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, 2009
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
Portfolio of Investments..................... 21
RiverSource California Tax-Exempt Fund..... 21
RiverSource Minnesota Tax-Exempt Fund...... 30
RiverSource New York Tax-Exempt Fund....... 41
Statements of Assets and Liabilities......... 49
Statements of Operations..................... 51
Statements of Changes in Net Assets.......... 52
Financial Highlights......................... 55
Notes to Financial Statements................ 64
Proxy Voting................................. 80
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource California Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource California Tax-Exempt Fund (the Fund) Class A shares declined
2.92% (excluding sales charge) for the six months ended Feb. 28, 2009. The
Fund underperformed the Barclays Capital California 2 Plus Year Municipal Bond
Index (formerly known as the Lehman Brothers California 2 Plus Year Municipal
Bond Index), which fell 1.57% for the same period. The Fund outperformed the
Lipper California Municipal Debt Funds Index, representing the Fund's peer
group, which declined 5.27% for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index (formerly known as the Lehman Brothers Municipal Bond
Index), was up 0.05% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 months* 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------
RiverSource California
Tax-Exempt Fund Class A
(excluding sales charge) -2.92% +1.99% +0.74% +1.85% +3.33%
- ---------------------------------------------------------------------------
Barclays Capital California
2 Plus Year Municipal Bond
Index (unmanaged)(1) -1.57% +3.85% +2.14% +3.01% +4.48%
- ---------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index (unmanaged)(2) +0.05% +5.18% +2.95% +3.13% +4.61%
- ---------------------------------------------------------------------------
Lipper California Municipal
Debt Funds Index(3) -5.27% -0.64% -0.22% +1.35% +3.26%
- ---------------------------------------------------------------------------
</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 institution or
visiting riversource.com/funds.
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 -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
performance of other classes may vary from that shown because of differences in
expenses. 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 California 2 Plus Year Municipal Bond Index (formerly
known as Lehman Brothers California 2 Plus Year Municipal Bond Index), an
unmanaged index, is a market value-weighted index of California investment-
grade fixed-rate municipal bonds with maturities of two years or more.
(2) The Barclays Capital Municipal Bond Index (formerly known as Lehman Brothers
Municipal Bond Index), an unmanaged index, is made up of a representative
list of general obligation, revenue, insured and pre-refunded bonds. The
index is frequently used as a general measure of tax-exempt bond market
performance. 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 -- 2009 SEMIANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource California Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) -2.92% +1.99% +0.74% +1.85% +3.33% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) -3.28% +1.22% +0.05% +1.09% +2.55% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) -3.27% +1.22% +0.06% +1.09% N/A +3.10%
- -------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -7.45% -2.91% -0.89% +0.85% +2.80% N/A
- -------------------------------------------------------------------------------------
Class B (inception
3/20/95) -8.03% -3.67% -1.16% +0.75% +2.55% N/A
- -------------------------------------------------------------------------------------
Class C (inception
6/26/00) -4.22% +0.24% +0.06% +1.09% N/A +3.10%
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) +1.66% -1.96% +0.66% +1.75% +3.23% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +1.50% -2.50% -0.03% +0.99% +2.46% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +1.50% -2.48% -0.02% +0.99% N/A +2.96
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -3.16% -6.54% -0.99% +0.78% +2.70% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -3.48% -7.20% -1.24% +0.65% +2.46% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +0.50% -3.42% -0.02% +0.99% N/A +2.96
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 4.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 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.
- --------------------------------------------------------------------------------
4 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 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 indicates 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) 17.3 years
- --------------------------------------
Effective duration(2) 9.2 years
- --------------------------------------
Weighted average bond
rating(3) AA-
- --------------------------------------
</Table>
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund Net fund
expenses expenses(a)
- -----------------------------------------
Class A 0.87% 0.80%
- -----------------------------------------
Class B 1.62% 1.55%
- -----------------------------------------
Class C 1.62% 1.55%
- -----------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Aug. 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding 0.01% of interest and fee expenses related to the Fund's
participation in certain inverse floater programs) will not exceed 0.79% for
Class A, 1.54% for Class B and 1.54% for Class C. See the Notes to Financial
Statements for more information regarding inverse floater program
transactions.
(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 bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Funds
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 usually 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.
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 distributions.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 5
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource California Tax-Exempt Fund
QUALITY BREAKDOWN (at Feb. 28, 2009; % of bond portfolio assets)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AAA bonds 14.5%
- -----------------------------------------------------------
AA bonds 41.3%
- -----------------------------------------------------------
A bonds 35.5%
- -----------------------------------------------------------
BBB bonds 6.2%
- -----------------------------------------------------------
Non-investment grade bonds 2.5%
- -----------------------------------------------------------
</Table>
Bond 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 Fund's investment manager, rates a security
using an internal rating system when Moody's doesn't provide a rating. Ratings
for 5.3% of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
6 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource Minnesota Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Minnesota Tax-Exempt Fund (the Fund) Class A shares declined 0.73%
(excluding sales charge) for the six months ended Feb. 28, 2009. The Fund
underperformed the Barclays Capital Minnesota 3 Plus Year Enhanced Municipal
Bond Index (formerly known as the Lehman Brothers Minnesota 3 Plus Year
Enhanced Municipal Bond Index), which rose 2.56% for the same period, but
outperformed the Lipper Minnesota Municipal Debt Funds Index, representing the
Fund's peer group, which fell 1.36%, for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index (formerly known as the Lehman Brothers Municipal Bond
Index), was up 0.05% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 months* 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------
RiverSource Minnesota Tax-
Exempt Fund Class A
(excluding
sales charge) -0.73% +4.38% +1.88% +2.16% +3.52%
- ---------------------------------------------------------------------------
Barclays Capital Minnesota 3
Plus Year Enhanced
Municipal Bond Index
(unmanaged)(1) +2.56% +7.98% +4.10% +3.81% +4.96%
- ---------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index (unmanaged)(2) +0.05% +5.18% +2.95% +3.13% +4.61%
- ---------------------------------------------------------------------------
Lipper Minnesota Municipal
Debt Funds Index(3) -1.36% +2.93% +1.69% +2.24% +3.67%
- ---------------------------------------------------------------------------
</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 institution or
visiting riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 7
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
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 in
expenses. 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 Minnesota 3 Plus Year Enhanced Municipal Bond Index
(formerly known as Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal
Bond Index), an unmanaged index, is a market value-weighted index of
Minnesota investment-grade fixed-rate municipal bonds with maturities of
three years or more.
(2) The Barclays Capital Municipal Bond Index (formerly known as Lehman Brothers
Municipal Bond Index), an unmanaged index, is made up of a representative
list of general obligation, revenue, insured and pre-refunded bonds. The
index is frequently used as a general measure of tax-exempt bond market
performance. 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 -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/08) -0.73% +4.38% +1.88% +2.16% +3.52% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -1.29% +3.60% +1.11% +1.40% +2.75% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -1.29% +3.60% +1.11% +1.39% N/A +3.40%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/08) -5.36% -0.63% +0.26% +1.17% +3.00% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -6.14% -1.40% -0.13% +1.05% +2.75% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -2.26% +2.60% +1.11% +1.39% N/A +3.40%
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/08) +4.40% +1.56% +2.30% +2.33% +3.55% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +4.22% +1.00% +1.60% +1.60% +2.80% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +4.01% +0.80% +1.53% +1.56% N/A +3.40%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/08) -0.51% -3.19% +0.66% +1.33% +3.02% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -0.78% -3.87% +0.35% +1.25% +2.80% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.01% -0.17% +1.53% +1.56% N/A +3.40%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 4.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 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 -- 2009 SEMIANNUAL REPORT 9
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix indicates 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) 13.7 years
- --------------------------------------
Effective duration(2) 7.5 years
- --------------------------------------
Weighted average bond
rating(3) AA
- --------------------------------------
</Table>
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund Net fund
expenses expenses(a)
- -----------------------------------------
Class A 0.99% 0.95%
- -----------------------------------------
Class B 1.75% 1.70%
- -----------------------------------------
Class C 1.75% 1.70%
- -----------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Aug. 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding 0.16% of interest and fee expenses related to the Fund's
participation in certain inverse floater programs) will not exceed 0.79% for
Class A, 1.54% for Class B and 1.54% for Class C. See the Notes to Financial
Statements for more information regarding inverse floater program
transactions.
(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 bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Funds
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 usually 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.
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 distributions.
- --------------------------------------------------------------------------------
10 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
QUALITY BREAKDOWN (at Feb. 28, 2009; % of bond portfolio assets)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AAA bonds 28.7%
- -----------------------------------------------------------
AA bonds 34.4%
- -----------------------------------------------------------
A bonds 24.8%
- -----------------------------------------------------------
BBB bonds 7.4%
- -----------------------------------------------------------
Non-investment grade bonds 4.0%
- -----------------------------------------------------------
Non-rated bonds 0.7%
- -----------------------------------------------------------
</Table>
Bond 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 Fund's investment manager, rates a security
using an internal rating system when Moody's doesn't provide a rating. Ratings
for 6.9% of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 11
YOUR FUND AT A GLANCE ----------------------------------------------------------
(UNAUDITED)
RiverSource New York Tax-Exempt Fund
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource New York Tax-Exempt Fund (the Fund) Class A shares declined 2.23%
(excluding sales charge) for the six months ended Feb. 28, 2009. The Fund
underperformed the Barclays Capital New York 4 Plus Year Municipal Bond Index
(formerly known as Lehman Brothers New York 4 Plus Year Municipal Bond Index),
which fell 0.33% for the same period. However, the Fund outperformed the
Lipper New York Municipal Debt Funds Index, representing the Fund's peer
group, which fell 3.77% for the same period.
> A broad barometer applicable to each of the Funds, the Barclays Capital
Municipal Bond Index (formerly known as the Lehman Brothers Municipal Bond
Index), was up 0.05% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
6 months* 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------
RiverSource New York Tax-
Exempt Fund Class A
(excluding
sales charge) -2.23% +2.73% +1.19% +1.73% +3.33%
- ---------------------------------------------------------------------------
Barclays Capital New York 4
Plus Year Municipal Bond
Index (unmanaged)(1) -0.33% +5.61% +2.93% +3.24% +4.81%
- ---------------------------------------------------------------------------
Barclays Capital Municipal
Bond Index (unmanaged)(2) +0.05% +5.18% +2.95% +3.13% +4.61%
- ---------------------------------------------------------------------------
Lipper New York Municipal
Debt Funds Index(3) -3.77% +0.77% +0.68% +1.62% +3.37%
- ---------------------------------------------------------------------------
</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 institution or
visiting riversource.com/funds.
- --------------------------------------------------------------------------------
12 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
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 in
expenses. 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 New York 4 Plus Year Municipal Bond Index (formerly
known as Lehman Brothers New York 4 Plus Year Municipal Bond Index), an
unmanaged index, is a market value-weighted index of New York investment-
grade fixed-rate municipal bonds with maturities of four years or more.
(2) The Barclays Capital Municipal Bond Index (formerly known as Lehman Brothers
Municipal Bond Index), an unmanaged index, is made up of a representative
list of general obligation, revenue, insured and pre-refunded bonds. The
index is frequently used as a general measure of tax-exempt bond market
performance. 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 -- 2009 SEMIANNUAL REPORT 13
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource New York Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT FEB. 28, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) -2.23% +2.73% +1.19% +1.73% +3.33% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -2.59% +1.97% +0.43% +0.96% +2.55% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -2.59% +1.97% +0.43% +0.97% N/A +3.20%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -6.84% -2.05% -0.42% +0.76% +2.80% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -7.38% -2.96% -0.80% +0.62% +2.55% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) -3.55% +0.98% +0.43% +0.97% N/A +3.20%
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
AT MARCH 31, 2009
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION**
Class A (inception
8/18/86) +3.55% -0.42% +1.54% +1.86% +3.35% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) +3.17% -1.16% +0.78% +1.09% +2.57% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +3.17% -1.16% +0.78% +1.09% N/A +3.18%
- ------------------------------------------------------------------------------------
With sales charge
Class A (inception
8/18/86) -1.41% -5.11% -0.10% +0.88% +2.82% N/A
- ------------------------------------------------------------------------------------
Class B (inception
3/20/95) -1.83% -5.94% -0.45% +0.75% +2.57% N/A
- ------------------------------------------------------------------------------------
Class C (inception
6/26/00) +2.17% -2.12% +0.78% +1.09% N/A +3.18%
- ------------------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 4.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 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 -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix indicates 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) 15.8 years
- --------------------------------------
Effective duration(2) 7.6 years
- --------------------------------------
Weighted average bond
rating(3) AA
- --------------------------------------
</Table>
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Total fund Net fund
expenses expenses(a)
- -----------------------------------------
Class A 1.12% 0.93%
- -----------------------------------------
Class B 1.87% 1.68%
- -----------------------------------------
Class C 1.87% 1.68%
- -----------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Aug. 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding 0.14% of interest and fee expenses related to the Fund's
participation in certain inverse floater programs) will not exceed 0.79% for
Class A, 1.54% for Class B and 1.54% for Class C. See the Notes to Financial
Statements for more information regarding inverse floater program
transactions.
(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 bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Funds
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 usually 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.
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 distributions.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 15
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
RiverSource New York Tax-Exempt Fund
QUALITY BREAKDOWN (at Feb. 28, 2009; % of bond portfolio assets)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AAA bonds 29.7%
- -----------------------------------------------------------
AA bonds 46.3%
- -----------------------------------------------------------
A bonds 12.0%
- -----------------------------------------------------------
BBB bonds 5.0%
- -----------------------------------------------------------
Non-investment grade bonds 7.0%
- -----------------------------------------------------------
</Table>
Bond 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 Fund's investment manager, rates a security
using an internal rating system when Moody's doesn't provide a rating. Ratings
for 2.4% of the bond portfolio assets were determined through internal analysis.
- --------------------------------------------------------------------------------
16 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 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, 2009.
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 -- 2009 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, 2008 FEB. 28, 2009 THE PERIOD(A) EXPENSE RATIO(B)
- ---------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 970.80 $4.13 .84%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.74 $4.23 .84%
- ---------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 967.20 $7.80 1.59%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.00 $8.00 1.59%
- ---------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 967.30 $7.80 1.59%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.00 $8.00 1.59%
- ---------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Annualized expense 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. The ratios excluding interest and fee
expense were 0.79% for Class A, 1.54% for Class B and 1.54% for Class C.
(c) Based on the actual return for the six months ended Feb. 28, 2009: -2.92%
for Class A, -3.28% for Class B and -3.27% for Class C.
- --------------------------------------------------------------------------------
18 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2008 FEB. 28, 2009 THE PERIOD(A) EXPENSE RATIO(B)
- ---------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 992.70 $4.47 .90%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.44 $4.53 .90%
- ---------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 987.10 $8.17 1.65%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.70 $8.30 1.65%
- ---------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 987.10 $8.17 1.65%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.70 $8.30 1.65%
- ---------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Annualized expense 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. The ratios excluding interest and fee
expense were 0.79% for Class A, 1.54% for Class B and 1.54% for Class C.
(c) Based on the actual return for the six months ended Feb. 28, 2009: -0.73%
for Class A, -1.29% for Class B and -1.29% for Class C.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 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, 2008 FEB. 28, 2009 THE PERIOD(A) EXPENSE RATIO(B)
- ---------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 977.70 $4.09 .83%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.79 $4.18 .83%
- ---------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 974.10 $7.78 1.58%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.05 $7.95 1.58%
- ---------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------
Actual(c) $1,000 $ 974.10 $7.78 1.58%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.05 $7.95 1.58%
- ---------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/365 (to reflect the one-half year period).
(b) Annualized expense 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. The ratios excluding interest and fee
expense were 0.79% for Class A, 1.54% for Class B and 1.54% for Class C.
(c) Based on the actual return for the six months ended Feb. 28, 2009: -2.23%
for Class A, -2.59% for Class B and -2.59% for Class C.
- --------------------------------------------------------------------------------
20 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
RiverSource California Tax-Exempt Fund
FEB. 28, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (92.9%)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
ADVANCED REFUNDED (0.6%)
Los Angeles Harbor Department
Revenue Bonds
Series 1988 Escrowed to Maturity
10-01-18 7.60% $780,000 $980,639
- -------------------------------------------------------------------------------------
CERTIFICATE OF PARTICIPATION (1.0%)
County of Riverside
Certificate of Participation
Series 1998 (MBIA Illinois Reinsurance)
12-01-21 5.00 1,530,000 1,541,414
- -------------------------------------------------------------------------------------
COLLEGE (12.1%)
California Educational Facilities Authority
Revenue Bonds
University of Southern California
Series 2007A
10-01-37 4.75 2,000,000 1,921,340
California Municipal Finance Authority
Revenue Bonds
Biola University
Series 2008
10-01-28 5.80 2,000,000 1,673,340
California Municipal Finance Authority
Revenue Bonds
Loma Linda University
Series 2007
04-01-32 4.75 2,300,000 1,864,288
Chabot-Las Positas Community College District
Unlimited General Obligation Bonds
Capital Appreciation Election of 2004B
Zero Coupon
Series 2006 (AMBAC)
08-01-19 4.75 1,000,000(e) 625,960
Foothill-De Anza Community College District
Unlimited General Obligation Bonds
Series 2007A (AMBAC)
08-01-27 5.00 2,500,000 2,520,425
Los Angeles Community College District
Unlimited General Obligation Bonds
2001 Election
Series 2008E-1
08-01-28 5.00 4,000,000 3,955,760
Merced Community College District
Refunding Revenue Bonds
School Facilities Financing Authority
Series 2006 (MBIA Illinois Reinsurance)
08-01-21 5.00 700,000 755,104
San Bernardino Community College District
Unlimited General Obligation Bonds
Election 2002
Series 2008A
08-01-33 6.25 1,000,000 1,089,090
San Diego Community College District
Unlimited General Obligation Bonds
Election 2006
Series 2007 (FSA)
08-01-30 5.00 2,500,000 2,473,975
San Mateo County Community College District
Unlimited General Obligation Bonds
Election of 2001
Series 2002A (MBIA Illinois Reinsurance/FGIC)
09-01-18 5.38 1,000,000 1,076,510
University of California Regents Medical Center
Revenue Bonds
Series 2008D
05-15-27 5.00 1,500,000 1,480,470
---------------
Total 19,436,262
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
COUNTY (0.5%)
California Statewide Communities Development Authority
Revenue Bonds
Thomas Jefferson School of Law
Series 2008A
10-01-38 7.25% $1,000,000 $738,000
- -------------------------------------------------------------------------------------
ELECTRIC (2.8%)
California State Department of Water Resources
Revenue Bonds
Power Supply
Series 2008H
05-01-22 5.00 2,000,000 2,078,040
Walnut Energy Center Authority
Revenue Bonds
Series 2004A (AMBAC)
01-01-29 5.00 2,500,000 2,417,375
---------------
Total 4,495,415
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (16.5%)
Abag Finance Authority for Nonprofit Corporations
Refunding Revenue Bonds
Children's Hospital & Research Center
Series 2007A
12-01-37 5.00 1,000,000 765,690
Abag Finance Authority for Nonprofit Corporations
Revenue Bonds
San Diego Hospital Association
Series 2001A
08-15-20 6.13 2,500,000 2,384,225
California Health Facilities Financing Authority
Refunding Revenue Bonds
Cedars-Sinai Medical Center
Series 2005
11-15-18 5.00 1,500,000 1,518,660
11-15-34 5.00 1,525,000 1,263,935
California Health Facilities Financing Authority
Revenue Bonds
Catholic Healthcare West
Series 2004G
07-01-23 5.25 3,500,000 3,284,786
California Health Facilities Financing Authority
Revenue Bonds
Providence Health & Services
Series 2008C
10-01-28 6.25 500,000 521,575
10-01-38 6.50 1,500,000 1,570,710
California Health Facilities Financing Authority
Revenue Bonds
Scripps Health
Series 2008A
10-01-22 5.00 3,250,000 2,933,840
California Health Facilities Financing Authority
Revenue Bonds
Sutter Health
Series 2008A
08-15-30 5.00 2,500,000 2,264,700
California Statewide Communities Development Authority
Revenue Bonds
Catholic Healthcare West
Series 2008B
07-01-30 5.50 1,975,000 1,821,167
California Statewide Communities Development Authority
Revenue Bonds
Daughters of Charity Health
Series 2005A
07-01-30 5.25 3,015,000 1,996,111
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2006B
03-01-45 5.25 1,000,000 821,000
Sierra View Local Health Care District
Revenue Bonds
Series 2007
07-01-37 5.25 2,000,000 1,432,900
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
22 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
Tulare Local Health Care District
Refunding Revenue Bonds
Series 2007
11-01-32 5.20% $2,180,000 $1,483,555
Turlock
Certificate of Participation
Emanuel Medical Center
Series 2007A
10-15-31 5.13 3,930,000 2,436,757
---------------
Total 26,499,611
- -------------------------------------------------------------------------------------
HOUSING -- OTHER (0.8%)
California Statewide Communities Development Authority
Revenue Bonds
CHF-Irvine LLC -- UCI East Campus
Series 2008
05-15-32 5.75 1,500,000 1,207,575
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (3.9%)
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006H (FGIC) A.M.T.
08-01-30 5.75 1,560,000 1,539,533
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006K A.M.T.
02-01-42 5.50 875,000 839,160
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2007D (FGIC) A.M.T.
02-01-17 4.35 1,555,000 1,482,599
08-01-17 4.35 2,470,000 2,349,168
---------------
Total 6,210,460
- -------------------------------------------------------------------------------------
LEASE (4.9%)
Eastern Municipal Water District
Certificate of Participation
Series 2008H
07-01-33 5.00 1,000,000 957,850
Golden State Tobacco Securitization Corporation
Enhanced Asset-backed Revenue Bonds
Series 2005A
06-01-45 5.00 2,000,000 1,496,120
Golden State Tobacco Securitization Corporation
Revenue Bonds
Series 2003A-1
06-01-33 6.25 2,325,000 2,551,827
Los Angeles Municipal Improvement Corporation
Revenue Bonds
Series 2008B
09-01-38 5.00 3,000,000 2,819,670
---------------
Total 7,825,467
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (5.2%)
California County Tobacco Securitization Agency
Asset-backed Revenue Bonds
Alameda County
Series 2002
06-01-29 5.75 785,000 596,380
06-01-42 6.00 240,000 151,462
California Infrastructure & Economic Development Bank
Revenue Bonds
Series 2008W
02-01-33 5.25 2,000,000 1,794,320
Golden State Tobacco Securitization Corporation
Prerefunded Revenue Bonds
Series 2003A-1
06-01-39 6.75 1,510,000 1,777,361
06-01-40 6.63 750,000 879,015
Los Angeles County Public Works Financing Authority
Refunding Revenue Bonds
Master Project
Series 2005A (MBIA Illinois Reinsurance)
12-01-26 5.00 2,000,000 1,883,059
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
MISCELLANEOUS REVENUE (CONT.)
Oakley Redevelopment Agency
Revenue Bonds
Oakley Redevelopment Project Area
Series 2008A (AMBAC)
09-01-38 5.00% $1,750,000 $1,331,418
---------------
Total 8,413,015
- -------------------------------------------------------------------------------------
PORT DISTRICT (0.6%)
Port of Oakland
Revenue Bonds
Series 2000K (MBIA Illinois Reinsurance/FGIC) A.M.T.
11-01-18 5.63 1,000,000 1,003,390
- -------------------------------------------------------------------------------------
SCHOOL (13.2%)
Alhambra City Elementary School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (FSA)
09-01-22 5.95 1,055,000(e) 525,664
Centinela Valley Union High School District
Unlimited General Obligation Bonds
Series 2002A (MBIA Illinois Reinsurance)
08-01-31 5.25 2,000,000 1,814,020
Encinitas Union School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1996 (MBIA Illinois Reinsurance)
08-01-15 5.85 2,500,000(e) 1,962,700
Fontana Unified School District
Unlimited General Obligation Bonds
Convertible Capital Appreciation
Series 1997D (MBIA Illinois Reinsurance/FGIC)
05-01-22 5.75 2,000,000 2,057,940
Fremont Union High School District/Santa Clara County
Unlimited General Obligation Bonds
Election of 2008
Series 2008
08-01-30 4.75 2,500,000 2,382,275
Grant Joint Union High School District
Unlimited General Obligation Bonds
Election 2006
Series 2008 (FSA)
08-01-25 5.00 1,000,000 1,008,190
Lammersville School District Community Facilities
Special Tax Bonds
Mountain House
Series 2006
09-01-35 5.13 1,000,000 639,270
Los Angeles Unified School District
Unlimited General Obligation Bonds
Election 2002
Series 2007B (AMBAC)
07-01-22 5.00 1,395,000 1,443,490
Menifee Union School District
Unlimited General Obligation Bonds
Election 2008
Series 2008A
08-01-33 5.50 3,125,000 3,147,720
Oxnard School District
Unlimited General Obligation Refunding Bonds
Series 2001A (MBIA Illinois Reinsurance)
08-01-30 5.75 2,575,000 2,509,904
San Juan Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999 (FSA)
08-01-21 5.68 820,000(e) 439,864
08-01-24 5.70 1,810,000(e) 780,635
Simi Valley School Financing Authority
Refunding Revenue Bonds
University School District
Series 2007 (FSA)
08-01-23 5.00 1,500,000 1,559,670
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
24 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
SCHOOL (CONT.)
Western Placer Unified School District
Certificate of Participation
Series 2008 (Assured Guaranty)
08-01-32 4.75% $1,000,000 $916,620
---------------
Total 21,187,962
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- ASSESSMENT (0.4%)
City of Azusa
Special Tax Bonds Escrow
Community Facilities
Series 2007
09-01-27 5.00 1,110,000 701,220
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (3.8%)
Anaheim Community Facilities District
Special Tax Bonds
Stadium Lofts
Series 2007
09-01-37 5.00 1,000,000 617,900
Beaumont Financing Authority
Prerefunded Revenue Bonds
Series 2000A
09-01-32 7.38 1,955,000 2,171,810
Orange Unified School District Community Facilities
Special Tax Bonds
Del Rio School Facilities
Series 2007-2
09-01-37 5.00 1,000,000 647,660
Pittsburg Redevelopment Agency
Tax Allocation Bonds
Los Medanos Community Development Project
Zero Coupon
Series 1999 (AMBAC)
08-01-24 6.05 2,100,000(e) 790,293
Rancho Cucamonga Redevelopment Agency
Tax Allocation Bonds
Housing Set Aside
Series 2007A (MBIA Illinois Reinsurance)
09-01-34 5.00 2,200,000 1,810,446
---------------
Total 6,038,109
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- TAX ALLOCATION (0.7%)
Inglewood Redevelopment Agency
Refunding Tax Allocation Bonds
Merged Redevelopment Project
Series 1998A (AMBAC)
05-01-23 5.25 1,100,000 1,066,010
- -------------------------------------------------------------------------------------
STATE (18.3%)
State of California
Prerefunded Unlimited General Obligation Bonds
Series 2004 (FGIC)
02-01-33 5.00 2,500,000 2,860,100
State of California
Unlimited General Obligation Bonds
Series 2002
02-01-15 6.00 1,000,000 1,114,240
State of California
Unlimited General Obligation Bonds
Series 2003
02-01-21 5.00 3,000,000 3,009,689
State of California
Unlimited General Obligation Bonds
Series 2004
02-01-22 5.00 1,000,000 998,640
State of California
Unlimited General Obligation Bonds
Series 2008
08-01-34 5.00 10,000,000 9,221,699
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2003
11-01-22 5.00 2,000,000 1,989,680
11-01-24 5.13 2,000,000 1,990,900
State of California
Unlimited General Obligation Bonds
Veterans
Series 2000BJ A.M.T.
12-01-12 4.95 2,250,000 2,324,250
12-01-13 5.05 1,435,000 1,474,678
12-01-14 5.15 2,535,000 2,591,176
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 25
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
STATE (CONT.)
State of California
Unlimited General Obligation Refunding Bonds
Series 2007
08-01-23 5.00% $2,015,000 $1,993,903
State of California
Unrefunded Unlimited General Obligation Bonds
Series 2004
04-01-29 5.30 2,000 1,986
---------------
Total 29,570,941
- -------------------------------------------------------------------------------------
WATER & SEWER (7.6%)
Anaheim Public Financing Authority
Revenue Bonds
Series 2007 (MBIA Illinois Reinsurance)
02-01-33 4.75 3,500,000 3,236,100
Eastern Municipal Water District
Special Tax Bonds
District #2004-27 Cottonwood
Series 2006
09-01-27 5.00 200,000 136,128
09-01-36 5.00 500,000 306,370
Los Angeles Department of Water & Power
Revenue Bonds
Series 2009A
07-01-34 5.38 2,495,000 2,518,553
Rowland Water District
Certificate of Participation
Recycled Water Project
Series 2008
12-01-39 6.25 2,235,000 2,316,175
Semitropic Improvement District
Revenue Bonds
Series 2004A (XLCA)
12-01-28 5.00 2,000,000 1,908,040
Turlock Public Financing Authority
Revenue Bonds
Series 2008
05-01-32 4.75 2,000,000 1,836,560
---------------
Total 12,257,926
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $158,131,085) $149,173,416
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL BONDS HELD IN TRUST
(2.7%)(d)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c,h) RATE AMOUNT VALUE(a)
WATER & SEWER
Austin Trust Various States
Certificate of Participation
Series 2008 (FSA)
05-01-33 5.00% $4,500,000 $4,394,790
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $4,584,065) $4,394,790
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (0.8%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE(b,c,g) YIELD MATURITY VALUE(a)
California State Department of Water Resources
Revenue Bonds
V.R.D.N. Series 2002B-3 (Bank of New York)
05-01-22 0.35% $100,000 $100,000
City of Santa Clara
Subordinated Revenue Bonds
V.R.D.N. Series 2008A (Bank of America)
07-01-34 0.45 1,000,000 1,000,000
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
26 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL NOTES (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE(b,c,g) YIELD MATURITY VALUE(a)
Irvine
Limited Obligation Special Assessment Bonds
District #93-14
Series 2000 (Bank of America)
09-02-25 0.45% $200,000(f) $200,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $1,300,000) $1,300,000
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (3.9%)
SHARES VALUE(a)
JPMorgan Tax Free Money Market Fund 6,208,976 $6,208,976
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $6,208,976) $6,208,976
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $170,224,126)(i) $161,077,182
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
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
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
</Table>
(c) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2009, the value
of securities subject to alternative minimum tax
represented 8.5% 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) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 27
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
RiverSource California Tax-Exempt Fund
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(e) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(f) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Feb. 28,
2009. The maturity date disclosed represents the final maturity. For
purposes of Rule 2a-7, maturity is the later of the next put or interest
rate reset date.
(g) 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, 2009.
(h) 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,
2009, the value of these securities amounted to $2,144,790 or 1.3% of net
assets.
(i) At Feb. 28, 2009, the cost of securities for federal income tax purposes
was approximately $167,974,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $2,925,000
Unrealized depreciation (12,072,000)
-----------------------------------------------------------
Net unrealized depreciation $(9,147,000)
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
28 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the fund, and unobservable inputs reflect the fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2009:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2009
----------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ----------------------------------------------------------------------------------
Investments in
securities $6,208,976 $154,868,206 $-- $161,077,182
</Table>
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 29
PORTFOLIO OF INVESTMENTS ------------------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
FEB. 28, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (96.2%)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
AIRPORT (3.2%)
Minneapolis-St. Paul Metropolitan Airports Commission
Prerefunded Revenue Bonds
Sub Series 2001C (FGIC)
01-01-18 5.50% $2,000,000 $2,152,940
01-01-32 5.25 7,000,000 7,503,510
---------------
Total 9,656,450
- -------------------------------------------------------------------------------------
CITY (0.1%)
City of Minneapolis
Prerefunded Unlimited General Obligation Bonds
Various Purpose
Series 2001 Escrowed to Maturity
12-01-11 5.00 145,000 158,437
- -------------------------------------------------------------------------------------
COLLEGE (9.6%)
Minnesota Higher Education Facilities Authority
Revenue Bonds
Bethel University
6th Series 2007R
05-01-37 5.50 3,000,000 2,230,890
Minnesota Higher Education Facilities Authority
Revenue Bonds
Carleton College
6th Series 2008T
01-01-28 5.00 3,000,000 3,021,120
Minnesota Higher Education Facilities Authority
Revenue Bonds
Macalester College
6th Series 2004B
03-01-17 5.00 2,395,000 2,602,263
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Benedict College
Series 2008V
03-01-18 5.00 500,000 498,560
03-01-23 4.75 800,000 692,424
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. John's University
6th Series 2005G
10-01-22 5.00 3,000,000 3,022,140
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. John's University
6th Series 2008U
10-01-28 4.75 1,000,000 891,830
10-01-33 4.75 825,000 703,577
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
6th Series 2006I
04-01-13 5.00 1,115,000 1,194,734
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St. Thomas
6th Series 2008W
10-01-30 6.00 3,625,000 3,585,850
University of Minnesota
Revenue Bonds
Series 1996A Escrowed to Maturity
07-01-21 5.50 8,500,000 9,502,914
University of Minnesota
Revenue Bonds
Series 2009A
04-01-34 5.13 1,000,000 1,016,980
---------------
Total 28,963,282
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
30 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
COUNTY (6.8%)
County of Ramsey
Unlimited General Obligation Bonds
Capital Improvement Plan
Series 2007A
02-01-21 5.00% $1,035,000 $1,138,241
02-01-22 5.00 1,080,000 1,174,792
02-01-23 5.00 1,125,000 1,207,024
02-01-24 5.00 1,170,000 1,244,365
County of Ramsey
Unlimited General Obligation Refunding Bonds
Capital Improvement Plan
Series 2002B
02-01-14 5.25 3,840,000 4,074,355
Hennepin County
Unlimited General Obligation Bonds
Series 2003
12-01-23 4.75 2,000,000 2,037,780
Hennepin County
Unlimited General Obligation Bonds
Series 2008D
12-01-28 5.00 9,355,000 9,639,392
---------------
Total 20,515,949
- -------------------------------------------------------------------------------------
ELECTRIC (17.9%)
City of Chaska
Refunding Revenue Bonds
Generating Facilities
Series 2005A
10-01-20 5.25 1,165,000 1,207,068
10-01-30 5.00 3,800,000 3,635,384
Minnesota State Municipal Power Agency
Revenue Bonds
Series 2004A
10-01-29 5.13 3,500,000 3,385,270
Minnesota State Municipal Power Agency
Revenue Bonds
Series 2007
10-01-32 4.75 3,000,000 2,779,140
Northern Municipal Power Agency
Refunding Revenue Bonds
Series 1998B (AMBAC)
01-01-20 4.75 5,000,000 5,029,200
Northern Municipal Power Agency
Revenue Bonds
Series 2007A (AMBAC)
01-01-26 5.00 2,500,000 2,497,025
Northern Municipal Power Agency
Revenue Bonds
Series 2008A
01-01-21 5.00 2,500,000 2,539,125
Puerto Rico Electric Power Authority
Prerefunded Revenue Bonds
Series 2003NN (MBIA)
07-01-32 5.00 2,820,000(b) 3,199,205
Southern Minnesota Municipal Power Agency
Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1994A (MBIA Illinois Reinsurance)
01-01-19 6.67 17,000,000(e) 11,622,901
01-01-26 5.23 10,000,000(e) 4,288,500
Southern Minnesota Municipal Power Agency
Revenue Bonds
Series 2002A (AMBAC)
01-01-17 5.25 6,000,000 6,576,540
Western Minnesota Municipal Power Agency
Revenue Bonds
Series 2003A (MBIA Illinois Reinsurance)
01-01-26 5.00 7,250,000 7,233,180
---------------
Total 53,992,538
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (18.8%)
City of Breckenridge
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00 2,000,000 1,852,080
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 31
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
City of Maple Grove
Revenue Bonds
Maple Grove Hospital Corporation
Series 2007
05-01-20 5.00% $1,000,000 $964,240
05-01-21 5.00 1,500,000 1,416,135
05-01-37 5.25 4,715,000 3,848,383
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2002B (MBIA Illinois Reinsurance)
05-15-14 5.50 2,050,000 2,154,038
05-15-15 5.50 2,160,000 2,257,438
05-15-16 5.50 2,200,000 2,290,486
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2008A
11-15-32 6.75 4,000,000 4,170,120
City of Winona
Refunding Revenue Bonds
Winona Health Obligation Group
Series 2007
07-01-31 5.15 2,000,000 1,492,680
County of Chippewa
Revenue Bonds
Montevideo Hospital Project
Series 2007
03-01-20 5.38 1,940,000 1,633,364
03-01-21 5.38 1,045,000 863,222
County of Meeker
Revenue Bonds
Memorial Hospital Project
Series 2007
11-01-27 5.75 1,000,000 774,790
11-01-37 5.75 2,250,000 1,623,668
Minnesota Agricultural & Economic Development Board
Prerefunded Revenue Bonds
Benedictine Health System
Series 1999A (MBIA)
02-15-16 4.75 245,000 256,170
Minnesota Agricultural & Economic Development Board
Prerefunded Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38 4,845,000 5,294,809
11-15-29 6.38 2,910,000 3,180,164
Minnesota Agricultural & Economic Development Board
Unrefunded Revenue Bonds
Benedictine Health System
Series 1999A (MBIA Illinois Reinsurance)
02-15-16 4.75 755,000 726,423
Northfield
Revenue Bonds
Series 2006
11-01-31 5.38 1,500,000 1,071,330
Shakopee
Revenue Bonds
St. Francis Regional Medical Center
Series 2004
09-01-25 5.10 3,300,000 2,768,667
St. Louis Park
Revenue Bonds
Park Nicollet Health Services
Series 2008C
07-01-26 5.63 6,145,000 5,904,545
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Allina Health Systems
Series 2007A (MBIA Illinois Reinsurance)
11-15-22 5.00 3,000,000 2,650,080
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
32 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
HEALTH CARE -- HOSPITAL (CONT.)
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Healtheast Project
Series 2005
11-15-25 6.00% $1,250,000 $995,238
St. Paul Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2006
05-15-23 5.25 1,000,000 855,970
05-15-26 5.25 1,000,000 811,730
05-15-36 5.25 6,500,000 4,788,419
Todd Morrison Cass & Wadena Counties
United Hospital District
Unlimited General Obligation Bonds
Health Care Facilities-Lakewood
Series 2004
12-01-34 5.00 2,500,000 2,221,800
---------------
Total 56,865,989
- -------------------------------------------------------------------------------------
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 1,526,875
- -------------------------------------------------------------------------------------
HEALTH CARE -- NURSING HOME (3.4%)
Annandale Economic Development Authority
Revenue Bonds
Annandale Care Center Project
Series 2007A
11-01-37 5.90 3,385,000 2,212,199
City of North Oaks
Revenue Bonds
Presbyterian Homes
Series 2007
10-01-27 6.00 1,250,000 973,963
10-01-33 6.00 3,000,000 2,214,270
City of Stillwater
Revenue Bonds
Health System Obligation Group
Series 2005
06-01-19 5.00 2,505,000 2,438,166
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Lyngblomsten Care Center Housing Project
Series 1993
11-01-17 7.13 1,250,000 1,112,738
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Rental -- Lyngblomsten Housing Project
Series 1993
11-01-24 7.00 1,545,000 1,284,374
---------------
Total 10,235,710
- -------------------------------------------------------------------------------------
HEALTH CARE -- OTHER (0.3%)
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2003
12-01-12 5.25 1,000,000 1,003,360
- -------------------------------------------------------------------------------------
HOUSING -- MULTI-FAMILY (2.0%)
Austin Housing & Redevelopment Authority
Revenue Bonds
Courtyard Residence Project
Series 2000A
01-01-32 7.25 2,000,000 1,734,260
City of Rochester
Refunding Revenue Bonds
Madonna Towers Incorporated Project
Series 2007A
11-01-28 5.88 2,050,000 1,415,341
Duluth Housing & Redevelopment Authority
Revenue Bonds
Benedictine Health Center Project
Series 2007
11-01-33 5.88 750,000 501,675
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 33
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
HOUSING -- MULTI-FAMILY (CONT.)
Steele County
Revenue Bonds
Elderly Housing Project
Series 2000
06-01-30 6.88% $2,205,000 $2,330,420
---------------
Total 5,981,696
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (5.5%)
Minneapolis/St. Paul Housing Finance Board
Revenue Bonds
Mortgage-backed City Living
Series 2006A-5 (GNMA/FNMA/FHLMC)
04-01-27 5.45 2,021,812 2,023,086
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 79,128
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006B A.M.T.
07-01-26 4.75 1,890,000 1,697,560
07-01-31 4.85 2,555,000 2,192,982
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006I A.M.T.
07-01-26 5.05 3,515,000 3,270,602
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006M A.M.T.
01-01-37 5.75 2,910,000 2,907,090
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2007D A.M.T.
01-01-38 5.50 3,830,000 3,818,472
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1996J A.M.T.
07-01-21 5.60 35,000 35,155
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1997K A.M.T.
01-01-26 5.75 620,000 620,105
---------------
Total 16,644,180
- -------------------------------------------------------------------------------------
LEASE (3.5%)
St. Paul Port Authority
Revenue Bonds
Office Building at Cedar Street
Series 2003
12-01-23 5.00 5,000,000 5,129,850
12-01-27 5.13 5,350,000 5,425,114
---------------
Total 10,554,964
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (2.9%)
City of Minneapolis
Limited Tax Revenue Bonds
Common Bond Fund
Series 2007-2A A.M.T.
06-01-22 5.13 1,035,000 874,534
06-01-28 5.00 1,500,000 1,158,825
Minneapolis Community Development Agency
Limited Tax Revenue Bonds
Common Bond Fund
Series 1996-1
06-01-11 6.00 725,000 731,105
Minneapolis Community Development Agency
Prerefunded Limited Tax Revenue Bonds
Common Bond Fund
Series 2001-2A A.M.T.
06-01-19 5.88 1,000,000 1,096,080
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
34 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
MISCELLANEOUS REVENUE (CONT.)
St. Cloud Housing & Redevelopment Authority
Revenue Bonds
State University Foundation Project
Series 2002
05-01-18 5.13% $3,000,000 $3,157,169
St. Paul Port Authority
Tax Allocation Bonds
River Bend Project Lot 1
Series 2007-5
02-01-32 6.38 2,685,000 1,743,129
---------------
Total 8,760,842
- -------------------------------------------------------------------------------------
SALES OR USE TAX (3.0%)
Hennepin County
Revenue Bonds
2nd Lien Ballpark Project
Series 2008B
12-15-27 4.75 4,205,000 4,228,758
12-15-29 5.00 1,825,000 1,852,138
Hennepin County
Revenue Bonds
Sales Tax
Series 2007
12-15-33 4.75 3,000,000 2,939,820
---------------
Total 9,020,716
- -------------------------------------------------------------------------------------
SCHOOL (13.4%)
Anoka-Hennepin Independent School District #11
Unlimited General Obligation Bonds
Series 2001A
(School District Credit Enhancement Program)
02-01-15 5.00 1,990,000 2,090,794
02-01-16 5.00 2,000,000 2,101,300
Bloomington Independent School District #271
Unlimited General Obligation Bonds
Series 2001A (FSA)
(School District Credit Enhancement Program)
02-01-24 5.13 4,000,000 4,259,960
City of Maple Grove
Revenue Bonds
North Memorial Health Care
Series 2005
09-01-35 5.00 2,500,000 2,010,200
Duluth Independent School District #709 Certificate of Participation
Series 2008B
(School District Credit Enhancement Program)
02-01-26 4.75 4,000,000 3,994,800
Edina Independent School District #273
Unlimited General Obligation Bonds
Series 2004
02-01-24 4.50 3,400,000 3,438,692
Elk River Independent School District #728
Unlimited General Obligation Bonds
Series 2002A (FSA)
(School District Credit Enhancement Program)
02-01-16 5.00 3,000,000 3,213,780
Lake Superior Independent School District #381
Prerefunded Unlimited General Obligation Bonds
Building
Series 2002A (FSA)
(School District Credit Enhancement Program)
04-01-13 5.00 65,000 73,146
Lake Superior Independent School District #381
Unrefunded Unlimited General Obligation Bonds
Building
Series 2002A (FSA)
(School District Credit Enhancement Program)
04-01-13 5.00 1,730,000 1,938,102
Marshall Independent School District #413
Unlimited General Obligation Bonds
Series 2003A (FSA)
(School District Credit Enhancement Program)
02-01-19 4.13 1,560,000 1,618,126
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 35
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d) RATE AMOUNT VALUE(a)
SCHOOL (CONT.)
Osseo Independent School District #279
Unlimited General Obligation Bonds
School Building
Series 2000A
(School District Credit Enhancement Program)
02-01-14 5.75% $1,100,000 $1,157,068
Osseo Independent School District #279
Unlimited General Obligation Bonds
Series 2002A (FSA)
(School District Credit Enhancement Program)
02-01-15 5.25 3,585,000 3,877,536
St. Paul Housing & Redevelopment Authority
Prerefunded Revenue Bonds
Community of Peace Academy Project
Series 2001A
12-01-30 7.88 2,390,000 2,706,699
St. Paul Housing & Redevelopment Authority
Refunding Revenue Bonds
St. Paul Academy & Summit School
Series 2007
10-01-24 5.00 5,000,000 4,888,599
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
Series 2002B (MBIA Illinois Reinsurance/FGIC)
(School District Credit Enhancement Program)
02-01-13 5.00 1,405,000 1,524,383
02-01-14 5.00 1,480,000 1,583,763
---------------
Total 40,476,948
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (0.1%)
Lakeville
Revenue Bonds
Series 2007
02-01-22 5.00 175,000 136,371
02-01-27 5.00 225,000 146,715
---------------
Total 283,086
- -------------------------------------------------------------------------------------
SPECIAL PURPOSE CERTIFICATES -- GENERAL OBLIGATIONS (0.1%)
Minneapolis Community Development Agency
Limited Tax Revenue Bonds
Common Bond Fund
Series 1997-7A
06-01-12 5.50 185,000 186,034
- -------------------------------------------------------------------------------------
STATE (3.6%)
Commonwealth of Puerto Rico
Prerefunded Unlimited General Obligation Public Improvement Bonds
Series 2006A
07-01-27 5.25 860,000(b) 1,020,932
State of Minnesota
Unlimited General Obligation Bonds
Series 2002
11-01-15 5.25 3,575,000 3,939,185
State of Minnesota
Unlimited General Obligation Bonds
Series 2008A
06-01-18 5.00 5,000,000 5,804,900
---------------
Total 10,765,017
- -------------------------------------------------------------------------------------
TOLL ROAD (0.6%)
Puerto Rico Highway & Transportation Authority
Revenue Bonds
Series 1996Y
07-01-13 6.25 1,650,000(b) 1,692,620
- -------------------------------------------------------------------------------------
WATER & SEWER (0.9%)
Minnesota Public Facilities Authority
Revenue Bonds
Series 2002B
03-01-14 5.25 2,500,000 2,854,800
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $295,853,395) $290,139,493
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
36 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS HELD IN TRUST (5.8%)(f)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(c,d,h) RATE AMOUNT VALUE(a)
HOUSING -- SINGLE FAMILY (0.9%)
Minnesota Housing Finance Agency
Revenue Bonds
Series 2002 A.M.T.
07-01-33 5.65% $2,730,000 $2,601,581
- -------------------------------------------------------------------------------------
SCHOOL (4.9%)
Elk River Independent School District #728
Unlimited General Obligation Bonds
Series 2002 (FSA)
(School District Credit Enhancement Program)
02-01-18 5.25 3,600,000 3,889,620
02-01-19 5.25 3,450,000 3,727,553
02-01-20 5.25 2,850,000 3,079,283
02-01-21 5.25 3,865,000 4,175,134
---------------
Total 14,871,590
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $16,757,943) $17,473,171
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (0.1%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE(c,d,g) YIELD MATURITY VALUE(a)
Center City
Revenue Bonds
Hazelden Foundation Project
V.R.D.N. Series 2005 (Bank of New York)
11-01-35 0.65% $400,000 $400,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $400,000) $400,000
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (0.5%)
SHARES VALUE(a)
JPMorgan Tax Free Money Market Fund 1,416,484 $1,416,484
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,416,484) $1,416,484
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $314,427,822)(i) $309,429,148
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 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. The securities represented
6.7% of net assets at Feb. 28, 2009.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 37
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(c) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
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
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
</Table>
(d) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2009, the value
of securities subject to alternative minimum tax
represented 6.2% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
</Table>
(e) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(f) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(g) 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, 2009.
(h) 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,
2009, the value of these securities amounted to $17,473,171 or 5.8% of net
assets.
- --------------------------------------------------------------------------------
38 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(i) At Feb. 28, 2009, the cost of securities for federal income tax purposes
was approximately $303,478,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $10,278,000
Unrealized depreciation (15,277,000)
-----------------------------------------------------------
Net unrealized depreciation $(4,999,000)
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 39
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the fund, and unobservable inputs reflect the fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2009:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2009
----------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ----------------------------------------------------------------------------------
Investments in
securities $1,416,484 $308,012,664 $-- $309,429,148
</Table>
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
40 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS ------------------------------------------------------
RiverSource New York Tax-Exempt Fund
FEB. 28, 2009 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL BONDS (94.7%)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
ADVANCED REFUNDED (2.9%)
Metropolitan Transportation Authority
Prerefunded Revenue Bonds
Series 1998A (FGIC)
04-01-28 4.75% $1,000,000 $1,153,060
New York State Dormitory Authority
Prerefunded Revenue Bonds
Series 1990B
05-15-11 7.50 415,000 435,484
---------------
Total 1,588,544
- -------------------------------------------------------------------------------------
CITY (3.2%)
City of New York
Prerefunded Unlimited General Obligation Bonds
Series 2002E
08-01-16 5.75 100,000 113,967
City of New York
Unlimited General Obligation Bonds
Series 2002C (XLCA)
03-15-12 5.00 500,000 533,645
City of New York
Unrefunded Unlimited General Obligation Bonds
Series 2002E
08-01-16 5.75 1,000,000 1,097,680
---------------
Total 1,745,292
- -------------------------------------------------------------------------------------
COLLEGE (14.4%)
Dutchess County Industrial Development Agency
Refunding Revenue Bonds
Bard College Civic Facilities
Series 2007-A1
08-01-22 5.00 500,000 491,350
New York State Dormitory Authority
Revenue Bonds
Brooklyn Law School
Series 2003B (XLCA)
07-01-30 5.13 1,000,000 899,820
New York State Dormitory Authority
Revenue Bonds
Columbia University
Series 2007C
07-01-29 5.00 1,250,000 1,288,624
New York State Dormitory Authority
Revenue Bonds
Cornell University
Series 2006A
07-01-26 5.00 1,000,000 1,031,230
07-01-31 5.00 1,000,000 1,007,270
New York State Dormitory Authority
Revenue Bonds
Education
Series 2008B
03-15-38 5.25 1,000,000 1,012,440
New York State Dormitory Authority
Revenue Bonds
Rochester Institute of Technology
Series 2008A
07-01-33 6.00 1,000,000 1,043,490
New York State Dormitory Authority
Revenue Bonds
Teacher's College
Series 2009
03-01-39 5.50 500,000 503,245
Seneca County Industrial Development Agency
Revenue Bonds
New York Chiropractic College
Series 2007
10-01-27 5.00 750,000 510,503
---------------
Total 7,787,972
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 41
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
COUNTY (2.6%)
County of Monroe
Unlimited General Obligation
Refunding & Public Improvement Bonds
Series 1996 (MBIA Illinois Reinsurance/IBC)
03-01-15 6.00% $1,250,000 $1,392,213
- -------------------------------------------------------------------------------------
ELECTRIC (1.4%)
Long Island Power Authority
Revenue Bonds
Series 2009A
04-01-23 5.00 750,000 749,963
- -------------------------------------------------------------------------------------
HEALTH CARE -- HOSPITAL (7.6%)
Albany Industrial Development Agency
Revenue Bonds
St. Peters Hospital Project
Series 2008A
11-15-27 5.25 1,000,000 765,580
New York State Dormitory Authority
Revenue Bonds
Mental Health Services Facilities Improvement
Series 2005E (MBIA Illinois Reinsurance/FGIC)
02-15-22 5.00 750,000 777,360
New York State Dormitory Authority
Revenue Bonds
New York University Hospital Center
Series 2007B
07-01-24 5.25 750,000 528,060
New York State Dormitory Authority
Revenue Bonds
Orange Regional Medical Center
Series 2008
12-01-29 6.13 1,250,000 929,613
New York State Dormitory Authority
Revenue Bonds
Sloan-Kettering Memorial Center
Series 2006-1
07-01-35 5.00 500,000 477,430
Ulster County Industrial Development Agency
Revenue Bonds
Series 2007A
09-15-42 6.00 1,000,000 599,790
---------------
Total 4,077,833
- -------------------------------------------------------------------------------------
HEALTH CARE -- LIFE CARE CENTER (0.5%)
Suffolk County Industrial Development Agency
Prerefunded Revenue Bonds
1st Mortgage Jeffersons Ferry
Series 1999A
11-01-28 7.25 250,000 265,435
- -------------------------------------------------------------------------------------
HOUSING -- OTHER (1.8%)
New York State Dormitory Authority
Revenue Bonds
Consolidated City University System
5th General Resolution
Series 2008B
07-01-27 5.00 1,000,000 991,640
- -------------------------------------------------------------------------------------
HOUSING -- SINGLE FAMILY (2.0%)
New York Mortgage Agency
Revenue Bonds
Series 2007-140 A.M.T.
10-01-21 4.60 500,000 472,950
New York Mortgage Agency
Revenue Bonds
Series 2007-143 A.M.T.
10-01-27 4.85 675,000 606,920
---------------
Total 1,079,870
- -------------------------------------------------------------------------------------
LEASE (9.7%)
New York City Industrial Development Agency
Revenue Bonds
Terminal One Group Association Project
Series 2005 A.M.T.
01-01-24 5.50 500,000 430,560
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
42 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
LEASE (CONT.)
New York State Dormitory Authority
Revenue Bonds
Consolidated City University System
Series 1993A
07-01-13 5.75% $3,000,000 $3,208,050
New York State Dormitory Authority
Revenue Bonds
New York University Hospital Center
Series 2006A
07-01-20 5.00 500,000 368,225
New York State Dormitory Authority
Unrefunded Revenue Bonds
Series 1990B
05-15-11 7.50 645,000 714,679
Tobacco Settlement Financing Authority
Asset-backed Revenue Bonds
Series 2003A-1
06-01-16 5.50 500,000 507,120
---------------
Total 5,228,634
- -------------------------------------------------------------------------------------
MISCELLANEOUS (4.3%)
New York City Trust for Cultural Resources
Revenue Bonds
Lincoln Center
Series 2008C
12-01-18 5.25 750,000 770,640
New York City Trust for Cultural Resources
Revenue Bonds
Museum of American Folk Art
Series 2000 (ACA)
07-01-22 6.00 825,000 661,023
New York State Dormitory Authority
Revenue Bonds
Mt. Sinai School of Medicine
New York University
Series 2007 (MBIA Illinois Reinsurance)
07-01-37 4.50 1,000,000 867,470
---------------
Total 2,299,133
- -------------------------------------------------------------------------------------
MISCELLANEOUS REVENUE (14.2%)
Metropolitan Transportation Authority
Revenue Bonds
Series 2006A
11-15-22 5.00 750,000 749,798
New York City Industrial Development Agency
Revenue Bonds
Queens Baseball Stadium Pilot
Series 2006 (AMBAC)
01-01-23 5.00 500,000 452,515
01-01-24 5.00 500,000 451,735
New York City Industrial Development Agency
Revenue Bonds
Yankee Stadium Pilot
Series 2009 (Assured Guaranty)
03-01-49 7.00 250,000 274,233
New York City Trust for Cultural Resources
Refunding Revenue Bonds
Museum of Modern Art
Series 2008-1A
04-01-28 5.00 1,000,000 1,008,299
New York State Thruway Authority
Revenue Bonds
2nd General Resolution
Series 2003B (FSA)
04-01-21 4.75 835,000 851,767
New York State Thruway Authority
Revenue Bonds
Transportation
Series 2008A
03-15-28 5.00 1,000,000 1,012,089
New York State Urban Development Corporation
Refunding Revenue Bonds
Service Contract
Series 2008B
01-01-29 4.75 755,000 696,503
Oneida County Industrial Development Agency
Revenue Bonds
Hamilton College Civic Facility
Series 2008
09-15-22 5.00 510,000 536,688
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 43
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
MISCELLANEOUS REVENUE (CONT.)
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 138th
Series 2004 (MBIA Reinsurance/FGIC) A.M.T.
12-01-12 5.00% $1,000,000 $1,064,279
Seneca Nation Indians Capital Improvements Authority
Revenue Bonds
Series 2007A
12-01-16 5.25 500,000(d) 391,120
12-01-23 5.00 250,000(d) 159,698
---------------
Total 7,648,724
- -------------------------------------------------------------------------------------
PORT DISTRICT (5.2%)
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 143rd
Series 2006 (FSA) A.M.T.
10-01-21 5.00 1,000,000 987,540
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 146th
Series 2006 (FSA) A.M.T.
12-01-23 4.50 1,500,000 1,349,730
Port Authority of New York & New Jersey
Revenue Bonds
Consolidated 147th
Series 2007 (MBIA Reinsurance/FGIC) A.M.T.
10-15-26 5.00 500,000 466,625
---------------
Total 2,803,895
- -------------------------------------------------------------------------------------
SPECIAL DISTRICT -- SPECIAL TAX (5.1%)
New York City Transitional Finance Authority
Revenue Bonds
Future Tax Secured
Series 2003D
02-01-23 5.00 500,000 511,005
02-01-31 5.00 1,000,000 988,149
New York State Dormitory Authority
Revenue Bonds
Education
Series 2005F
03-15-23 5.00 250,000 258,343
New York State Dormitory Authority
Revenue Bonds
Education
Series 2006C
12-15-31 5.00 750,000 741,893
New York State Dormitory Authority
Revenue Bonds
Education
Series 2007A
03-15-37 5.00 250,000 243,735
---------------
Total 2,743,125
- -------------------------------------------------------------------------------------
TOLL ROAD (7.9%)
Metropolitan Transportation Authority
Revenue Bonds
Series 2005F
11-15-12 5.00 560,000 599,984
11-15-35 5.00 500,000 476,595
New York State Thruway Authority
Revenue Bonds
Series 2007H (MBIA Reinsurance/FGIC)
01-01-23 5.00 500,000 509,270
New York State Thruway Authority
Revenue Bonds
Series 2009A-1
04-01-29 5.00 1,000,000(g) 993,690
Triborough Bridge & Tunnel Authority
Refunding Revenue Bonds
Series 2002B
11-15-29 5.13 1,000,000 1,005,800
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
44 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS (CONTINUED)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c) RATE AMOUNT VALUE(a)
TOLL ROAD (CONT.)
Triborough Bridge & Tunnel Authority
Revenue Bonds
General Purpose
Series 2008
11-15-15 5.00% $620,000 $702,150
---------------
Total 4,287,489
- -------------------------------------------------------------------------------------
WATER & SEWER (11.9%)
Erie County Water Authority
Revenue Bonds
4th Resolution
Series 2007 (MBIA Illinois Reinsurance)
12-01-34 4.75 500,000 470,250
New York City Municipal Water Finance Authority
Revenue Bonds
Fiscal 2009
Series 2008A
06-15-40 5.75 1,000,000 1,065,490
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2002A
06-15-29 5.00 1,000,000 1,000,830
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2008CC
06-15-34 5.00 1,500,000 1,464,120
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2008DD
06-15-38 4.50 500,000 433,460
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 1,000,830
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 1,007,480
---------------
Total 6,442,460
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $52,933,766) $51,132,223
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL BONDS HELD IN TRUST (2.2%)(f)
NAME OF
ISSUER AND
TITLE OF COUPON PRINCIPAL
ISSUE(b,c,d) RATE AMOUNT VALUE(a)
HOUSING -- SINGLE FAMILY
New York Mortgage Agency
Revenue Bonds
Series 2002 A.M.T.
04-01-32 5.40% $1,280,000 $1,180,499
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $1,279,892) $1,180,499
- -------------------------------------------------------------------------------------
<Caption>
MUNICIPAL NOTES (2.1%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUE(b,c,e) 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 0.45% $1,110,000 $1,110,000
- -------------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $1,110,000) $1,110,000
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 45
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource New York Tax-Exempt Fund
<Table>
<Caption>
MONEY MARKET FUND (3.1%)
SHARES VALUE(a)
JPMorgan Tax Free Money Market Fund 1,676,972 $1,676,972
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,676,972) $1,676,972
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $57,000,630)(h) $55,099,694
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
<Table>
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BHAC -- Berkshire Hathaway Assurance Corporation
BIG -- Bond Investors Guarantee
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
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
</Table>
(c) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2009, the value
of securities subject to alternative minimum tax
represented 12.2% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
</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,
2009, the value of these securities amounted to $1,731,317 or 3.2% of net
assets.
- --------------------------------------------------------------------------------
46 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(e) 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, 2009.
(f) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(g) At Feb. 28, 2009, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$997,440. See Note 1 to the financial statements.
(h) At Feb. 28, 2009, the cost of securities for federal income tax purposes
was approximately $56,231,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $1,300,000
Unrealized depreciation (3,201,000)
-----------------------------------------------------------
Net unrealized depreciation $(1,901,000)
-----------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 47
PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
RiverSource New York Tax-Exempt Fund
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, it is likely
that there may be a range of practices utilized and it may be some period of
time before industry practices become more uniform. For this reason care should
be exercised in interpreting this information and/or using it for comparison
with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the fund, and unobservable inputs reflect the fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level.
The following table is a summary of the inputs used to value the Fund's
investments as of Feb. 28, 2009:
<Table>
<Caption>
FAIR VALUE AT FEB. 28, 2009
--------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ---------------------------------------------------------------------------------
Investments in
securities $1,676,972 $53,422,722 $-- $55,099,694
</Table>
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
48 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
STATEMENTS OF ASSETS AND LIABILITIES -------------------------------------------
<Table>
<Caption>
RIVERSOURCE RIVERSOURCE RIVERSOURCE
CALIFORNIA MINNESOTA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2009 (UNAUDITED) FUND FUND FUND
ASSETS
Investments in securities, at value (identified cost
$170,224,126, $314,427,822 and $57,000,630) $161,077,182 $309,429,148 $55,099,694
Capital shares receivable 44,870 160,000 17,112
Accrued interest receivable 1,836,984 3,667,018 682,782
Receivable for investment securities sold -- 8,665 --
- -----------------------------------------------------------------------------------------------------------
Total assets 162,959,036 313,264,831 55,799,588
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable to shareholders 78,372 144,879 22,806
Capital shares payable 25,138 325,035 3,319
Payable for investment securities purchased -- -- 997,440
Short-term floating rate notes outstanding 2,250,000 10,950,000 770,000
Accrued investment management services fees 1,807 3,359 607
Accrued distribution fees 32,138 60,412 10,672
Accrued transfer agency fees 166 440 92
Accrued administrative services fees 308 580 104
Other accrued expenses 44,469 54,526 35,059
- -----------------------------------------------------------------------------------------------------------
Total liabilities 2,432,398 11,539,231 1,840,099
- -----------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $160,526,638 $301,725,600 $53,959,489
- -----------------------------------------------------------------------------------------------------------
REPRESENTED BY
Shares of beneficial interest -- $.01 par value $ 345,022 $ 608,392 $ 116,250
Additional paid-in capital 171,681,668 311,321,171 56,655,176
Undistributed net investment income 41,410 74,709 17,138
Accumulated net realized gain (loss) (2,394,518) (5,279,998) (928,139)
Unrealized appreciation (depreciation) on investments (9,146,944) (4,998,674) (1,900,936)
- -----------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
shares $160,526,638 $301,725,600 $53,959,489
- -----------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 49
STATEMENTS OF ASSETS AND LIABILITIES (continued) -------------------------------
<Table>
<Caption>
RIVERSOURCE RIVERSOURCE RIVERSOURCE
CALIFORNIA MINNESOTA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2009 (UNAUDITED) FUND FUND FUND
Net assets applicable to
outstanding shares: Class A $154,185,637 $279,874,417 $49,912,352
Class B $ 3,981,997 $ 13,120,232 $ 3,322,260
Class C $ 2,359,004 $ 8,730,951 $ 724,877
Outstanding shares of
beneficial interest: Class A shares 33,139,463 56,434,159 10,753,041
Class B shares 856,393 2,644,729 715,771
Class C shares 506,373 1,760,263 156,184
Net asset value per
share: Class A(1) $ 4.65 $ 4.96 $ 4.64
Class B $ 4.65 $ 4.96 $ 4.64
Class C $ 4.66 $ 4.96 $ 4.64
- ----------------------------------------------------------------------------------
</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 $4.88, $5.21 and $4.87, 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 -- 2009 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, 2009 (UNAUDITED) FUND FUND FUND
INVESTMENT INCOME
Income:
Interest $ 4,341,573 $ 7,713,259 $ 1,346,261
- -------------------------------------------------------------------------------------------------------------
Expenses:
Investment management services fees 330,714 593,104 106,279
Distribution fees
Class A 193,446 338,651 59,904
Class B 20,560 64,854 16,202
Class C 12,274 40,275 3,399
Transfer agency fees
Class A 29,516 73,452 15,311
Class B 869 3,840 1,119
Class C 499 2,285 232
Administrative services fees 56,463 102,181 18,145
Interest and fee expense 37,294 158,337 9,847
Compensation of board members 2,750 5,015 890
Custodian fees 10,650 12,875 5,512
Printing and postage 3,685 19,675 11,800
Registration fees 21,300 24,144 22,800
Professional fees 16,165 17,496 15,079
Other 3,765 5,192 1,749
- -------------------------------------------------------------------------------------------------------------
Total expenses 739,950 1,461,376 288,268
Expenses waived/reimbursed by the Investment Manager and its
affiliates (39,561) (68,719) (58,313)
Earnings and bank fee credits on cash balances (2,507) (3,043) --
- -------------------------------------------------------------------------------------------------------------
Total net expenses 697,882 1,389,614 229,955
- -------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 3,643,691 6,323,645 1,116,306
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on security transactions (182,100) (1,274,703) (579,843)
Net change in unrealized appreciation (depreciation) on
investments (9,269,954) (8,366,428) (1,984,638)
- -------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (9,452,054) (9,641,131) (2,564,481)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(5,808,363) $(3,317,486) $(1,448,175)
- -------------------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 51
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
RIVERSOURCE
CALIFORNIA TAX-EXEMPT FUND
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2009 AUG. 31, 2008
(Unaudited)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 3,643,691 $ 6,941,429
Net realized gain (loss) on investments (182,100) (1,876,280)
Net change in unrealized appreciation (depreciation) on
investments (9,269,954) (1,439,312)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (5,808,363) 3,625,837
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (3,521,537) (6,676,981)
Class B (78,001) (186,183)
Class C (46,569) (67,785)
Net realized gain
Class A -- (1,181,240)
Class B -- (42,325)
Class C -- (10,896)
- --------------------------------------------------------------------------------------------------
Total distributions (3,646,107) (8,165,410)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 11,685,465 65,548,797
Class B shares 340,431 841,055
Class C shares 204,317 1,663,705
Reinvestment of distributions at net asset value
Class A shares 2,381,962 5,715,149
Class B shares 65,448 208,722
Class C shares 38,984 69,070
Payments for redemptions
Class A shares (22,885,686) (59,067,436)
Class B shares (876,570) (2,298,575)
Class C shares (567,312) (741,437)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (9,612,961) 11,939,050
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (19,067,431) 7,399,477
Net assets at beginning of period 179,594,069 172,194,592
- --------------------------------------------------------------------------------------------------
Net assets at end of period $160,526,638 $179,594,069
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 41,410 $ 43,826
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
52 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
RIVERSOURCE
MINNESOTA TAX-EXEMPT FUND
SIX MONTHS ENDED YEAR ENDED
FEB. 28, 2009 AUG. 31, 2008
(Unaudited)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 6,323,645 $ 12,238,164
Net realized gain (loss) on investments (1,274,703) (1,301,693)
Net change in unrealized appreciation (depreciation) on
investments (8,366,428) (383,745)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (3,317,486) 10,552,726
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (6,110,014) (11,396,501)
Class B (243,883) (578,310)
Class C (151,409) (248,552)
- --------------------------------------------------------------------------------------------------
Total distributions (6,505,306) (12,223,363)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 24,482,596 47,044,047
Class B shares 677,766 1,495,288
Class C shares 1,130,974 2,599,145
Reinvestment of distributions at net asset value
Class A shares 5,003,352 9,552,532
Class B shares 214,809 516,735
Class C shares 132,980 222,405
Payments for redemptions
Class A shares (29,794,994) (53,551,129)
Class B shares (1,291,306) (7,639,629)
Class C shares (738,461) (1,341,812)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (182,284) (1,102,418)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (10,005,076) (2,773,055)
Net assets at beginning of period 311,730,676 314,503,731
- --------------------------------------------------------------------------------------------------
Net assets at end of period $301,725,600 $311,730,676
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 74,709 $ 256,370
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 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, 2009 AUG. 31, 2008
(Unaudited)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 1,116,306 $ 2,349,562
Net realized gain (loss) on investments (579,843) (245,291)
Net change in unrealized appreciation (depreciation) on
investments (1,984,638) (522,090)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (1,448,175) 1,582,181
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,044,356) (2,189,003)
Class B (58,437) (134,397)
Class C (12,252) (23,906)
Net realized gain
Class A -- (98,846)
Class B -- (7,550)
Class C -- (1,363)
- --------------------------------------------------------------------------------------------------
Total distributions (1,115,045) (2,455,065)
- --------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Proceeds from sales
Class A shares 4,336,955 4,185,226
Class B shares 106,912 277,150
Class C shares 75,188 115,478
Reinvestment of distributions at net asset value
Class A shares 854,804 1,915,808
Class B shares 49,684 125,138
Class C shares 11,520 24,019
Payments for redemptions
Class A shares (5,467,726) (11,068,956)
Class B shares (187,975) (1,394,638)
Class C shares (49,734) (204,109)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (270,372) (6,024,884)
- --------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (2,833,592) (6,897,768)
Net assets at beginning of period 56,793,081 63,690,849
- --------------------------------------------------------------------------------------------------
Net assets at end of period $53,959,489 $ 56,793,081
- --------------------------------------------------------------------------------------------------
Undistributed net investment income $ 17,138 $ 15,877
- --------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
54 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
RiverSource California Tax-Exempt Fund
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.90 $5.03 $5.16 $5.06 $5.27 $5.11
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10(c) .20(c) .20(c) .03 .19 .20
Net gains (losses) (both realized and
unrealized) (.25) (.09) (.13) .10 (.15) .23
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.15) .11 .07 .13 .04 .43
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.20) (.20) (.03) (.19) (.20)
Distributions from realized gains -- (.04) -- -- (.06) (.07)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.24) (.20) (.03) (.25) (.27)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.65 $4.90 $5.03 $5.16 $5.06 $5.27
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $154 $172 $164 $170 $171 $190
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) .89%(f) .87% .88% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) .84%(f) .80% .80% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) .84%(f) .86% .87% .87%(f) .88% .86%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) .79%(f) .79% .79% .79%(f) .81% .86%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.54%(f) 4.01% 3.89% 3.81%(f) 3.69% 3.71%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 49% 62% 7% 20% 28%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (2.92%)(j) 2.13% 1.35% 2.63%(j) .81% 8.53%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 55
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource California Tax-Exempt Fund
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.90 $5.03 $5.16 $5.06 $5.27 $5.11
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09(c) .16(c) .16(c) .03 .15 .16
Net gains (losses) (both realized and
unrealized) (.25) (.09) (.13) .10 (.15) .23
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.16) .07 .03 .13 -- .39
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.16) (.16) (.03) (.15) (.16)
Distributions from realized gains -- (.04) -- -- (.06) (.07)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.20) (.16) (.03) (.21) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.65 $4.90 $5.03 $5.16 $5.06 $5.27
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $4 $5 $6 $9 $11 $16
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.64%(f) 1.62% 1.63% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.59%(f) 1.55% 1.55% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.59%(f) 1.61% 1.62% 1.62%(f) 1.63% 1.61%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.54% 1.55%(f) 1.57% 1.61%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.80%(f) 3.27% 3.12% 3.01%(f) 2.92% 2.95%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 49% 62% 7% 20% 28%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (3.28%)(j) 1.37% .59% 2.50%(j) .05% 7.72%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
56 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.91 $5.04 $5.17 $5.07 $5.28 $5.12
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09(c) .16(c) .16(c) .03 .15 .16
Net gains (losses) (both realized and
unrealized) (.25) (.09) (.13) .10 (.15) .23
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.16) .07 .03 .13 -- .39
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.16) (.16) (.03) (.15) (.16)
Distributions from realized gains -- (.04) -- -- (.06) (.07)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.20) (.16) (.03) (.21) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.66 $4.91 $5.04 $5.17 $5.07 $5.28
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $2 $3 $2 $2 $2 $3
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.64%(f) 1.62% 1.63% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.59%(f) 1.55% 1.55% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.59%(f) 1.61% 1.62% 1.63%(f) 1.64% 1.62%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.54% 1.55%(f) 1.58% 1.62%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.79%(f) 3.18% 3.13% 3.05%(f) 2.93% 2.94%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 49% 62% 7% 20% 28%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (3.27%)(j) 1.38% .60% 2.50%(j) .06% 7.71%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 57
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $5.11 $5.14 $5.27 $5.17 $5.35 $5.20
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(c) .21(c) .19(c) .03 .18 .18
Net gains (losses) (both realized and
unrealized) (.15) (.03) (.13) .10 (.17) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.04) .18 .06 .13 .01 .35
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.11) (.21) (.19) (.03) (.18) (.18)
Distributions from realized gains -- -- -- -- (.01) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.21) (.19) (.03) (.19) (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $5.11 $5.14 $5.27 $5.17 $5.35
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $280 $289 $288 $309 $303 $341
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) .95%(f) .99% 1.05% 1.06%(f) 1.01% .95%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) .90%(f) .95% .99% .98%(f) .96% .95%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) .84%(f) .83% .85% .87%(f) .86% .85%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) .79%(f) .79% .79% .79%(f) .81% .85%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.38%(f) 4.05% 3.70% 3.60%(f) 3.52% 3.37%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 23% 26% 3% 13% 15%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (.73%)(j) 3.50% 1.26% 2.56%(j) .29% 6.73%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
58 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $5.12 $5.15 $5.27 $5.17 $5.35 $5.20
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09(c) .17(c) .15(c) .03 .14 .14
Net gains (losses) (both realized and
unrealized) (.16) (.03) (.11) .10 (.17) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.07) .14 .04 .13 (.03) .31
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.16) (.03) (.14) (.14)
Distributions from realized gains -- -- -- -- (.01) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.16) (.03) (.15) (.16)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $5.12 $5.15 $5.27 $5.17 $5.35
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $13 $14 $20 $29 $34 $49
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.70%(f) 1.75% 1.80% 1.81%(f) 1.77% 1.70%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.65%(f) 1.70% 1.75% 1.74%(f) 1.72% 1.70%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.59%(f) 1.59% 1.60% 1.62%(f) 1.62% 1.60%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.55% 1.55%(f) 1.57% 1.60%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.63%(f) 3.29% 2.93% 2.81%(f) 2.75% 2.62%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 23% 26% 3% 13% 15%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (1.29%)(j) 2.72% .70% 2.42%(j) (.47%) 5.94%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 59
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource Minnesota Tax-Exempt Fund
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $5.12 $5.15 $5.27 $5.17 $5.35 $5.20
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09(c) .17(c) .15(c) .03 .14 .14
Net gains (losses) (both realized and
unrealized) (.16) (.03) (.11) .10 (.17) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.07) .14 .04 .13 (.03) .31
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.17) (.16) (.03) (.14) (.14)
Distributions from realized gains -- -- -- -- (.01) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.17) (.16) (.03) (.15) (.16)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.96 $5.12 $5.15 $5.27 $5.17 $5.35
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $9 $8 $7 $8 $8 $9
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.70%(f) 1.75% 1.80% 1.82%(f) 1.77% 1.71%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.65%(f) 1.70% 1.75% 1.74%(f) 1.72% 1.71%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.59%(f) 1.59% 1.60% 1.63%(f) 1.62% 1.61%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.55% 1.55%(f) 1.57% 1.61%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.63%(f) 3.29% 2.94% 2.84%(f) 2.76% 2.62%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 14% 23% 26% 3% 13% 15%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (1.29%)(j) 2.72% .70% 2.42%(j) (.47%) 5.94%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the six months ended Feb. 28,
2009 were less than 0.01% of average net assets. Earnings and bank fee
credits lowered the expense ratio by 0.01% of average net assets for the
year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
60 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
RiverSource New York Tax-Exempt Fund
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.85 $4.93 $5.05 $4.95 $5.18 $5.07
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10(c) .20(c) .19(c) .03 .19 .18
Net gains (losses) (both realized and
unrealized) (.21) (.07) (.11) .10 (.18) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.11) .13 .08 .13 .01 .35
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.20) (.19) (.03) (.19) (.18)
Distributions from realized gains -- (.01) (.01) -- (.05) (.06)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.21) (.20) (.03) (.24) (.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.64 $4.85 $4.93 $5.05 $4.95 $5.18
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $50 $53 $58 $63 $63 $73
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.05%(f) 1.12% 1.18% 1.20%(f) 1.13% 1.02%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) .83%(f) .93% 1.00% .98%(f) .98% .98%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.01%(f) .98% .97% 1.01%(f) .96% .92%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) .79%(f) .79% .79% .79%(f) .81% .88%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.36%(f) 4.03% 3.81% 3.77%(f) 3.75% 3.47%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 31% 28% 7% 17% 30%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (2.23%)(j) 2.59% 1.53% 2.67%(j) .20% 7.04%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits lowered the expense ratio by 0.01%
for the year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 61
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
RiverSource New York Tax-Exempt Fund
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.85 $4.93 $5.05 $4.95 $5.18 $5.07
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(c) .16(c) .15(c) .03 .15 .14
Net gains (losses) (both realized and
unrealized) (.21) (.07) (.11) .10 (.18) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.13) .09 .04 .13 (.03) .31
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.16) (.15) (.03) (.15) (.14)
Distributions from realized gains -- (.01) (.01) -- (.05) (.06)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.17) (.16) (.03) (.20) (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.64 $4.85 $4.93 $5.05 $4.95 $5.18
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $3 $4 $5 $7 $8 $11
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.81%(f) 1.87% 1.93% 1.95%(f) 1.88% 1.77%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.58%(f) 1.68% 1.76% 1.74%(f) 1.75% 1.74%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.77%(f) 1.73% 1.72% 1.76%(f) 1.71% 1.67%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.55% 1.55%(f) 1.58% 1.64%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.61%(f) 3.28% 3.05% 2.98%(f) 2.98% 2.70%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 31% 28% 7% 17% 30%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (2.59%)(j) 1.83% .76% 2.54%(j) (.55%) 6.23%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits lowered the expense ratio by 0.01%
for the year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
62 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX
MONTHS PERIOD
ENDED ENDED
FEB. 28, YEAR ENDED AUG. 31, AUG. 31, YEAR ENDED JUNE 30,
2009 2008 2007 2006(b) 2006 2005
(UNAUDI-
TED)
Net asset value, beginning of period $4.85 $4.92 $5.05 $4.95 $5.18 $5.07
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(c) .16(c) .15(c) .03 .15 .14
Net gains (losses) (both realized and
unrealized) (.21) (.06) (.12) .10 (.18) .17
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.13) .10 .03 .13 (.03) .31
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.16) (.15) (.03) (.15) (.14)
Distributions from realized gains -- (.01) (.01) -- (.05) (.06)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.17) (.16) (.03) (.20) (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.64 $4.85 $4.92 $5.05 $4.95 $5.18
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $1 $1 $1 $1 $1
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (including interest and
fee expense)(d),(e) 1.81%(f) 1.87% 1.93% 1.97%(f) 1.89% 1.78%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (including interest and
fee expense)(e),(g),(h) 1.58%(f) 1.68% 1.76% 1.74%(f) 1.75% 1.74%
- ---------------------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement (excluding interest and
fee expense)(d) 1.77%(f) 1.73% 1.72% 1.78%(f) 1.72% 1.68%
- ---------------------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement (excluding interest and
fee expense)(g),(h) 1.54%(f) 1.54% 1.55% 1.55%(f) 1.58% 1.64%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.61%(f) 3.28% 3.05% 3.01%(f) 2.99% 2.70%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 31% 28% 7% 17% 30%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(i) (2.59%)(j) 2.04% .56% 2.54%(j) (.55%) 6.23%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from July 1, 2006 to Aug. 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) 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.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(h) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits lowered the expense ratio by 0.01%
for the year ended Aug. 31, 2008.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of these
statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 63
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
(UNAUDITED AS TO FEB. 28, 2009)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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). 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 sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - 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 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.
Each Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
- --------------------------------------------------------------------------------
64 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
VALUATION OF SECURITIES
Effective Sept. 1, 2008, each Fund adopted Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statements of Operations for a fiscal period. There was no impact to each
Fund's net assets or results of operations upon adoption. The fair valuation
measurements disclosure can be found following the Notes to Portfolio of
Investments.
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
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 the 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. Swap transactions are valued
through an authorized pricing service, broker, or an internal model.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost which
approximates fair value.
SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS
Delivery and payment for securities that have been purchased by the Funds on a
forward-commitment basis, including when-issued securities and other forward-
commitments, can take place one month or more after the transaction date. During
this period, such securities are subject to market fluctuations, and they may
affect each Fund's net assets the same as owned securities. The Funds designate
cash or liquid securities at least equal to the amount of its forward-
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 65
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
commitments. At Feb. 28, 2009, RiverSource New York Tax-Exempt Fund has
outstanding when-issued securities of $997,440.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Funds may buy and sell put and call options
and write covered call options on portfolio securities as well as write cash-
secured put options. The Funds also may write over-the-counter options where
completing the obligation depends upon the credit standing of the other party.
Cash collateral may be collected by the Funds to secure certain over-the-counter
options (OTC options) trades. Cash collateral held by the Funds for such option
trades must be returned to the counterparty upon closure, exercise or expiration
of the contract. The risk in writing a call option is that the Funds give up the
opportunity for profit if the market price of the security increases. The risk
in writing a put option is that the Funds may incur a loss if the market price
of the security decreases and the option is exercised. The risk in buying an
option is that the Funds pay a premium whether or not the option is exercised.
The Funds also have the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. Option
contracts, including OTC option contracts, with no readily available market
value are valued using quotations obtained from independent brokers as of the
close of the New York Stock Exchange. The Funds will realize a gain or loss when
the option transaction expires or closes. When options on debt securities or
futures are exercised, the Funds will realize a gain or loss. When other options
are exercised, the proceeds on sales for a written call option, the purchase
cost for a written put option or the cost of a security for a purchased put or
call option is adjusted by the amount of the premium received or paid. At Feb.
28, 2009, and for the six months then ended, the Funds had no outstanding
options contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Funds may buy and
sell financial futures contracts. Risks of entering into futures contracts and
related options include the possibility of an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
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, the Funds are required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the
- --------------------------------------------------------------------------------
66 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
contract value. Subsequent payments (variation margin) are made or received by
the Funds each day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. At
Feb. 28, 2009, the Funds had no outstanding futures contracts.
INTEREST RATE SWAP TRANSACTIONS
Each Fund may enter into interest rate swap agreements to produce incremental
earnings, to gain exposure to or protect themselves from market changes, or to
synthetically add or subtract principal exposure to the municipal market.
Interest rate swaps are agreements between two parties that involve the exchange
of one type of interest rate for another type of interest rate cash flow on
specified dates in the future, based on a predetermined, specified notional
amount. Certain interest rate swaps are considered forward-starting; whereby the
accrual for the exchange of cash flows does not begin until a specified date in
the future (the "effective date"). The net cash flow for a standard interest
rate swap transaction is generally the difference between a floating market
interest rate versus a fixed interest rate.
Interest rate swaps are valued daily and unrealized appreciation (depreciation)
is recorded. Certain interest rate swaps may accrue periodic interest on a daily
basis as a component of unrealized appreciation (depreciation); the Funds will
realize a gain or loss upon the payment or receipt of accrued interest. The
Funds will realize a gain or a loss when the interest rate swap is terminated.
Risks of entering into an interest rate swap include a lack of correlation
between swaps and the portfolio of municipal bonds the swaps are designed to
hedge or replicate. A lack of correlation may cause the interest rate swap to
experience adverse changes in value relative to expectations. In addition,
interest rate swaps are subject to the risk of default of a counterparty, and
the risk of adverse movements in market interest rates relative to the interest
rate swap positions entered. At Feb. 28, 2009, the Funds had no outstanding
interest rate swap contracts.
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 (1)
to cause the holders of the short-term floating rate notes to tender their notes
at par, and (2) to transfer the municipal bonds from the trusts to each Fund,
thereby collapsing the trusts.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 67
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The municipal bonds transferred to the trusts 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 notes outstanding.
Contractual maturities and interest rates of the municipal bonds held in trust
at Feb. 28, 2009, 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. For the six months ended Feb. 28, 2009, the
average short-term floating rate notes outstanding and the average interest rate
and fees related to these short-term floating rate notes was as follows:
<Table>
<Caption>
AVERAGE
AVERAGE INTEREST RATE
SHORT-TERM AND FEES RELATED TO
FLOATING RATE SHORT-TERM FLOATING
FUND NOTES OUTSTANDING RATE NOTES
- -------------------------------------------------------------------------
RiverSource California Tax-Exempt
Fund $ 2,552,885 2.92%
RiverSource Minnesota Tax-Exempt
Fund 11,856,962 2.67
RiverSource New York Tax-Exempt
Fund 778,322 2.53
</Table>
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
- --------------------------------------------------------------------------------
68 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 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.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. Management of the 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 the tax
returns filed for the last three years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures contracts,
recognition of unrealized appreciation (depreciation) for certain derivative
investments, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Funds have adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS
133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.
45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures
about a fund's derivatives and guarantees. Funds are required to provide
enhanced disclosures about (a) how and why a fund uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for under
SFAS 133 and its related interpretations, (c) how derivative instruments and
related hedged items affect a fund's financial position, financial performance,
and cash flows and (d) the current status of the payment/performance risk of the
credit derivative. The amendments to FSP FAS 133-1 and
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 69
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
FIN 45-4 also require additional disclosures about the current status of the
payment/performance risk of a guarantee. At Feb. 28, 2009, each Fund did not own
nor was it a party to any credit derivative contracts within the scope of these
amendments.
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging
Activities -- an amendment of FASB Statement No. 133," which requires enhanced
disclosures about a fund's derivative and hedging activities. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after Nov. 15, 2008. As of Feb. 28, 2009, management does not believe
the adoption of SFAS 161 will impact the financial statement amounts; however,
additional footnote disclosures may be required about the use of derivative
instruments and hedging items.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and paid monthly, are
reinvested in additional shares of each Fund at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including amortization of premium, market discount and
original issue discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
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 a percentage of each Fund's average daily net assets
that declines from 0.41% to 0.25% annually as each Fund's assets increase. The
management fee for the six months ended Feb. 28, 2009 was 0.41% of each Fund's
average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, each Fund pays Ameriprise Financial,
Inc. (Ameriprise Financial), the parent company of the Investment Manager, a fee
for administration and accounting services at a percentage of each Fund's
average daily net assets that declines from 0.07% to 0.04% annually as each
Fund's assets increase. The fee for the six months ended Feb. 28, 2009 was 0.07%
of each Fund's average daily net assets.
- --------------------------------------------------------------------------------
70 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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, 2009, other expenses paid to this company are as follows:
<Table>
<Caption>
FUND AMOUNT
- ----------------------------------------------------------
RiverSource California Tax-Exempt Fund $538
RiverSource Minnesota Tax-Exempt Fund 860
RiverSource New York Tax-Exempt Fund 188
</Table>
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of each Fund or other
RiverSource funds. Each Fund's liability for these amounts is adjusted for
market value changes and remains in each Fund until distributed in accordance
with the Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. 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 charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months 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 agreements with RiverSource Distributors, Inc. and RiverSource
Fund Distributors, Inc. (collectively, 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, up to 0.75% of the
fee is reimbursed for distribution expenses.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 71
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 $ 97,000 $18,000
RiverSource Minnesota Tax-Exempt Fund 266,000 66,000
RiverSource New York Tax-Exempt Fund 65,000 6,000
</Table>
These amounts are based on the most recent information available as of Jan. 31,
2009, 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.
SALES CHARGES
Sales charges received by the Distributor for distributing the Funds' shares for
the six months ended Feb. 28, 2009 are as follows:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------
RiverSource California Tax-Exempt Fund $ 32,357 $4,450 $331
RiverSource Minnesota Tax-Exempt Fund 166,800 1,822 334
RiverSource New York Tax-Exempt Fund 7,766 351 75
</Table>
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the six months ended Feb. 28, 2009, 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 the Funds'
participation in certain inverse floater programs) are 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 1.54 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 $ 5,897 $ 211 $107
RiverSource Minnesota Tax-Exempt Fund 18,541 1,119 598
RiverSource New York Tax-Exempt Fund 5,596 440 90
</Table>
- --------------------------------------------------------------------------------
72 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The management fees waived/reimbursed at the Fund level were as follows:
<Table>
<Caption>
FUND CLASS C
- -----------------------------------------------------------
RiverSource California Tax-Exempt Fund $33,346
RiverSource Minnesota Tax-Exempt Fund 48,461
RiverSource New York Tax-Exempt Fund 52,187
</Table>
The Investment Manager and its affiliates have contractually agreed to waive
certain fees and expenses until Aug. 31, 2009, unless sooner terminated at the
discretion of the Board such that net expenses (excluding interest and fee
expenses related to each Fund's participation in certain inverse floater
programs), will not exceed 0.79% for Class A, 1.54% for Class B and 1.54% for
Class C of each Fund's average daily net assets.
EARNINGS AND BANK FEE CREDITS
During the six months ended Feb. 28, 2009, the Funds' custodian and transfer
agency fees were reduced as a result of earnings and bank fee credits from
overnight cash balances as follows:
<Table>
<Caption>
FUND AMOUNT
- ----------------------------------------------------------
RiverSource California Tax-Exempt Fund $2,507
RiverSource Minnesota Tax-Exempt Fund 3,043
</Table>
3. SECURITIES TRANSACTIONS
For the six months ended Feb. 28, 2009, 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 $34,485,675 $42,319,046
RiverSource Minnesota Tax-Exempt Fund 43,522,586 41,176,543
RiverSource New York Tax-Exempt Fund 7,673,709 8,559,724
</Table>
Realized gains and losses are determined on an identified cost basis.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 73
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
4. SHARE TRANSACTIONS
Transactions in shares for each Fund for the periods indicated are as follows:
<Table>
<Caption>
SIX MONTHS ENDED FEB. 28, 2009
ISSUED FOR
REINVESTED NET
FUND SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
Class A 2,600,093 524,587 (5,082,987) (1,958,307)
Class B 74,197 14,424 (194,121) (105,500)
Class C 43,383 8,573 (124,925) (72,969)
RiverSource Minnesota Tax-Exempt Fund
Class A 5,074,124 1,036,037 (6,240,457) (130,296)
Class B 139,459 44,486 (269,585) (85,640)
Class C 232,995 27,533 (154,212) 106,316
RiverSource New York Tax-Exempt Fund
Class A 954,851 188,878 (1,232,777) (89,048)
Class B 23,620 10,983 (41,347) (6,744)
Class C 16,413 2,546 (10,847) 8,112
- ---------------------------------------------------------------------------------
<Caption>
YEAR ENDED AUG. 31, 2008
ISSUED FOR
REINVESTED NET
FUND SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
RiverSource California Tax-Exempt Fund
Class A 13,173,910 1,151,547 (11,856,270) 2,469,187
Class B 170,107 42,038 (462,980) (250,835)
Class C 337,281 13,927 (147,407) 203,801
RiverSource Minnesota Tax-Exempt Fund
Class A 9,122,186 1,854,907 (10,357,016) 620,077
Class B 291,180 100,267 (1,480,144) (1,088,697)
Class C 503,745 43,204 (259,716) 287,233
RiverSource New York Tax-Exempt Fund
Class A 851,576 390,445 (2,246,691) (1,004,670)
Class B 56,763 25,495 (284,042) (201,784)
Class C 23,555 4,894 (41,259) (12,810)
- ---------------------------------------------------------------------------------
</Table>
5. BANK BORROWINGS
Each Fund has entered into a revolving credit facility with a syndicate of banks
headed 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
- --------------------------------------------------------------------------------
74 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
on Oct. 16, 2008, replacing a prior credit facility. The credit facility
agreement, which is a collective agreement between each Fund and certain other
RiverSource funds, severally and not jointly, permits collective borrowings up
to $475 million. The borrowers shall have the right, upon written notice to the
Administrative Agent to request an increase of up to $175 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 $650
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 federal funds rate plus 0.75%. 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 0.06% 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, 2009.
Under the prior credit facility which was effective until Oct. 15, 2008, each
Fund had entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A., whereby each Fund was permitted to borrow
for the temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The credit facility agreement, which was a collective
agreement between each Fund and certain other RiverSource funds, severally and
not jointly, permitted collective borrowings up to $500 million. Interest was
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matured no later
than 60 days after the date of borrowing. 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.
6. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, capital loss carry-overs at Aug. 31, 2008 were
as follows:
<Table>
<Caption>
FUND 2013 2014 2015 2016
- ---------------------------------------------------------------------
RiverSource California Tax-
Exempt Fund $ -- $ -- $ -- $359,905
RiverSource Minnesota Tax-
Exempt Fund 1,199,755 913,006 3,601 --
RiverSource New York Tax-
Exempt Fund -- -- -- 3,668
</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
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 75
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
tax distributions. As a result, each Fund is permitted to treat net capital
losses realized between Nov. 1, 2007, and its fiscal year end ("post-October
loss") as occurring on the first day of the following tax year. At Aug. 31,
2008, post-October losses that are treated as occurring on Sept. 1, 2008 were as
follows:
<Table>
<Caption>
FUND POST-OCTOBER LOSS
- ----------------------------------------------------------------
RiverSource California Tax-Exempt Fund $1,055,305
RiverSource Minnesota Tax-Exempt Fund 649,431
RiverSource New York Tax-Exempt Fund 99,184
</Table>
It is unlikely the Board will authorize distributions of any net realized
capital gains until the available capital loss carry-overs have been offset or
expire.
7. RISKS RELATING TO CERTAIN INVESTMENTS
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. 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.
8. 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 they are investors in several American Express Company 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
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76 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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.
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., Inc. (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 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 2005, the New
York staff of the SEC indicated that it was considering recommending to the
Commissioners of the SEC the instituting of a formal
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RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 77
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
action against Seligman and the distributor of the Seligman Funds, Seligman
Advisors, Inc. (which is now known as RiverSource Fund Distributors, 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.
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, 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 is and has 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 will pay $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 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
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78 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 SEMIANNUAL REPORT 79
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
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 RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the 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; or
searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
80 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2009 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 Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource is part
of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6329 Z (4/09)
</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. The complete schedule of investments is included in Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) 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 1, 2009
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 1, 2009
By /s/ Jeffrey P. Fox
-------------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date May 1, 2009