UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4646
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RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST
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(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28
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Semiannual Report
RIVERSOURCE [LOGO](R)
INVESTMENTS
RiverSource(R) California Tax-Exempt Fund
RiverSource(R) Massachusetts Tax-Exempt Fund
RiverSource(R) Michigan Tax-Exempt Fund
RiverSource(R) Minnesota Tax-Exempt Fund
RiverSource(R) New York Tax-Exempt Fund
RiverSource(R) Ohio Tax-Exempt Fund
Semiannual Report for the
Period Ended Feb. 28, 2007
>Each Fund seeks to provide shareholders
with a high level of income generally
exempt from federal income tax as well
as from respective state and local
income tax.
TABLE OF CONTENTS
Fund Snapshots ......................................................... 2
Fund Snapshot
RiverSource California Tax-Exempt Fund .............................. 2
RiverSource Massachusetts Tax-Exempt Fund ........................... 3
RiverSource Michigan Tax-Exempt Fund ................................ 4
RiverSource Minnesota Tax-Exempt Fund ............................... 5
RiverSource New York Tax-Exempt Fund ................................ 6
RiverSource Ohio Tax-Exempt Fund .................................... 7
Performance Summary
RiverSource California Tax-Exempt Fund .............................. 8
RiverSource Massachusetts Tax-Exempt Fund ........................... 10
RiverSource Michigan Tax-Exempt Fund ................................ 12
RiverSource Minnesota Tax-Exempt Fund ............................... 14
RiverSource New York Tax-Exempt Fund ................................ 16
RiverSource Ohio Tax-Exempt Fund .................................... 18
Questions & Answers with Portfolio Management .......................... 20
Fund Expenses Examples ................................................. 23
Investments in Securities
RiverSource California Tax-Exempt Fund .............................. 27
RiverSource Massachusetts Tax-Exempt Fund ........................... 31
RiverSource Michigan Tax-Exempt Fund ................................ 34
RiverSource Minnesota Tax-Exempt Fund ............................... 37
RiverSource New York Tax-Exempt Fund ................................ 42
RiverSource Ohio Tax-Exempt Fund .................................... 46
Financial Statements ................................................... 49
Notes to Financial Statements .......................................... 60
Proxy Voting ........................................................... 89
[LOGO]
DALBAR RATED
2007
FOR COMMUNICATION
The RiverSource mutual fund shareholder reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services
research firm. The Seal recognizes communications demonstrating a level of
excellence in the industry.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 1
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource California Tax-Exempt Fund
FUND OVERVIEW
For California investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
Non-investment grade bonds 2.3%
BBB bonds 11.1%
A bonds 25.8% [PIE CHART]
AAA bonds 51.2%
AA bonds 9.6%
Bond ratings apply to 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 4.0% of the bond portfolio assets were determined
through internal analysis.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A ICALX 8/18/86
Class B ACABX 3/20/95
Class C -- 6/26/00
Total net assets $177.0 million
Number of holdings 108
Effective maturity(1) 15 years
Effective duration(2) 6.1 years
Weighted average bond rating(3) AA
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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2 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource Massachusetts Tax-Exempt Fund
FUND OVERVIEW
For Massachusetts investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
Non-investment grade bonds -%
BBB bonds 5.4%
A bonds 2.7% [PIE CHART]
AA bonds 23.9%
AAA bonds 68.0%
Bond ratings apply to 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 1.6% of the bond portfolio assets were determined
through internal analysis.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A IDMAX 7/2/87
Class B AXMBX 3/20/95
Class C 6/26/00
Total net assets $54.2 million
Number of holdings 59
Effective maturity(1) 12.4 years
Effective duration(2) 6.1 years
Weighted average bond rating(3) AA+
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 3
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource Michigan Tax-Exempt Fund
FUND OVERVIEW
For Michigan investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
AAA bonds 74.6%
AA bonds 14.9%
A bonds 6.6% [PIE CHART]
BBB bonds 3.9%
Non-investment grade bonds --%
Bond ratings apply to 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 1.1% of the bond portfolio assets were determined
through internal analysis.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A INMIX 7/2/87
Class B -- 3/20/95
Class C -- 6/26/00
Total net assets $ 46.0 million
Number of holdings 60
Effective maturity(1) 11.6 years
Effective duration(2) 5.4 years
Weighted average bond rating(3) AA+
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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4 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource Minnesota Tax-Exempt Fund
FUND OVERVIEW
For Minnesota investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
AAA bonds 57.1%
AA bonds 23.7%
A bonds 10.0% [PIE CHART]
BBB bonds 7.9%
Non-investment grade bonds 1.3%
Bond ratings apply to 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 1.5% of the bond portfolio assets were determined
through internal analysis.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A IMNTX 8/18/86
Class B IDSMX 3/20/95
Class C -- 6/26/00
Total net assets $339.3 million
Number of holdings 127
Effective maturity(1) 11.2 years
Effective duration(2) 5.5 years
Weighted average bond rating(3) AA
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 5
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource New York Tax-Exempt Fund
FUND OVERVIEW
For New York investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
AAA bonds 50.1%
AA bonds 35.3%
A bonds 5.1% [PIE CHART]
BBB bonds 8.8%
Non-investment grade bonds 0.7%
Bond ratings apply to 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.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A INYKX 8/18/86
Class B -- 3/20/95
Class C -- 6/26/00
Total net assets $68.5 million
Number of holdings 78
Effective maturity(1) 14.4 years
Effective duration(2) 6.2 years
Weighted average bond rating(3) AA
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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6 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
FUND SNAPSHOT AT FEB. 28, 2007
RiverSource Ohio Tax-Exempt Fund
FUND OVERVIEW
For Ohio investors, this Fund seeks to provide a high level of income
generally exempt from federal income tax as well as from the respective state
and local taxes.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
AAA bonds 52.9%
AA bonds 36.3%
A bonds 4.7% [PIE CHART]
BBB bonds 6.1%
Non-investment grade bonds --%
Bond ratings apply to 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 1.2% of the bond portfolio assets were determined
through internal analysis.
STYLE MATRIX
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
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 serves 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 MANAGER
YEARS IN INDUSTRY
Rick LaCoff* 15
* The Fund is managed by a team of portfolio managers led by Rick LaCoff.
FUND FACTS
TICKER SYMBOL INCEPTION DATE
Class A IOHIX 7/2/87
Class B -- 3/20/95
Class C -- 6/26/00
Total net assets $ 46.3 million
Number of holdings 64
Effective maturity(1) 13.5 years
Effective duration(2) 6.0 years
Weighted average bond rating(3) AA+
(1) EFFECTIVE MATURITY measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before
its maturity date.
(2) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the
levels of interest rates from two years out to 30 years). Positive
duration means that as rates rise, the price decreases, and negative
duration means that as rates rise, the price increases.
(3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of
the underlying bonds in the portfolio.
There are risks associated with an investment in a bond fund, including credit
risk, interest rate risk, and prepayment and extension risk. See the Fund's
prospectus for information on these and other risks associated with the Fund.
In general, bond prices rise when interest rates fall and vice versa. This
effect is 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 distribution.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 7
PERFORMANCE SUMMARY
RIVERSOURCE
CALIFORNIA TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource California Tax-Exempt Fund Class A (excluding sales charge) +2.91%
Lehman Brothers California 2 Plus Year Municipal Bond Index(1) (unmanaged) +3.08%
Lehman Brothers Municipal Bond lndex(2) (unmanaged) +2.89%
Lipper California Municipal Debt Funds lndex(3) +2.86%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers California 2 Plus Year Municipal Bond Index, an
unmanaged index, is a market value-weighted index of California
investment-grade fixed-rate municipal bonds with maturities of two years
or more.
(2) The Lehman Brothers 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 Lehman Brothers 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 returns include net reinvested dividends.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
CALIFORNIA
NET
TOTAL EXPENSES(a)
Class A 0.87% 0.79%
Class B 1.62% 1.55%
Class C 1.63% 1.55%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding any interest and fee expenses related to the
Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
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8 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource California Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
AT FEB 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +2.91% +4.71% +3.93% +4.68% +4.96% +5.92%
Class B (inception 3/20/95) +2.53% +4.12% +3.14% +3.90% +4.17% +4.41%
Class C (inception 6/26/00) +2.53% +4.13% +3.14% +3.93% N/A +4.65%
With sales charge
Class A (inception 8/18/86) -1.97% -0.26% +2.25% +3.67% +4.45% +5.67%
Class B (inception 3/20/95) -2.47% -0.88% +1.90% +3.55% +4.17% +4.41%
Class C (inception 6/26/00) +1.53% +3.13% +3.14% +3.93% N/A +4.65%
AT MARCH 31, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +1.95% +5.13% +3.97% +5.08% +5.05% +5.88%
Class B (inception 3/20/95) +1.37% +4.34% +3.13% +4.25% +4.25% +4.33%
Class C (inception 6/26/00) +1.37% +4.34% +3.13% +4.24% N/A +4.51%
With sales charge
Class A (inception 8/18/86) -2.88% +0.14% +2.30% +4.06% +4.54% +5.63%
Class B (inception 3/20/95) -3.62% -0.66% +1.89% +3.91% +4.25% +4.33%
Class C (inception 6/26/00) +0.38% +3.34% +3.13% +4.24% N/A +4.51%
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.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 9
PERFORMANCE SUMMARY
- ------------------------------------------------------------------------------
RIVERSOURCE
MASSACHUSETTS TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource Massachusetts Fund Class A (excluding sales charge) +2.32%
Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond Index Index(1) (unmanaged) +2.99%
Lehman Brothers Municipal Bond Index(2) (unmanaged) +2.89%
Lipper Massachusetts Municipal Debt Funds Index(3) +2.80%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers Massachusetts 3 Plus Year Enhanced Municipal Bond
Index, an unmanaged index, is a market value-weighted index of
Massachusetts investment-grade fixed-rate municipal bonds with
maturities of three years or more.
(2) The Lehman Brothers 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 Lehman Brothers indices reflect
reinvestment of all distributions and changes in market prices.
(3) The Lipper Massachusetts Municipal Debt Funds Index includes the 10
largest municipal debt funds in Massachusetts tracked by Lipper Inc. The
Lipper index returns include net reinvested dividends.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPESPECTUS)
MASSACHUSETTS
TOTAL NET EXPENSES(a)
Class A 1.08% 0.82%
Class B 1.82% 1.58%
Class C 1.84% 1.58%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding 0.03% of interest and fee expenses related to
the Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
- ------------------------------------------------------------------------------
10 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Massachusetts Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
AT FEB. 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +2.32% +4.16% +2.93% +3.96% +4.50% +5.76%
Class B (inception 3/20/95) +1.94% +3.37% +2.15% +3.17% +3.71% +4.03%
Class C (inception 6/26/00) +2.13% +3.38% +2.16% +3.18% N/A +4.20%
With sales charge
Class A (inception 7/2/87) -2.54% -0.79% +1.28% +2.95% +3.99% +5.50%
Class B (inception 3/20/95) -3.06% -1.63% +0.89% +2.82% +3.71% +4.03%
Class C (inception 6/26/00) +1.13% +2.38% +2.16% +3.18% N/A +4.20%
AT MARCH 31, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +1.39% +4.75% +3.00% +4.19% +4.60% +5.72%
Class B (inception 3/20/95) +1.01% +3.97% +2.22% +3.40% +3.81% +3.98%
Class C (inception 6/26/00) +0.82% +3.77% +2.16% +3.37% N/A +4.07%
With sales charge
Class A (inception 7/2/87) -3.43% -0.22% +1.34% +3.18% +4.09% +5.46%
Class B (inception 3/20/95) -3.97% -1.03% +0.96% +3.05% +3.81% +3.98%
Class C (inception 6/26/00) -0.18% +2.77% +2.16% +3.37% N/A +4.07%
Class A share performance reflects the maximum sales charge of.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.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 11
PERFORMANCE SUMMARY
RIVERSOURCE
MICHIGAN TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource Michigan Tax-Exempt Fund Class A (excluding sales charge) +2.34%
Lehman Brothers Michigan Municipal Bond Index(1) (unmanaged) +2.80%
Lehman Brothers Municipal Bond Index(2) (unmanaged) +2.89%
Lipper Michigan Municipal Debt Funds Index(3) +2.53%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers Michigan Municipal Bond Index, an unmanaged index,
is a subset of the Lehman Brothers Municipal Bond Index. The index is
made up of investment-grade, tax-exempt, and fixed-rate bonds issued in
the state of Michigan. All securities have effective maturities greater
than one year and are selected from issues larger than $50 million.
(2) The Lehman Brothers Municipal Bond Index, an unmanaged index, is made up
of a representative list of general obligation, revenue, insured and
pre-refunded bonds. The index is frequently used as a general measure of
tax-exempt bond market performance. The Lehman Brothers indices reflect
reinvestment of all distributions and changes in market prices.
(3) The Lipper Michigan Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Michigan tracked by Lipper Inc. The Lipper index
returns include net reinvested dividends.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
MICHIGAN
TOTAL NET EXPENSES (a)
Class A 1.11% 0.81%
Class B 1.85% 1.57%
Class C 1.86% 1.57%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding 0.02% of interest and fee expenses related to
the Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
- ------------------------------------------------------------------------------
12 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Michigan Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
AT FEB. 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +2.34% +3.95% +3.06% +4.33% +4.60% +5.92%
Class B (inception 3/20/95) +1.96% +3.35% +2.34% +3.58% +3.83% +4.12%
Class C (inception 6/26/00) +1.76% +3.15% +2.28% +3.54% N/A +4.44%
With sales charge
Class A (inception 7/2/87) -2.52% -0.99% +1.41% +3.32% +4.09% +5.66%
Class B (inception 3/20/95) -3.04% -1.65% +1.09% +3.23% +3.93% +4.12%
Class C (inception 6/26/00) +0.76% +2.15% +2.28% +3.54% N/A +4.44%
AT MARCH 31, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +1.40% +4.35% +3.12% +4.59% +4.69% +5.88%
Class B (inception 3/20/95) +0.82% +3.56% +2.33% +3.80% +3.90% +4.04%
Class C (inception 6/26/00) +0.83% +3.56% +2.33% +3.80% N/A +4.33%
With sales charge
Class A (inception 7/2/87) -3.42% -0.61% +1.46% +3.58% +4.18% +5.62%
Class B (inception 3/20/95) -4.15% -1.44% +1.08% +3.46% +3.90% +4.04%
Class C (inception 6/26/00) -0.17% +2.56% +2.33% +3.80% N/A +4.33%
Class A share performance reflects the maximum sales charge of.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.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 13
PERFORMANCE SUMMARY
RIVERSOURCE
MINNESOTA TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource Minnesota Tax-Exempt Fund Class A (excluding sales charge) +2.45%
Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index(1) (unmanaged) +2.76%
Lehman Brothers Municipal Bond - Index(2) (unmanaged) +2.89%
Lipper Minnesota Municipal Debt Funds Index(3) +2.55%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers Minnesota 3 Plus Year Enhanced Municipal Bond Index,
an unmanaged index, is a market value-weighted index of Minnesota
investment-grade fixed-rate municipal bonds with maturities of three
years or more.
(2) The Lehman Brothers 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 Lehman Brothers 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 returns include net reinvested dividends.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
MINNESOTA
TOTAL NET EXPENSES(a)
Class A 1.06% 0.98%
Class B 1.81% 1.74%
Class C 1.82% 1.74%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding 0.19% of interest and fee expenses related to
the Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
- ------------------------------------------------------------------------------
14 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Minnesota Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
AT FEB. 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +2.45% +4.13% +3.10% +4.32% +4.79% +5.95%
Class B (inception 3/20/95) +2.07% +3.35% +2.33% +3.53% +4.01% +4.30%
Class C (inception 6/26/00) +2.07% +3.34% +2.32% +3.53% N/A +4.44%
With sales charge
Class A (inception 8/18/86) -2.42% -0.81% +1.44% +3.31% +4.28% +5.70%
Class B (inception 3/20/95) -2.93% -1.65% +1.06% +3.18% +4.01% +4.30%
Class C (inception 6/26/00) +1.07% +2.34% +2.32% +3.53% N/A +4.44%
AT MARCH 31, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +1.50% +4.74% +3.16% +4.59% +4.87% +5.91%
Class B (inception 3/20/95) +1.12% +3.96% +2.39% +3.81% +4.09% +4.24%
Class C (inception 6/26/00) +1.12% +3.95% +2.38% +3.80% N/A +4.33%
With sales charge
Class A (inception 8/18/86) -3.33% -0.23% +1.50% +3.58% +4.36% +5.66%
Class B (inception 3/20/95) -3.86% -1.04% +1.12% +3.46% +4.09% +4.24%
Class C (inception 6/26/00) +0.12% +2.95% +2.38% +3.80% N/A +4.33%
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.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 15
PERFORMANCE SUMMARY
RIVERSOURCE
NEW YORK TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
RiverSource New York Tax-Exempt Fund Class A (excluding sales charge) +2.60%
Lehman Brothers New York 4 Plus Year Municipal Bond lndex(1) (unmanaged) +3.06%
Lehman Brothers Municipal Bond lndex(2) (unmanaged) +2.89%
Lipper New York Municipal Debt Funds lndex(3) +2.79%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers New York 4 Plus Year Municipal Bond Index, an
unmanaged index, is a market value-weighted index of New York
investment-grade fixed-rate municipal bonds with maturities of four
years or more.
(2) The Lehman Brothers 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 Lehman Brothers 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
returns include net reinvested dividends.
ANNUAL OPERATING EXPENSES RATIO (AS OF THE CURRENT PROSPECTUS)
NEW YORK
TOTAL NET EXPENSES(a)
Class A 1.20% 0.98%
Class B 1.95% 1.74%
Class C 1.97% 1.74%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding 0.19% of interest and fee expenses related to
the Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
- ------------------------------------------------------------------------------
16 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource New York Tax-Exempt Fund
AVERAGE ANNUAL TOTAL RETURNS
AT FEB. 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +2.60% +4.38% +3.15% +4.45% +4.84% +5.74%
Class B (inception 3/20/95) +2.21% +3.59% +2.37% +3.66% +4.06% +4.19%
Class C (inception 6/26/00) +2.21% +3.59% +2.38% +3.66% N/A +4.52%
With sales charge
Class A (inception 8/18/86) -2.28% -0.57% +1.50% +3.44% +4.33% +5.49%
Class B (inception 3/20/95) -2.79% -1.41% +1.13% +3.32% +4.06% +4.19%
Class C (inception 6/26/00) +1.21% +2.59% +2.38% +3.66% N/A +4.52%
AT MARCH 31, 2007
SINCE
without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/18/86) +1.41% +4.79% +3.15% +4.64% +4.90% +5.69%
Class B (inception 3/20/95) +1.02% +4.00% +2.37% +3.85% +4.11% +4.11%
Class C (inception 6/26/00) +1.02% +4.00% +2.38% +3.85% N/A +4.38%
With sales charge
Class A (inception 8/18/86) -3.41% -0.18% +1.49% +3.63% +4.39% +5.45%
Class B (inception 3/20/95) -3.95% -1.00% +1.13% +3.51% +4.11% +4.11%
Class C (inception 6/26/00) +0.03% +3.00% +2.38% +3.85% N/A +4.38%
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.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 17
PERFORMANCE SUMMARY
RIVERSOURCE
OHIO TAX-EXEMPT FUND
PERFORMANCE COMPARISON
For the six-month period ended Feb. 28, 2007
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource Ohio Tax-Exempt Fund Class A (excluding sales charge) +2.48%
Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index(1) (unmanaged) +2.95%
Lehman Brothers Municipal Bond Index (2) (unmanaged) +2.89%
Lipper Ohio Municipal Debt Funds Index (3) +2.76%
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 bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
(1) The Lehman Brothers Ohio 4 Plus Year Enhanced Municipal Bond Index, an
unmanaged index, is a market value-weighted index of Ohio
investment-grade fixed-rate municipal bonds with maturities of four
years or more.
(2) The Lehman Brothers 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 Lehman Brothers indices reflect
reinvestment of all distributions and changes in market prices.
(3) The Lipper Ohio Municipal Debt Funds Index includes the 10 largest
municipal debt funds in Ohio tracked by Lipper Inc. The Lipper index
returns include net reinvested dividends.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
OHIO
TOTAL NET EXPENSES(a)
Class A 1.12% 0.81%
Class B 1.87% 1.57%
Class C 1.88% 1.57%
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until Aug. 31, 2007,
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 expenses (excluding 0.02% of interest and fee expenses related to
the Fund's participation in certain inverse floater programs) will not
exceed 0.79% for Class A; 1.55% for Class B; and 1.55% for Class C. See
the Notes to Financial Statements for more information regarding inverse
floater program transactions.
- ------------------------------------------------------------------------------
18 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Ohio Tax-Exempt Find
AVERAGE ANNUAL TOTAL RETURNS
AT FEB. 28, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +2.48% +4.07% +2.80% +3.86% +4.47% +5.74%
Class B (inception 3/20/95) +2.09% +3.29% +2.02% +3.07% +3.69% +3.95%
Class C (inception 6/26/00) +2.09% +3.29% +1.96% +3.07% N/A +3.98%
With sales charge
Class A (inception 7/2/87) -2.39% -0.87% +1.15% +2.85% +3.96% +5.48%
Class B (inception 3/20/95) -2.91% -1.71% +0.74% +2.72% +3.69% +3.95%
Class C (inception 6/26/00) +1.09% +2.29% +1.96% +3.07% N/A +3.98%
AT MARCH 31, 2007
SINCE
Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 7/2/87) +1.34% +4.28% +2.87% +4.05% +4.55% +5.69%
Class B (inception 3/20/95) +0.96% +3.49% +2.08% +3.26% +3.77% +3.88%
Class C (inception 6/26/00) +0.96% +3.50% +2.09% +3.26% N/A +3.85%
With sales charge
Class A (inception 7/2/87) -3.47% -0.67% +1.21% +3.04% +4.04% +5.43%
Class B (inception 3/20/95) -4.03% -1.51% +0.81% +2.91% +3.77% +3.88%
Class C (inception 6/26/00) -0.04% +2.50% +2.09% +3.26% N/A +3.85%
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.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 19
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Rick LaCoff discusses the Funds' positioning and
results for the six months ended Feb. 28, 2007.
Q: How did the RiverSource State Tax-Exempt Funds perform for the first
half of the fiscal year?
A: All Fund returns are for Class A shares, excluding sales charge. All
returns are for the six months ended Feb. 28, 2007. All Lipper
categories represent the respective Fund's peer group.
RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND increased 2.91%. The Fund
underperformed the Lehman Brothers California 2 Plus Year Municipal Bond
Index, which returned 3.08%. The Lipper California Municipal Debt Funds
Index increased 2.86% for the same period.
RIVERSOURCE MASSACHUSETTS TAX-EXEMPT FUND increased 2.32%. The Fund
underperformed the Lehman Brothers Massachusetts 3 Plus Year Enhanced
Municipal Bond Index, which increased 2.99%. The Lipper Massachusetts
Municipal Debt Funds Index increased 2.80% for the same period.
RIVERSOURCE MICHIGAN TAX-EXEMPT FUND increased 2.34%. The Fund
underperformed the Lehman Brothers Michigan Municipal Bond Index, which
increased 2.80%. The Lipper Michigan Municipal Debt Funds Index produced
a total return of 2.53% for the same period.
RIVERSOURCE MINNESOTA TAX-EXEMPT FUND increased 2.45%. The Fund
underperformed the Lehman Brothers Minnesota 3 Plus Year Enhanced
Municipal Bond Index, which increased 2.76%. The Lipper Minnesota
Municipal Debt Funds Index increased 2.55% for the same period.
RIVERSOURCE NEW YORK TAX-EXEMPT FUND increased 2.60%. The Fund
underperformed the Lehman Brother New York 4 Plus Year Municipal Bond
Index, which increased 3.06%. The Lipper New York Municipal Debt Funds
Index increased 2.79% for the same period.
RIVERSOURCE OHIO TAX-EXEMPT FUND increased 2.48%. The Fund
underperformed the Lehman Brothers Ohio 4 Plus Year Enhanced Municipal
Bond Index, which increased 2.95%. The Lipper Ohio Municipal Debt Funds
Index increased 2.76% for the same period.
A broad barometer applicable to each of the Funds, the Lehman Brothers
Municipal Bond Index, increased 2.89% for the same six-month period.
ALL SIX OF THE RIVERSOURCE STATE TAX-EXEMPT FUNDS BENEFITED FROM THEIR
POSITIONS IN HEALTH CARE MUNICIPAL BONDS AND THEIR INCREASED EXPOSURE TO
COMMONWEALTH OF PUERTO RICO MUNICIPAL BONDS.
Q: What factors most significantly affected performance during the
semi-annual period?
A: The tax-exempt fixed income market produced positive performance during
the period. Tax-exempt yields actually moved higher across the
short-term portion of the yield curve (i.e., five-year maturities and
shorter) but declined across the remainder of the yield curve (i.e.,
six-year maturities and longer), causing a further flattening of the
yield curve. Interest rates rallied across most of the tax-exempt yield
curve.
All six of the RiverSource State Tax-Exempt Funds benefited from their
positions in health care municipal bonds and their increased exposure to
Commonwealth of Puerto Rico municipal bonds. Both of these sectors
performed well during the period, particularly select hospital bonds.
Puerto Rico municipal bonds benefited from the fact that the
Commonwealth enacted a local sales tax to raise revenues and implemented
other reforms to cut expenses. As these potential fiscal remedies take
hold, Puerto Rico municipal bonds may become increasingly attractive to
investors, given the triple-tax-exemption (i.e. federal, state and
local) they offer.
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20 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
A positive contributing factor to the six-month performance of
RiverSource New York Tax-Exempt Fund and RiverSource California
Tax-Exempt Fund were their allocations to non-enhanced municipal tobacco
bonds, which was a strong performing sector for the period. Widespread
anticipation of the refunding of Golden State Tobacco Securitization
Corporation particularly helped boost the performance of the municipal
bond sector in California. Results of the RiverSource State Tax-Exempt
Funds of California, Minnesota and New York were further helped by
having positions in select non-investment grade or non-rated bonds, as
these bonds performed strongly.
Bonds that were advance refunded during the period boosted the returns
of RiverSource California Tax-Exempt Fund but had a rather neutral
effect on the other RiverSource State Tax-Exempt Funds. Advance
refunding is a procedure in which a bond issuer floats a second bond at
a lower interest rate, and the proceeds from the sale of the second bond
are conservatively invested, usually in Treasury securities, which in
turn, are held in escrow collateralizing the first bond. Given that the
advance refunded bonds become, essentially, fully tax-exempt U.S.
Treasury securities and no longer represent the credit risk profile of
the original borrower, they often increase in value -- sometimes
significantly.
Each of the Funds underperformed its respective Lehman benchmark index
due primarily to its comparatively short duration positioning during a
period when rates generally declined. We implemented this duration
strategy because we believed rates declined to levels that appeared too
low given our economic view. Rather than rising as we had anticipated
though, rates continued to fall through the period. Duration is a
measure of the Funds' sensitivity to changes in interest rates.
Also detracting modestly from all six of the Funds' results was yield
curve positioning, that is, the way the Funds were positioned to respond
to changes in short-term vs. long-term interest rates. The Funds'
moderate exposure to the short-term segment of the municipal yield curve
proved prudent. However this positive was not enough to offset the
detracting effect of the Funds' modest position in long-term bonds,
which performed best during the semiannual period. As yields at the
long-term end of the yield curve fell, the prices of these bonds
increased.
The primary reason most of the Funds underperformed their respective
Lipper Municipal Debt Funds Index was their moderate exposure to bonds
rated BBB compared to their peers. Bonds rated BBB generally
outperformed higher quality bonds during the period. We did add to each
of the RiverSource State Tax-Exempt Fund's allocation to bonds rated BBB
during the period on a highly selective basis, as we expect these bonds
to perform well and provide attractive income during the coming months
given anticipated technical conditions within the municipal bond market.
Q: What changes did you make to the Funds and how are they currently
positioned?
A: Besides adding to each of the RiverSource State Tax-Exempt Funds'
exposure to bonds rated BBB and Commonwealth of Puerto Rico bonds, as
mentioned above, we also made several other changes during the
semiannual period. We increased holdings in zero coupon bonds in
RiverSource California Tax-Exempt Fund and added non-callable bonds in
RiverSource Massachusetts Tax-Exempt Fund and RiverSource Ohio
Tax-Exempt Fund. Zero coupon bonds are municipal bonds that accumulate
and compound interest for a given period of time before converting into
an interest bearing bond at some date before maturity. Non-callable
bonds are bonds that cannot be redeemed at the option of the issuer.
Both of these types of bonds performed well as the fixed income market
rallied during the period.
We also increased exposure to non-enhanced municipal tobacco bonds in
RiverSource California Tax-Exempt Fund and RiverSource New York
Tax-Exempt Fund. We added special project financing bonds to RiverSource
California Tax-Exempt Fund on an opportunistic basis. We increased
holdings in single-family housing bonds in RiverSource California
Tax-Exempt Fund and RiverSource Minnesota Tax-Exempt Fund, as this
sector offered an attractive yield during the period. Within these
housing bonds, we particularly focused on what are known as planned
amortization class (PAC) bonds, which receive principal payments in
accordance with a predetermined payment schedule. The PAC is therefore
considered a bond class with among the most stable cash flow and the
lowest prepayment risk.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 21
QUESTIONS & ANSWERS
In each of the RiverSource State Tax-Exempt Funds, we decreased exposure
to bonds with maturities at the shorter end of the yield curve (i.e.,
one- to five-years) and increased positions in longer intermediate-term
and long-term bonds. Finally, when tax-exempt bond yields rallied in
response to the equity market decline in February, we shortened the
Funds' duration further, thereby removing some interest rate risk from
the portfolios.
STILL, WE BELIEVE THE TAX-EXEMPT BOND MARKET IS LIKELY TO CONTINUE TO
PERFORM WELL AND PROVIDE ATTRACTIVE YIELD.
Q: How do you intend to manage the Funds in the coming months?
A: We believe the primary questions facing the municipal market at the end
of February centered on the strength of the economy and the direction of
the Federal Reserve going forward. Until there is more clarity
surrounding these questions, volatility within the tax-exempt bond
market will likely remain high. Still, we believe the tax-exempt bond
market is likely to continue to perform well and provide attractive
yield.
Given our view that rates are too low and will ultimately move higher,
we intend to maintain the Funds' current short duration positioning
compared to their respective Lehman benchmark index for the near term.
We further intend to watch closely for opportunities to modestly
increase the Funds' exposure to bonds rated BBB and below, especially
non-enhanced tobacco municipal bonds, hospital bonds, special project
financing bonds and single-family housing bonds.
At the same time, of course, we intend to maintain our focus on seeking
higher quality securities with good structure and on further
diversifying the portfolios. Each Fund's emphasis continues to be on
generating a high level of income generally exempt from federal income
tax as well as from the respective state and local taxes.
Any specific securities mentioned are for illustrative purposes only and are
not a complete list of securities that have increased or decreased in value.
The views expressed in this statement reflect those of the portfolio
manager(s) only through the end of the period of the report as stated on the
cover and do not necessarily represent the views of RiverSource Investments,
LLC (RiverSource) or any subadviser to the Fund or any other person in the
RiverSource or subadviser organizations. Any such views are subject to change
at any time based upon market or other conditions and RiverSource disclaims
any responsibility to update such views. These views may not be relied on as
investment advice and, because investment decisions for a RiverSource Fund are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any RiverSource Fund.
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22 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 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 acquired funds expense ratio as of the
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, 2007.
ACTUAL EXPENSES
The first line of each table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading titled "Expenses paid during the period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each table provides information about hypothetical account
values and hypothetical expenses based on each Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare each 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in each table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 23
RiverSource California Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,029.10 $3.97 .79%
Hypothetical (5% return before expenses) $1,000 $1,020.88 $3.96 .79%
Class B
Actual(b) $1,000 $1,025.30 $7.78 1.55%
Hypothetical (5% return before expenses) $1,000 $1,017.11 $7.75 1.55%
Class C
Actual(b) $1,000 $1,025.30 $7.78 1.55%
Hypothetical (5% return before expenses) $1,000 $1,017.11 $7.75 1.55%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.91% for Class A, +2.53% for Class B and +2.53% for Class C.
RiverSource Massachusetts Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO(c)
Class A
Actual(b) $1,000 $1,023.20 $4.11 .82%
Hypothetical (5% return before expenses) $1,000 $1,020.73 $4.11 .82%
Class B
Actual(b) $1,000 $1,019.40 $7.91 1.58%
Hypothetical (5% return before expenses) $1,000 $1,016.96 $7.90 1.58%
Class C
Actual(b) $1,000 $1,021.30 $7.92 1.58%
Hypothetical (5% return before expenses) $1,000 $1,016.96 $7.90 1.58%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.32% for Class A, +1.94% for Class B and +2.13% for Class C.
(c) 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, 1.55% for Class B and
1.55% for Class C. See Notes 1 and 10 to the financial statements.
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24 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Michigan Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO(c)
Class A
Actual(b) $1,000 $1,023.40 $4.06 .81%
Hypothetical (5% return before expenses) $1,000 $1,020.78 $4.06 .81%
Class B
Actual(b) $1,000 $1,019.60 $7.86 1.57%
Hypothetical (5% return before expenses) $1,000 $1,017.01 $7.85 1.57%
Class C
Actual(b) $1,000 $1,017.60 $7.85 1.57%
Hypothetical (5% return before expenses) $1,000 $1,017.01 $7.85 1.57%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.34% for Class A, +1.96% for Class B and +1.76% for Class C.
(c) 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, 1.55% for Class B and
1.55% for Class C. See Notes 1 and 10 to the financial statements.
RiverSource Minnesota Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO(c)
Class A
Actual(b) $1,000 $1,024.50 $4.92 .98%
Hypothetical (5% return before expenses) $1,000 $1,019.93 $4.91 .98%
Class B
Actual(b) $1,000 $1,020.70 $8.72 1.74%
Hypothetical (5% return before expenses) $1,000 $1,016.17 $8.70 1.74%
Class C
Actual(b) $1,000 $1,020.70 $8.72 1.74%
Hypothetical (5% return before expenses) $1,000 $1,016.17 $8.70 1.74%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.45% for Class A, +2.07% for Class B and +2.07% for Class C.
(c) 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, 1.55% for Class B and
1.55% for Class C. See Notes 1 and 10 to the financial statements.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 25
RiverSource New York Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO(c)
Class A
Actual(b) $1,000 $1,026.00 $4.97 .99%
Hypothetical (5% return before expenses) $1,000 $1,019.89 $4.96 .99%
Class B
Actual(b) $1,000 $1,022.10 $8.77 1.75%
Hypothetical (5% return before expenses) $1,000 $1,016.12 $8.75 1.75%
Class C
Actual(b) $1,000 $1,022.10 $8.77 1.75%
Hypothetical (5% return before expenses) $1,000 $1,016.12 $8.75 1.75%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.60% for Class A, +2.21% for Class B and +2.21% for Class C.
(c) 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, 1.55% for Class B and
1.55% for Class C. See Notes 1 and 10 to the financial statements.
RiverSource Ohio Tax-Exempt Fund
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
SEPT. 1, 2006 FEB. 28, 2007 THE PERIOD(a) EXPENSE RATIO(c)
Class A
Actual(b) $1,000 $1,024.80 $4.07 .81%
Hypothetical (5% return before expenses) $1,000 $1,020.78 $4.06 .81%
Class B
Actual(b) $1,000 $1,020.90 $7.87 1.57%
Hypothetical (5% return before expenses) $1,000 $1,017.01 $7.85 1.57%
Class C
Actual(b) $1,000 $1,020.90 $7.87 1.57%
Hypothetical (5% return before expenses) $1,000 $1,017.01 $7.85 1.57%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Feb. 28, 2007:
+2.48% for Class A, +2.09% for Class B and +2.09% for Class C.
(c) 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, 1.55% for Class B and
1.55% for Class C. See Notes 1 and 10 to the financial statements.
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26 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource California Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (96.7%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Abag Finance Authority for Nonprofit Corporations
Revenue Bonds
San Diego Hospital Association
Series 2001A
08-15-20 6.13% $ 2,500,000 $ 2,712,625
Alhambra City Elementary School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (FSA)
09-01-22 5.95 1,055,000(b) 548,336
Anaheim Community Facilities District
Special Tax Bonds
Stadium Lofts
Series 2007
09-01-37 5.00 1,000,000 1,020,870
Anaheim Union High School District
Prerefunded Unlimited General Obligation Bonds
Series 2002A (FSA)
08-01-16 5.38 1,550,000 1,688,772
Beaumont Financing Authority
Prerefunded Revenue Bonds
Series 2000A
09-01-32 7.38 1,955,000 2,230,147
California County Tobacco Securitization Agency
Asset-backed Revenue Bonds
Alameda County
Series 2002
06-01-29 5.75 785,000 825,561
06-01-42 6.00 240,000 258,638
California Educational Facilities Authority
Revenue Bonds
Stanford University
Series 1997N
12-01-27 5.20 1,000,000 1,021,390
California Educational Facilities Authority
Revenue Bonds
University of Southern California
Series 2003A
10-01-33 5.00 2,000,000 2,107,920
California Educational Facilities Authority
Revenue Bonds
University of the Pacific
Series 2006
11-01-25 5.00 1,685,000 1,780,641
California Health Facilities Financing Authority
Prerefunded Revenue Bonds
Sutter Health
Series 1999A (MBIA)
08-15-28 5.35 160,000 168,118
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
California Health Facilities Financing Authority
Refunding Revenue Bonds
Cedars-Sinai Medical Center
Series 2005
11-15-18 5.00% $ 1,500,000 $ 1,596,675
11-15-34 5.00 1,525,000 1,591,536
California Health Facilities Financing Authority
Revenue Bonds
Catholic Healthcare West
Series 2004G
07-01-23 5.25 3,500,000 3,729,389
California Health Facilities Financing Authority
Revenue Bonds
Kaiser Permanente
Series 2006A
04-01-39 5.25 2,000,000 2,144,520
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006H (FGIC) A.M.T.
08-01-30 5.75 2,000,000 2,154,280
California Housing Finance Agency
Revenue Bonds
Home Mortgage
Series 2006K A.M.T.
08-01-41 4.80 1,500,000 1,509,660
02-01-42 5.50 1,000,000(g) 1,066,100
California Infrastructure & Economic Development Bank
Prerefunded Revenue Bonds
Bay Area Toll Bridges
1st Lien
Series 2003A (AMBAC)
07-01-36 5.00 225,000 258,658
California Pollution Control Financing Authority
Revenue Bonds
Waste Management Project
Series 2005C A.M.T.
11-01-23 5.13 1,500,000 1,581,135
California Rural Home Mortgage Finance Authority
Revenue Bonds
Mortgage-backed Securities Program
Series 1998B-5 (GNMA/FNMA/FHLMC) A.M.T.
12-01-29 6.35 45,000 45,025
California Statewide Communities Development Authority
Prerefunded Revenue Bonds
Thomas Jefferson School of Law Project
Series 2001
10-01-31 7.75 2,460,000 2,836,995
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2004E
04-01-32 3.88% $ 750,000 $ 751,388
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2006B
03-01-45 5.25 1,000,000(g) 1,069,440
California Statewide Communities Development Authority
Revenue Bonds
Kaiser Permanente
Series 2007B
04-01-36 4.37 300,000(i) 301,440
Chabot-Las Positas Community College District
Unlimited General Obligation Bonds
Capital Appreciation Election 2004-B
Zero Coupon
Series 2006 (AMBAC)
08-01-19 4.75 1,000,000(b) 587,510
City of Azusa
Special Tax Bonds Escrow
Community Facilities
Series 2007
09-01-27 5.00 1,110,000 1,127,183
City of Long Beach
Refunding Revenue Bonds
Series 2005A (MBIA) A.M.T.
05-15-20 5.00 1,500,000 1,596,285
05-15-21 5.00 1,000,000 1,062,760
City of Los Angeles
Revenue Bonds
Series 2003A (FSA)
02-01-13 5.00 2,000,000 2,152,120
Clovis Unified School District
Unlimited General Obligation Bonds
Capital Appreciation Election 2004
Zero Coupon
Series 2004A (FGIC)
08-01-24 4.65 5,000,000(b) 2,417,100
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2004A
07-01-24 5.00 1,000,000(c) 1,051,850
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-30 5.25 500,000(c) 544,145
See accompanying notes to investments in securities.
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 27
RiverSource California Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding
& Public Improvement Bonds
Series 2006B
07-01-32 5.25% $ 1,250,000(c) $ 1,359,363
07-01-35 5.00 1,250,000(c) 1,324,425
County of Riverside
Certificate of Participation
Series 1998 (MBIA)
12-01-21 5.00 1,530,000 1,575,640
County of San Diego
Certificate of Participation
Series 1993 Inverse Floater (AMBAC)
09-01-07 7.17 3,200,000(f) 3,261,759
Desert Sands Unified School District
Refunding Certificate of Participation
Series 2003 (MBIA)
03-01-17 5.25 1,135,000 1,230,624
Eastern Municipal Water
Special Tax Bonds
District #2004-27 Cottonwood
Series 2006
09-01-27 5.00 200,000 203,782
09-01-36 5.00 500,000 507,440
Encinitas Union School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1996 (MBIA)
08-01-15 5.85 2,500,000(b) 1,802,475
Fontana Unified School District
Unlimited General Obligation Bonds
Convertible Capital Appreciation
Series 1997D (FGIC)
05-01-22 5.75 2,000,000 2,124,920
Golden State Tobacco Securitization Corporation
Enhanced Asset-backed Revenue Bonds
Series 2005A
06-01-45 5.00 1,300,000 1,351,701
Golden State Tobacco Securitization Corporation
Prerefunded Enhanced Asset-backed Revenue Bonds
Series 2003B (FSA)
06-01-43 5.00 110,000 118,086
Golden State Tobacco Securitization Corporation
Revenue Bonds
Series 2003A-1
06-01-33 6.25 2,490,000 2,795,822
06-01-39 6.75 1,510,000 1,735,262
06-01-40 6.63 750,000 856,755
Inglewood Redevelopment Agency
Refunding Tax Allocation Bonds
Merged Redevelopment Project
Series 1998A (AMBAC)
05-01-23 5.25 1,100,000 1,257,333
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Lake Elsinore Public Financing Authority
Revenue Bonds
Series 1997F
09-01-20 7.10% $ 780,000 $ 803,876
Lammersville School District Community Facilities District
Special Tax Bonds
#2002 Mountain House
Series 2006
09-01-35 5.13 1,000,000 1,022,030
Lancaster Redevelopment Agency
Refunding Tax Allocation Bonds
Combined Redevelopment Project Areas
Series 2003 (MBIA)
08-01-17 5.13 1,840,000 2,052,888
Los Angeles Department of Water & Power
Revenue Bonds
Power System
Series 2003B (FSA)
07-01-16 5.13 1,460,000 1,582,246
07-01-17 5.13 2,315,000 2,503,395
Los Angeles Harbor Department
Refunding Revenue Bonds
Series 2006A (MBIA) A.M.T.
08-01-13 5.00 2,000,000 2,134,080
Los Angeles Harbor Department
Revenue Bonds
Series 1988 Escrowed to Maturity
10-01-18 7.60 880,000(g) 1,068,109
Los Angeles Municipal Improvement Corporation
Revenue Bonds
Police Headquarters Facility
Series 2006A (FGIC)
01-01-31 4.75 3,000,000 3,131,520
Menlo Park
Unlimited General Obligation Bonds
Series 2002
08-01-32 5.30 1,900,000 2,050,613
Merced Community College District
Refunding Revenue Bonds
School Facilities Financing Authority
Series 2006 (MBIA)
08-01-21 5.00 700,000 785,050
Oxnard School District
Unlimited General Obligation Refunding Bonds
Series 2001A (MBIA)
08-01-30 5.75 2,575,000 3,149,663
Pittsburg Redevelopment Agency
Tax Allocation Bonds
Los Medanos Community Development Project
Zero Coupon
Series 1999 (AMBAC)
08-01-24 6.05 2,100,000(b) 1,006,572
Port of Oakland
Revenue Bonds
Series 1997G (MBIA) A.M.T.
11-01-25 5.38 3,080,000 3,176,957
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Port of Oakland
Revenue Bonds
Series 2000K (FGIC) A.M.T.
11-01-18 5.63% $ 1,000,000 $ 1,050,700
Puerto Rico Highway & Transportation Authority
Refunding Revenue Bonds
Series 2007N (MBIA)
07-01-32 5.25 1,000,000(c,j) 1,187,100
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2004J (AMBAC)
07-01-36 5.00 1,000,000(c) 1,062,730
Puerto Rico Public Finance Corporation
Revenue Bonds
Commonwealth Appropriation
Series 2004A (MBIA)
08-01-29 5.25 1,000,000(c) 1,067,990
Roseville Natural Gas Finance Authority
Revenue Bonds
Series 2007
02-15-22 5.00 1,500,000 1,653,240
02-15-25 5.00 1,500,000 1,666,230
San Diego Public Water Facilities Financing Authority
Revenue Bonds
Series 2002 (MBIA)
08-01-26 5.00 2,500,000 2,627,800
San Diego Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999A (FGIC)
07-01-12 3.70 3,420,000(b) 2,794,721
San Francisco Bay Area Transit Financing Authority
Prerefunded Revenue Bonds
Series 2001 (AMBAC)
07-01-36 5.13 1,475,000 1,568,471
San Francisco Bay Area Transit Financing Authority
Unrefunded Revenue Bonds
Series 2001 (AMBAC)
07-01-36 5.13 525,000 550,111
San Francisco City & County Airports Commission
Refunding Revenue Bonds
2nd Series 2001-27B (FGIC)
05-01-16 5.25 2,170,000 2,312,981
San Francisco City & County Public Utilities Commission
Revenue Bonds
Series 2002A (MBIA)
11-01-25 5.00 2,000,000 2,114,760
San Juan Unified School District
Unlimited General Obligation Bonds
Capital Appreciation
Zero Coupon
Series 1999 (FSA)
08-01-21 5.68 820,000(b) 457,634
08-01-24 5.70 1,810,000(b) 882,484
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
28 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource California Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
San Mateo County Community College District
Unlimited General Obligation Bonds
Election of 2001
Series 2002A (FGIC)
09-01-18 5.38% $ 1,000,000 $ 1,089,770
Santa Maria Joint Union High School District
Prerefunded Unlimited General Obligation Bonds
Election of 2000
Series 2003B (FSA)
08-01-27 5.00 3,000,000 3,306,779
Semitropic Improvement District
Revenue Bonds
Series 2004A (XLCA)
12-01-28 5.00 2,000,000 2,112,780
State of California
Prerefunded Unlimited General Obligation Bonds
Series 2000
10-01-25 5.38 2,500,000 2,652,800
State of California
Unlimited General Obligation Bonds
Series 2001
03-01-31 5.13 2,500,000 2,605,550
06-01-31 5.13 2,500,000 2,611,475
State of California
Unlimited General Obligation Bonds
Series 2002
02-01-15 6.00 1,000,000(g) 1,146,040
State of California
Unlimited General Obligation Bonds
Series 2003
02-01-21 5.25 2,500,000 2,698,400
02-01-29 5.25 2,500,000 2,669,600
02-01-32 5.00 2,500,000 2,621,225
State of California
Unlimited General Obligation Bonds
Series 2004
03-01-14 5.25 2,000,000 2,184,220
04-01-29 5.30 2,000,000 2,158,720
02-01-33 5.00 1,000,000 1,051,160
State of California
Unlimited General Obligation Bonds
Series 2004 (FGIC)
02-01-33 5.00 2,500,000 2,643,275
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2003
11-01-22 5.00 2,000,000 2,114,560
11-01-23 5.13 2,500,000 2,673,325
11-01-24 5.13 2,000,000 2,136,260
11-01-29 5.25 500,000 537,690
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
State of California
Unlimited General Obligation Bonds
Various Purpose
Series 2005
06-01-28 5.00% $ 2,000,000 $ 2,126,080
State of California
Unlimited General Obligation Bonds
Veterans
Series 2000BJ A.M.T.
12-01-12 4.95 2,250,000 2,318,445
12-01-13 5.05 1,435,000 1,480,418
12-01-14 5.15 2,535,000 2,617,235
State of California
Unrefunded Unlimited General Obligation Bonds
Series 2000
05-01-19 5.63 400,000 427,016
Stockton
Revenue Bonds
Mortgage-backed Securities Program
Series 1990A (GNMA/FNMA/FHLMC) A.M.T.
02-01-23 7.50 30,000 30,230
Tobacco Securitization Authority of Southern California
Revenue Bonds
Series 2006-A1
06-01-37 5.00 2,000,000 2,030,140
University of California
Revenue Bonds
Multiple Purpose Projects
Series 2003Q (FSA)
09-01-18 5.00 2,000,000 2,138,140
Walnut Energy Center Authority
Prerefunded Revenue Bonds
Series 2004A (AMBAC)
01-01-29 5.00 2,500,000 2,632,575
01-01-34 5.00 1,000,000 1,050,300
Whittier Union High School District
Prerefunded Unlimited General Obligation Bonds
Election of 1999
Series 2003D (FSA)
08-01-28 5.00 2,615,000 2,815,309
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $162,562,209) $ 171,187,067
- -------------------------------------------------------------------------------
MUNICIPAL NOTES (1.8%)
ISSUE(d,e,h) EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
California Health Facilities Financing Authority
Revenue Bonds
Sutter Health
V.R.D.N. Series 1996B (KBC Bank) AMBAC
07-01-12 3.50% $ 700,000 $ 700,000
California Infrastructure & Economic Development Bank
Revenue Bonds
Rand Corporation
V.R.D.N. Series 2002B
(JPMorgan Chase Bank) AMBAC
04-01-42 3.50 1,100,000 1,100,000
California State Department of Water Resources
Revenue Bonds
V.R.D.N. Series 2002B-3
(Bank of New York)
05-01-22 3.50 900,000 900,000
California State Department of Water Resources
Revenue Bonds
V.R.D.N. Series 2005F-4
(Bank of America)
05-01-22 3.53 400,000 400,000
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $3,100,000) $ 3,100,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $165,662,209)(k) $ 174,287,067
===============================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 29
RiverSource California Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
4.3% of net assets at Feb. 28, 2007.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
12.3% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a
decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on Feb. 28, 2007. At Feb. 28, 2007, the value of
inverse floaters represented 1.8% of net assets.
(g) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
------------------------------------------------------------------------
SALE CONTRACTS
U.S. Treasury Note, June 2007, 10-year $13,600,000
(h) 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, 2007.
(i) Interest rate varies either based on a predetermined schedule or to
reflect current market conditions; rate shown is the effective rate on
Feb. 28, 2007.
(j) At Feb. 28, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$1,187,100.
(k) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $165,662,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 8,664,000
Unrealized depreciation (39,000)
-------------------------------------------------------------------------
Net unrealized appreciation $ 8,625,000
-------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
30 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource Massachusetts Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (95.9%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Boston Metropolitan District
Unlimited General Obligation Refunding Bonds
Series 2002A
12-01-11 5.13% $ 2,050,000 $ 2,173,964
City of Boston
Revenue Bonds
Series 2004A
11-01-22 5.00 1,000,000 1,071,470
City of Boston
Unlimited General Obligation Refunding Bonds
Series 2003A (MBIA)
02-01-23 5.00 1,000,000 1,052,640
City of Springfield
Prerefunded Limited General Obligation Bonds
State Qualified
Series 2003 (MBIA)
01-15-20 5.25 1,405,000 1,522,584
Commonwealth of Massachusetts
Limited General Obligation Bonds
Consolidated Loan
Series 2002C (FSA)
11-01-15 5.50 2,500,000 2,826,599
Commonwealth of Massachusetts
Limited General Obligation Refunding Bonds
Series 1997A (AMBAC)
08-01-10 5.75 2,185,000 2,332,051
Commonwealth of Massachusetts
Limited General Obligation Refunding Bonds
Series 2004B
08-01-22 5.25 500,000 573,835
08-01-28 5.25 500,000 585,330
Commonwealth of Massachusetts
Limited General Obligation Refunding Bonds
Series 2004B (MBIA)
08-01-27 5.25 500,000 586,595
Commonwealth of Massachusetts
Prerefunded Limited General Obligation Bonds
Consolidated Loan
Series 2002A (FGIC)
01-01-14 5.00 1,500,000 1,536,105
Commonwealth of Massachusetts
Prerefunded Limited General Obligation Bonds
Consolidated Loan
Series 2002C
11-01-30 5.25 1,290,000 1,390,452
11-01-30 5.25 710,000(g) 765,288
Commonwealth of Massachusetts
Prerefunded Unlimited General Obligation Bonds
Consolidated Loan
Series 2003D
10-01-22 5.25 1,000,000 1,088,450
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Commonwealth of Massachusetts
Refunding Revenue Bonds
Series 2005 (FGIC)
01-01-28 5.50% $ 500,000 $ 602,095
Commonwealth of Massachusetts
Special Obligation Refunding Bonds
Federal Highway Grant Anticipation Notes
Series 2003A (FSA)
12-15-14 5.00 1,000,000 1,083,600
Commonwealth of Massachusetts
Unlimited General Obligation Bonds
Consolidated Loan
Series 2005B
08-01-14 5.00 750,000 810,608
Commonwealth of Massachusetts
Unlimited General Obligation Refunding Bonds
Series 2004A (FSA)
08-01-20 5.25 500,000(g) 571,055
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001 (FSA)
07-01-16 5.50 500,000(b) 569,965
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001A (FGIC)
07-01-29 5.50 250,000(b) 304,588
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-27 5.25 375,000(b) 409,020
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 2006B
07-01-32 5.25 375,000(b) 407,809
07-01-35 5.00 250,000(b) 264,885
Massachusetts Bay Transportation Authority
Prerefunded Special Assessment Bonds
Series 2005A
07-01-25 5.00 250,000(g) 273,460
07-01-26 5.00 250,000 273,460
Massachusetts Bay Transportation Authority
Refunding Revenue Bonds
Series 1992B
03-01-16 6.20 1,500,000 1,709,985
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Massachusetts Bay Transportation Authority
Revenue Bonds
Series 2005A
07-01-30 5.00% $ 450,000 $ 515,574
07-01-31 5.00 500,000 573,870
Massachusetts Development Finance Agency
Prerefunded Revenue Bonds
Briarwood
Series 2001B
12-01-30 8.25 750,000 873,465
Massachusetts Development Finance Agency
Revenue Bonds
Boston University
Series 1999P
05-15-59 6.00 325,000 403,822
Massachusetts Development Finance Agency
Revenue Bonds
Devens Electric System
Series 2001
12-01-30 6.00 1,000,000 1,076,050
Massachusetts Development Finance Agency
Revenue Bonds
May Institute
Series 1999 (Radian Group Financial Guaranty)
09-01-29 5.75 1,000,000 1,050,890
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Boston College
Series 2003N
06-01-21 5.25 1,000,000 1,086,170
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Harvard University
Series 2002FF
07-15-37 5.13 2,000,000 2,121,380
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Massachusetts Institute of Technology
Series 2004M
07-01-25 5.25 1,000,000 1,166,890
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Milford Regional Medical
Series 2007E
07-15-27 5.00 250,000 259,600
07-15-32 5.00 250,000 258,573
07-15-37 5.00 500,000 515,060
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 31
RiverSource Massachusetts Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Williams College
Series 2003H
07-01-33 5.00% $ 1,000,000 $ 1,055,320
Massachusetts Housing Finance Agency
Revenue Bonds
Single Family
Series 2003-98 A.M.T.
06-01-23 4.88 985,000 1,008,000
Massachusetts Housing Finance Agency
Revenue Bonds
Single Family
Series 2006-122 A.M.T.
12-01-31 4.85 750,000 769,103
Massachusetts Industrial Finance Agency
Revenue Bonds
Tufts University
Series 1998H (MBIA)
02-15-28 4.75 1,000,000 1,009,960
Massachusetts Municipal Wholesale Electric Company
Revenue Bonds
Nuclear Project #5
Series 2001A (MBIA)
07-01-10 5.00 1,000,000 1,040,240
Massachusetts Port Authority
Revenue Bonds
Series 2003A (MBIA)
07-01-18 5.00 1,000,000 1,062,780
Massachusetts State Water Pollution Abatement
Prerefunded Revenue Bonds
Pool Program
Series 2004-10
08-01-34 5.00 855,000 928,128
Massachusetts State Water Pollution Abatement
Unrefunded Revenue Bonds
Pool Program
Series 2002-8
08-01-20 5.00 25,000 26,528
Massachusetts State Water Pollution Abatement
Unrefunded Revenue Bonds
Pool Program
Series 2004-10
08-01-34 5.00 145,000 153,542
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Massachusetts Water Resources Authority
Refunding Revenue Bonds
Series 1998B (FSA)
08-01-11 5.50% $ 1,430,000 $ 1,536,106
Massachusetts Water Resources Authority
Refunding Revenue Bonds
Series 2005A (MBIA)
08-01-22 5.00 500,000 546,655
Massachusetts Water Resources Authority
Revenue Bonds
Series 1992A (FGIC)
07-15-19 6.50 2,000,000 2,400,139
Massachusetts Water Resources Authority
Revenue Bonds
Series 2004D (MBIA)
08-01-27 4.75 1,000,000 1,030,570
Puerto Rico Highway & Transportation Authority
Refunding Revenue Bonds
Series 2007N (MBIA)
07-01-32 5.25 300,000(b,f) 356,130
Puerto Rico Highway & Transportation Authority
Revenue Bonds
Series 1996Y
07-01-13 6.25 300,000(b) 339,324
Puerto Rico Infrastructure Financing Authority
Refunding Special Tax Bonds
Series 2005C (AMBAC)
07-01-23 5.50 500,000(b) 594,554
University of Massachusetts Building Authority
Prerefunded Revenue Bonds
Series 2003-1 (AMBAC)
11-01-21 5.25 1,000,000 1,093,740
University of Massachusetts Building Authority
Revenue Bonds
Series 1976 Escrowed to Maturity
05-01-11 7.50 50,000 53,778
Woods Hole Martha's Vineyard &
Nantucket Steamship Authority
Revenue Bonds
Series 2004B
03-01-20 5.00 750,000 810,435
Worcester
Limited General Obligation Bonds
Series 2001A (FGIC)
08-15-12 5.50 1,400,000 1,500,590
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $50,237,779) $ 52,002,859
- --------------------------------------------------------------------------------
MUNICIPAL BONDS HELD IN TRUST (2.1%)(e)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(c,d)
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2002 (MBIA)
07-01-17 5.50% $ 1,000,000(b) $ 1,149,510
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $1,000,000) $ 1,149,510
- --------------------------------------------------------------------------------
MUNICIPAL NOTES (0.7%)
ISSUE(c,d,h) EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Capital Assets Program
V.R.D.N. Series 1985D (State Street B&T) MBIA
01-01-35 3.63% $ 400,000 $ 400,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $400,000) $ 400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $51,637,779)(i) $ 53,552,369
================================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
32 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Massachusetts Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by 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
8.1% of net assets at Feb. 28, 2007.
(c) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(d) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
3.3% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(e) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(f) At Feb. 28, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$356,130.
(g) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
------------------------------------------------------------------------
Sale contracts
U.S. Treasury Note, June 2007, 10-year $ 4,300,000
(h) 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, 2007.
(i) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $51,138,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 1,989,000
Unrealized depreciation (75,000)
------------------------------------------------------------------------
Net unrealized appreciation $ 1,914,000
------------------------------------------------------------------------
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 - 2007 SEMIANNUAL REPORT 33
INVESTMENTS IN SECURITIES
RiverSource Michigan Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (95.4%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Allen Park Public School District
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-18 5.00% $ 500,000 $ 536,320
Anchor Bay School District
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-29 5.00 1,000,000 1,050,720
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001A (FGIC)
07-01-29 5.50 500,000(c) 609,175
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2004A
07-01-24 5.00 500,000(c) 525,925
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-30 5.25 250,000(c) 272,073
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 2006B
07-01-32 5.25 250,000(c) 271,873
07-01-35 5.00 250,000(c) 264,885
Detroit
Prerefunded Revenue Bonds
Series 2003B (MBIA)
07-01-32 5.25 1,500,000 1,634,324
Detroit
Revenue Bonds
Second Lien
Series 2005A (MBIA)
07-01-30 5.00 500,000 532,520
Detroit
Revenue Bonds
Senior Lien
Series 2003A (MBIA)
07-01-34 5.00 1,375,000 1,450,281
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Detroit
Unlimited General Obligation Bonds
Series 2001A-1 (MBIA)
04-01-15 5.38% $ 1,000,000 $ 1,067,230
Eastern Michigan University
Prerefunded Revenue Bonds
Series 2003A (FGIC)
06-01-28 5.00 1,000,000 1,074,660
Goodrich Area School District
Prerefunded Unlimited General Obligation Bonds
Series 2003B
(Qualified School Bond Loan Fund)
05-01-27 5.00 505,000 544,935
Goodrich Area School District
Unrefunded Unlimited General Obligation Bonds
Series 2003B
(Qualified School Bond Loan Fund)
05-01-27 5.00 495,000 524,834
Grand Rapids Building Authority
Prerefunded Revenue Bonds
Series 2002A (AMBAC)
10-01-17 5.50 505,000(h) 551,975
Grand Rapids Building Authority
Unrefunded Revenue Bonds
Series 2002A (AMBAC)
10-01-17 5.50 765,000 832,940
Grand Traverse Academy
Refunding Revenue Bonds
Series 2007
11-01-17 5.00 390,000(i) 407,047
Howell Public Schools
Unlimited General Obligation Bonds
School Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-29 5.00 1,000,000 1,056,080
Jackson
Limited General Obligation Bonds
Capital Appreciation
Downtown Development
Zero Coupon
Series 2001 (FSA)
06-01-21 5.58 1,450,000(b) 796,717
L'Anse Creuse Public Schools
Unlimited General Obligation Refunding Bonds
Building & Site
Series 2003
(Qualified School Bond Loan Fund)
05-01-11 4.00 1,000,000 1,011,030
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Lansing Community College
Limited General Obligation Bonds
Series 2002 (FGIC)
05-01-12 5.00% $ 1,000,000 $ 1,063,840
Lawton Community Schools
Prerefunded Unlimited General Obligation Bonds
Series 2001
(Qualified School Bond Loan Fund)
05-01-31 5.00 800,000 845,816
Lawton Community Schools
Unrefunded Unlimited General Obligation Bonds
Series 2001
(Qualified School Bond Loan Fund)
05-01-31 5.00 200,000 208,494
Manchester Community Schools
Prerefunded Unlimited General Obligation Bonds
Building & Site
Series 2001
(Qualified School Bond Loan Fund)
05-01-26 5.00 1,400,000 1,473,303
Michigan Higher Education Student Loan Authority
Revenue Bonds
Student Loan
Series 2006 XVII-Q (AMBAC) A.M.T.
03-01-26 4.95 200,000 208,614
03-01-31 5.00 725,000 758,444
Michigan Municipal Bond Authority
Refunding Revenue Bonds
Clean Water State Revolving Fund
Series 2005
10-01-15 5.00 500,000(h) 546,210
Michigan Municipal Bond Authority
Revenue Bonds
Clean Water Revolving Fund
Series 2001
10-01-14 5.00 500,000 528,390
10-01-20 5.00 1,000,000 1,054,630
Michigan Municipal Bond Authority
Revenue Bonds
Clean Water Revolving Fund
Series 2006
10-01-27 5.00 390,000(h) 420,432
Michigan Municipal Bond Authority
Revenue Bonds
Clean Water State Revolving Fund
Series 2002
10-01-20 5.38 1,000,000 1,089,390
10-01-21 5.38 1,000,000 1,087,820
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
34 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Michigan Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Michigan Municipal Bond Authority
Revenue Bonds
School District City of Detroit
Series 2005 (FSA)
06-01-19 5.00% $ 500,000 $ 536,950
Michigan Public Power Agency
Refunding Revenue Bonds
Belle River Project
Series 2002A (MBIA)
01-01-09 5.25 1,000,000 1,027,730
01-01-14 5.25 500,000 545,380
Michigan State Building Authority
Refunding Revenue Bonds
Facilities Program
Series 2003 II (MBIA)
10-15-29 5.00 1,000,000 1,058,140
Michigan State Hospital Finance Authority
Refunding Revenue Bonds
Henry Ford Health System
Series 2006A
11-15-26 5.00 500,000 529,510
11-15-46 5.25 750,000 801,653
Michigan State Hospital Finance Authority
Revenue Bonds
MidMichigan Obligated Group
Series 2006A
04-15-36 5.00 500,000 522,295
Michigan State Hospital Finance Authority
Revenue Bonds
Oakwood Obligated Group
Series 2003
11-01-18 5.50 1,000,000 1,078,960
Michigan Strategic Fund
Refunding Revenue Bonds
Detroit Edison
Series 1990BB (MBIA)
07-15-08 7.00 1,000,000 1,043,760
Oakland Schools Intermediate School District
Limited General Obligation Bonds
School Building & Site
Series 2007 (FSA)
05-01-36 5.00 500,000(i) 538,340
Plymouth-Canton Community School District
Unlimited General Obligation Refunding Bonds
Series 2003
(Qualified School Bond Loan Fund)
05-01-15 5.25 600,000 653,160
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2002C (XLCA)
07-01-13 5.50 1,000,000(c) 1,105,329
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2004J (AMBAC)
07-01-36 5.00% $ 500,000(c) $ 531,365
Roseville School District
Refunding Unlimited General Obligation Bonds
School Building & Site
Series 2006 (FSA)
(Qualified School Bond Loan Fund)
05-01-23 5.00 500,000 539,185
Saline Area Schools
Unlimited General Obligation Bonds
Series 2000A
(Qualified School Bond Loan Fund)
05-01-09 4.75 1,000,000 1,021,720
South Lyon Community Schools
Prerefunded Unlimited General Obligation Bonds
School Building & Site
Series 2003 (FGIC)
05-01-28 5.00 1,000,000 1,068,900
Southfield Public Schools
Unlimited General Obligation Bonds
School Building & Site
Series 2003A
(Qualified School Bond Loan Fund)
05-01-22 5.25 1,025,000 1,109,932
State of Michigan
Certificate of Participation
Series 2004A (MBIA)
09-01-31 4.25 750,000 765,045
Summit Academy North
Prerefunded Certificate of Participation
Series 2001
07-01-30 7.38 750,000 835,613
Summit Academy
Prerefunded Certificate of Participation
Full Term
Series 1998
09-01-18 7.00 455,000 474,943
Troy City School District
Unlimited General Obligation Bonds
School Building & Site
Series 2006 (MBIA)
(Qualified School Board Loan Fund)
05-01-24 5.00 500,000 540,780
Waverly Community School
Prerefunded Unlimited General Obligation Bonds
Series 2000 (FGIC)
05-01-17 5.25 1,000,000 1,048,150
Wayne County Airport Authority
Revenue Bonds
Detroit Metro Wayne County Airport
Series 2005 (MBIA) A.M.T.
12-01-19 4.75 500,000 518,060
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Western Township Utilities Authority
Limited General Obligation Bonds
Series 2002 (FGIC)
01-01-08 5.00% $ 500,000 $ 505,395
Williamston Community School District
Unlimited General Obligation Bonds
Series 1996 (MBIA)
(Qualified School Bond Loan Fund)
05-01-25 5.50 1,000,000 1,160,290
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $42,267,523) $ 43,861,512
- ------------------------------------------------------------------------------
MUNICIPAL BONDS HELD IN TRUST (1.3%)(g)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE (d,e)
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2002 (MBIA)
07-01-17 5.50% $ 500,000(c) $ 574,755
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $561,588) $ 574,755
- ------------------------------------------------------------------------------
MUNICIPAL NOTES (4.6%)
ISSUE(d,e,f) EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
Royal Oak Hospital Finance Authority
Refunding Revenue Bonds
William Beaumont University
V.R.D.N. Series 2006U (Morgan Stanley Bank) AMBAC
01-01-20 3.64% $ 1,300,000 $ 1,300,000
University of Michigan
Refunding Revenue Bonds
University of Michigan Hospitals
V.R.D.N. Series 1992A
12-01-19 3.64 800,000 800,000
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $2,100,000) $ 2,100,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $44,929,111)(j) $ 46,536,267
==============================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 35
RiverSource Michigan Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
9.0% of net assets at Feb. 28, 2007.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
3.2% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party,
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, 2007.
(g) Municipal Bonds Held in Trust - See Note 1 to the financial statements.
(h) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
------------------------------------------------------------------------
SALE CONTRACTS
U.S. Treasury Note, June 2007, 10-year $ 3,700,000
(i) At Feb. 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$938,956.
(j) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $44,679,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 1,647,000
Unrealized depreciation (40,000)
------------------------------------------------------------------------
Net unrealized appreciation $ 1,607,000
------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
36 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource Minnesota Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (93.8%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Anoka County Housing & Redevelopment Authority
Unlimited General Obligation Bonds
Housing Development
Series 2004 (AMBAC)
02-01-34 5.00% $ 1,355,000 $ 1,432,655
Anoka-Hennepin Independent School District #11
Unlimited General Obligation Bonds
Series 2001A
(School District Credit Enhancement Program)
02-01-13 5.00 4,175,000 4,378,281
02-01-15 5.00 1,990,000 2,084,684
02-01-16 5.00 2,000,000 2,095,900
Austin Housing & Redevelopment Authority
Revenue Bonds
Courtyard Residence Project
Series 2000A
01-01-32 7.25 2,000,000 2,094,380
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 4,244,760
City of Breckenridge
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00 3,335,000 3,502,450
City of Chaska
Refunding Revenue Bonds
Generating Facilities
Series 2005A
10-01-20 5.25 1,165,000 1,275,966
10-01-30 5.00 3,800,000 4,002,844
City of Minneapolis
Revenue Bonds
Fairview Health Services
Series 2002B (MBIA)
05-15-14 5.50 2,050,000 2,239,748
05-15-15 5.50 2,160,000 2,355,653
05-15-16 5.50 2,200,000 2,397,098
05-15-17 5.50 1,295,000 1,409,102
City of Minneapolis
Unlimited General Obligation Bonds
Convention Center
Series 2002
12-01-12 5.00 1,500,000 1,570,620
City of Minneapolis
Unlimited General Obligation Bonds
Various Purpose
Series 2001
12-01-11 5.00 3,035,000 3,217,070
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
City of Stillwater
Revenue Bonds
Health System Obligation Group
Series 2005
06-01-19 5.00% $ 2,505,000 $ 2,636,062
06-01-25 5.00 1,750,000 1,836,590
06-01-35 5.00 3,145,000 3,293,947
City of Willmar
Unlimited General Obligation Bonds
Rice Memorial Hospital Project
Series 2002 (FSA)
02-01-11 5.00 1,025,000 1,074,149
02-01-12 5.00 1,120,000 1,184,736
02-01-13 5.00 1,200,000 1,280,064
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001 (FSA)
07-01-16 5.50 1,500,000(c) 1,709,895
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-27 5.25 2,000,000(c) 2,181,440
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 2006B
07-01-32 5.25 2,000,000(c) 2,174,980
07-01-35 5.00 1,500,000(c) 1,589,310
County of Ramsey
Unlimited General Obligation Refunding Bonds
Capital Improvement Plan
Series 2002B
02-01-14 5.25 3,840,000 4,075,968
County of Washington
Unlimited General Obligation Bonds
Capital Improvement Plan
Series 2000A
02-01-20 5.50 1,000,000 1,048,560
Edina Independent School District #273
Unlimited General Obligation Bonds
Series 2004
02-01-12 4.00 3,700,000 3,759,237
02-01-22 4.25 3,000,000 3,026,430
02-01-23 4.50 3,000,000 3,095,640
02-01-24 4.50 3,400,000 3,524,746
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
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 $ 3,193,140
Elk River Independent School District #728
Unlimited General Obligation Refunding Bonds
School Building
Series 2007A (FSA)
(School District Credit Enhancement Program)
02-01-22 4.25 5,275,000(b) 5,313,033
Farmington Independent School District #192
Unlimited General Obligation Bonds
School Building
Series 2005B (FSA)
(School District Credit Enhancement Program)
02-01-21 5.00 3,615,000 3,885,691
Hennepin County
Unlimited General Obligation Bonds
Series 2003
12-01-23 4.75 2,000,000(h) 2,078,060
Lake Superior Independent School District #381
Unlimited General Obligation Bonds Building
Series 2002A (FSA)
(School District Credit Enhancement Program)
04-01-13 5.00 1,795,000 1,922,840
Lakeville Independent School District #194
Unlimited General Obligation Bonds
Series 1997A
(School District Credit Enhancement Program)
02-01-22 5.13 2,400,000 2,430,096
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 1,576,318
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2003
12-01-12 5.25 1,000,000 1,055,600
12-01-15 5.13 1,500,000 1,575,210
12-01-16 5.25 1,250,000 1,321,000
Minneapolis & St. Paul
Housing & Redevelopment Authority
Revenue Bonds
HealthSpan
Series 1993A (AMBAC)
11-15-18 4.75 5,000,000 5,002,350
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 37
RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 1996-1
06-01-11 6.00% $ 980,000 $ 985,370
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 1997-7A
06-01-12 5.50 250,000 253,308
Minneapolis Community Development Agency
Revenue Bonds
Limited Tax - Common Bond Fund
Series 2001-2-A A.M.T.
06-01-19 5.88 1,000,000 1,069,960
Minneapolis/St. Paul Housing Finance Board
Revenue Bonds
Mortgage-backed-City Living
Series 2006A-5 (GNMA/FNMA/FHLMC)
04-01-27 5.45 2,250,000 2,404,373
Minneapolis/St. Paul Housing Finance Board
Revenue Bonds
Single Family Housing
Series 2005-A-4 (GNMA/FNMA/FHLMC) A.M.T.
12-01-37 4.70 104,428 105,580
Minneapolis-St. Paul Metropolitan Airports Commission
Prerefunded Revenue Bonds
Series 1998A (AMBAC)
01-01-24 5.20 4,000,000 4,090,680
Minneapolis-St. Paul Metropolitan Airports Commission
Prerefunded Revenue Bonds
Sub Series 2001C (FGIC)
01-01-18 5.50 2,000,000 2,132,240
01-01-32 5.25 7,000,000 7,400,959
Minneapolis-St. Paul Metropolitan Airports Commission
Revenue Bonds
Series 1999B (FGIC) A.M.T.
01-01-16 5.63 2,920,000 3,042,698
Minneapolis-St. Paul Metropolitan Airports Commission
Revenue Bonds
Series 2001B (FGIC) A.M.T.
01-01-16 5.75 4,875,000 5,190,315
Minnesota Agricultural & Economic Development Board
Prerefunded Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38 4,845,000 5,341,273
11-15-29 6.38 2,910,000 3,208,071
Minnesota Agricultural & Economic Development Board
Revenue Bonds
Health Care Benedictine
Series 1999A (MBIA)
02-15-16 4.75 1,000,000 1,036,700
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Minnesota Agricultural & Economic Development Board
Unrefunded Revenue Bonds
Health Care System
Series 2000A
11-15-22 6.38% $ 155,000 $ 170,877
11-15-29 6.38 90,000 99,482
Minnesota Higher Education Facilities Authority
Revenue Bonds
Macalester College
6th Series 2004B
03-01-17 5.00 2,395,000 2,562,363
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. John's University
6th Series 2005G
10-01-22 5.00 2,000,000 2,140,880
Minnesota Higher Education Facilities Authority
Revenue Bonds
University of St.Thomas
5th Series 2004Y
10-01-34 5.25 2,800,000 3,007,704
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006B A.M.T.
07-01-26 4.75 1,905,000(h) 1,948,263
07-01-31 4.85 2,570,000 2,633,505
07-01-37 4.90 5,000,000 5,105,900
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2006M A.M.T.
01-01-37 5.75 3,000,000 3,223,650
Minnesota Housing Finance Agency
Revenue Bonds
Residential Housing Finance
Series 2007D A.M.T.
01-01-38 5.50 4,000,000(b) 4,252,280
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1996J A.M.T.
07-01-21 5.60 80,000 81,622
Minnesota Housing Finance Agency
Revenue Bonds
Single Family Mortgage
Series 1997K A.M.T.
01-01-26 5.75 935,000(h) 951,176
Minnesota Public Facilities Authority
Prerefunded Revenue Bonds
Series 2001A
03-01-20 5.00 4,000,000 4,155,040
Minnesota Public Facilities Authority
Revenue Bonds
Series 2002B
03-01-13 5.25 2,500,000 2,713,425
03-01-14 5.25 2,500,000 2,741,550
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Minnesota Public Facilities Authority
Revenue Bonds
Series 2005C
03-01-25 5.00% $ 2,000,000 $ 2,148,340
Minnesota State Municipal Power Agency
Revenue Bonds
Series 2004A
10-01-29 5.13 3,500,000 3,710,350
Minnesota State Municipal Power Agency
Revenue Bonds
Series 2005
10-01-30 5.00 2,000,000 2,106,760
Northern Municipal Power Agency
Refunding Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1989A (AMBAC)
01-01-10 3.80 2,000,000(g,h) 1,790,960
Northern Municipal Power Agency
Refunding Revenue Bonds
Series 1998B (AMBAC)
01-01-20 4.75 5,000,000 5,124,400
Northfield
Revenue Bonds
Series 2006
11-01-31 5.38 1,500,000 1,576,635
Osseo Independent School District #279
Unlimited General Obligation Bonds
School Building
Series 2000A
(School District Credit Enhancement Program)
02-01-13 5.75 3,200,000 3,406,912
02-01-14 5.75 1,100,000 1,169,685
Osseo Independent School District #279
Unlimited General Obligation Bonds
Series 2002A (FSA)
(School District Credit Enhancement Program)
02-01-11 5.00 1,570,000 1,648,783
02-01-12 5.00 3,455,000 3,664,235
02-01-15 5.25 3,585,000 3,837,061
Plymouth Housing & Redevelopment Authority
Unlimited General Obligation Bonds
Governmental Housing Project
Series 2005
02-01-35 5.00 2,135,000 2,291,880
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2003NN (MBIA)
07-01-32 5.00 2,820,000(c) 2,980,852
Puerto Rico Highway & Transportation Authority
Revenue Bonds
Series 1996Y
07-01-13 6.25 1,650,000(c) 1,866,282
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 2,250,000(c) 2,421,653
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
38 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
Puerto Rico Municipal Finance Agency
Unlimited General Obligation Bonds
Series 2005A
08-01-11 5.00% $ 1,000,000(c) $ 1,045,330
Puerto Rico Public Buildings Authority
Refunding Revenue Bonds
Government Facilities
Series 2004J (AMBAC)
07-01-36 5.00 1,500,000(c) 1,594,095
Shakopee
Revenue Bonds
St. Francis Regional Medical Center
Series 2004
09-01-25 5.10 3,300,000 3,467,508
South Washington County
Independent School District #833
Unlimited General Obligation Bonds
School Building
Series 2006A (FSA)
(School District Credit Enhancement Program)
02-01-15 5.00 4,500,000 4,891,230
Southern Minnesota Municipal Power Agency
Revenue Bonds
Capital Appreciation
Zero Coupon
Series 1994A (MBIA)
01-01-19 6.67 17,000,000(g) 10,472,679
Southern Minnesota Municipal Power Agency
Revenue Bonds
Series 2002A (AMBAC)
01-01-17 5.25 6,000,000 6,707,280
St. Cloud Housing & Redevelopment Authority
Revenue Bonds
State University Foundation Project
Series 2002
05-01-18 5.13 3,000,000 3,187,260
St. Paul Housing & Redevelopment Authority
Prerefunded Revenue Bonds
Community of Peace Academy Project
Series 2001A
12-01-30 7.88 2,390,000 2,768,696
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Healtheast Project
Series 2005
11-15-25 6.00 1,250,000 1,395,738
St. Paul Housing & Redevelopment Authority
Revenue Bonds
HealthPartners Obligation Group Project
Series 2006
05-15-23 5.25 1,000,000 1,068,870
05-15-26 5.25 1,000,000 1,062,370
05-15-36 5.25 4,750,000 5,030,915
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Lyngblomsten Care Center Housing Project
Series 1993
11-01-17 7.13% $ 1,410,000 $ 1,413,440
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Rental - Lyngblomsten Housing Project
Series 1993
11-01-24 7.00 1,640,000 1,643,460
St. Paul Port Authority
Revenue Bonds
Office Building at Cedar Street
Series 2003
12-01-23 5.00 5,000,000 5,298,550
12-01-27 5.13 5,350,000 5,695,610
State of Minnesota
Unlimited General Obligation Bonds
Series 2001
10-01-10 5.00 5,000,000 5,234,250
10-01-14 5.00 4,000,000 4,234,040
10-01-15 5.00 4,455,000 4,725,285
State of Minnesota
Unlimited General Obligation Bonds
Series 2002
08-01-10 5.00 4,075,000 4,257,519
11-01-15 5.25 3,575,000 3,864,718
Steele Count
Revenue Bonds
Elderly Housing Project
Series 2000
06-01-30 6.88 2,205,000 2,406,118
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 2,605,650
University of Minnesota
Revenue Bonds
State Supported Stadium Debt
Series 2006
08-01-24 5.00 1,750,000 1,891,698
08-01-25 5.00 1,750,000 1,888,845
Virginia Housing & Redevelopment Authority
Revenue Bonds
Series 2005
10-01-20 5.13 1,350,000 1,405,512
Western Minnesota Municipal Power Agency
Revenue Bonds
Series 2003A (MBIA)
01-01-26 5.00 7,250,000 7,642,079
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
School Building
Series 2002C (FSA)
(School District Credit Enhancement Program)
02-01-09 5.00% $ 1,375,000 $ 1,410,104
White Bear Lake Independent School District #624
Unlimited General Obligation Refunding Bonds
Series 2002B (FGIC)
(School District Credit Enhancement Program)
02-01-13 5.00 1,405,000 1,490,087
02-01-14 5.00 1,480,000 1,568,948
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $306,464,498) $ 318,308,219
- --------------------------------------------------------------------------------
MUNICIPAL BONDS HELD IN TRUST (8.2%)(i)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(d,e)
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 $ 3,879,072
02-01-19 5.25 3,450,000 3,717,444
02-01-20 5.25 2,850,000 3,070,932
02-01-21 5.25 3,865,000 4,164,611
Minnesota Housing Finance Agency
Revenue Bonds
Series 2002 A.M.T.
07-01-33 5.65 3,000,000 3,093,288
University of Minnesota
Revenue Bonds
Series 2002
07-01-21 5.50 8,500,000 9,966,987
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $26,054,372) $ 27,892,334
- --------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 39
RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL NOTES (3.4%)
ISSUE(d,e,f) EFFECTIVE AMOUNT VALUE
YIELD PAYABLE AT
MATURITY
Center City
Revenue Bonds
Hazelden Foundation Project
V.R.D.N. Series 2005 (Bank of New York)
11-01-35 3.64% $ 4,000,000 $ 4,000,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2000H (Harris Trust & Savings Bank)
10-01-30 3.64 1,200,000 1,200,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2002M1 (Harris Trust & Savings Bank)
10-01-32 3.64 1,100,000 1,100,000
Minnesota Higher Education Facilities Authority
Revenue Bonds
St. Olaf College
V.R.D.N. 5th Series 2002M2 (Harris Trust & Savings Bank)
10-01-20 3.64 3,900,000 3,900,000
MUNICIPAL NOTES (CONTINUED)
ISSUE(d,e,f) EFFECTIVE AMOUNT VALUE
YIELD PAYABLE AT
MATURITY
St. Paul Housing & Redevelopment Authority
Revenue Bonds
Minnesota Public Radio Project
V.R.D.N. Series 2005 (Allied Irish Bank)
10-01-25 3.64% $ 620,000 $ 620,000
St. Paul Port Authority
Revenue Bonds
Minnesota Public Radio Project
V.R.D.N. 7th Series 2005 (Allied Irish Bank)
05-01-25 3.64 700,000 700,000
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $11,520,000) $ 11,520,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $344,038,870)(j) $ 357,720,553
================================================================================
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At Feb. 28, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$9,545,935.
(c) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
5.2% of net assets at Feb. 28, 2007.
(d) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
9.0% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party,
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, 2007.
(g) For zero coupon bonds, the interest rate disclosed represents the
annualized effective yield on the date of acquisition.
- ------------------------------------------------------------------------------
40 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Minnesota Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES (CONTINUED)
(h) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
- --------------------------------------------------------------------------------
SALE CONTRACTS
U.S. Treasury Note, June 2007, 10-year $ 26,100,000
(i) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(j) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $327,229,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 13,880,000
Unrealized depreciation (198,000)
- ------------------------------------------------------------------------------
Net unrealized appreciation $ 13,682,000
- ------------------------------------------------------------------------------
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 - 2007 SEMIANNUAL REPORT 41
INVESTMENTS IN SECURITIES
RiverSource New York Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (93.5%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
City of New York
Prerefunded Unlimited General Obligation Bonds
Series 2002E
08-01-16 5.75% $ 100,000 $ 110,524
City of New York
Prerefunded Unlimited General Obligation Bonds
Series 2003I
03-01-27 5.38 1,465,000 1,602,314
City of New York
Prerefunded Unlimited General Obligation Bonds
Series 2003J
06-01-20 5.50 655,000 723,179
City of New York
Unlimited General Obligation Bonds
Series 2002C (XLCA)
03-15-12 5.00 1,000,000 1,057,720
City of New York
Unlimited General Obligation Bonds
Series 2003J
06-01-18 5.50 2,000,000 2,192,959
City of New York
Unlimited General Obligation Bonds
Series 2004D
11-01-34 5.00 1,000,000 1,055,210
City of New York
Unlimited General Obligation Refunding Bonds
Series 2002E
08-01-16 5.75 1,900,000 2,085,269
City of New York
Unrefunded Unlimited General Obligation Bonds
Series 2003I
03-01-27 5.38 535,000 578,265
City of New York
Unrefunded Unlimited General Obligation Bonds
Series 2003J
06-01-20 5.50 1,345,000 1,476,339
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001A (FGIC)
07-01-29 5.50 500,000(d) 609,175
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2004A
07-01-24 5.00 500,000(d) 525,925
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-30 5.25 500,000(d) 544,145
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 2006B
07-01-32 5.25% $ 500,000(d) $ 543,745
07-01-35 5.00 375,000(d) 397,328
County of Monroe
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 1996 (MBIA)
03-01-15 6.00 1,250,000 1,436,088
Hudson Yards Infrastructure Corporation
Revenue Bonds
Series 2006A
02-15-47 5.00 500,000 531,395
Liberty Development Corporation
Revenue Bonds
Goldman Sachs Headquarters
Series 2005
10-01-35 5.25 500,000 586,865
Metropolitan Transportation Authority
Prerefunded Revenue Bonds
Series 1998A (FGIC)
04-01-28 4.75 1,000,000 1,081,850
Metropolitan Transportation Authority
Refunding Revenue Bonds
Series 2002A
01-01-16 5.75 500,000 569,660
Metropolitan Transportation Authority
Refunding Revenue Bonds
Series 2002A (AMBAC)
11-15-19 5.50 1,000,000 1,091,600
Metropolitan Transportation Authority
Revenue Bonds
Series 2002A (FSA)
11-15-26 5.50 750,000 816,690
Metropolitan Transportation Authority
Revenue Bonds
Series 2005F
11-15-12 5.00 560,000 595,857
11-15-35 5.00 500,000 528,855
Metropolitan Transportation Authority
Revenue Bonds
Series 2006A
11-15-22 5.00 750,000 808,485
New York City Housing Development Corporation
Revenue Bonds
Capital Funding Program
New York City Housing Authority Program
Series 2005A (FGIC)
07-01-25 5.00 1,500,000 1,603,020
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
New York City Industrial Development Agency
Revenue Bonds
Queens Baseball Stadium Pilot
Series 2006 (AMBAC)
01-01-23 5.00% $ 500,000 $ 541,945
01-01-24 5.00 500,000(g) 541,100
New York City Industrial Development Agency
Revenue Bonds
Terminal One Group Association Project
Series 2005 A.M.T.
01-01-24 5.50 500,000 545,165
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2002A
06-15-29 5.00 1,000,000 1,050,010
New York City Municipal Water Finance Authority
Revenue Bonds
Series 2004A
06-15-39 5.00 1,000,000 1,054,790
New York City Transitional Finance Authority
Revenue Bonds
Future Tax Secured
Series 2003D
02-01-23 5.00 500,000 529,555
02-01-31 5.00 1,000,000 1,052,640
New York City Transitional Finance Authority
Revenue Bonds
Future Tax Secured
Series 2004C
02-01-33 5.00 1,000,000 1,056,080
New York City Trust for Cultural Resources
Revenue Bonds
Museum of American Folk Art
Series 2000 (ACA)
07-01-22 6.00 1,000,000 1,078,770
New York Counties Tobacco Trust II
Revenue Bonds
Tobacco Settlement Pass Thru Bonds
Series 2001
06-01-35 5.63 500,000 519,650
New York Mortgage Agency
Revenue Bonds
Series 2007-140 A.M.T.
10-01-21 4.60 500,000 509,650
New York State Dormitory Authority
Prerefunded Revenue Bonds
Series 1990B
05-15-11 7.50 415,000 454,060
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
42 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource New York Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
New York State Dormitory Authority
Revenue Bonds
Brooklyn Law School
Series 2003B (XLCA)
07-01-30 5.13% $ 1,000,000 $ 1,072,050
New York State Dormitory Authority
Revenue Bonds
Consolidated City University System
Series 1993A
07-01-13 5.75 3,000,000 3,249,839
New York State Dormitory Authority
Revenue Bonds
Cornell University
Series 2006A
07-01-26 5.00 1,000,000 1,080,360
New York State Dormitory Authority
Revenue Bonds
Education
Series 2006C
12-15-31 5.00 750,000 809,528
New York State Dormitory Authority
Revenue Bonds
Memorial Sloan-Kettering Center
Series 2003-1 (MBIA)
07-01-21 5.00 1,000,000 1,060,480
New York State Dormitory Authority
Revenue Bonds
Memorial Sloan-Kettering Center
Series 2006-1
07-01-35 5.00 500,000 533,345
New York State Dormitory Authority
Revenue Bonds
Mental Health Services Facilities Improvement
Series 2005E (FGIC)
02-15-22 5.00 750,000 804,293
New York State Dormitory Authority
Revenue Bonds
Montefiore Hospital
Series 2004 (FGIC/FHA)
08-01-19 5.00 735,000 791,595
New York State Dormitory Authority
Revenue Bonds
New York Hospital Medical Center Queens
Series 2007 (FHA)
02-15-37 4.75 500,000 509,920
New York State Dormitory Authority
Revenue Bonds
New York University Hospitals Center
Series 2006A
07-01-20 5.00 500,000 519,980
New York State Dormitory Authority
Revenue Bonds
Pratt Institute
Series 1999
(Radian Group Financial Guaranty)
07-01-20 6.00 1,500,000 1,599,045
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
New York State Dormitory Authority
Revenue Bonds
Series 2005F
03-15-23 5.00% $ 250,000 $ 268,975
New York State Dormitory Authority
Unrefunded Revenue Bonds
Series 1990B
05-15-11 7.50 970,000 1,061,617
New York State Environmental Facilities Corporation
Revenue Bonds
New York City Municipal Water Financing Project
Series 2004
06-15-26 5.00 1,000,000 1,070,360
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 1,051,960
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 1,055,370
New York State Thruway Authority
Revenue Bonds
Second Generation Resolution
Series 2003B (FSA)
04-01-21 4.75 835,000 872,567
New York State Thruway Authority
Revenue Bonds
Series 2005G (FSA)
01-01-24 5.00 1,000,000 1,076,010
New York State Thruway Authority
Revenue Bonds
Transportation
Series 2003A (MBIA)
03-15-22 5.00 1,000,000 1,066,870
New York State Thruway Authority
Revenue Bonds
Transportation
Series 2004A (AMBAC)
03-15-12 5.25 750,000 806,085
New York State Urban Development Corporation
Refunding Revenue Bonds
Service Contract
Series 2005 (FSA)
01-01-17 5.00 1,000,000 1,090,090
New York State Urban Development Corporation
Revenue Bonds
Series 2002A (XLCA)
01-01-11 5.25 1,000,000 1,056,550
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
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 $ 1,070,710
Puerto Rico Highway & Transportation Authority
Refunding Revenue Bonds
Series 2007N (MBIA)
07-01-32 5.25 1,000,000(d,f) 1,187,100
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 1,000,000(d) 1,076,290
Suffolk County Industrial Development Agency
Prerefunded Revenue Bonds
1st Mortgage Jeffersons Ferry
Series 1999A
11-01-28 7.25 250,000 277,310
Tobacco Settlement Financing Authority
Asset-backed Revenue Bonds
Series 2003A-1
06-01-16 5.50 500,000 526,110
06-01-19 4.25 500,000 502,970
Tobacco Settlement Financing Authority
Revenue Bonds
Series 2003B-1C
06-01-15 5.50 500,000 526,420
Triborough Bridge & Tunnel Authority
Refunding Revenue Bonds
Series 2002B
11-15-29 5.13 1,000,000 1,060,910
Triborough Bridge & Tunnel Authority
Revenue Bonds
Convention Center Project
Series 1990E
01-01-11 6.00 1,145,000 1,237,573
TSASC Incorporated
Revenue Bonds
Series 2006-1
06-01-34 5.00 500,000 508,225
06-01-42 5.13 500,000 512,850
Westchester Tobacco Asset Securitization
Revenue Bonds
Series 2005
06-01-26 5.00 875,000 894,005
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $61,359,125) $ 63,973,239
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 43
RiverSource New York Tax-Exempt Fund
MUNICIPAL BONDS HELD IN TRUST (8.9%)(h)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
City of New York
Unlimited General Obligation Bonds
Series 2000 (FGIC)
05-15-16 5.88% $ 2,500,000 $ 2,694,245
New York Mortgage Agency
Revenue Bonds
Series 2002 A.M.T.
04-01-32 5.40 1,200,000 1,241,136
New York State Energy Research & Development Authority
Revenue Bonds
Residual Certificates
Series 2000-379 (MBIA)
01-01-21 5.50 990,000 1,000,712
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2002 (MBIA)
07-01-17 5.50 1,000,000(d) 1,149,510
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $5,840,303) $ 6,085,603
- --------------------------------------------------------------------------------
MUNICIPAL NOTES (2.0%)
ISSUE(b,c,e) EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
City of New York
Unlimited General Obligation Bonds
V.R.D.N. Series 2006H-1 (Dexia Credit Local)
01-01-36 3.62% $ 500,000 $ 500,000
New York City Municipal Water Finance Authority
2nd Generation Resolution Revenue Bonds
V.R.D.N. Series 2005AA-2
06-15-32 3.62 500,000(g) 500,000
New York City Municipal Water Finance Authority
2nd Generation Resolution Revenue Bonds
V.R.D.N. Series 2006CC-1
(Bank of Nova Scotia)
06-15-38 3.62 400,000(g) 400,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $1,400,000) $ 1,400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $68,599,428)(i) $ 71,458,842
================================================================================
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
4.9% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(d) Municipal obligations include debt obligations issued by or on behalf of
states, territories, possessions, or sovereign nations within the
territorial boundaries of the United States. The securities represented
8.8% of net assets at Feb. 28, 2007.
(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, 2007.
(f) At Feb. 28, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$1,187,100.
- ------------------------------------------------------------------------------
44 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource New York Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES (CONTINUED)
(g) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
-----------------------------------------------------------------------
SALE CONTRACTS
U.S. Treasury Note, June 2007, 10-year $ 5,500,000
(h) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(i) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $64,969,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 2,866,000
Unrealized depreciation (6,000)
-----------------------------------------------------------------------
Net unrealized appreciation $ 2,860,000
-----------------------------------------------------------------------
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 - 2007 SEMIANNUAL REPORT 45
INVESTMENTS IN SECURITIES
RiverSource Ohio Tax-Exempt Fund
FEB. 28, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
MUNICIPAL BONDS (96.1%)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Bowling Green State University
Refunding Revenue Bonds
Series 2005 (MBIA)
06-01-15 5.00% $ 500,000 $ 545,400
Bowling Green State University
Revenue Bonds
Series 2003 (AMBAC)
06-01-12 5.00 1,145,000 1,219,162
Brookville Local School District
Prerefunded Unlimited General Obligation Bonds
Series 2003 (FSA)
12-01-18 5.25 1,000,000 1,094,770
Cincinnati City School District
Limited General Obligation Bonds
School Improvement
Series 2002 (FSA)
06-01-21 5.25 1,000,000 1,079,430
Cincinnati City School District
Unlimited General Obligation Refunding Bonds
Classroom Construction & Improvement
Series 2006 (FGIC)
12-01-25 5.25 500,000(g) 587,650
City of Cincinnati
Unlimited General Obligation Bonds
Series 2000
12-01-16 5.25 1,000,000 1,054,320
City of Cleveland
Limited General Obligation Refunding Bonds
Series 2005 (AMBAC)
10-01-23 5.50 500,000 597,640
City of Columbus
Unlimited General Obligation Bonds
Various Purpose
Series 2006A
12-15-20 5.00 500,000 547,735
Cleveland State University
Revenue Bonds
Series 2003A (FGIC)
06-01-15 5.00 1,000,000 1,070,630
Cleveland State University
Revenue Bonds
Series 2004 (FGIC)
06-01-24 5.25 500,000 545,145
Columbus City School District
Prerefunded Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2004 (FSA)
12-01-29 5.25 500,000 552,775
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Columbus City School District
Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2003 (FGIC)
12-01-11 5.00% $ 1,000,000 $ 1,059,990
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2001A (FGIC)
07-01-29 5.50 500,000(d) 609,175
Commonwealth of Puerto Rico
Unlimited General Obligation Public Improvement
Bonds
Series 2006A
07-01-27 5.25 250,000(d) 272,680
07-01-30 5.25 250,000(d) 272,073
Commonwealth of Puerto Rico
Unlimited General Obligation Refunding & Public
Improvement Bonds
Series 2006B
07-01-32 5.25 250,000(d) 271,873
07-01-35 5.00 250,000(d) 264,885
County of Cuyahoga
Limited General Obligation Bonds
Series 1993
05-15-13 5.60 450,000 472,145
County of Cuyahoga
Refunding Revenue Bonds
Series 2003A
01-01-17 6.00 1,000,000 1,117,190
01-01-32 6.00 1,000,000 1,110,680
County of Cuyahoga
Revenue Bonds
Canton Incorporated Project
Series 2000
01-01-30 7.50 500,000 557,290
County of Erie
Revenue Bonds
Firelands Regional Medical Center
Series 2002A
08-15-32 5.63 245,000 262,422
County of Montgomery
Revenue Bonds
Catholic Health Initiatives
Series 2004A
05-01-30 5.00 750,000 787,185
05-01-32 5.00 500,000 524,475
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Dayton City School District
Unlimited General Obligation Bonds
School Facilities Construction & Improvement
Series 2003A (FGIC)
12-01-27 5.00% $ 1,250,000 $ 1,326,138
12-01-31 5.00 1,000,000 1,058,630
Franklin County
Refunding Revenue Bonds
OhioHealth Corporation
Series 2003C
05-15-24 5.25 1,000,000 1,070,190
Franklin County
Refunding Revenue Bonds
Trinity Health Credit
Series 2005A
06-01-20 5.00 500,000 531,165
Kenston Local School District
Unlimited General Obligation Bonds
School Improvement
Series 2003 (MBIA)
12-01-16 5.00 1,000,000 1,068,910
Lakewood
Limited General Obligation Bonds
Series 2003
12-01-19 5.00 1,515,000 1,599,127
Miami County
Improvement Refunding Revenue Bonds
Upper Valley Medical Center
Series 2006
05-15-26 5.25 500,000 535,335
Miami University
Refunding Revenue Bonds
Series 2005 (AMBAC)
09-01-23 4.75 500,000 529,720
Ohio Housing Finance Agency
Revenue Bonds
Residential Mortgage-backed Securities
Series 2006A (GNMA) A.M.T.
09-01-26 4.75 500,000 513,250
09-01-36 4.90 500,000 511,310
Ohio Housing Finance Agency
Revenue Bonds
Residential Mortgage-backed Securities
Series 2006E (GNMA/FNMA) A.M.T.
09-01-36 5.00 500,000 513,660
Ohio Municipal Electric Generation Agency
Refunding Revenue Bonds
Joint Venture 5
Series 2004 (AMBAC)
02-15-24 4.75 750,000 779,648
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
46 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Ohio Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Ohio State Building Authority
Refunding Revenue Bonds
State Facilities Adult Correctional
Series 2001A (FSA)
10-01-14 5.50% $ 1,000,000 $ 1,077,230
Ohio State Building Authority
Revenue Bonds
State Facilities Adult Correctional Building Fund Projects
Series 2005A (FSA)
04-01-22 5.00 750,000 806,640
Ohio State Higher Educational Facility Commission
Revenue Bonds
University Hospitals Health System
Series 2007A
01-15-36 4.75 500,000 504,680
Ohio State Higher Educational Facility Commission
Unrefunded Revenue Bonds
Oberlin
Series 1999
10-01-29 5.00 85,000 88,035
Port of Greater Cincinnati Development Authority
Revenue Bonds
Sisters of Mercy
Series 2006
10-01-25 5.00 500,000 527,615
Puerto Rico Highway & Transportation Authority
Refunding Revenue Bonds
Series 2007N (MBIA)
07-01-32 5.25 500,000(d,e) 593,550
Puerto Rico Highway & Transportation Authority
Revenue Bonds
Series 1996Y
07-01-13 6.25 250,000(d) 282,770
Puerto Rico Infrastructure Financing Authority
Refunding Special Tax Bonds
Series 2005C (AMBAC)
07-01-23 5.50 400,000(d) 475,644
Puerto Rico Municipal Finance Agency
Revenue Bonds
Series 2002A (FSA)
08-01-17 5.25 750,000(d) 807,217
State of Ohio
Revenue Bonds
Case Western Reserve University Project
Series 2006 (MBIA)
12-01-21 5.25 250,000 288,460
State of Ohio
Revenue Bonds
Denison University 2007 Project
Series 2007
11-01-32 5.00 595,000 639,226
State of Ohio
Revenue Bonds
Mount Union College Project
Series 2006
10-01-31 5.00 500,000 528,420
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
State of Ohio
Unlimited General Obligation Bonds
Common Schools Capital Facilities
Series 2001A
06-15-13 5.00% $ 1,500,000 $ 1,560,059
State of Ohio
Unlimited General Obligation Bonds
Common Schools Capital Facilities
Series 2001B
09-15-20 5.00 1,000,000 1,055,010
State of Ohio
Unlimited General Obligation Bonds
Conservation Projects
Series 2005A
03-01-20 5.00 500,000 531,865
State of Ohio
Unlimited General Obligation Bonds
Higher Education
Series 2002A
08-01-18 5.38 500,000(g) 538,170
State of Ohio
Unlimited General Obligation Bonds
Higher Education
Series 2004B
02-01-12 5.00 500,000 529,820
State of Ohio
Unlimited General Obligation Bonds
Higher Education
Series 2005B
05-01-23 5.00 500,000(g) 537,360
State of Ohio
Unlimited General Obligation Bonds
Highway Capital Improvements
Series 2002G
05-01-12 5.25 750,000 805,530
State of Ohio
Unlimited General Obligation Bonds
Infrastructure Improvement
Series 2005A
09-01-21 5.00 500,000 538,505
Summit County
Limited General Obligation Bonds
Series 2003
12-01-18 5.25 1,490,000 1,632,130
Toledo City School District
Unlimited General Obligation Bonds
School Facilities Improvement
Series 2003 (FSA)
(School District Credit Enhancement Program)
12-01-15 5.00 1,000,000 1,076,240
University of Akron
Revenue Bonds
Series 2003A (AMBAC)
01-01-22 5.00 1,000,000 1,057,810
MUNICIPAL BONDS (CONTINUED)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
University of Cincinnati
Revenue Bonds
Series 2001A (FGIC)
06-01-14 5.50% $ 1,000,000 $ 1,080,560
Warren County
Limited General Obligation Bonds
Series 1992
12-01-12 6.10 445,000 473,191
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $43,433,683) $ 44,549,540
- --------------------------------------------------------------------------------
MUNICIPAL BONDS HELD IN TRUST (1.2%)(f)
NAME OF COUPON PRINCIPAL VALUE(a)
ISSUER AND RATE AMOUNT
TITLE OF
ISSUE(b,c)
Puerto Rico Electric Power Authority
Revenue Bonds
Series 2002 (MBIA)
07-01-17 5.50% $ 500,000(d) $ 574,755
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS HELD IN TRUST
(Cost: $561,588) $ 574,755
- --------------------------------------------------------------------------------
MUNICIPAL NOTES (0.9%)
ISSUE(b,c,h) EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
Ohio Air Quality Development Authority
Revenue Bonds
Pollution Control Ohio Edison
V.R.D.N. Series 2000C (Wachovia Bank)
06-01-23 3.63% $ 300,000 $ 300,000
Ohio State Water Development Authority
Refunding Revenue Bonds
FirstEnergy Generation
V.R.D.N. Series 2006A (Barclays Bank)
05-15-19 3.64 100,000 100,000
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL NOTES
(Cost: $400,000) $ 400,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $44,395,271)(i) $ 45,524,295
================================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 47
RiverSource Ohio Tax-Exempt Fund
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in the portfolio security
descriptions to identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
CIFG -- IXIS Financial Guaranty
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FHLMC -- Federal Home Loan Mortgage Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- MBIA Insurance Corporation
XLCA -- XL Capital Assurance
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2007, the value of
securities subject to alternative minimum tax represented
3.3% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(d) 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
9.5% of net assets at Feb. 28, 2007.
(e) At Feb. 28, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$593,550.
(f) Municipal Bonds Held in Trust -- See Note 1 to the financial statements.
(g) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY NOTIONAL AMOUNT
------------------------------------------------------------------------
SALE CONTRACTS
U.S. Treasury Note, June 2007, 10-year $3,700,000
(h) 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, 2007.
(i) At Feb. 28, 2007, the cost of securities for federal income tax purposes
was approximately $44,145,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $1,141,000
Unrealized depreciation (12,000)
------------------------------------------------------------------------
Net unrealized appreciation $1,129,000
------------------------------------------------------------------------
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 - 2007 SEMIANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
CALIFORNIA MASSACHUSETTS MICHIGAN
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2007 (UNAUDITED) FUND FUND FUND
ASSETS
Investments in securities, at value (Note 1)
(identified cost $165,662,209, $51,637,779 and $44,929,111) $ 174,287,067 $ 53,552,369 $ 46,536,267
Cash in bank on demand deposit 8,333 5,098 52,389
Capital shares receivable 381 24,658 333
Accrued interest receivable 1,989,755 524,378 631,342
Receivable for investment securities sold 5,194,788 1,046,150 --
- ------------------------------------------------------------------------------------------------------------------
Total assets 181,480,324 55,152,653 47,220,331
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable to shareholders 124,888 23,621 21,164
Capital shares payable 17,225 -- 6
Payable for investment securities purchased 4,313,700 356,130 957,281
Short-term floating rate notes outstanding (Note 1) -- 500,000 250,000
Accrued investment management services fee 1,988 610 517
Accrued distribution fee 35,238 11,062 9,263
Accrued transfer agency fee 204 16 9
Accrued administrative services fee 339 104 88
Other accrued expenses 33,510 27,494 26,075
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 4,527,092 919,037 1,264,403
- ------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $ 176,953,232 $ 54,233,616 $ 45,955,928
==================================================================================================================
REPRESENTED BY
Shares of beneficial interest - $.01 par value (Note 1) $ 339,716 $ 101,168 $ 86,995
Additional paid-in capital 168,228,543 52,482,926 44,410,806
Undistributed net investment income 30,503 1,997 15
Accumulated net realized gain (loss) (Note 7) (186,675) (239,733) (126,160)
Unrealized appreciation (depreciation) on investments (Note 5) 8,541,145 1,887,258 1,584,272
- ------------------------------------------------------------------------------------------------------------------
Total - representing net assets applicable to outstanding shares $ 176,953,232 $ 54,233,616 $ 45,955,928
==================================================================================================================
Net assets applicable to outstanding shares: Class A $ 166,525,046 $ 45,676,872 $ 42,424,792
Class B $ 8,345,492 $ 7,961,719 $ 2,283,389
Class C $ 2,082,694 $ 595,025 $ 1,247,747
Outstanding shares of beneficial interest: Class A shares 31,969,029 8,520,467 8,031,336
Class B shares 1,603,209 1,485,305 432,046
Class C shares 399,343 111,058 236,158
Net asset value per share: Class A $ 5.21 $ 5.36 $ 5.28
Class B $ 5.21 $ 5.36 $ 5.29
Class C $ 5.22 $ 5.36 $ 5.28
- ------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 49
STATEMENTS OF ASSETS AND LIABILITIES
MINNESOTA NEW YORK OHIO
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FEB. 28, 2007 (UNAUDITED) FUND FUND FUND
ASSETS
Investments in securities, at value (Note 1)
(identified cost $344,038,870, $68,599,428 and $44,395,271) $ 357,720,553 $ 71,458,842 $ 45,524,295
Cash in bank on demand deposit 258,651 11,000 91,023
Capital shares receivable 14,821 -- 619
Accrued interest receivable 3,403,134 791,968 570,323
Receivable for investment securities sold 4,740,225 1,086,620 1,052,642
- ------------------------------------------------------------------------------------------------------------------
Total assets 366,137,384 73,348,430 47,238,902
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends payable to shareholders 177,332 33,018 19,561
Capital shares payable 14,433 -- --
Payable for investment securities purchased 9,706,390 1,187,100 593,550
Short-term floating rate notes outstanding (Note 1) 16,810,000 3,630,000 250,000
Accrued investment management services fee 3,754 770 521
Accrued distribution fee 67,707 13,729 9,339
Accrued transfer agency fee 499 16 30
Accrued administrative services fee 651 131 89
Other accrued expenses 37,844 31,078 22,634
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 26,818,610 4,895,842 895,724
- ------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding shares $ 339,318,774 $ 68,452,588 $ 46,343,178
==================================================================================================================
REPRESENTED BY
Shares of beneficial interest - $.01 par value (Note 1) $ 640,711 $ 134,735 $ 87,506
Additional paid-in capital 327,878,303 65,611,772 45,230,685
Undistributed (excess of distributions over) net investment
income 223,177 12,441 (215)
Accumulated net realized gain (loss) (Note 7) (2,944,645) (131,874) (80,938)
Unrealized appreciation (depreciation) on investments (Note 5) 13,521,228 2,825,514 1,106,140
- ------------------------------------------------------------------------------------------------------------------
Total - representing net assets applicable to outstanding shares $ 339,318,774 $ 68,452,588 $ 46,343,178
==================================================================================================================
Net assets applicable to outstanding shares: Class A $ 303,908,162 $ 61,323,787 $ 40,354,654
Class B $ 27,496,575 $ 6,144,798 $ 4,721,162
Class C $ 7,914,037 $ 984,003 $ 1,267,362
Outstanding shares of beneficial interest: Class A shares 57,385,764 12,070,249 7,619,998
Class B shares 5,191,065 1,209,587 891,370
Class C shares 1,494,221 193,706 239,238
Net asset value per share: Class A $ 5.30 $ 5.08 $ 5.30
Class B $ 5.30 $ 5.08 $ 5.30
Class C $ 5.30 $ 5.08 $ 5.30
- ------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
50 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
STATEMENTS OF OPERATIONS
CALIFORNIA TAX-EXEMPT FUND MASSACHUSETTS TAX-EXEMPT FUND
SIX MONTHS SIX MONTHS
ENDED ENDED
FEB. 28, PERIOD ENDED YEAR ENDED FEB. 28, PERIOD ENDED YEAR ENDED
2007 AUG. 31, JUNE 30, 2007 AUG. 31, JUNE 30,
(UNAUDITED) 2006(a) 2006 (UNAUDITED) 2006(a) 2006
INVESTMENT INCOME
INCOME:
Interest (Note 1) $ 4,075,843 $ 1,430,060 $ 8,784,573 $ 1,214,706 $ 437,845 $ 2,872,156
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 362,309 127,684 880,490 115,534 41,475 306,031
Distribution fee
Class A 207,546 72,992 450,844 58,967 20,570 131,376
Class B 42,851 15,773 124,630 42,407 17,499 140,903
Class C 10,637 3,680 25,844 3,508 1,377 11,424
Transfer agency fee 35,860 12,322 77,619 19,075 6,643 43,524
Incremental transfer agency fee
Class A 1,745 1,086 6,749 804 505 3,276
Class B 316 165 1,226 392 205 1,470
Class C 112 61 416 46 26 194
Administrative services fees and expenses 61,858 22,618 126,617 19,725 7,162 42,344
Interest and fee expense (Note 1) -- -- -- 9,516 3,379 39,211
Compensation of board members 1,831 1,797 8,844 601 1,797 8,844
Custodian fees 9,360 3,100 18,695 5,907 1,664 10,119
Printing and postage 22,656 2,840 32,850 7,375 1,400 9,903
Registration fees 11,740 5,824 42,705 11,544 5,980 37,070
Professional fees 10,777 14,500 21,000 9,840 13,600 19,500
Other 24,405 535 12,375 20,850 232 4,775
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 804,003 284,977 1,830,904 326,091 123,514 809,964
Expenses waived/reimbursed by the Investment
Manager and its affiliates (Note 2) (65,399) (24,169) (129,935) (59,177) (25,874) (102,889)
- ------------------------------------------------------------------------------------------------------------------------------------
738,604 260,808 1,700,969 266,914 97,640 707,075
Earnings and bank fee credits
on cash balances (Note 2) (8,699) (1,945) (17,465) (4,629) (672) (8,320)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net expenses 729,905 258,863 1,683,504 262,285 96,968 698,755
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 3,345,938 1,171,197 7,101,069 952,421 340,877 2,173,401
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized gain (loss) - net
Net realized gain (loss) on:
Security transactions (Note 3) 270,433 141,692 123,549 38,819 (48,017) 60,245
Futures contracts (175,559) (22,669) 56,742 (55,517) (7,556) 20,026
payment from affiliate (Note 2) -- -- 16,837 -- -- 5,873
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 94,874 119,023 197,128 (16,698) (55,573) 86,144
Net change in unrealized appreciation
(depreciation) on investments 1,503,564 3,438,131 (5,679,188) 365,366 1,311,823 (2,607,074)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,598,438 3,557,154 (5,482,060) 348,668 1,256,250 (2,520,930)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 4,944,376 $ 4,728,351 $ 1,619,009 $ 1,301,089 $ 1,597,127 $ (347,529)
====================================================================================================================================
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 51
STATEMENTS OF OPERATIONS
MICHIGAN TAX-EXEMPT FUND MINNESOTA TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006 FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED) (UNAUDITED)
INVESTMENT INCOME
Income:
Interest (Note 1) $ 1,025,800 $ 358,767 $ 2,331,310 $ 7,793,648 $ 2,676,058 $ 16,742,991
- -------------------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management
services fee 97,437 34,676 251,431 684,267 236,249 1,661,816
Distribution fee
Class A 54,679 19,288 124,222 378,802 129,940 815,467
Class B 12,249 4,968 42,252 141,694 52,438 408,052
Class C 6,681 2,452 18,031 39,906 13,856 85,832
Transfer agency fee 13,809 4,832 31,242 87,328 29,827 188,098
Incremental transfer
agency fee
Class A 634 400 2,561 4,044 2,514 15,682
Class B 139 74 544 1,079 552 3,955
Class C 80 44 297 342 187 1,191
Administrative services
fees and expenses 16,636 5,953 34,522 118,777 42,806 243,244
Interest and fee expense
(Note 1) 4,689 1,690 2,307 320,559 112,173 555,509
Compensation of board
members 520 1,797 8,844 3,501 1,930 10,211
Custodian fees 5,285 1,550 9,125 13,575 4,325 27,720
Printing and postage 5,270 1,280 9,300 48,550 11,805 81,555
Registration fees 14,100 6,200 39,100 11,520 7,990 39,527
Professional fees 9,826 13,600 19,500 11,772 15,400 22,500
Other 12,115 247 2,572 8,552 10,623 10,258
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 254,149 99,051 595,850 1,874,268 672,615 4,170,617
Expenses waived/
reimbursed by the
Investment
Manager and its
affiliates (Note 2) (47,371) (24,907) (94,095) (75,722) (47,073) (205,028)
- -------------------------------------------------------------------------------------------------------------------------------
206,778 74,144 501,755 1,798,546 625,542 3,965,589
Earnings and bank fee
credits on cash
balances (Note 2) (3,247) (570) (6,650) (21,285) (9,068) (50,995)
- -------------------------------------------------------------------------------------------------------------------------------
Total net expenses 203,531 73,574 495,105 1,777,261 616,474 3,914,594
- -------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)
- net 822,269 285,193 1,836,205 6,016,387 2,059,584 12,828,397
- -------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized
gain (loss) - net
Net realized gain (loss) on:
Security transactions
(Note 3) 25,698 (41,518) 236,365 (155,832) (201,478) (2,248,309)
Futures contracts (47,473) (5,985) 16,689 (341,119) (41,987) 106,808
Payment from affiliate
(Note 2) -- -- 5,451 -- -- 27,504
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments (21,775) (47,503) 258,505 (496,951) (243,465) (2,113,997)
Net change in unrealized
appreciation (depreciation)
on investments 275,419 1,016,039 (1,886,447) 2,171,095 6,880,299 (10,149,663)
- -------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on
investments 253,644 968,536 (1,627,942) 1,674,144 6,636,834 (12,263,660)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations $ 1,075,913 $ 1,253,729 $ 208,263 $ 7,690,531 $ 8,696,418 $ 564,737
===============================================================================================================================
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
52 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
STATEMENTS OF OPERATIONS
NEW YORK TAX-EXEMPT FUND OHIO TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006 FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED) (UNAUDITED)
INVESTMENT INCOME
Income:
Interest (Note 1) $ 1,636,315 $ 572,495 $ 3,691,625 $ 992,015 $ 353,010 $ 2,286,353
- -------------------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management
services fee 141,678 49,608 352,633 96,536 34,119 250,961
Distribution fee
Class A 77,126 26,781 169,873 51,005 18,012 117,636
Class B 31,897 11,930 89,633 24,335 8,607 68,128
Class C 5,147 1,938 12,639 7,091 2,561 17,305
Transfer agency fee 20,475 7,101 46,110 14,965 5,196 33,678
Incremental transfer
agency fee
Class A 936 587 3,782 662 417 2,670
Class B 274 141 1,049 200 102 763
Class C 64 35 230 77 45 322
Administrative services
fees and expenses 24,189 8,563 49,410 16,482 5,858 34,377
Interest and fee expense
(Note 1) 68,607 23,052 132,118 4,689 1,689 2,306
Compensation of board
members 731 1,797 8,844 520 1,797 8,844
Custodian fees 5,792 1,984 11,296 4,755 1,860 9,950
Printing and postage 8,342 2,170 13,990 5,525 1,550 9,125
Registration fees 12,100 6,200 39,500 11,630 5,580 38,850
Professional fees 10,108 13,900 20,000 9,825 13,600 19,500
Other 19,308 265 6,580 17,856 316 2,996
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 426,774 156,052 957,687 266,153 101,309 617,411
Expenses waived/
reimbursed by the
Investment
Manager and its
affiliates (Note 2) (57,121) (26,875) (111,449) (51,655) (25,390) (97,315)
- -------------------------------------------------------------------------------------------------------------------------------
Earnings and bank fee
credits 369,653 129,177 846,238 214,498 75,919 520,096
on cash balances
(Note 2) (3,512) (1,748) (8,318) (2,807) (1,024) (6,726)
- -------------------------------------------------------------------------------------------------------------------------------
Total net expenses 366,141 127,429 837,920 211,691 74,895 513,370
- -------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)
- net 1,270,174 445,066 2,853,705 780,324 278,115 1,772,983
- -------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) - NET
Net realized gain (loss) on:
Security transactions
(Note 3) 101,241 (63,412) 499,717 57,496 (40,482) 31,271
Futures contracts (69,938) (9,127) 20,027 (46,773) (5,776) 16,689
Payment from affiliate
(Note 2) -- -- 8,239 -- -- 5,251
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 31,303 (72,539) 527,983 10,723 (46,258) 53,211
Net change in unrealized
appreciation (depreciation)
on investments 470,923 1,514,873 (3,334,496) 296,719 1,057,934 (2,047,369)
- -------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 502,226 1,442,334 (2,806,513) 307,442 1,011,676 (1,994,158)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations $ 1,772,400 $ 1,887,400 $ 47,192 $ 1,087,766 $ 1,289,791 $ (221,175)
===============================================================================================================================
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 53
STATEMENTS OF CHANGES IN NET ASSETS
CALIFORNIA TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 3,345,938 $ 1,171,197 $ 7,101,069
Net realized gain (loss) on investments 94,874 119,023 197,128
Net change in unrealized appreciation (depreciation) on investments 1,503,564 3,438,131 (5,679,188)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 4,944,376 4,728,351 1,619,009
- --------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (3,181,699) (1,111,403) (6,678,350)
Class B (131,689) (47,396) (365,234)
Class C (32,664) (11,212) (75,848)
Net realized gain
Class A (20,710) -- (2,060,962)
Class B (1,083) -- (141,135)
Class C (266) -- (28,036)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (3,368,111) (1,170,011) (9,349,565)
- --------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 6,757,380 3,629,083 20,891,751
Class B shares 267,467 143,769 1,055,877
Class C shares 96,009 56,836 491,178
Reinvestment of distributions at net asset value
Class A shares 2,231,149 799,255 6,405,081
Class B shares 110,432 40,099 436,470
Class C shares 30,496 10,802 97,101
Payments for redemptions
Class A shares (14,235,018) (8,060,501) (39,268,742)
Class B shares (Note 2) (878,675) (2,227,223) (6,518,006)
Class C shares (Note 2) (240,450) (78,651) (1,394,220)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (5,861,210) (5,686,531) (17,803,510)
- --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,284,945) (2,128,191) (25,534,066)
Net assets at beginning of period 181,238,177 183,366,368 208,900,434
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 176,953,232 $ 181,238,177 $ 183,366,368
==========================================================================================================================
Undistributed net investment income $ 30,503 $ 30,617 $ 29,431
- --------------------------------------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
54 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
MASSACHUSETTS TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 952,421 $ 340,877 $ 2,173,401
Net realized gain (loss) on investments (16,698) (55,573) 86,144
Net change in unrealized appreciation (depreciation) on
investments 365,366 1,311,823 (2,607,074)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,301,089 1,597,127 (347,529)
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (826,471) (289,620) (1,851,979)
Class B (116,465) (47,646) (387,693)
Class C (9,632) (3,799) (31,553)
Net realized gain
Class A (802) -- (260,911)
Class B (142) -- (70,980)
Class C (12) -- (6,115)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (953,524) (341,065) (2,609,231)
- -----------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 2,557,715 1,907,931 6,460,310
Class B shares 182,193 53,468 849,949
Class C shares 22,475 17,855 151,990
Reinvestment of distributions at net asset value
Class A shares 663,703 236,232 1,715,619
Class B shares 87,720 36,650 357,931
Class C shares 8,639 3,546 34,168
Payments for redemptions
Class A shares (6,605,159) (2,110,518) (14,249,579)
Class B shares (Note 2) (1,431,506) (2,732,774) (6,616,572)
Class C shares (Note 2) (238,559) (57,449) (687,929)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (4,752,779) (2,645,059) (11,984,113)
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,405,214) (1,388,997) (14,940,873)
Net assets at beginning of period 58,638,830 60,027,827 74,968,700
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 54,233,616 $ 58,638,830 $ 60,027,827
=================================================================================================================
Undistributed net investment income $ 1,997 $ 2,144 $ 2,332
- -----------------------------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 55
STATEMENTS OF CHANGES IN NET ASSETS
MICHIGAN TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 822,269 $ 285,193 $ 1,836,205
Net realized gain (loss) on investments (21,775) (47,503) 258,505
Net change in unrealized appreciation (depreciation) on
investments 275,419 1,016,039 (1,886,447)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,075,913 1,253,729 208,263
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (769,860) (265,857) (1,683,666)
Class B (33,784) (13,020) (110,672)
Class C (18,451) (6,475) (47,318)
Net realized gain
Class A (993) -- (405,309)
Class B (55) -- (33,837)
Class C (31) -- (15,842)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (823,174) (285,352) (2,296,644)
- -----------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 1,755,803 650,935 5,292,299
Class B shares 23,512 10,393 131,671
Class C shares 91,588 26,971 524,009
Reinvestment of distributions at net asset value
Class A shares 614,292 219,921 1,671,150
Class B shares 25,839 9,697 101,482
Class C shares 15,793 5,742 55,784
Payments for redemptions
Class A shares (5,884,842) (1,196,107) (13,226,236)
Class B shares (Note 2) (429,385) (722,774) (2,254,715)
Class C shares (Note 2) (282,576) (132,316) (866,833)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (4,069,976) (1,127,538) (8,571,389)
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,817,237) (159,161) (10,659,770)
Net assets at beginning of period 49,773,165 49,932,326 60,592,096
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 45,955,928 $ 49,773,165 $ 49,932,326
=================================================================================================================
Undistributed (excess of distributions over) net
investment income $ 15 $ (159) $ --
- -----------------------------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
56 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
MINNESOTA TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 6,016,387 $ 2,059,584 $ 12,828,397
Net realized gain (loss) on investments (496,951) (243,465) (2,113,997)
Net change in unrealized appreciation (depreciation) on
investments 2,171,095 6,880,299 (10,149,663)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 7,690,531 8,696,418 564,737
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (5,665,610) (1,869,249) (11,469,702)
Class B (422,618) (146,952) (1,122,358)
Class C (119,125) (38,972) (236,496)
Net realized gain
Class A -- -- (630,199)
Class B -- -- (79,986)
Class C -- -- (16,239)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (6,207,353) (2,055,173) (13,554,980)
- -----------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 14,720,400 6,491,810 28,475,102
Class B shares 340,887 117,193 1,638,107
Class C shares 512,591 79,478 1,632,443
Reinvestment of distributions at net asset value
Class A shares 4,567,399 1,552,821 9,873,223
Class B shares 361,835 126,055 1,007,721
Class C shares 104,498 35,357 221,889
Payments for redemptions
Class A shares (25,260,671) (8,600,320) (65,255,595)
Class B shares (Note 2) (2,805,204) (5,711,230) (15,531,202)
Class C shares (Note 2) (888,357) (324,412) (2,355,251)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (8,346,622) (6,233,248) (40,293,563)
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (6,863,444) 407,997 (53,283,806)
Net assets at beginning of period 346,182,218 345,774,221 399,058,027
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 339,318,774 $ 346,182,218 $ 345,774,221
=================================================================================================================
Undistributed net investment income $ 223,177 $ 414,143 $ 409,732
- -----------------------------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 57
STATEMENTS OF CHANGES IN NET ASSETS
NEW YORK TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 1,270,174 $ 445,066 $ 2,853,705
Net realized gain (loss) on investments 31,303 (72,539) 527,983
Net change in unrealized appreciation (depreciation) on
investments 470,923 1,514,873 (3,334,496)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,772,400 1,887,400 47,192
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,155,950) (405,739) (2,553,156)
Class B (95,212) (35,821) (268,752)
Class C (15,378) (5,866) (38,050)
Net realized gain
Class A (70,294) -- (665,061)
Class B (7,232) -- (87,026)
Class C (1,128) -- (12,789)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (1,345,194) (447,426) (3,624,834)
- -----------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 2,466,664 1,254,286 7,210,267
Class B shares 257,264 104,005 625,727
Class C shares 70,209 32,356 237,394
Reinvestment of distributions at net asset value
Class A shares 995,233 333,628 2,653,759
Class B shares 83,154 28,703 287,925
Class C shares 15,257 5,642 48,248
Payments for redemptions
Class A shares (5,612,013) (2,281,555) (16,835,510)
Class B shares (Note 2) (1,064,913) (1,146,108) (3,708,928)
Class C shares (Note 2) (256,528) (60,772) (452,020)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (3,045,673) (1,729,815) (9,933,138)
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (2,618,467) (289,841) (13,510,780)
Net assets at beginning of period 71,071,055 71,360,896 84,871,676
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 68,452,588 $ 71,071,055 $ 71,360,896
=================================================================================================================
Undistributed net investment income $ 12,441 $ 8,807 $ 11,167
- -----------------------------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
58 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
OHIO TAX-EXEMPT FUND
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 20061(a) JUNE 30, 2006
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) - net $ 780,324 $ 278,115 $ 1,772,983
Net realized gain (loss) on investments 10,723 (46,258) 53,211
Net change in unrealized appreciation (depreciation) on
investments 296,719 1,057,934 (2,047,369)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,087,766 1,289,791 (221,175)
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (697,070) (248,276) (1,594,779)
Class B (64,639) (22,960) (178,210)
Class C (18,830) (6,879) (45,451)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (780,539) (278,115) (1,818,440)
- --------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 1,286,526 1,007,750 4,686,479
Class B shares 118,662 52,305 184,460
Class C shares 36,254 14,061 111,991
Reinvestment of distributions at net asset value
Class A shares 529,048 191,425 1,201,933
Class B shares 52,278 18,814 140,854
Class C shares 17,413 6,450 41,682
Payments for redemptions
Class A shares (3,967,562) (2,090,937) (12,949,939)
Class B shares (Note 2) (471,331) (498,609) (2,915,146)
Class C shares (Note 2) (290,015) (105,925) (454,252)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from share transactions (2,688,727) (1,404,666) (9,951,938)
- --------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (2,381,500) (392,990) (ll,991,553)
Net assets at beginning of period 48,724,678 49,117,668 61,109,221
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 46,343,178 $48,724,678 $ 49,117,668
====================================================================================================================
(a) For the period from July 1, 2006 to Aug. 31, 2006.
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 59
NOTES TO FINANCIAL STATEMENTS
(Unaudited as to Feb. 28, 2007)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource California Tax-Exempt Trust and RiverSource Special Tax-Exempt
Series Trust were 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
Massachusetts Tax-Exempt Fund, RiverSource Michigan Tax-Exempt Fund,
RiverSource Minnesota Tax-Exempt Fund, RiverSource New York Tax-Exempt Fund
and RiverSource Ohio Tax-Exempt Fund (the Funds). The Funds are
non-diversified, except for RiverSource Minnesota Tax-Exempt Fund, which is a
diversified fund, open-end management investment companies as defined in the
Investment Company Act of 1940 (as amended). Each Fund has unlimited
authorized shares of beneficial interest.
Each Fund's goal is to provide a high level of income generally exempt from
federal income tax as well as from the respective state and local income tax.
A portion of each Fund's assets may be invested in bonds whose interest is
subject to the alternative minimum tax computation. The Funds concentrate
their investments in a single state and therefore may have more credit risk
related to the economic conditions of the respective state than Funds that
have a broader geographical diversification.
Each Fund offers Class A, Class B and Class C shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee and transfer agency fees (class specific expenses) differ
among classes. Income, expenses (other than class-specific expenses) and
realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets.
Each Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from
actual results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sale price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the Board.
Short-term securities maturing in more than 60 days from the valuation date
are valued at the market price or approximate market value based on current
interest rates; those maturing in 60 days or less are valued at amortized
cost.
SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS
Delivery and payment for securities that have been purchased by the Funds on a
forward-commitment basis, including when-issued securities and other
forward-commitments, can take place one month or more after the transaction
date. During this period, such securities are subject to market fluctuations,
and they may affect each Fund's net assets the same as owned securities. The
Funds designate cash or liquid securities at least equal to the amount of its
forward-commitments. At Feb. 28, 2007, the outstanding forward-commitments for
the Funds are as follows:
WHEN-ISSUED OTHER
FUND SECURITIES FORWARD-COMMITMENTS
- --------------------------------------------------------------------------------
California Tax-Exempt Fund $ 1,187,100 $--
Massachusetts Tax-Exempt Fund 356,130 --
Michigan Tax-Exempt Fund 938,956 --
Minnesota Tax-Exempt Fund 9,545,935 --
New York Tax-Exempt Fund 1,187,100 --
Ohio Tax-Exempt Fund 593,550 --
- ------------------------------------------------------------------------------
60 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
OPTION TRANSACTIONS
To produce incremental earnings, protect gains and facilitate buying and
selling of securities for investments, the Funds may buy and sell put and call
options and write covered call options on portfolio securities as well as
write cash-secured put options. The risk in writing a call option is that the
Funds give up the opportunity for profit if the market price of the security
increases. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. The Funds also have the additional risk of being unable
to enter into a closing transaction if a liquid secondary market does not
exist. The Funds also may write over-the-counter options where completing the
obligation depends upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Funds
will realize a gain or loss when the option transaction expires or closes.
When options on debt securities or futures are exercised, the Funds will
realize a gain or loss. When other options are exercised, the proceeds on
sales for a written call option, the purchase cost for a written put option or
the cost of a security for a purchased put or call option is adjusted by the
amount of the premium received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Funds may buy
and sell financial futures contracts. Risks of entering into futures contracts
and related options include the possibility of an illiquid market and that a
change in the value of the contract or option may not correlate with changes
in the value of the underlying securities.
Upon entering into a futures contract, the Funds are required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Funds each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Funds recognize a realized gain or loss when
the contract is closed or expires.
SWAP TRANSACTIONS
To produce incremental earnings, to gain exposure to or protect itself from
market changes, the Funds may enter into swap agreements. Swaps are an
agreement between two parties to exchange periodic cash flows based on a
specified amount of principal. The net cash flow is generally the difference
between a floating market interest rate versus a fixed interest rate. The
Funds may employ swaps to synthetically add or subtract principal exposure to
the municipal market.
Risks of entering into a swap include a lack of correlation between swaps and
the portfolio of municipal bonds the swaps are designed to hedge or replicate.
A lack of correlation may cause the swap to experience adverse changes in
value relative to expectations. In addition, swaps are subject to the risk of
default of a counterparty, and the risk of adverse movements in market
interest rates relative to the swap positions entered.
Swaps are valued daily and unrealized appreciation and depreciation is
recorded. The Funds will realize a gain or a loss when the swap is terminated.
The Funds did not enter into any swap agreements for the six months ended Feb.
28, 2007.
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. 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 "Statement 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. Each Fund's
investments are held by the trusts and serve as collateral in short-term
floating rate notes outstanding. Contractual maturities and interest rates of
the municipal bonds held in trust at Feb. 28, 2007, are presented in the
"Investments in Securities." The inclusion of interest and fee expense related
to the short-term floating rate notes corresponds to an equal increase in
interest income from the fixed rate municipal bonds held in trust. At Feb. 28,
2007, the short-term floating rate notes outstanding were as follows:
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 61
MARKET VALUE SHORT-TERM
OF MUNICIPAL FLOATING RATE RANGE OF
BONDS HELD NOTES INTEREST
FUND IN TRUST OUTSTANDING RATES
- --------------------------------------------------------------------------------
Massachusetts Tax-Exempt Fund $ 1,149,510 $ 500,000 3.65%
Michigan Tax-Exempt Fund 574,755 250,000 3.65%
Minnesota Tax-Exempt Fund 27,892,334 16,810,000 3.69% - 3.72%
New York Tax-Exempt Fund 6,085,603 3,630,000 3.65% - 3.72%
Ohio Tax-Exempt Fund 574,755 250,000 3.65%
GUARANTEES AND INDEMNIFICATIONS
Under each Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to each Fund. In addition, certain of each Fund's contracts with
its service providers contain general indemnification clauses. Each Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against each Fund cannot be determined and each
Fund has no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
Each Fund's policy is to comply with 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.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts and losses deferred due to "wash sale" transactions.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed may differ
from the year that the income or realized gains (losses) were recorded by the
Funds.
RECENT ACCOUNTING PRONOUNCEMENTS
On Sept. 20, 2006, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards No. 157 "Fair Value Measurements"
("SFAS 157"). SFAS 157 establishes an authoritative definition of fair value,
sets out a framework for measuring fair value, and requires additional
disclosures about fair-value measurements. The application of SFAS 157 is
required for fiscal years beginning after Nov. 15, 2007 and interim periods
within those fiscal years. The impact of SFAS 157 on the Fund's financial
statements is being evaluated.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN
48 clarifies the accounting for uncertainty in income taxes recognized in
accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48
prescribes a two-step process to recognize and measure a tax position taken or
expected to be taken in a tax return. The first step is to determine whether a
tax position has met the more-likely-than-not recognition threshold and the
second step is to measure a tax position that meets the threshold to determine
the amount of benefit to recognize. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after Dec. 15, 2006. Tax positions of each Fund are being evaluated
to determine the impact, if any, to the Funds. The adoption of FIN 48 is not
anticipated to have a material impact on the Funds.
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.
- ------------------------------------------------------------------------------
62 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial, Inc. (Ameriprise Financial). 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. Prior to March 1,
2006, the fee percentage of each Fund's average daily net assets declined from
0.47% to 0.38% annually as each Fund's assets increased.
Under an Administrative Services Agreement, each Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
each Fund's average daily net assets that declines from 0.07% to 0.04%
annually as each Fund's assets increase. Prior to Oct. 1, 2005, the fee
percentage of each Fund's average daily net assets declined from 0.04% to
0.02% annually as each Fund's assets increased.
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, 2007, these amounts are as follows:
FUND OTHER EXPENSES
- --------------------------------------------------------------------------------
California Tax-Exempt Fund $ 3,579
Massachusetts Tax-Exempt Fund 3,348
Michigan Tax-Exempt Fund 3,317
Minnesota Tax-Exempt Fund 4,092
New York Tax-Exempt Fund 3,380
Ohio Tax-Exempt Fund 3,312
Compensation of Board members includes, for the former Board Chair,
compensation as well as retirement benefits. Certain other aspects of the
former Board Chair's compensation, including health benefits and payment of
certain other expenses, are included under other expenses.
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.
Professional fees included fees paid by each Fund for legal services and
independent auditor services.
Under a Transfer Agency Agreement, RiverSource Service Corporation (the
Transfer Agent) maintains shareholder accounts and records. Each Fund pays the
Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $20.50
o Class B $21.50
o Class C $21.00
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the base fee of $18.50.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statements of operations.
Each Fund has agreements with Ameriprise Financial Services, Inc. and
RiverSource Distributors, Inc. (collectively, the Distributor) for
distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-l, 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.
Under an agreement which was effective until Sept. 30, 2005, net expenses
would not exceed 0.88% for Class A, 1.64% for Class B and 1.64% for Class C of
the Fund's average daily net assets for Massachusetts Tax-Exempt Fund,
Michigan Tax-Exempt Fund, New York Tax-Exempt Fund and Ohio Tax-Exempt Fund.
Effective as of Oct. 1, 2005, the Investment Manager and its affiliates have
agreed to waive certain fees and expenses until Aug. 31, 2007, unless sooner
terminated at the discretion of the Board, such that net expenses (excluding
interest and fee expenses related to the Fund's participation in certain
inverse floater programs) will not exceed 0.79% for Class A, 1.55% for Class B
and 1.55% for Class C of the Fund's average daily net assets for California
Tax-Exempt Fund, Massachusetts Tax-Exempt Fund, Michigan Tax-Exempt Fund,
Minnesota Tax-Exempt Fund, New York Tax-Exempt Fund and Ohio Tax-Exempt Fund.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 63
For the six months ended Feb. 28, 2007, the Investment Manager and its
affiliates waived certain fees and expenses (excluding interest and fee
expenses related to the Fund's participation in certain inverse floater
programs), such that the Funds net expenses are as follows:
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund 0.79% 1.55% 1.55%
Massachusetts Tax-Exempt Fund 0.79 1.55 1.55
Michigan Tax-Exempt Fund 0.79 1.55 1.55
Minnesota Tax-Exempt Fund 0.79 1.55 1.55
New York Tax-Exempt Fund 0.79 1.55 1.55
Ohio Tax-Exempt Fund 0.79 1.55 1.55
For the period from July 1, 2006 to Aug. 31, 2006, the Investment Manager and
its affiliates waived certain fees and expenses (excluding interest and fee
expenses related to the Fund's participation in certain inverse floater
programs), such that the Funds net expenses are as follows:
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund 0.79% 1.55% 1.55%
Massachusetts Tax-Exempt Fund 0.79 1.55 1.55
Michigan Tax-Exempt Fund 0.79 1.55 1.55
Minnesota Tax-Exempt Fund 0.79 1.55 1.55
New York Tax-Exempt Fund 0.79 1.55 1.55
Ohio Tax-Exempt Fund 0.79 1.55 1.55
For the year ended June 30, 2006, the Investment Manager and its affiliates
waived certain fees and expenses (excluding interest and fee expenses related
to the Fund's participation in certain inverse floater programs), such that
the Funds net expenses are as follows:
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund 0.81% 1.57% 1.58%
Massachusetts Tax-Exempt Fund 0.81 1.58 1.58
Michigan Tax-Exempt Fund 0.81 1.58 1.57
Minnesota Tax-Exempt Fund 0.81 1.57 1.57
New York Tax-Exempt Fund 0.81 1.58 1.58
Ohio Tax-Exempt Fund 0.81 1.58 1.58
- ------------------------------------------------------------------------------
64 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
Of these waived fees and expenses, the transfer agency fees waived (noted by
share class) and management fees for the periods indicated are as follows:
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
FUND AMOUNT AMOUNT AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund
Class A $ 35,434 $ 9,368 $ 58,036
Class B 1,749 385 3,499
Class C 468 128 850
The management fees waived at the Fund level were 27,748 14,288 67,550
Massachusetts Tax-Exempt Fund
Class A 16,774 15,032 34,233
Class B 2,939 2,876 8,270
Class C 256 252 748
The management fees waived at the Fund level were 39,208 7,714 59,638
Michigan Tax-Exempt Fund
Class A 13,344 4,808 27,785
Class B 752 309 2,229
Class C 418 159 1,034
The management fees waived at the Fund level were 32,857 19,631 63,047
Minnesota Tax-Exempt Fund
Class A 67,937 28,966 132,553
Class B 6,036 2,697 14,644
Class C 1,749 754 3,422
The management fees waived at the Fund level were -- 14,656 54,409
New York Tax-Exempt Fund
Class A 19,217 6,875 40,263
Class B 1,926 722 4,927
Class C 331 129 780
The management fees waived at the Fund level were 35,647 19,149 65,479
Ohio Tax-Exempt Fund
Class A 13,630 4,914 28,633
Class B 1,602 553 3,812
Class C 440 179 1,103
The management fees waived at the Fund level were. 35,983 19,744 63,767
(a) For the period from July 1, 2006 to Aug. 31, 2006.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 65
Sales charges received by the Distributor for distributing the Funds' shares
for the periods indicated are as follows:
SIX MONTHS ENDED FEB. 28, 2007
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $ 57,897 $ 5,021 $ 131
Massachusetts Tax-Exempt Fund 24,004 9,029 12
Michigan Tax-Exempt Fund 12,432 1,134 284
Minnesota Tax-Exempt Fund 152,016 15,245 352
New York Tax-Exempt Fund 12,091 6,489 410
Ohio Tax-Exempt Fund 10,274 1,746 51
PERIOD ENDED AUG. 31, 2006(a)
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $ 28,971 $ 1,714 $ 17
Massachusetts Tax-Exempt Fund 7,835 7,394 1
Michigan Tax-Exempt Fund 2,094 3,820 362
Minnesota Tax-Exempt Fund 32,269 5,001 467
New York Tax-Exempt Fund 4,504 959 75
Ohio Tax-Exempt Fund 8,897 767 --
(a) For the period from July 1, 2006 to Aug. 31, 2006.
YEAR ENDED JUNE 30, 2006
FUND CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $151,906 $29,100 $ 449
Massachusetts Tax-Exempt Fund 53,101 38,137 582
Michigan Tax-Exempt Fund 38,134 9,161 1,077
Minnesota Tax-Exempt Fund 355,581 85,770 1,314
New York Tax-Exempt Fund 64,053 18,982 987
Ohio Tax-Exempt Fund 38,443 19,731 254
The Funds' custodian and transfer agency fees were reduced as a result of
earnings and bank fee credits from overnight cash balances for the periods
indicated and are as follows:
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED
FEB. 28, 2007 AUG. 31, 2006(a) JUNE 30, 2006
FUND REDUCTION REDUCTION REDUCTION
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $8,699 $1,945 $17,465
Massachusetts Tax-Exempt Fund 4,629 672 8,320
Michigan Tax-Exempt Fund 3,247 570 6,650
Minnesota Tax-Exempt Fund 21,285 9,068 50,995
New York Tax-Exempt Fund 3,512 1,748 8,318
Ohio Tax-Exempt Fund 2,807 1,024 6,726
(a) For the period from July 1, 2006 to Aug. 31, 2006.
For the year ended June 30, 2006, the Funds received a one time payment by
Ameriprise Financial for additional earnings from overnight cash balances
determined to be owed for prior years. This amount was insignificant to each
Fund's net asset value and total return.
FUND AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $16,837
Massachusetts Tax-Exempt Fund 5,873
Michigan Tax-Exempt Fund 5,451
Minnesota Tax-Exempt Fund 27,504
New York Tax-Exempt Fund 8,239
Ohio Tax-Exempt Fund 5,251
- ------------------------------------------------------------------------------
66 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
3. SECURITIES TRANSACTIONS
For the six months ended Feb. 28, 2007, cost of purchases and proceeds from
sales (other than short-term obligations) aggregated for each Fund are as
follows:
FUND PURCHASES PROCEEDS
- ----------------------------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund $24,372,280 $30,112,585
Massachusetts Tax-Exempt Fund 2,192,376 7,102,233
Michigan Tax-Exempt Fund 2,400,833 6,434,323
Minnesota Tax-Exempt Fund 31,210,573 38,151,651
New York Tax-Exempt Fund 5,418,488 7,949,630
Ohio Tax-Exempt Fund 4,343,078 7,441,789
Realized gains and losses are determined on an identified cost basis.
4. SHARE TRANSACTIONS
Transactions in shares for each Fund for the periods indicated are as follows:
CALIFORNIA TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 1,303,332 51,669 18,526
Issued for reinvested distributions 429,972 21,296 5,870
Redeemed (2,743,974) (169,609) (46,287)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,010,670) (96,644) (21,891)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 713,105 28,307 11,091
Issued for reinvested distributions 155,930 7,832 2,105
Redeemed (1,573,086) (438,186) (15,324)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (704,051) (402,047) (2,128)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 4,036,004 204,267 95,008
Issued for reinvested distributions 1,243,495 84,748 18,813
Redeemed (7,590,967) (1,255,215) (269,704)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (2,311,468) (966,200) (155,883)
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 478,375 34,021 4,203
Issued for reinvested distributions 124,095 16,401 1,617
Redeemed (1,236,226) (268,183) (44,673)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (633,756) (217,761) (38,853)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 363,719 10,202 3,388
Issued for reinvested distributions 44,686 6,934 672
Redeemed (401,184) (518,954) (10,891)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 7,221 (501,818) (6,831)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 1,209,044 159,477 28,692
Issued for reinvested distributions 322,790 67,314 6,428
Redeemed (2,681,419) (1,239,200) (129,837)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,149,585) (1,012,409) (94,717)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 67
MICHIGAN TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 333,228 4,466 17,351
Issued for reinvested distributions 116,489 4,898 2,995
Redeemed (1,116,473) (81,487) (53,572)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (666,756) (72,123) (33,226)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold
Issued for 125,670 1,992 5,188
reinvested distributions 42,120 1,857 1,100
Redeemed (230,194) (139,247) (25,467)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (62,404) (135,398) (19,179)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 1,007,240 25,135 99,433
Issued for reinvested distributions 318,908 19,353 10,644
Redeemed (2,520,700) (427,991) (165,508)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,194,552) (383,503) (55,431)
- ------------------------------------------------------------------------------------------------------------------------------------
MINNESOTA TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 2,784,437 64,594 96,979
Issued for reinvested distributions 863,339 68,370 19,746
Redeemed (4,778,184) (530,981) (168,094)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,130,408) (398,017) (51,369)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 1,249,041 22,719 15,239
Issued for reinvested distributions 296,839 24,100 6,760
Redeemed (1,650,357) (1,099,618) (62,221)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (104,477) (1,052,799) (40,222)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 5,404,198 310,952 309,585
Issued for reinvested distributions 1,880,076 191,786 42,259
Redeemed (12,427,629) (2,948,175) (447,815)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,143,355) (2,445,437) (95,971)
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 487,557 50,634 13,866
Issued for reinvested distributions 196,255 16,403 3,010
Redeemed (1,107,773) (209,824) (50,669)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (423,961) (142,787) (33,793)
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 252,039 20,852 6,460
Issued for reinvested distributions 66,580 5,730 1,126
Redeemed (456,343) (230,530) (12,175)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (137,724) (203,948) (4,589)
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
Sold 1,420,333 123,189 46,590
Issued for reinvested distributions 525,877 57,046 9,561
Redeemed (3,327,671) (729,908) (89,076)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,381,461) (549,673) (32,925)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
68 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
OHIO TAX-EXEMPT FUND
SIX MONTHS ENDED FEB. 28, 2007
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------
Sold 243,730 22,402 6,869
Issued for reinvested distributions 100,135 9,895 3,296
Redeemed (751,650) (89,402) (54,873)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (407,785) (57,105) (44,708)
- ---------------------------------------------------------------------------------------------
PERIOD ENDED AUG. 31, 2006(a)
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------
Sold 194,690 10,118 2,707
Issued for reinvested distributions 36,662 3,603 1,235
Redeemed (401,786) (96,356) (20,427)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (170,434) (82,635) (16,485)
- ---------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 2006
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------
Sold 892,271 35,150 21,350
Issued for reinvested distributions 229,263 26,859 7,950
Redeemed (2,470,653) (554,877) (86,600)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (1,349,119) (492,868) (57,300)
- ---------------------------------------------------------------------------------------------
(a) For the period from July 1, 2006 to Aug. 31, 2006.
5. INTEREST RATE FUTURES CONTRACTS
At Feb. 28, 2007, RiverSource California Tax-Exempt Fund's investments in
securities included securities valued at $111,315 that were pledged as
collateral to cover initial margin deposits on 136 open sale contracts. The
notional market value of the open sale contracts at Feb. 28, 2007 was
$14,768,750 with a net unrealized loss of $83,713. See "Summary of significant
accounting policies" and "Notes to investments in securities."
At Feb. 28, 2007, RiverSource Massachusetts Tax-Exempt Fund's investments in
securities included securities valued at $39,621 that were pledged as
collateral to cover initial margin deposits on 43 open sale contracts. The
notional market value of the open sale contracts at Feb. 28, 2007 was
$4,669,531 with a net unrealized loss of $27,332. See "Summary of significant
accounting policies" and "Notes to investments in securities."
At Feb. 28, 2007, RiverSource Michigan Tax-Exempt Fund's investments in
securities included securities valued at $37,022 that were pledged as
collateral to cover initial margin deposits on 37 open sale contracts. The
notional market value of the open sale contracts at Feb. 28, 2007 was
$4,017,969 with a net unrealized loss of $22,884. See "Summary of significant
accounting policies" and "Notes to investments in securities."
At Feb. 28, 2007, RiverSource Minnesota Tax-Exempt Fund's investments in
securities included securities valued at $236,215 that were pledged as
collateral to cover initial margin deposits on 261 open sale contracts. The
notional market value of the open sale contracts at Feb. 28, 2007 was
$28,342,969 with a net unrealized loss of $160,455. See "Summary of
significant accounting policies" and "Notes to investments in securities."
At Feb. 28, 2007, RiverSource New York Tax-Exempt Fund's investments in
securities included securities valued at $54,644 that were pledged as
collateral to cover initial margin deposits on 55 open sale contracts. The
notional market value of the open sale contracts at Feb. 28, 2007 was
$5,972,656 with a net unrealized loss of $33,900. See "Summary of significant
accounting policies" and "Notes to investments in securities."
At Feb. 28, 2007, RiverSource Ohio Tax-Exempt Fund's investments in securities
included securities valued at $45,875 that were pledged as collateral to cover
initial margin deposits on 37 open sale contracts. The notional market value
of the open sale contracts at Feb. 28, 2007 was $4,017,969 with a net
unrealized loss of 22,884. See "Summary of significant accounting policies"
and "Notes to investments in securities."
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RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 69
6. BANK BORROWINGS
Each Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby each Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 19, 2006. Each Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables each Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate.
Borrowings are payable within 60 days after such loan is executed. Each Fund
also pays a commitment fee equal to its pro rata share of the amount of the
credit facility at a rate of 0.06% per annum. Prior to this agreement, the
Fund paid a commitment fee equal to its pro rata share of the amount of the
credit facility at a rate of 0.07% per annum. Each Fund had no borrowings
under the facility outstanding during the six months ended Feb. 28, 2007.
7. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, capital loss carry-overs at Aug. 31, 2006 are
as follows:
FUND 2012 2013 2014
- -----------------------------------------------------------------
California Tax-Exempt Fund $ -- $ -- $ 109,278
Massachusetts Tax-Exempt Fund -- -- 150,080
Michigan Tax-Exempt Fund -- -- 73,073
Minnesota Tax-Exempt Fund -- 1,520,753 913,006
New York Tax-Exempt Fund -- -- 79,756
Ohio Tax-Exempt Fund 39,505 -- 51,069
It is unlikely the Board will authorize distributions of any net realized
capital gains for the Funds until the respective capital loss carry-overs have
been offset or expire.
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 to transfer this case to the United States
District Court for the District of Minnesota. In response to our motion to
dismiss the complaint, the Court dismissed one of plaintiffs' four claims and
granted plaintiffs limited discovery. Discovery is currently set to end in
March 2007.
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement agreements
with the Securities and Exchange Commission (SEC) and Minnesota Department of
Commerce (MDOC) related to market timing activities. In connection with these
matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC
violated certain provisions of the federal and Minnesota securities laws by
failing to adequately disclose market timing activities by allowing certain
identified market timers to continue to market time contrary to disclosures in
mutual fund and variable annuity product prospectuses. The Orders also alleged
that AEFC failed to implement procedures to detect and prevent market timing
in 401(k) plans for employees of AEFC and related companies and failed to
adequately disclose that there were no such procedures. Pursuant to the MDOC
Order, the MDOC also alleged that AEFC allowed inappropriate market timing to
occur by failing to have written policies and procedures and failing to
properly supervise its employees.
As a result of the Orders, 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. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million. AEFC
also agreed to make presentations at least annually to its board of directors
and the relevant mutual funds' board that include an overview of policies and
procedures to prevent market timing, material changes to these policies and
procedures and whether disclosures related to market timing are consistent
with the SEC order and federal securities laws. 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. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a summary
of actions taken to ensure compliance with applicable laws and regulations and
certification by a senior officer regarding compliance and supervisory
procedures.
- ------------------------------------------------------------------------------
70 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
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.
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 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.
9. CHANGE OF FUND'S FISCAL YEAR
The By-Laws of each Fund were amended on April 13, 2006, changing their fiscal
year end from June 30 to Aug. 31, effective Aug. 31, 2006.
10. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
each Fund's results.
RiverSource California Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $5.16 $5.06 $5.27 $5.11 $5.37 $5.23
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .03 .19 .20 .21 .23
Net gains (losses) (both realized and unrealized) .05 .10 (.15) .23 (.20) .14
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .15 .13 .04 .43 .01 .37
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.03) (.19) (.20) (.21) (.23)
Distributions from realized gains -- -- (.06) (.07) (.06) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.03) (.25) (.27) (.27) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.21 $5.16 $5.06 $5.27 $ 5.11 $5.37
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 167 $ 170 $ 171 $ 190 $ 194 $ 237
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .79%(d),(e) .79%(d),(e) .81%(d) .86% .86% .85%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.83%(e) 3.81%(e) 3.69% 3.71% 4.03% 4.34%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 14% 7% 20% 28% 30% 95%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(f) 2.91%(g) 2.63%(g) .81% 8.53% .25% 7.26%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 0.86% for the six months ended Feb. 28,
2007, 0.87% for the period ended Aug. 31, 2006 and 0.88% for the year
ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 71
RiverSource California Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $5.16 $5.06 $5.27 $5.11 $5.37 $5.23
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .03 .15 .16 .17 .19
Net gains (losses) (both realized and unrealized) .05 .10 (.15) .23 (.20) .14
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .13 -- .39 (.03) .33
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) (.15) (.16) (.17) (.19)
Distributions from realized gains -- -- (.06) (.07) (.06) -
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.21) (.23) (.23) (.19)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.21 $5.16 $5.06 $5.27 $5.11 $5.37
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 8 $ 9 $ 11 $ 16 $ 21 $ 27
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.55%(d),(e) 1.55%(d),(e) 1.57%(d) 1.61% 1.61% 1.60%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.08%(e) 3.01%(e) 2.92% 2.95% 3.28% 3.58%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 14% 7% 20% 28% 30% 95%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(f) 2.53%(g) 2.50%(g) .05% 7.72% (.50%) 6.44%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.62% for the six months ended Feb. 28,
2007, 1.62% for the period ended Aug. 31, 2006 and 1.63% for the year
ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
72 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource California Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.17 $ 5.07 $ 5.28 $ 5.12 $ 5.38 $ 5.24
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .03 .15 .16 .17 .19
Net gains (losses) (both realized and unrealized) .05 .10 (.15) .23 (.20) .14
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .13 -- .39 (.03) .33
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) (.15) (.16) (.17) (.19)
Distributions from realized gains -- -- (.06) (.07) (.06) -
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.21) (.23) (.23) (.19)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.22 $ 5.17 $ 5.07 $ 5.28 $ 5.12 $ 5.38
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 2 $ 2 $ 2 $ 3 $ 4 $ 5
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.55%(d),(e) 1.55%(d),(e) 1.58%(d) 1.62% 1.62% 1.61%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.07%(e) 3.05%(e) 2.93% 2.94% 3.27% 3.56%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 14% 7% 20% 28% 30% 95%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(f) 2.53%(g) 2.50%(g) .06% 7.71% (.50%) 6.43%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.62% for the six months ended Feb. 28,
2007, 1.63% for the period ended Aug. 31, 2006 and 1.64% for the year
ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 73
RiverSource Massachusetts Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.33 $ 5.22 $ 5.45 $ 5.26 $ 5.51 $ 5.37
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .03 .18 .17 .18 .19
Net gains (losses) (both realized and unrealized) .03 .11 (.20) .22 (.19) .16
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations .12 .14 (.02) .39 (.01) .35
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) (.18) (.17) (.18) (.19)
Distributions from realized gains -- -- (.03) (.03) (.06) (.02)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.03) (.21) (.20) (.24) (.21)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.36 $ 5.33 $ 5.22 $ 5.45 $ 5.26 $ 5.51
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 46 $ 49 $ 48 $ 56 $ 59 $ 73
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) .79%(e) .79%(e) .81% .88% .88% .88%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) .82%(e) .82%(e) .87% .92% .90% .98%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.50%(e) 3.52%(e) 3.38% 3.17% 3.35% 3.57%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 4% 5% 17% 9% 14% 141%
- -------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.32%(h) 2.72%(h) (.29%) 7.42% (.24%) 6.73%
- -------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.00%, excluding interest and fee expense,
and 1.03%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.05%, excluding interest and fee expense, and 1.08%
including interest and fee expense, for the period ended Aug. 31, 2006
and 0.97%, 0.94%, 0.93% and 0.92%, excluding interest and fee expense,
and 1.03%, 0.98%, 0.95% and 1.02%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
74 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Massachusetts Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.33 $ 5.22 $ 5.45 $ 5.26 $ 5.51 $ 5.37
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .14 .13 .14 .15
Net gains (losses) (both realized and unrealized) .03 .10 (.20) .22 (.19) .16
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations .10 .13 (.06) .35 (.05) .31
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.02) (.14) (.13) (.14) (.15)
Distributions from realized gains -- -- (.03) (.03) (.06) (.02)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.02) (.17) (.16) (.20) (.17)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.36 $ 5.33 $ 5.22 $ 5.45 $ 5.26 $ 5.51
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 8 $ 9 $ 12 $ 18 $ 21 $ 24
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.64% 1.63%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.58%(e) 1.58%(e) 1.64% 1.68% 1.66% 1.73%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.75%(e) 2.72%(e) 2.61% 2.41% 2.59% 2.81%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 4% 5% 17% 9% 14% 141%
- -------------------------------------------------------------------------------------------------------------------------
Total return(g) 1.94%(h) 2.58%(h) (1.05%) 6.61% (.99%) 5.92%
- -------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.76%, excluding interest and fee expense,
and 1.79%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.79%, excluding interest and fee expense, and 1.82%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.72%, 1.69%, 1.69% and 1.68%, excluding interest and fee expense,
and 1.78%, 1.73%, 1.71% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 75
RiverSource Massachusetts Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.32 $ 5.21 $ 5.44 $ 5.26 $ 5.51 $ 5.37
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .14 .13 .14 .15
Net gains (losses) (both realized and unrealized) .04 .11 (.20) .21 (.19) .16
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .14 (.06) .34 (.05) .31
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.03) (.14) (.13) (.14) (.15)
Distributions from realized gains -- -- (.03) (.03) (.06) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.03) (.17) (.16) (.20) (.17)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.36 $ 5.32 $ 5.21 $ 5.44 $ 5.26 $ 5.51
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ 1 $ 2 $ 2
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.64% 1.64%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.58%(e) 1.58%(e) 1.64% 1.68% 1.66% 1.74%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.75%(e) 2.76%(e) 2.62% 2.41% 2.58% 2.88%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 4% 5% 17% 9% 14% 141%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.13%(h) 2.59%(h) (1.05%) 6.41% (.97%) 5.91%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.76%, excluding interest and fee expense,
and 1.79%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.81%, excluding interest and fee expense, and 1.84%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.73%, 1.70%, 1.69% and 1.68%, excluding interest and fee expense,
and 1.79%, 1.74%, 1.71% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
76 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Michigan Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.25 $ 5.15 $ 5.35 $ 5.21 $ 5.47 $ 5.33
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .03 .18 .18 .19 .22
Net gains (losses) (both realized and unrealized) .03 .10 (.16) .17 (.18) .19
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .12 .13 .02 .35 .01 .41
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) (.18) (.18) (.19) (.22)
Distributions from realized gains -- -- (.04) (.03) (.08) (.05)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.03) (.22) (.21) (.27) (.27)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.28 $ 5.25 $ 5.15 $ 5.35 $ 5.21 $ 5.47
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 42 $ 46 $ 45 $ 53 $ 56 $ 70
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) .79%(e) .79%(e) .81% .88% .88% .88%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) .81%(e) .81%(e) .81% .88% .89% .97%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.52%(e) 3.44%(e) 3.38% 3.45% 3.55% 4.06%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 5% 6% 16% 9% 32% 113%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.34%(h) 2.54%(h) .40% 6.80% .19% 8.00%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived / reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class A would have been 0.99%, excluding interest and fee
expense, and 1.01%, including interest and fee expense, for the six
months ended Feb. 28,2007 and 1.09%, excluding interest and fee
expense, and 1.11%, including interest and fee expense, for the period
ended Aug. 31,2006 and 0.98%, 0.96%, 0.94% and 0.93%, excluding interest
and fee expense, and 0.98%, 0.96%, 0.95% and 1.02%, including interest
and fee expense, for the years ended June 30, 2006, 2005, 2004 and 2003,
respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 77
RiverSource Michigan Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.26 $ 5.16 $ 5.35 $ 5.21 $ 5.47 $ 5.33
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .02 .14 .14 .15 .18
Net gains (losses) (both realized and unrealized) .03 .10 (.15) .17 (.18) .19
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .10 .12 (.01) .31 (.03) .37
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.02) (.14) (.14) (.15) (.18)
Distributions from realized gains -- -- (.04) (.03) (.08) (.05)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.02) (.18) (.17) (.23) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.29 $ 5.26 $ 5.16 $ 5.35 $ 5.21 $ 5.47
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 2 $ 3 $ 3 $ 5 $ 7 $ 9
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.63% 1.63%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.57%(e) 1.57%(e) 1.58% 1.64% 1.64% 1.72%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.76%(e) 2.65%(e) 2.61% 2.69% 2.79% 3.28%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 5% 6% 16% 9% 32% 113%
- ---------------------------------------------------------------------------------------------------------------------------
Total return(g) 1.96%(h) 2.39%(h) (.17%) 5.99% (.56%) 7.18%
- ---------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.75%, excluding interest and fee expense,
and 1.77%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.83%, excluding interest and fee expense, and 1.85%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.74%, 1.71%, 1.70% and 1.69%, excluding interest and fee expense,
and 1.74%, 1.71%, 1.71% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
78 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Michigan Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.26 $ 5.15 $ 5.35 $ 5.21 $ 5.47 $ 5.33
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .02 .14 .14 .15 .18
Net gains (losses) (both realized and unrealized) .02 .11 (.16) .17 (.18) .19
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .09 .13 (.02) .31 (.03) .37
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.02) (.14) (.14) (.15) (.18)
Distributions from realized gains -- -- (.04) (.03) (.08) (.05)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.02) (.18) (.17) (.23) (.23)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.28 $ 5.26 $ 5.15 $ 5.35 $ 5.21 $ 5.47
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ 2 $ 2 $ 2
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.57% 1.64% 1.64% 1.63%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.57%(e) 1.57%(e) 1.57% 1.64% 1.65% 1.72%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.77%(e) 2.67%(e) 2.61% 2.70% 2.80% 3.27%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 5% 6% 16% 9% 32% 113%
- -------------------------------------------------------------------------------------------------------------------------------
Total return(g) 1.76%(h) 2.59%(h) (.36%) 5.99% (.57%) 7.18%
- -------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.75%, excluding interest and fee expense,
and 1.77%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.84%, excluding interest and fee expense, and 1.86%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.74%, 1.72%, 1.70% and 1.69%, excluding interest and fee expense,
and 1.74%, 1.72%, 1.71% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 79
RiverSource Minnesota Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37 $ 5.20
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .03 .18 .18 .19 .22
Net gains (losses) (both realized and unrealized) .04 .10 (.17) .17 (.17) .17
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .13 .01 .35 .02 .39
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.03) (.18) (.18) (.19) (.22)
Distributions from realized gains -- -- (.01) (.02) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.03) (.19) (.20) (.19) (.22)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $ 304 $ 309 $ 303 $ 341 $ 347 $ 393
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c) .79%(d),(e) .79%(d),(e) .81%(d) .85% .84% .84%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) .98%(d),(e) .98%(d),(e) .96%(d) .95% .90% .96%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.63%(e) 3.60%(e) 3.52% 3.37% 3.60% 4.26%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 3% 13% 15% 23% 73%
- -------------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.45%(h) 2.56.%(h) .29% 6.73% .32% 7.78%
- -------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 0.84%, excluding interest and fee expense,
and 1.02%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 0.87%, excluding interest and fee expense, and 1.06%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 0.86%, excluding interest and fee expense, and 1.01%, including
interest and fee expense, for the year ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
80 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Minnesota Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37 $ 5.20
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .14 .14 .15 .18
Net gains (losses) (both realized and unrealized) .04 .10 (.17) .17 (.17) .17
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .13 (.03) .31 (.02) .35
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) (.14) (.14) (.15) (.18)
Distributions from realized gains -- -- (.01) (.02) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.15) (.16) (.15) (.18)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 27 $ 29 $ 34 $ 49 $ 59 $ 68
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c) 1.55%(d),(e) 1.55%(d),(e) 1.57%(d) 1.60% 1.59% 1.59%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.74%(d),(e) 1.74%(d),(e) 1.72%(d) 1.70% 1.65% 1.71%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.87%(e) 2.81%(e) 2.75% 2.62% 2.85% 3.48%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 3% 13% 15% 23% 73%
- -------------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.07%(h) 2.42%(h) (.47%) 5.94% (.44%) 6.97%
- -------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.59%, excluding interest and fee expense,
and 1.78%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.62%, excluding interest and fee expense, and 1.81%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.62%, excluding interest and fee expense, and 1.77%, including
interest and fee expense, for the year ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 81
RiverSource Minnesota Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG.31 YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37 $ 5.20
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .14 .14 .15 .18
Net gains (losses) (both realized and
unrealized) .04 .10 (.17) .17 (.17) .17
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .13 (.03) .31 (.02) .35
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) (.14) (.14) (.15) (.18)
Distributions from realized gains -- -- (.01) (.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.15) (.16) (.15) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.27 $ 5.17 $ 5.35 $ 5.20 $ 5.37
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 8 $ 8 $ 8 $ 9 $ 9 $ 9
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c) 1.55%(d),(e) 1.55%(d),(e) 1.57%(d) 1.61% 1.60% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.74%(d),(e) 1.74%(d),(e) 1.72%(d) 1.71% 1.66% 1.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average daily net assets 2.87%(e) 2.84%(e) 2.76% 2.62% 2.84% 3.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 3% 13% 15% 23% 73%
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.07%(h) 2.42%(h) (.47%) 5.94% (.44%) 6.96%
- ------------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.59%, excluding interest and fee expense,
and 1.78%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.63%, excluding interest and fee expense, and 1.82%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.62%, excluding interest and fee expense, and 1.77%, including
interest and fee expense, for the year ended June 30, 2006.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
82 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource New York Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG.31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.05 $ 4.95 $ 5.18 $ 5.07 $ 5.36 $ 5.16
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .03 .19 .18 .18 .20
Net gains (losses) (both realized and
unrealized) .04 .10 (.18) .17 (.18) .22
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .13 .01 .35 - .42
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) (.19) (.18) (.18) (.20)
Distributions from realized gains (.01) - (.05) (.06) (.11) (.02)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.03) (.24) (.24) (.29) (.22)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.08 $ 5.05 $ 4.95 $ 5.18 $ 5.07 $ 5.36
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 61 $ 63 $ 63 $ 73 $ 79 $ 97
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) .79%(e) .79%(e) .81% .88% .88% .88%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) .99%(e) .98%(e) .98% .98% .95% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to
average daily net assets 3.76%(e) 3.77%(e) 3.75% 3.47% 3.44% 3.88%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 8% 7% 17% 30% 36% 91%
- --------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.60%(h) 2.67%(h) .20% 7.04% (.02%) 8.43%
- --------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 0.95%, excluding interest and fee expense,
and 1.15%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.01%, excluding interest and fee expense, and 1.20%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 0.96%, 0.92%, 0.93% and 0.90%, excluding interest and fee expense,
and 1.13%, 1.02%, 1.00% and 1.02%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 83
RiverSource New York Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.05 $4.95 $ 5.18 $ 5.07 $ 5.36 $ 5.16
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .15 .14 .14 .16
Net gains (losses) (both realized and unrealized) .04 .10 (.18) .17 (.18) .22
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .13 (.03) .31 (.04) .38
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.03) (.15) (.14) (.14) (.16)
Distributions from realized gains (.01) -- (.05) (.06) (.11) (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.20) (.20) (.25) (.18)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.08 $5.05 $ 4.95 $ 5.18 $ 5.07 $ 5.36
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 6 $ 7 $ 8 $ 11 $ 15 $ 18
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.63% 1.63%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.75%(e) 1.74%(e) 1.75% 1.74% 1.70% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.00%(e) 2.98%(e) 2.98% 2.70% 2.69% 3.13%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 8% 7% 17% 30% 36% 91%
- ------------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.21%(h) 2.54%(h) (.55%) 6.23% (.78%) 7.61%
- ------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.71%, excluding interest and fee expense,
and 1.91%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.76%, excluding interest and fee expense, and 1.95%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.71%, 1.67%, 1.69% and 1.66%, excluding interest and fee expense,
and 1.88%, 1.77%, 1.76% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
84 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource New York Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.05 $4.95 $ 5.18 $ 5.07 $ 5.36 $ 5.16
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .03 .15 .14 .14 .16
Net gains (losses) (both realized and unrealized) .04 .10 (.18) .17 (.18) .22
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .13 (.03) .31 (.04) .38
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.03) (.15) (.14) (.14) (.16)
Distributions from realized gains (.01) -- (.05) (.06) (.11) (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) (.03) (.20) (.20) (.25) (.18)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.08 $5.05 $ 4.95 $ 5.18 $ 5.07 $ 5.36
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ 1 $ 2 $ 2
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.63% 1.64%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.75%(e) 1.74%(e) 1.75% 1.74% 1.70% 1.76%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.00%(e) 3.01%(e) 2.99% 2.70% 2.68% 3.07%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 8% 7% 17% 30% 36% 91%
- ------------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.21%(h) 2.54%(h) (.55%) 6.23% (.78%) 7.60%
- ------------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.71%, excluding interest and fee expense,
and 1.91%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.78%, excluding interest and fee expense, and 1.97%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.72%, 1.68%, 1.69% and 1.66%, excluding interest and fee expense,
and 1.89%, 1.78%, 1.76% and 1.78%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 85
RiverSource Ohio Tax-Exempt Fund
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.26 $ 5.15 $ 5.35 $ 5.16 $ 5.43 $ 5.35
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .03 .17 .16 .17 .18
Net gains (losses) (both realized and unrealized) .04 .11 (.19) .19 (.20) .19
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .14 (.02) .35 (.03) .37
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) (.18) (.16) (.17) (.18)
Distributions from realized gains -- -- -- -- (.07) (.11)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.03) (.18) (.16) (.24) (.29)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.26 $ 5.15 $ 5.35 $ 5.16 $ 5.43
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 40 $ 42 $ 42 $ 51 $ 56 $ 67
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) .79%(e) .79%(e) .81% .88% .88% .88%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) .81%(e) .81%(e) .81% .89% .90% .96%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 3.42%(e) 3.45%(e) 3.31% 3.07% 3.13% 3.40%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 7% 18% 33% 17% 194%
- -----------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.48%(h) 2.73%(h) (.41%) 6.90% (.67%) 7.08%
- -----------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.01%, excluding interest and fee expense,
and 1.03%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.10%, excluding interest and fee expense, and 1.12%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 0.99%, 0.95%, 0.95% and 0.92%, excluding interest and fee expense,
and 0.99%, 0.96%, 0.97% and 1.00%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
86 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
RiverSource Ohio Tax-Exempt Fund
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.26 $ 5.15 $ 5.35 $ 5.16 $ 5.43 $ 5.34
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .02 .13 .12 .13 .14
Net gains (losses) (both realized and unrealized) .04 .11 (.19) .19 (.20) .20
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .13 (.06) .31 (.07) .34
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.02) (.14) (.12) (.13) (.14)
Distributions from realized gains -- -- -- -- (.07) (.11)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.02) (.14) (.12) (.20) (.25)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.26 $ 5.15 $ 5.35 $ 5.16 $ 5.43
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 5 $ 5 $ 5 $ 8 $ 10 $ 13
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.63% 1.63%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.57%(e) 1.57%(e) 1.58% 1.65% 1.65% 1.71%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.66%(e) 2.67%(e) 2.54% 2.31% 2.38% 2.62%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 7% 18% 33% 17% 194%
- -----------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.09%(h) 2.60%(h) (1.17%) 6.10% (1.43%) 6.47%
- -----------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.76%, excluding interest and fee expense,
and 1.78%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.85%, excluding interest and fee expense, and 1.87%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.74%, 1.70%, 1.71% and 1.68%, excluding interest and fee expense,
and 1.74%, 1.71%, 1.73% and 1.76%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 87
RiverSource Ohio Tax-Exempt Fund
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
SIX MONTHS ENDED PERIOD ENDED
FEB. 28, 2007 AUG. 31, YEAR ENDED JUNE 30,
(UNAUDITED) 2006(b) 2006 2005 2004 2003
Net asset value, beginning of period $ 5.26 $ 5.16 $ 5.35 $ 5.16 $ 5.43 $ 5.35
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .02 .13 .12 .13 .14
Net gains (losses) (both realized and unrealized) .04 .10 (.18) .19 (.20) .19
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .11 .12 (.05) .31 (.07) .33
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.02) (.14) (.12) (.13) (.14)
Distributions from realized gains -- -- -- -- (.07) (.11)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.02) (.14) (.12) (.20) (.25)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.30 $ 5.26 $ 5.16 $ 5.35 $ 5.16 $ 5.43
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1 $ 1 $ 2 $ 2 $ 2 $ 3
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
excluding interest and fee expense(c),(d) 1.55%(e) 1.55%(e) 1.58% 1.64% 1.63% 1.63%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets,
including interest and fee expense(f) 1.57%(e) 1.57%(e) 1.58% 1.65% 1.65% 1.71%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
daily net assets 2.65%(e) 2.69%(e) 2.55% 2.31% 2.38% 2.54%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term
securities) 9% 7% 18% 33% 17% 194%
- -----------------------------------------------------------------------------------------------------------------------------
Total return(g) 2.09%(h) 2.40%(h) (.98%) 6.10% (1.44%) 6.26%
- -----------------------------------------------------------------------------------------------------------------------------
(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) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.77%, excluding interest and fee expense,
and 1.79%, including interest and fee expense, for the six months ended
Feb. 28, 2007 and 1.86%, excluding interest and fee expense, and 1.88%,
including interest and fee expense, for the period ended Aug. 31, 2006
and 1.75%, 1.71%, 1.71% and 1.68%, excluding interest and fee expense,
and 1.75%, 1.72%, 1.73% and 1.76%, including interest and fee expense,
for the years ended June 30, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) 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. See Note 1 to the
financial statements.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
- ------------------------------------------------------------------------------
88 RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling 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 during
the 12-month period ended June 30, 2006 is available without charge by
visiting riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- ------------------------------------------------------------------------------
RIVERSOURCE STATE TAX-EXEMPT FUNDS - 2007 SEMIANNUAL REPORT 89
RIVERSOURCE [LOGO](R)
INVESTMENTS
RIVERSOURCE(R) STATE TAX-EXEMPT FUNDS
734 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
riversource.com/funds
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource(R)mutual funds are distributed by RiverSource Distributors, Inc.
and Ameriprise Financial Services, Inc., Members NASD, and managed by
RiverSource Investments, LLC. These companies are part of Ameriprise
Financial, Inc.
S-6329 X (4/07)
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 2, 2007
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 2, 2007
By /s/ Jeffrey P. Fox
-----------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date May 2, 2007