders 133,316 264,743 42,919
Capital shares payable 2,241,112 141,233 8,943
Payable for investment securities purchased -- -- 474,364
Accrued investment management services fees 1,733 3,730 616
Accrued distribution fees 31,264 66,975 10,927
Accrued transfer agency fees 157 460 88
Accrued administrative services fees 296 647 105
Other accrued expenses 37,033 45,866 32,091
- ----------------------------------------------------------------------------------------------------------
Total liabilities 2,444,911 523,654 570,053
- ----------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $154,010,041 $337,567,785 $54,815,428
- ----------------------------------------------------------------------------------------------------------
REPRESENTED BY
Shares of beneficial interest -- $.01 par value $ 310,764 $ 637,419 $ 110,171
Additional paid-in capital 155,002,095 326,261,570 53,641,468
Undistributed net investment income 75,942 130,787 23,416
Accumulated net realized gain (loss) (3,217,208) (2,100,633) (1,063,892)
Unrealized appreciation (depreciation) on investments 1,838,448 12,638,642 2,104,265
- ----------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding shares $154,010,041 $337,567,785 $54,815,428
- ----------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 49
STATEMENT OF ASSETS AND LIABILITIES (continued) --------------------------------
<Table>
<Caption>
RIVERSOURCE RIVERSOURCE RIVERSOURCE
CALIFORNIA MINNESOTA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2010 (UNAUDITED) FUND FUND FUND
Net assets applicable to
outstanding shares: Class A $148,203,598 $311,630,694 $51,716,756
Class B $ 2,608,638 $ 9,134,164 $ 2,095,401
Class C $ 3,197,805 $ 16,802,927 $ 1,003,271
Outstanding shares of
beneficial interest: Class A 29,905,492 58,845,158 10,394,226
Class B 526,499 1,724,022 421,161
Class C 644,455 3,172,670 201,677
Net asset value per
share: Class A(1) $ 4.96 $ 5.30 $ 4.98
Class B $ 4.95 $ 5.30 $ 4.98
Class C $ 4.96 $ 5.30 $ 4.97
- ------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A for RiverSource California
Tax-Exempt Fund, RiverSource Minnesota Tax-Exempt Fund and RiverSource New
York Tax-Exempt Fund is $5.21, $5.56 and $5.23, respectively. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 4.75%.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
50 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
STATEMENTS OF OPERATIONS -------------------------------------------------------
<Table>
<Caption>
RIVERSOURCE RIVERSOURCE RIVERSOURCE
CALIFORNIA MINNESOTA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
SIX MONTHS ENDED FEB. 28, 2010 (UNAUDITED) FUND FUND FUND
INVESTMENT INCOME
Income:
Interest $4,170,998 $ 7,983,326 $1,330,910
Income distributions from money market fund 206 391 79
- --------------------------------------------------------------------------------------------------------
Total income 4,171,204 7,983,717 1,330,989
- --------------------------------------------------------------------------------------------------------
Expenses:
Investment management services fees 326,019 655,407 111,286
Distribution fees
Class A 191,712 376,638 64,040
Class B 13,321 44,886 10,427
Class C 15,001 71,304 4,845
Transfer agency fees
Class A 27,372 75,135 14,928
Class B 544 2,483 669
Class C 567 3,702 299
Administrative services fees 55,662 113,592 19,000
Compensation of board members 2,486 5,080 848
Custodian fees 1,472 2,761 1,685
Printing and postage 10,260 6,625 4,920
Registration fees 25,015 27,060 27,810
Professional fees 11,660 13,334 10,943
Other 6,976 13,048 3,987
- --------------------------------------------------------------------------------------------------------
Total expenses 688,067 1,411,055 275,687
Expenses waived/reimbursed by the Investment Manager and its
affiliates (38,643) (41,698) (49,804)
- --------------------------------------------------------------------------------------------------------
Total net expenses 649,424 1,369,357 225,883
- --------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 3,521,780 6,614,360 1,105,106
- --------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (7,600) 1,117,652 46,410
Futures contracts (62,369) (122,135) (22,109)
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (69,969) 995,517 24,301
Net change in unrealized appreciation (depreciation) on
investments 3,591,427 7,566,987 1,318,254
- --------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 3,521,458 8,562,504 1,342,555
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $7,043,238 $15,176,864 $2,447,661
- --------------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 51
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
RIVERSOURCE
CALIFORNIA TAX-EXEMPT FUND
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 3,521,780 $ 7,304,681
Net realized gain (loss) on investments (69,969) (934,821)
Net change in unrealized appreciation (depreciation) on
investments 3,591,427 (1,875,989)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 7,043,238 4,493,871
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (3,398,263) (7,049,353)
Class B (48,958) (149,044)
Class C (55,008) (93,719)
- --------------------------------------------------------------------------------------------------
Total distributions (3,502,229) (7,292,116)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 5,986,971 19,923,096
Class B shares 73,039 443,125
Class C shares 929,210 472,755
Reinvestment of distributions at net asset value
Class A shares 2,404,604 4,800,389
Class B shares 40,264 124,705
Class C shares 46,995 77,165
Conversions from Class B to Class A
Class A shares -- 1,139,538
Class B shares -- (1,139,538)
Payments for redemptions
Class A shares (20,134,785) (38,756,535)
Class B shares (312,193) (1,267,870)
Class C shares (479,082) (698,645)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (11,444,977) (14,881,815)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (7,903,968) (17,680,060)
Net assets at beginning of period 161,914,009 179,594,069
- --------------------------------------------------------------------------------------------------
Net assets at end of period $154,010,041 $161,914,009
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 75,942 $ 56,391
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
52 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
RIVERSOURCE
MINNESOTA TAX-EXEMPT FUND
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 6,614,360 $ 12,926,170
Net realized gain (loss) on investments 995,517 909,145
Net change in unrealized appreciation (depreciation) on
investments 7,566,987 1,703,901
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 15,176,864 15,539,216
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (6,192,763) (12,286,856)
Class B (150,756) (461,961)
Class C (239,591) (334,186)
- --------------------------------------------------------------------------------------------------
Total distributions (6,583,110) (13,083,003)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 19,610,557 41,948,263
Class B shares 279,514 1,076,993
Class C shares 4,430,422 4,828,068
Reinvestment of distributions at net asset value
Class A shares 5,150,167 10,050,436
Class B shares 131,757 407,559
Class C shares 204,752 292,939
Conversions from Class B to Class A
Class A shares -- 3,807,793
Class B shares -- (3,807,793)
Payments for redemptions
Class A shares (22,548,988) (45,969,582)
Class B shares (579,347) (2,591,129)
Class C shares (792,067) (1,143,172)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions 5,886,767 8,900,375
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 14,480,521 11,356,588
Net assets at beginning of period 323,087,264 311,730,676
- --------------------------------------------------------------------------------------------------
Net assets at end of period $337,567,785 $323,087,264
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 130,787 $ 99,537
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 53
STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
<Table>
<Caption>
RIVERSOURCE
NEW YORK TAX-EXEMPT FUND
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 1,105,106 $ 2,283,385
Net realized gain (loss) on investments 24,301 (739,903)
Net change in unrealized appreciation (depreciation) on
investments 1,318,254 702,309
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 2,447,661 2,245,791
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,050,860) (2,138,780)
Class B (34,943) (113,911)
Class C (16,251) (26,205)
- --------------------------------------------------------------------------------------------------
Total distributions (1,102,054) (2,278,896)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 1,287,391 6,574,142
Class B shares 128,254 259,408
Class C shares 168,488 322,075
Reinvestment of distributions at net asset value
Class A shares 868,376 1,749,901
Class B shares 29,432 95,703
Class C shares 14,802 24,460
Conversions from Class B to Class A .
Class A shares -- 1,435,523
Class B shares -- (1,435,523)
Payments for redemptions
Class A shares (4,707,637) (9,315,791)
Class B shares (164,043) (350,063)
Class C shares (134,147) (140,906)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (2,509,084) (781,071)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (1,163,477) (814,176)
Net assets at beginning of period 55,978,905 56,793,081
- --------------------------------------------------------------------------------------------------
Net assets at end of period $54,815,428 $55,978,905
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 23,416 $ 20,364
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
54 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The following tables are intended to help you understand each Fund's financial
performance. Certain information reflects financial results for a single share
of a class held for the periods shown. For periods ended 2007 and after, per
share net investment income (loss) amounts are calculated based on average
shares outstanding during the period. Total returns assume reinvestment of all
dividends and distributions. Total returns do not reflect payment of sales
charges, if any, and are not annualized for periods of less than one year.
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS A FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 $5.11
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11 .21 .20 .20 .03 .19 .20
Net gains (losses) (both realized and
unrealized) .11 (.05) (.09) (.13) .10 (.15) .23
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .22 .16 .11 .07 .13 .04 .43
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.21) (.20) (.20) (.03) (.19) (.20)
Distributions from realized gains -- -- (.04) -- -- (.06) (.07)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.21) (.24) (.20) (.03) (.25) (.27)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $4.85 $4.90 $5.03 $5.16 $5.06 $5.27
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.51% 3.59% 2.13% 1.35% 2.63% .81% 8.53%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A .86% .87% .88% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(d),(e) N/A .82% .80% .80% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) .84%(f) .83% .86% .87% .87%(f) .88% .86%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(d),(e) .79%(f) .79% .79% .79% .79%(f) .81% .86%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.46%(f) 4.54% 4.01% 3.89% 3.81%(f) 3.69% 3.71%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $148 $157 $172 $164 $170 $171 $190
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 55
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS B FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 $5.11
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .18 .16 .16 .03 .15 .16
Net gains (losses) (both realized and
unrealized) .10 (.06) (.09) (.13) .10 (.15) .23
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .19 .12 .07 .03 .13 -- .39
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.16) (.16) (.03) (.15) (.16)
Distributions from realized gains -- -- (.04) -- -- (.06) (.07)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.20) (.16) (.03) (.21) (.23)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.95 $4.85 $4.90 $5.03 $5.16 $5.06 $5.27
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.92% 2.81% 1.37% .59% 2.50% .05% 7.72%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.61% 1.62% 1.63% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(d),(e) N/A 1.57% 1.55% 1.55% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.59%(f) 1.58% 1.61% 1.62% 1.62%(f) 1.63% 1.61%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(d),(e) 1.54%(f) 1.54% 1.54% 1.54% 1.55%(f) 1.57% 1.61%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.70%(f) 3.78% 3.27% 3.12% 3.01%(f) 2.92% 2.95%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $3 $3 $5 $6 $9 $11 $16
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
56 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS C FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.85 $4.91 $5.04 $5.17 $5.07 $5.28 $5.12
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .18 .16 .16 .03 .15 .16
Net gains (losses) (both realized and
unrealized) .11 (.07) (.09) (.13) .10 (.15) .23
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .20 .11 .07 .03 .13 -- .39
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.16) (.16) (.03) (.15) (.16)
Distributions from realized gains -- -- (.04) -- -- (.06) (.07)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.20) (.16) (.03) (.21) (.23)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $4.85 $4.91 $5.04 $5.17 $5.07 $5.28
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.13% 2.60% 1.38% .60% 2.50% .06% 7.71%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(b)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.61% 1.62% 1.63% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(d),(e) N/A 1.57% 1.55% 1.55% N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.59%(f) 1.58% 1.61% 1.62% 1.63%(f) 1.64% 1.62%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(d),(e) 1.54%(f) 1.54% 1.54% 1.54% 1.55%(f) 1.58% 1.62%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.69%(f) 3.78% 3.18% 3.13% 3.05%(f) 2.93% 2.94%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $3 $3 $3 $2 $2 $2 $3
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 57
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource California Tax-Exempt Fund
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006,
the Fund's fiscal year end was changed from June 30 to Aug. 31.
(b) In addition to the fees and expenses the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
reported expense ratios.
(c) Ratios include interest and fee expense related to the Fund's participation
in certain inverse floater programs. Due to an equal increase in interest
income from fixed rate municipal bonds held in trust, there is no impact on
the Fund's net assets, net asset value per share, total return or net
investment income.
(d) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(e) Expense ratio is before the reduction for earnings/bank fee credits on cash
balances. For the year ended Aug. 31, 2008, earnings/bank fee credits
lowered the expense ratio by 0.01% of average daily net assets.
(f) Annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
58 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS A FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $5.16 $5.11 $5.14 $5.27 $5.17 $5.35 $5.20
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11 .21 .21 .19 .03 .18 .18
Net gains (losses) (both realized and
unrealized) .14 .05 (.03) (.13) .10 (.17) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .25 .26 .18 .06 .13 .01 .35
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.21) (.21) (.19) (.03) (.18) (.18)
Distributions from realized gains -- -- -- -- -- (.01) (.02)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.21) (.21) (.19) (.03) (.19) (.20)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.30 $5.16 $5.11 $5.14 $5.27 $5.17 $5.35
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.80% 5.50% 3.50% 1.26% 2.56% .29% 6.73%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A .88% .99% 1.05% 1.06%(d) 1.01% .95%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A .84% .95%(f) .99% .98%(d) .96% .95%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) .82%(d) .83% .83% .85% .87%(d) .86% .85%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) .79%(d) .79% .79%(f) .79% .79%(d) .81% .85%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.13%(d) 4.31% 4.05% 3.70% 3.60%(d) 3.52% 3.37%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $312 $301 $289 $288 $309 $303 $341
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 59
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS B FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 $5.20
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .18 .17 .15 .03 .14 .14
Net gains (losses) (both realized and
unrealized) .14 .04 (.03) (.11) .10 (.17) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .23 .22 .14 .04 .13 (.03) .31
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.18) (.17) (.16) (.03) (.14) (.14)
Distributions from realized gains -- -- -- -- -- (.01) (.02)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.18) (.17) (.16) (.03) (.15) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.30 $5.16 $5.12 $5.15 $5.27 $5.17 $5.35
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.41% 4.50% 2.72% .70% 2.42% (.47%) 5.94%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE DAILY NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.63% 1.75% 1.80% 1.81%(d) 1.77% 1.70%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A 1.59% 1.70%(f) 1.75% 1.74%(d) 1.72% 1.70%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.57%(d) 1.58% 1.59% 1.60% 1.62%(d) 1.62% 1.60%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) 1.55%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.57% 1.60%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.38%(d) 3.56% 3.29% 2.93% 2.81%(d) 2.75% 2.62%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $9 $9 $14 $20 $29 $34 $49
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
60 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS C FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 $5.20
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .18 .17 .15 .03 .14 .14
Net gains (losses) (both realized and
unrealized) .14 .04 (.03) (.11) .10 (.17) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .23 .22 .14 .04 .13 (.03) .31
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.18) (.17) (.16) (.03) (.14) (.14)
Distributions from realized gains -- -- -- -- -- (.01) (.02)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.18) (.17) (.16) (.03) (.15) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.30 $5.16 $5.12 $5.15 $5.27 $5.17 $5.35
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.41% 4.51% 2.72% .70% 2.42% (.47%) 5.94%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.63% 1.75% 1.80% 1.82%(d) 1.77% 1.71%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A 1.59% 1.70%(f) 1.75% 1.74%(d) 1.72% 1.71%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.57%(d) 1.58% 1.59% 1.60% 1.63%(d) 1.62% 1.61%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.57% 1.61%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.38%(d) 3.55% 3.29% 2.94% 2.84%(d) 2.76% 2.62%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $17 $13 $8 $7 $8 $8 $9
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 61
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006,
the Fund's fiscal year end was changed from June 30 to Aug. 31.
(b) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
reported expense ratios.
(c) Ratios include interest and fee expense related to the Fund's participation
in certain inverse floater programs, if any. Due to an equal increase in
interest income from fixed rate municipal bonds held in trust, there is no
impact on the Fund's net assets, net asset value per share, total return or
net investment income.
(d) Annualized.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(f) Expense ratio is before the reduction for earnings/bank fee credits on cash
balances. For the year ended Aug. 31, 2008, earnings/bank fee credits
lowered the expense ratio by 0.01% of average daily net assets.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
62 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED JULY 31, 30,
CLASS A FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 $5.07
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .20 .20 .19 .03 .19 .18
Net gains (losses) (both realized and
unrealized) .12 .01 (.07) (.11) .10 (.18) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .22 .21 .13 .08 .13 .01 .35
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.20) (.20) (.19) (.03) (.19) (.18)
Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.20) (.21) (.20) (.03) (.24) (.24)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.98 $4.86 $4.85 $4.93 $5.05 $4.95 $5.18
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.55% 4.62% 2.59% 1.53% 2.67% .20% 7.04%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.02% 1.12% 1.18% 1.20%(d) 1.13% 1.02%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A .81% .93%(f) 1.00% .98%(d) .98% .98%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) .97%(d) 1.00% .98% .97% 1.01%(d) .96% .92%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) .79%(d) .79% .79%(f) .79% .79%(d) .81% .88%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.11%(d) 4.30% 4.03% 3.81% 3.77%(d) 3.75% 3.47%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $52 $53 $53 $58 $63 $63 $73
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 63
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS B FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 $5.07
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .17 .16 .15 .03 .15 .14
Net gains (losses) (both realized and
unrealized) .12 -- (.07) (.11) .10 (.18) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .20 .17 .09 .04 .13 (.03) .31
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.16) (.16) (.15) (.03) (.15) (.14)
Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.16) (.17) (.16) (.03) (.20) (.20)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.98 $4.86 $4.85 $4.93 $5.05 $4.95 $5.18
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.16% 3.83% 1.83% .76% 2.54% (.55%) 6.23%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.77% 1.87% 1.93% 1.95%(d) 1.88% 1.77%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A 1.56% 1.68%(f) 1.76% 1.74%(d) 1.75% 1.74%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.73%(d) 1.75% 1.73% 1.72% 1.76%(d) 1.71% 1.67%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.58% 1.64%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.36%(d) 3.54% 3.28% 3.05% 2.98%(d) 2.98% 2.70%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $2 $2 $4 $5 $7 $8 $11
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
64 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
YEAR ENDED JUNE
SIX MONTHS ENDED YEAR ENDED AUG. 31, 30,
CLASS C FEB. 28, 2010 ---------------------------------------- ----------------
PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005
Net asset value, beginning of period $4.86 $4.85 $4.92 $5.05 $4.95 $5.18 $5.07
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .17 .16 .15 .03 .15 .14
Net gains (losses) (both realized and
unrealized) .11 -- (.06) (.12) .10 (.18) .17
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .19 .17 .10 .03 .13 (.03) .31
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.16) (.16) (.15) (.03) (.15) (.14)
Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.16) (.17) (.16) (.03) (.20) (.20)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.97 $4.86 $4.85 $4.92 $5.05 $4.95 $5.18
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.96% 3.84% 2.04% .56% 2.54% (.55%) 6.23%
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(B)
Gross expenses prior to expense
waiver/reimbursement
(including interest and fee
expense)(c) N/A 1.77% 1.87% 1.93% 1.97%(d) 1.89% 1.78%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(including interest and fee
expense)(c),(e) N/A 1.56% 1.68%(f) 1.76% 1.74%(d) 1.75% 1.74%
- --------------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement
(excluding interest and fee expense) 1.72%(d) 1.75% 1.73% 1.72% 1.78%(d) 1.72% 1.68%
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement
(excluding interest and fee
expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.58% 1.64%
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.37%(d) 3.55% 3.28% 3.05% 3.01%(d) 2.99% 2.70%
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1 $1 $1 $1 $1 $1 $1
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 65
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource New York Tax-Exempt Fund
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006,
the Fund's fiscal year end was changed from June 30 to Aug. 31.
(b) In addition to the fees and expenses the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(c) Ratios include interest and fee expense related to the Fund's participation
in certain inverse floater programs, if any. Due to an equal increase in
interest income from fixed rate municipal bonds held in trust, there is no
impact on the Fund's net assets, net asset value per share, total return or
net investment income.
(d) Annualized.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds).
(f) Expense ratio is before the reduction for earnings/bank fee credits on cash
balances. For the year ended Aug. 31, 2008, earnings/bank fee credits
lowered the expense ratio by 0.01% of average daily net assets.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
66 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS OF FEB. 28, 2010)
1. ORGANIZATION
RiverSource California Tax-Exempt Trust and RiverSource Special Tax-Exempt
Series Trust are organized as Massachusetts business trusts. RiverSource
California Tax-Exempt Trust includes only RiverSource California Tax-Exempt
Fund. RiverSource Special Tax-Exempt Series Trust is a "series fund" that is
currently composed of individual state tax-exempt funds, including RiverSource
Minnesota Tax-Exempt Fund and RiverSource New York Tax-Exempt Fund (together
with RiverSource California Tax-Exempt Fund, herein after referred to as the
Funds). The Funds are non-diversified, open-end management investment companies
as defined in the Investment Company Act of 1940, as amended (the 1940 Act).
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.
- - Class A shares are offered with a front-end sales charge, which may be waived
under certain circumstances.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares one month after the completion of
the eighth year of ownership if originally purchased in a RiverSource fund on
or after May 21, 2005 or originally purchased in a Seligman fund on or after
June 13, 2009. Class B shares originally purchased in a RiverSource fund
prior to May 21, 2005 will convert to Class A shares in the ninth calendar
year of ownership. Class B shares originally purchased in a Seligman fund
prior to June 13, 2009 will convert to Class A shares in the month prior to
the ninth year of ownership.
- - Class C shares may be subject to a CDSC.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees) 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.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 67
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ADOPTION OF NEW ACCOUNTING STANDARD
In June 2009, the Financial Accounting Standards Board (FASB) established the
FASB Accounting Standards Codification(TM) (Codification) as the single source
of authoritative accounting principles recognized by the FASB in the preparation
of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP). The Codification supersedes existing non-grandfathered, non-
SEC accounting and reporting standards. The Codification did not change GAAP
but, rather, organized it into a hierarchy where all guidance within the
Codification carries an equal level of authority. The Codification became
effective for financial statements issued for interim and annual periods ending
after Sept. 15, 2009. The Codification did not have an effect on the Funds'
financial statements.
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.
VALUATION OF SECURITIES
All securities are valued at the close of business of the New York Stock
Exchange (NYSE). Securities traded on national securities exchanges or included
in national market systems are valued at the last quoted sales price from the
primary exchange. Debt securities are generally traded in the over-the-counter
market and are valued by an independent pricing service using an evaluated bid.
When market quotes are not readily available, the pricing service, in
determining fair values of debt securities, takes into consideration such
factors as current quotations by broker/dealers, coupon, maturity, quality, type
of issue, trading characteristics, and other yield and risk factors it deems
relevant in determining valuations. The procedures adopted by each Fund's Board
of Trustees (the Board) generally contemplate the use of fair valuation in the
event that price quotations or valuations are not readily available, price
quotations or valuations from other sources are not reflective of market value
and thus deemed unreliable, or a significant event has occurred in relation to a
security or class of securities that is not reflected in price quotations or
valuations from other sources. A fair value price is a good faith estimate of
the value of a security at a given point in time.
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. Typically, those maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at amortized cost
using the market value on the 61st day before maturity. Short-term securities
maturing in
- --------------------------------------------------------------------------------
68 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
60 days or less at acquisition date are valued at amortized cost. Amortized cost
is an approximation of market value. Investments in money market funds are
valued at net asset value.
SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS
Delivery and payment for securities that have been purchased by the Fund 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 the Fund's net assets the same as owned securities. The Fund designates
cash or liquid securities at least equal to the amount of its forward-
commitments. At Feb. 28, 2010, RiverSource New York Tax-Exempt Fund has
outstanding when-issued securities of $474,364.
INVERSE FLOATER PROGRAM TRANSACTIONS
Each Fund may enter into transactions in which it transfers to trusts fixed rate
municipal bonds in exchange for cash and residual interests in the trusts'
assets and cash flows, which are in the form of inverse floating rate
securities. The trusts fund the purchases of the municipal bonds by issuing
short-term floating rate notes to third parties. The residual interests held by
each Fund (inverse floating rate securities) include the right of each Fund (i)
to cause the holders of the short-term floating rate notes to tender their notes
at par, and (ii) to transfer the municipal bonds from the trusts to each Fund,
thereby collapsing the trusts. The municipal bonds transferred to the trusts, if
any, remain in each Fund's investments in securities and the related short-term
floating rate notes are reflected as Fund liabilities under the caption "Short-
term floating rate notes outstanding" in the Statements of Assets and
Liabilities. The notes issued by the trusts have interest rates that are multi-
modal, which means that they can be reset to a new or different mode at the
reset date (e.g., mode can be daily, weekly, monthly, or a fixed specific date)
at the discretion of the holder of the inverse floating rate security. The
floating rate note holders have the option to tender their notes to the trusts
for redemption at par at each reset date. The income received by the inverse
floating rate security holder varies inversely with the short-term rate paid to
the floating rate note holders, and in most circumstances the inverse floating
rate security holder bears substantially all of the underlying bond's downside
investment risk and also benefits disproportionately from any potential
appreciation of the underlying bond's value. The inverse floating rate security
holder will be subject to greater interest rate risk than if they were to hold
the underlying bond because the interest rate is dependent on both the fixed
coupon rate of the underlying bond and the short-term interest rate paid on the
floating rate notes. The inverse floating rate security holder is also subject
to the credit risk, liquidity risk and market risk associated with the
underlying bond. The bonds held by the trusts serve as collateral for the short-
term floating rate
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 69
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
notes outstanding. Contractual maturities and interest rates of the municipal
bonds held in trust, if any, are presented in the Portfolio of Investments. The
inclusion of interest and fee expense related to the short-term floating rate
notes corresponds to an equal increase in interest income from the fixed rate
municipal bonds held in trust. At Feb. 28, 2010, the Funds had no outstanding
short-term floating rate notes.
GUARANTEES AND INDEMNIFICATIONS
Under each Fund's organizational documents, its officers and trustees 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 Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income (which includes net short-term capital gains) and tax-
exempt ordinary 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.
Management of each Fund has concluded that there are no significant uncertain
tax positions that would require recognition in the financial statements.
Generally, the tax authorities can examine all tax returns filed for the last
three years.
RECENT ACCOUNTING PRONOUNCEMENT
On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the
amendment), Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements, which provides guidance on how
investment assets and liabilities are to be valued and disclosed. Specifically,
the amendment requires reporting entities to disclose the input and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements for Level 2 or Level 3 positions. The amendment also requires
that transfers between all levels (including Level 1 and Level 2) be disclosed
on a gross basis (i.e., transfers out must be disclosed separately from
transfers in), and the reason(s) for the transfer. Additionally purchases,
sales, issuances and settlements must be disclosed on a gross basis in the Level
3 rollforward. The effective date of the amendment is for interim and annual
periods beginning after Dec. 15, 2009, however, the requirement to provide the
Level 3 activity for purchases, sales, issuances and settlements on a gross
basis
- --------------------------------------------------------------------------------
70 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
will be effective for interim and annual periods beginning after Dec. 15, 2010.
At this time the Funds are evaluating the implications of the amendment and the
impact to the financial statements.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and payable monthly, when
available, 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.
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.
3. INVESTMENTS IN DERIVATIVES
Each Fund may invest in certain derivative instruments, which are transactions
whose values depend on or are derived from (in whole or in part) the value of
one or more other assets, such as securities, currencies, commodities or
indices. Such derivative instruments may be used to maintain cash reserves while
maintaining exposure to certain other assets, to offset anticipated declines in
values of investments, to facilitate trading, to reduce transaction costs, and
to pursue higher investment returns. Each Fund may also use derivative
instruments to mitigate certain investment risks, such as foreign currency
exchange rate risk, interest rate risk, and credit risk. Investments in
derivative instruments may expose each Fund to certain additional risks,
including those detailed below.
FUTURES TRANSACTIONS
Each Fund may buy and sell financial futures contracts traded on any U.S. or
foreign exchange to produce incremental earnings, hedge existing positions or
protect against market changes in the value of equities, interest rates or
foreign currencies. Each Fund may also buy and write put and call options on
these futures contracts. A futures contract represents a commitment for the
future purchase or sale of an asset at a specified price on a specified date.
Futures and options on futures are valued daily based upon the last sale price
at the close of the market on the principal exchange on which they are traded.
Upon entering into a futures contract, each Fund is 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 each Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 71
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Each Fund recognizes a realized gain or loss when the contract is closed or
expires.
Upon entering into futures contracts, each Fund bears the risk of interest
rates, exchange rates or securities prices moving unexpectedly, in which case,
each Fund may not achieve the anticipated benefits of the futures contracts and
may realize a loss. Additional risks include counterparty credit risk, 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. At Feb. 28, 2010, the Funds had no outstanding futures contracts.
EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS
The following tables are intended to provide additional information about the
effect of derivatives on the financial statements of each Fund including: the
fair value of derivatives by risk category and the location of those fair values
in the Statement of Assets and Liabilities; the impact of derivative
transactions on each Fund's operations over the period including realized gains
or losses and unrealized gains or losses. The derivative schedules following the
Portfolio of Investments present additional information regarding derivative
instruments outstanding at the end of the period, if any.
RiverSource California Tax-Exempt Fund
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010
At Feb. 28, 2010, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEB. 28, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN
INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $(62,369)
- -----------------------------------------------------------------
Total $(62,369)
- -----------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $--
- -----------------------------------------------------------------
Total $--
- -----------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FUTURES
At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly
average gross notional amount for short contracts was $1.7 million for the six
months ended Feb. 28, 2010.
- --------------------------------------------------------------------------------
72 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010
At Feb. 28, 2010, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEB. 28, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN
INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $(122,135)
- -----------------------------------------------------------------
Total $(122,135)
- -----------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $--
- -----------------------------------------------------------------
Total $--
- -----------------------------------------------------------------
</Table>
VOLUME OF DERIVATIVE ACTIVITY
FUTURES
At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly
average gross notional amount for short contracts was $4.2 million for the six
months ended Feb. 28, 2010.
RiverSource New York Tax-Exempt Fund
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010
At Feb. 28, 2010, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEB. 28, 2010
<Table>
<Caption>
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN
INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $(22,109)
- -----------------------------------------------------------------
Total $(22,109)
- -----------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- -----------------------------------------------------------------
RISK EXPOSURE CATEGORY FUTURES
- -----------------------------------------------------------------
Interest rate contracts $--
- -----------------------------------------------------------------
Total $--
- -----------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 73
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
VOLUME OF DERIVATIVE ACTIVITY
FUTURES
At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly
average gross notional amount for short contracts was $700,000 for the six
months ended Feb. 28, 2010.
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. The management fee is an annual fee that is equal to a percentage of each
Fund's average daily net assets that declines from 0.41% to 0.25% as each Fund's
net assets increase. The management fee for the six months ended Feb. 28, 2010
was 0.41% of RiverSource California Tax-Exempt Fund and RiverSource New York
Tax-Exempt Fund's average daily net assets and 0.40% of RiverSource Minnesota
Tax-Exempt Fund's average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, each Fund pays Ameriprise Financial,
Inc., parent company of the Investment Manager, an annual fee for administration
and accounting services equal to a percentage of each Fund's average daily net
assets that declines from 0.07% to 0.04% as each Fund's net assets increase. The
fee for the six months ended Feb. 28, 2010 was 0.07% of each Fund's average
daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Funds or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Funds and the Board. For the six months ended
Feb. 28, 2010, other expenses paid to this company were as follows:
<Table>
<Caption>
FUND AMOUNT
- -----------------------------------------------------------
RiverSource California Tax-Exempt Fund $ 706
RiverSource Minnesota Tax-Exempt Fund 1,406
RiverSource New York Tax-Exempt Fund 242
</Table>
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of each Fund under the 1940 Act 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 funds in the RiverSource
Family of Funds. Each Fund's liability for these amounts is adjusted for market
- --------------------------------------------------------------------------------
74 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
value changes and remains in the funds until distributed in accordance with the
Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains Fund shareholder accounts and records and provides Fund
shareholder services. Each Fund pays the Transfer Agent an annual account-based
fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for
Class C for this service. The Transfer Agent also charges an annual fee of $3
per account serviced directly by each Fund or its designated agent for Class A,
Class B and Class C shares. The Transfer Agent charges an annual fee of $5 per
inactive account, charged on a pro rata basis for the 12 month period from the
date the account becomes inactive. These fees are included in the transfer
agency fees in the Statements of Operations.
DISTRIBUTION FEES
Each Fund has an agreement with RiverSource Fund Distributors, 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 of up to 0.25% of each Fund's average daily net assets attributable
to Class A shares and a fee at an annual rate of up to 1.00% of each Fund's
average daily net assets attributable to Class B and Class C shares. For Class B
and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution
expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed (unreimbursed expense) for each Fund was approximately as follows:
<Table>
<Caption>
FUND CLASS B CLASS C
- ----------------------------------------------------------------
RiverSource California Tax-Exempt Fund $ 83,000 $ 32,000
RiverSource Minnesota Tax-Exempt Fund 221,000 144,000
RiverSource New York Tax-Exempt Fund 63,000 11,000
</Table>
These amounts are based on the most recent information available as of Jan. 31,
2010, and may be recovered from future payments under the distribution plan or
CDSC. To the extent the unreimbursed expense has been fully recovered, the
distribution fee is reduced.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 75
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing the Funds' shares for the six months ended Feb. 28, 2010 were as
follows:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C
- -------------------------------------------------------------------
RiverSource California Tax-Exempt Fund $ 50,829 $ 920 $334
RiverSource Minnesota Tax-Exempt Fund 296,017 1,125 526
RiverSource New York Tax-Exempt Fund 11,956 307 4
</Table>
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended Feb. 28, 2010, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that the Funds' net
expenses (excluding interest and fee expenses related to each Fund's
participation in certain inverse floater programs and fees and expenses of
acquired funds*) were as follows:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C
- -------------------------------------------------------------------
RiverSource California Tax-Exempt Fund 0.79% 1.54% 1.54%
RiverSource Minnesota Tax-Exempt Fund 0.79 1.55 1.54
RiverSource New York Tax-Exempt Fund 0.79 1.54 1.54
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C
- -------------------------------------------------------------------
RiverSource California Tax-Exempt Fund $ 4,367 $144 $117
RiverSource Minnesota Tax-Exempt Fund 14,873 443 850
RiverSource New York Tax-Exempt Fund 4,682 252 105
</Table>
The management fees waived/reimbursed at the Fund level were as follows:
<Table>
<Caption>
FUND AMOUNT
- ------------------------------------------------------------
RiverSource California Tax-Exempt Fund $34,015
RiverSource Minnesota Tax-Exempt Fund 25,532
RiverSource New York Tax-Exempt Fund 44,765
</Table>
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and expenses until Oct. 31, 2010, unless sooner terminated at the
sole discretion of the Board, such that net expenses (excluding interest and fee
expenses related to each Fund's participation in certain inverse floater
programs
- --------------------------------------------------------------------------------
76 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
and fees and expenses of acquired funds*) will not exceed the following
percentage of the class' average daily net assets:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C
- -------------------------------------------------------------------
RiverSource California Tax-Exempt Fund 0.79% 1.54% 1.54%
RiverSource Minnesota Tax-Exempt Fund 0.79 1.55 1.54
RiverSource New York Tax-Exempt Fund 0.79 1.54 1.54
</Table>
* In addition to the fees and expenses which each Fund bears directly, each
Fund indirectly bears a pro rata share of the fees and expenses of the funds
in which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and each Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by each Fund will vary.
5. SECURITIES TRANSACTIONS
For the six months ended Feb. 28, 2010, cost of purchases and proceeds from
sales (other than short-term obligations) aggregated for each Fund are as
follows:
<Table>
<Caption>
FUND PURCHASES PROCEEDS
- ------------------------------------------------------------------
RiverSource California Tax-Exempt Fund $22,884,549 $40,325,895
RiverSource Minnesota Tax-Exempt Fund 31,923,183 34,274,319
RiverSource New York Tax-Exempt Fund 2,927,378 5,854,220
</Table>
Realized gains and losses are determined on an identified cost basis.
6. SHARE TRANSACTIONS
Transactions in shares for each Fund for the periods indicated are as follows:
<Table>
<Caption>
CALIFORNIA TAX-EXEMPT FUND MINNESOTA TAX-EXEMPT FUND NEW YORK TAX-EXEMPT FUND
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009
- ------------------------------------------------------------------------------------------------------------
CLASS A
Sold 1,210,788 4,355,164 3,723,520 8,539,717 259,826 1,430,554
Converted from
Class B* -- 240,409 -- 748,093 -- 300,948
Reinvested
distributions 484,818 1,037,102 976,301 2,034,376 174,878 377,970
Redeemed (4,071,525) (8,449,034) (4,290,221) (9,451,083) (945,993) (2,046,046)
- ------------------------------------------------------------------------------------------------------------
Net increase
(decrease) (2,375,919) (2,816,359) 409,600 1,871,103 (511,289) 63,426
- ------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 77
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
<Table>
<Caption>
CALIFORNIA TAX-EXEMPT FUND MINNESOTA TAX-EXEMPT FUND NEW YORK TAX-EXEMPT FUND
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009
- ------------------------------------------------------------------------------------------------------------
CLASS B
Sold 14,716 96,134 53,222 218,554 26,031 56,152
Reinvested
distributions 8,121 27,005 24,968 82,625 5,928 20,715
Converted to Class
A* -- (240,917) -- (748,093) -- (300,948)
Redeemed (62,850) (277,603) (110,152) (527,471) (33,056) (76,176)
- ------------------------------------------------------------------------------------------------------------
Net increase
(decrease) (40,013) (395,381) (31,962) (974,385) (1,097) (300,257)
- ------------------------------------------------------------------------------------------------------------
CLASS C
Sold 187,077 100,253 840,740 964,981 34,130 68,512
Reinvested
distributions 9,473 16,658 38,818 59,157 2,981 5,278
Redeemed (95,592) (152,756) (150,363) (234,610) (27,083) (30,213)
- ------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 100,958 (35,845) 729,195 789,528 10,028 43,577
- ------------------------------------------------------------------------------------------------------------
</Table>
* Automatic conversion of Class B shares to Class A shares based on the
original purchase date.
7. BANK BORROWINGS
Each Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby each Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
15, 2009, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between each Fund and certain other funds in the
RiverSource Family of Funds, severally and not jointly, permits collective
borrowings up to $300 million. The borrowers shall have the right, upon written
notice to the Administrative Agent to request an increase of up to $200 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $500 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each Fund based on
its borrowings at a rate equal to the sum of the federal funds rate plus (i)
1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the
amount of such excess. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. Each Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.10% per annum, in addition to an upfront fee equal to its pro rata share of
0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit
facility
- --------------------------------------------------------------------------------
78 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
agreement, which was a collective agreement between each Fund and certain other
funds in the RiverSource Family of Funds, severally and not jointly, permitted
collective borrowings up to $475 million. Interest was charged to each Fund
based on its borrowings at a rate equal to the federal funds rate plus 0.75%.
Each Fund also paid a commitment fee equal to its pro rata share of the amount
of the credit facility at a rate of 0.06% per annum, in addition to an upfront
fee equal to its pro rata share of 0.02% of the amount of the credit facility.
The Funds had no borrowings during the six months ended Feb. 28, 2010.
8. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures contracts,
post-October losses and market discount. 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.
For federal income tax purposes, capital loss carry-overs at Aug. 31, 2009 were
as follows:
<Table>
<Caption>
FUND CARRY-OVER
- -------------------------------------------------------------
RiverSource California Tax-Exempt Fund $1,607,252
RiverSource Minnesota Tax-Exempt Fund 2,322,451
RiverSource New York Tax-Exempt Fund 344,679
</Table>
At the end of the most recent fiscal year, if the capital loss carry-overs are
not offset by subsequent capital gains, they will expire as follows:
<Table>
<Caption>
FUND 2013 2014 2015 2016 2017
- ---------------------------------------------------------------------------------
RiverSource California Tax-
Exempt Fund $ -- $ -- $ -- $359,905 $1,247,347
RiverSource Minnesota Tax-
Exempt Fund 1,199,755 913,006 3,601 -- 206,089
RiverSource New York Tax-
Exempt Fund -- -- -- 3,664 341,015
</Table>
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
tax distributions. As a result, each Fund is permitted to treat net capital
losses realized between Nov. 1, 2008, and their fiscal year end (post-October
loss) as occurring on the first day of the following tax year. At Aug. 31, 2009,
post-
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 79
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
October losses that are treated for income purposes as occurring on Sept. 1,
2009 were as follows:
<Table>
<Caption>
FUND POST-OCTOBER LOSS
- -----------------------------------------------------------------
RiverSource California Tax-Exempt Fund $1,014,807
RiverSource New York Tax-Exempt Fund 553,244
</Table>
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-overs have been offset or
expire. There is no assurance that the Funds will be able to utilize all of
their capital loss carry-overs before they expire.
9. RISKS RELATING TO CERTAIN INVESTMENTS
NON-DIVERSIFICATION RISK
Each Fund is non-diversified. A non-diversified fund may invest more of its
assets in fewer companies than if it were a diversified fund. Because each
investment has a greater effect on each Fund's performance, each Fund may be
more exposed to the risks of loss and volatility than a fund that invests more
broadly.
GEOGRAPHIC CONCENTRATION RISK
Because state-specific tax-exempt funds invest primarily in the municipal
securities issued by the state and political sub-divisions of the state, each
Fund will be particularly affected by political and economic conditions and
developments in the state in which it invests. This vulnerability to factors
affecting the state fund's tax-exempt investments will be significantly greater
than that of a more geographically diversified fund, which may result in greater
losses and volatility. The value of municipal securities owned by a Fund also
may be adversely affected by future changes in federal or state income tax laws.
10. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statements of Assets and Liabilities
through the date of issuance of each Fund's financial statements. There were no
events or transactions that occurred during the period that materially impacted
the amounts or disclosures in each Fund's financial statements.
11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that
- --------------------------------------------------------------------------------
80 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
they are investors in several American Express Company (now known as
RiverSource) mutual funds and they purport to bring the action derivatively on
behalf of those funds under the Investment Company Act of 1940. The plaintiffs
allege that fees allegedly paid to the defendants by the funds for investment
advisory and administrative services are excessive. The plaintiffs seek remedies
including restitution and rescission of investment advisory and distribution
agreements. The plaintiffs voluntarily agreed to transfer this case to the
United States District Court for the District of Minnesota (the District Court).
In response to defendants' motion to dismiss the complaint, the District Court
dismissed one of plaintiffs' four claims and granted plaintiffs limited
discovery. Defendants moved for summary judgment in April 2007. Summary judgment
was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a
notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit)
on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary
judgment and remanded to the District Court for further proceedings. On August
6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court,
asking the U.S. Supreme Court to stay the District Court proceedings while the
U.S. Supreme Court considers and rules in a case captioned Jones v. Harris
Associates, which involves issues of law similar to those presented in the
Gallus case.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise
Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In
late 2003, Seligman conducted an extensive internal review concerning mutual
fund trading practices. Seligman's review, which covered the period 2001-2003,
noted one arrangement that permitted frequent trading in
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 81
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
certain open-end registered investment companies managed by Seligman (the
Seligman Funds); this arrangement was in the process of being closed down by
Seligman before September 2003. Seligman identified three other arrangements
that permitted frequent trading, all of which had been terminated by September
2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these
four arrangements to its clients and to shareholders of the Seligman Funds.
Seligman also provided information concerning mutual fund trading practices to
the SEC and the Office of the Attorney General of the State of New York (NYAG).
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund
Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the
Seligman Parties), alleging, in substance, that the Seligman Parties permitted
various persons to engage in frequent trading and, as a result, the prospectus
disclosure used by the registered investment companies then managed by Seligman
was and had been misleading. The NYAG included other related claims and also
claimed that the fees charged by Seligman to the Seligman Funds were excessive.
On March 13, 2009, without admitting or denying any violations of law or
wrongdoing, the Seligman Parties entered into a stipulation of settlement with
the NYAG and settled the claims made by the NYAG. Under the terms of the
settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement
resolved all outstanding matters between the Seligman Parties and the NYAG. In
addition to the foregoing matter, the New York staff of the SEC indicated in
September 2005 that it was considering recommending to the Commissioners of the
SEC the instituting of a formal action against Seligman and Seligman Advisors,
Inc. relating to frequent trading in the Seligman Funds. Seligman responded to
the staff in October 2005 that it believed that any action would be both
inappropriate and unnecessary, especially in light of the fact that Seligman had
previously resolved the underlying issue with the Independent Directors of the
Seligman Funds and made recompense to the affected Seligman Funds. There have
been no further developments with the SEC on this matter.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required
- --------------------------------------------------------------------------------
82 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and
Exchange Commission on legal and regulatory matters that relate to Ameriprise
Financial and its affiliates. Copies of these filings may be obtained by
accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 83
PROXY VOTING ------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which each
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds (for RiverSource or
Threadneedle funds) or seligman.com (for Seligman funds); or searching the
website of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how each Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds (for RiverSource or Threadneedle funds) or seligman.com
(for Seligman funds); or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
84 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT
RIVERSOURCE STATE TAX-EXEMPT FUNDS
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Fund Distributors, Inc., Member
FINRA, and managed by RiverSource Investments, LLC.
RiverSource is part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C)2010 RiverSource Investments, LLC. S-6329 AA (4/10)
</Table>
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual
reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. Investments.
(a) The complete schedule of investments is included in Item 1 of this Form
N-CSR.
(b) Not applicable.
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) Not applicable for semi-annual reports.
(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) RiverSource California Tax-Exempt Trust
By /s/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date May 3, 2010
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/ Patrick T. Bannigan
----------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date May 3, 2010
By /s/ Jeffrey P. Fox
----------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial
Officer
Date May 3, 2010