-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UegkS8AiVhckZCPLpusU8TXWqRgwwbHZ+LXcJRrx3kqPhjzNOH4JUO+/rhcw4pXi diJn4HwO6LVKWSQlQpsm/Q== 0000820027-02-000196.txt : 20020415 0000820027-02-000196.hdr.sgml : 20020415 ACCESSION NUMBER: 0000820027-02-000196 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP CALIFORNIA TAX-EXEMPT TRUST CENTRAL INDEX KEY: 0000792717 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04646 FILM NUMBER: 02568837 BUSINESS ADDRESS: STREET 1: IDS TOWER 10 STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 MAIL ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 FORMER COMPANY: FORMER CONFORMED NAME: IDS CALIFORNIA TAX EXEMPT TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 s6329r.txt AXP CALIFORNIA TAX-EXEMPT TRUST AXP(R) State Tax-Exempt Funds 2001 SEMIANNUAL REPORT American Express(R) Funds (icon of) lock Tax-exempt funds from the following states: California Massachusetts Michigan Minnesota New York Ohio Each Fund seeks to provide shareholderswith a high level of income generally exempt from federal income tax as well as from the respective state and local income tax. Twice the Tax Relief Many people who want to reduce their tax burden favor municipal bonds because the interest they pay is generally free from federal tax. If you want to reduce state tax, too, you can invest in municipal bonds in the state you reside. Investments in municipal bonds are one of the best tax-advantaged investments still available to individuals. What's more, the money you invest is typically used by municipalities to fund projects such as schools and highways. So, with this investment, the benefits reach well beyond your pocketbook. CONTENTS From the Chairman 3 Portfolio Manager Q & A 3 Fund Facts 5 The 10 Largest Holdings 11 Financial Statements 17 Notes to Financial Statements 24 Investments in Securities 41 - ------------------------------------------------------------------------------- 2 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board From the Chairman For most of us investors, the past several months proved to be an extremely trying time. More recently, the events of this past September and the prospect of what may follow have added to our collective concern. While nothing can change what has happened, we can control how we respond. In broad terms, I would strongly advise that you keep a focus on your long-term financial goals and not let specific events dictate your investment decisions. Ultimately, it is where you finish, not where you are at the moment, that matters most. Your financial advisor plays an essential role in this process, so please let him or her help you by reviewing your situation and plotting the proper investment course. As I have indicated in the past, the role our Board plays in your financial future is to monitor and confirm that each American Express mutual fund meets its investment objective and that its management style stays on target. We want each fund to be able to deliver to you, the shareholder, the type of performance you expect and the best results that can be obtained. Toward that end, American Express has made significant changes in its investment management capability, and will continue to make changes as it strives to provide a consistent standard of excellence. On behalf of the Board, Arne H. Carlson (picture of) Paul B. Hylle Paul B. Hylle Portfolio manager Portfolio Manager Q & A Q: How did the Funds perform over the six-month period ending December 31, 2001? A: The past six months were a tale of two distinct periods of performance, with strong returns occurring in the early months of the period due to declining interest rates. Performance took a downward turn in November and December as interest rates headed higher, which has a negative effect on bond prices. By the end of December, interest rates and municipal bond prices were little changed from the start of the six-month period. Q: What factors contributed to the Funds' performance during this period? A: The Federal Reserve's campaign to lower short-term interest rates benefited the State Tax-Exempt Funds in the opening months of the period. With ongoing signs of a weakening economy, interest rates continued to move lower, boosting bond values and the total returns of the Funds. In particular, higher-quality, shorter-term securities performed the best. A few weeks after the terrible attacks of September 11, interest rates reached their lowest levels. From that point through the end of the year, the general trend of interest rates was sharply higher, detracting from the performance of the Funds. Q: What changes did you make to the portfolios during the past six months? A: As the period began, the Funds maintained a slightly shorter-than-average duration. While this more defensive posture detracted from overall performance initially, we did eventually see the market shift in favor of this strategy. After the markets rallied significantly in the late summer, I became concerned that interest rates were ready to move higher, and therefore positioned the Funds even more defensively to help offset the impact of negative interest rate trends. That proved to be beneficial when interest rates turned sharply higher in November and December. In terms of individual states, California and New York faced the biggest hurdles. California is suffering from a severe decline in the dominant technology sector and its energy supply problems, while New York is now faced with costs associated with the September 11th attacks. This is putting added stress on the budgets of each state at the same time an economic decline is reducing tax revenues. - ------------------------------------------------------------------------------- 3 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Q: What is your outlook for the coming year? A: It is likely that the U.S. economy will improve during the first part of 2002, which should continue to put upward pressure on interest rates. Nevertheless, the economic struggles of 2001 have contributed to budgetary problems for most states. That could result in a larger supply of new bonds, a trend that can push interest rates higher. An additional concern is that some issuers may undergo a downgrade in their credit rating. Still, there are positive factors in the market as well. The likelihood of an improved economy may mean these budgetary woes are short-lived. What's more, most states have a budget reserve that can help offset some of the difficulties they will face. Also, these states have fairly strong demand for their bonds due to their relatively high income tax structures. Most likely 2002 will offer limited opportunities to benefit from capital appreciation in our holdings. Therefore, our focus will be on maintaining a shorter duration in our holdings while generating a competitive level of income in order to boost the Funds' overall return. We may seek to invest in bonds from issuers with slightly lower credit ratings that offer a more attractive yield, in order to improve overall performance in what may be a challenging environment. Paul B. Hylle Note to shareholders: In January 2002, the following individuals succeeded Paul Hylle as portfolio managers of the State Tax-Exempt Funds. AXP California Tax-Exempt Fund: Terry Fettig AXP Massachusetts Tax-Exempt Fund: Terry Seierstad AXP Michigan Tax-Exempt Fund: Terry Fettig AXP Minnesota Tax-Exempt Fund: Dave Kerwin AXP New York Tax-Exempt Fund: Dave Kerwin AXP Ohio Tax-Exempt Fund: Terry Seierstad - ------------------------------------------------------------------------------- 4 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Fund Facts AXP California Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.19 June 30, 2001 $5.18 Increase $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +2.48% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.19 June 30, 2001 $5.17 Increase $0.02 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +2.29% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.19 June 30, 2001 $5.18 Increase $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +2.10% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 5 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Massachusetts Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.31 June 30, 2001 $5.28 Increase $0.03 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +2.76% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.31 June 30, 2001 $5.28 Increase $0.03 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +2.37% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.31 June 30, 2001 $5.28 Increase $0.03 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +2.38% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 6 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Michigan Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.26 June 30, 2001 $5.27 Decrease $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.12 From long-term capital gains $ -- Total distributions $0.12 Total return* +2.15% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.26 June 30, 2001 $5.27 Decrease $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.10 From long-term capital gains $ -- Total distributions $0.10 Total return* +1.76% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.26 June 30, 2001 $5.27 Decrease $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.10 From long-term capital gains $ -- Total distributions $0.10 Total return* +1.77% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 7 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Minnesota Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.13 June 30, 2001 $5.14 Decrease $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.13 From long-term capital gains $ -- Total distributions $0.13 Total return* +2.34% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.13 June 30, 2001 $5.14 Decrease $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +1.95% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.14 June 30, 2001 $5.14 Increase $ -- Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +2.15% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 8 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP New York Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.08 June 30, 2001 $5.12 Decrease $0.04 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +1.40% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.08 June 30, 2001 $5.12 Decrease $0.04 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +1.01% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.08 June 30, 2001 $5.11 Decrease $0.03 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +1.21% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 9 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Ohio Tax-Exempt Fund Class A -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.28 June 30, 2001 $5.27 Increase $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.11 From long-term capital gains $ -- Total distributions $0.11 Total return* +2.43% Class B -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.28 June 30, 2001 $5.27 Increase $0.01 Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +2.04% Class C -- 6-month performance (All figures per share) Net asset value (NAV) Dec. 31, 2001 $5.28 June 30, 2001 $5.28 Increase $ -- Distributions -- July 1, 2001 - Dec. 31, 2001 From income $0.09 From long-term capital gains $ -- Total distributions $0.09 Total return* +1.85% * The total return is a hypothetical investment in the Fund with all distributions reinvested. Returns do not include sales load. The prospectus discusses the effect of sales charges, if any, on the various classes. - ------------------------------------------------------------------------------- 10 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT The 10 Largest Holdings AXP California Tax-Exempt Fund
Percent Value (of net assets) (as of Dec. 31, 2001) Anaheim Public Finance Authority Revenue Bonds Electric Utilities San Juan 2nd Series 1993 5.75% 2022 4.3% $11,372,615 Statewide Communities Development Authority Certificates of Participation St. Joseph Health System Group Series 1994 6.50% 2015 2.3 6,136,184 Community Development Authority Health Facilities Unihealth America Certificate of Participation Series 1993 Inverse Floater 9.50% 2011 2.2 5,912,500 San Diego County Water Authority Revenue Bonds Certificates of Participation Series 1998A 4.50% 2024 2.2 5,881,502 Northern California Transmission Select Auction Variable Rate Security & Residual Interest Revenue Bonds Series 1993 5.50% 2024 1.8 4,647,600 Redding Redevelopment Agency Tax Allocation Refunding Bonds Canby Hilltop Cypress Series 1993D 5.00% 2023 1.8 4,632,414 Fontana Redevelopment Agency Refunding Certificate of Participation Police Facility Series 1993 5.63% 2016 1.7 4,570,875 Rancho Mirage Joint Powers Finance Authority Certificate of Participation Eisenhower Memorial Hospital Series 1992 7.00% 2022 1.7 4,373,875 State Refunding Unlimited General Obligation Bonds Series 2001 4.00% 2004 1.6 4,106,640 San Diego County Capital Asset Lease Certificate of Participation Series 1993 Inverse Floater 8.32% 2007 1.4 3,804,000
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 21.0% of net assets - ------------------------------------------------------------------------------- 11 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
The 10 Largest Holdings AXP Massachusetts Tax-Exempt Fund Percent Value (of net assets) (as of Dec. 31, 2001) Boston City Hospital Refunding Revenue Bonds Series 1993B 5.75% 2023 3.4% $3,003,959 Health & Educational Facilities Authority Revenue Bonds Suffolk University Series 1992B 6.35% 2022 2.9 2,591,481 Greater Lawrence Regional Vocational Technical High School District General Obligation Bonds 5.00% 2003 2.9 2,584,325 Health & Educational Facilities Authority Revenue Bonds Cape Cod Health System Series 1993A 5.25% 2021 2.8 2,454,475 Development Finance Agency Revenue Bonds SeMass Systems Series 2001B A.M.T. 5.00% 2005 2.3 2,072,040 State Industrial Finance Agency Pollution Control Refunding Revenue Bonds Eastern Edison Series 1993 5.88% 2008 2.3 2,057,320 Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds Series 1994B 4.75% 2011 2.1 1,863,173 State Turnpike Authority Metro Highway System Senior Lien Revenue Bonds Toll Road Series 1997A 5.00% 2037 2.1 1,848,320 Health & Educational Facilities Authority College Revenue Bonds Brandeis University Series 1998I 4.75% 2028 2.0 1,809,380 Bay Transportation Authority General Transportation System Refunding Revenue Bonds Series 1992B 6.20% 2016 1.9 1,702,335
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further details about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 24.7% of net assets - ------------------------------------------------------------------------------- 12 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
The 10 Largest Holdings AXP Michigan Tax-Exempt Fund Percent Value (of net assets) (as of Dec. 31, 2001) Romulus Township School District Unlimited Tax General Obligation Refunding Bonds Series 1993 5.75% 2022 3.3% $2,541,924 Grand Ledge Public Schools Unlimited Tax General Obligation Refunding Bonds Eaton, Clinton & Ionia Counties Series 1995 5.38% 2024 2.6 2,008,299 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Ford Motor Series 1991A 7.10% 2006 2.3 1,791,784 Detroit Sewer Disposal Pre-refunded Revenue Bonds Series 1993 5.70% 2023 2.2 1,710,080 Troy City Downtown Development Authority County of Oakland Development Pre-refunded Revenue Bonds Series 1995A 6.38% 2018 2.2 1,691,535 Farmington Hills Hospital Finance Authority Pre-refunded Revenue Bonds Botsford General Hospital Series 1992A 6.50% 2022 2.0 1,539,030 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Detroit Edison Series 1992BB 6.50% 2016 2.0 1,536,825 Detroit Water Supply System Second Lien Revenue Bonds Series 1995A 5.50% 2025 2.0 1,513,965 Redford General Obligation Bonds Series 1995 5.25% 2016 1.9 1,469,140 Battle Creek Calhoun County Downtown Development Authority Pre-refunded Bonds Series 1994 7.65% 2022 1.8 1,405,113
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 22.3% of net assets - ------------------------------------------------------------------------------- 13 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
The 10 Largest Holdings AXP Minnesota Tax-Exempt Fund Percent Value (of net assets) (as of Dec. 31, 2001) St. Louis Park Health Care Facilities Revenue Bonds Healthsystem Minnesota Series 1993 5.10% 2013 3.3% $14,048,859 University of Minnesota Refunding Revenue Bonds Series 1996A 5.50% 2021 3.1 13,160,749 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Healthspan Series 1993A 4.75% 2018 3.0 12,706,604 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Group Health Plan Series 1992 6.75% 2013 2.5 10,706,009 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Series 1993A 4.75% 2016 2.1 8,829,010 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Zero Coupon Series 1994A 6.67% 2019 1.8 7,752,614 Metropolitan Council Minneapolis & St. Paul Metropolitan Area Transit Unlimited General Obligation Bonds Series 2001B 4.00% 2004 1.8 7,636,341 St. Paul Housing & Redevelopment Authority Sales Tax Revenue Bonds Civic Center Escrowed to Maturity Series 1993 5.55% 2023 1.8 7,594,799 Faribault Rice & Goodhue Counties Independent School District #656 General Obligation School Building Bonds Series 1995 5.75% 2015 1.7 7,330,145 Richfield Independent School District #280 General Obligation Bonds Series 1993 Inverse Floater 5.30% 2010 1.6 6,671,873
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 22.7% of net assets - ------------------------------------------------------------------------------- 14 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
The 10 Largest Holdings AXP New York Tax-Exempt Fund Percent Value (of net assets) (as of Dec. 31, 2001) United Nations Development Senior Lien Pre-refunded Revenue Bonds Series 1992A 6.00% 2026 4.5% $4,838,039 State Dormitory Authority College Revenue Bonds Consolidated City University System Series 1993A 5.75% 2013 3.0 3,238,979 State Environmental Facilities State Water Revolving Fund Pollution Control Revenue Bonds Series 1990A 7.50% 2012 2.9 3,086,550 State Energy Research & Development Authority Solid Waste Disposal Revenue Bonds State Electric & Gas Company Series 1993A A.M.T. 5.70% 2028 2.8 3,033,450 Port Authority Refunding Revenue Bonds 124th Series 2001 A.M.T. 4.00% 2003 2.6 2,797,410 State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds Rochester Gas & Electric Series 1992B A.M.T. 6.50% 2032 2.4 2,561,125 State Urban Development Capital Correctional Facilities Refunding Lease Revenue Bonds Series 1994A 5.25% 2021 2.3 2,479,225 New York City Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1993 Inverse Floater 7.72% 2009 2.0 2,150,000 State Dormitory Authority State University Educational Facilities Refunding Revenue Bonds Series 1993A 5.50% 2019 2.0 2,115,060 New York City Industrial Development Agency Civic Facilities Revenue Bonds Rockefeller Foundation Series 1993 5.38% 2023 1.9 2,014,240
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 26.4% of net assets - ------------------------------------------------------------------------------- 15 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
The 10 Largest Holdings AXP Ohio Tax-Exempt Fund Percent Value (of net assets) (as of Dec. 31, 2001) Lakota Local School District Unlimited Tax Improvement General Obligation Pre-refunded Bonds Series 1994 6.25% 2014 2.8% $2,214,879 State Air Quality Development Authority Refunding Revenue Bonds JMG Funding Limited Partnership Series 1994 A.M.T. 6.38% 2029 2.8 2,162,239 Erie County Hospital Improvement Refunding Revenue Bonds Firelands Community Hospital Series 1992 6.75% 2015 2.6 2,041,679 State Valley School District School Improvement Unlimited Tax General Obligation Bonds Counties of Adams & Highland Series 1995 5.25% 2021 2.6 2,004,039 Lorain County Hospital Facilities Refunding Revenue Bonds EMH Regional Medical Center Series 1995 5.38% 2021 2.6 2,003,320 State Municipal Electric Generation Agency Revenue Bonds Joint Venture #5 Series 1993 5.38% 2024 2.6 2,001,240 Gateway Economic Development Greater Cleveland Excise Tax Refunding Revenue Bonds Senior Lien Series 2001 A.M.T. 5.13% 2005 2.4 1,833,458 Butler County Hospital Facility Improvement Pre-refunded Revenue Bonds Fort Hamilton-Hughes Memorial Center Series 1991 7.50% 2010 2.3 1,785,000 Cuyahoga County Hospital Refunding Revenue Bonds Cleveland Clinic Foundation Series 1992C 5.50% 2011 2.0 1,571,025 North Olmstead County General Obligation Bonds Series 1996 5.00% 2016 1.9 1,502,850
Note: Investment income from certain securities may be subject to the Alternative Minimum Tax (A.M.T.). For further detail about these holdings, please refer to the section entitled "Investments in Securities." (picture of) pie chart The 10 holdings listed here make up 24.6% of net assets - ------------------------------------------------------------------------------- 16 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Financial Statements Statements of assets and liabilities AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust California Massachusetts Michigan Tax-Exempt Tax-Exempt Tax-Exempt Dec. 31, 2001 (Unaudited) Fund Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $246,278,883, $85,035,397 and $72,356,087) $262,617,087 $87,048,924 $75,688,973 Cash in bank on demand deposit 36,354 112,280 644,131 Capital shares receivable -- 2,440 -- Accrued interest receivable 3,750,229 1,628,561 1,037,707 Receivable for investment securities sold -- 41,067 -- ---- ------ ---- Total assets 266,403,670 88,833,272 77,370,811 ----------- ---------- ---------- Liabilities Payable for securities purchased on a when-issued basis (Note 1) -- -- 637,738 Dividends payable to shareholders 354,953 107,123 98,319 Payable for investment securities purchased 1,568,843 -- -- Accrued investment management services fee 10,153 3,420 2,956 Accrued distribution fee 7,103 3,188 2,095 Accrued transfer agency fee 813 423 32 Accrued administrative services fee 861 291 252 Other accrued expenses 23,032 19,010 36,264 ------ ------ ------ Total liabilities 1,965,758 133,455 777,656 --------- ------- ------- Net assets applicable to outstanding shares $264,437,912 $88,699,817 $76,593,155 ============ =========== =========== Represented by Shares of beneficial interest -- $.01 par value (Note 1) $ 509,701 $ 167,091 $ 145,508 Additional paid-in capital 256,489,864 87,601,218 75,293,023 Undistributed (excess of distributions over) net investment income 899 (1) -- Accumulated net realized gain (loss) (Note 6) (8,730,047) (1,082,018) (2,178,262) Unrealized appreciation (depreciation) on investments (Note 5) 16,167,495 2,013,527 3,332,886 ---------- --------- --------- Total -- representing net assets applicable to outstanding shares $264,437,912 $88,699,817 $76,593,155 ============ =========== =========== Net assets applicable to outstanding shares: Class A $236,860,234 $66,394,181 $68,094,788 Class B $ 25,058,713 $21,225,996 $ 7,317,815 Class C $ 2,518,965 $ 1,079,640 $ 1,180,552 Outstanding shares of beneficial interest: Class A shares 45,653,069 12,507,191 12,936,561 Class B shares 4,831,891 3,998,579 1,390,028 Class C shares 485,152 203,373 224,227 Net asset value per share: Class A $ 5.19 $ 5.31 $ 5.26 Class B $ 5.19 $ 5.31 $ 5.26 Class C $ 5.19 $ 5.31 $ 5.26 ------------ ----------- -----------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 17 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of assets and liabilities AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust Minnesota New York Ohio Tax-Exempt Tax-Exempt Tax-Exempt Dec. 31, 2001 (Unaudited) Fund Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $418,127,600, $101,584,955 and $73,937,589) $424,535,274 $106,385,795 $76,883,324 Cash in bank on demand deposit 148,655 198,428 39,770 Capital shares receivable 91,409 -- -- Accrued interest receivable 6,227,927 1,662,798 919,782 Receivable for investment securities sold 583,235 -- -- ------- ---- ---- Total assets 431,586,500 108,247,021 77,842,876 ----------- ----------- ---------- Liabilities Dividends payable to shareholders 565,023 131,828 96,448 Payable for investment securities purchased 3,908,519 1,162,641 1,750 Accrued investment management services fee 16,100 4,125 3,000 Accrued distribution fee 12,584 3,279 2,247 Accrued transfer agency fee 13 135 92 Accrued administrative services fee 1,329 351 255 Other accrued expenses 30,620 17,072 18,453 ------ ------ ------ Total liabilities 4,534,188 1,319,431 122,245 --------- --------- ------- Net assets applicable to outstanding shares $427,052,312 $106,927,590 $77,720,631 ============ ============ =========== Represented by Shares of beneficial interest -- $.01 par value (Note 1) $ 831,955 $ 210,569 $ 147,163 Additional paid-in capital 428,788,937 104,384,981 76,486,956 Undistributed net investment income 155 12 1,500 Accumulated net realized gain (loss) (Note 6) (8,818,263) (2,465,866) (1,857,777) Unrealized appreciation (depreciation) on investments (Note 5) 6,249,528 4,797,894 2,942,789 --------- --------- --------- Total -- representing net assets applicable to outstanding shares $427,052,312 $106,927,590 $77,720,631 ============ ============ =========== Net assets applicable to outstanding shares: Class A $364,785,121 $ 89,281,147 $67,139,622 Class B $ 59,399,523 $ 16,957,214 $ 9,586,781 Class C $ 2,867,668 $ 689,229 $ 994,228 Outstanding shares of beneficial interest: Class A shares 71,066,566 17,581,783 12,712,725 Class B shares 11,570,479 3,339,398 1,815,397 Class C shares 558,431 135,749 188,216 Net asset value per share: Class A $ 5.13 $ 5.08 $ 5.28 Class B $ 5.13 $ 5.08 $ 5.28 Class C $ 5.14 $ 5.08 $ 5.28 ------------ ------------ -----------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 18 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of operations AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust California Massachusetts Michigan Tax-Exempt Tax-Exempt Tax-Exempt Six months ended Dec. 31, 2001 (Unaudited) Fund Fund Fund Investment income Income: Interest $7,126,485 $2,276,697 $2,103,965 ---------- ---------- ---------- Expenses (Note 2): Investment management services fee 630,726 207,259 179,396 Distribution fee Class A 303,573 83,951 86,078 Class B 124,032 100,472 34,704 Class C 7,844 4,693 2,672 Transfer agency fee 44,044 22,395 15,714 Incremental transfer agency fee Class A 4,315 1,974 1,582 Class B 971 835 289 Class C 85 23 24 Administrative services fees and expenses 54,590 17,298 15,277 Compensation of board members 5,460 5,460 5,460 Custodian fees 9,322 3,030 4,110 Printing and postage 14,259 6,310 5,644 Registration fees 32,103 20,281 25,698 Audit fees 8,750 8,000 8,000 Other 1,431 52 1,218 ----- -- ----- Total expenses 1,241,505 482,033 385,866 Earnings credits on cash balances (Note 2) (13,859) (5,598) (1,873) ------- ------ ------ Total net expenses 1,227,646 476,435 383,993 --------- ------- ------- Investment income (loss) -- net 5,898,839 1,800,262 1,719,972 --------- --------- --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 119,236 341,382 251,255 Futures contracts (202,394) -- -- -------- ---- ---- Net realized gain (loss) on investments (83,158) 341,382 251,255 Net change in unrealized appreciation (depreciation) on investments 522,690 23,808 (408,937) ------- ------ -------- Net gain (loss) on investments 439,532 365,190 (157,682) ------- ------- -------- Net increase (decrease) in net assets resulting from operations $6,338,371 $2,165,452 $1,562,290 ========== ========== ==========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 19 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of operations AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust Minnesota New York Ohio Tax-Exempt Tax-Exempt Tax-Exempt Six months ended Dec. 31, 2001 (Unaudited) Fund Fund Fund Investment income Income: Interest $12,333,829 $2,810,170 $2,098,519 ----------- ---------- ---------- Expenses (Note 2): Investment management services fee 989,506 253,964 186,809 Distribution fee Class A 463,409 113,292 86,901 Class B 286,605 84,553 45,623 Class C 12,064 2,622 4,231 Transfer agency fee 98,527 25,197 16,454 Incremental transfer agency fee Class A 9,473 2,353 1,595 Class B 2,482 719 391 Class C 140 50 27 Administrative services fees and expenses 83,841 21,816 15,921 Compensation of board members 5,910 5,460 5,460 Custodian fees 10,492 5,770 5,054 Printing and postage 19,066 8,719 5,627 Registration fees 22,987 25,608 24,004 Audit fees 9,500 8,750 8,000 Other 2,117 1,755 129 ----- ----- --- Total expenses 2,016,119 560,628 406,226 Earnings credits on cash balances (Note 2) (14,019) (2,294) (5,617) ------- ------ ------ Total net expenses 2,002,100 558,334 400,609 --------- ------- ------- Investment income (loss) -- net 10,331,729 2,251,836 1,697,910 ---------- --------- --------- Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 2,587,194 11,261 139,304 Futures contracts (225,524) (10,015) (9,983) -------- ------- ------ Net realized gain (loss) on investments 2,361,670 1,246 129,321 Net change in unrealized appreciation (depreciation) on investments (3,154,194) (809,901) (50,583) ---------- -------- ------- Net gain (loss) on investments (792,524) (808,655) 78,738 -------- -------- ------ Net increase (decrease) in net assets resulting from operations $ 9,539,205 $1,443,181 $1,776,648 =========== ========== ==========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 20 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of changes in net assets AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust California Tax-Exempt Fund Massachusetts Tax-Exempt Fund Dec. 31, 2001 June 30, 2001 Dec. 31, 2001 June 30, 2001 Six months ended Year ended Six months ended Year ended (Unaudited) (Unaudited) Operations and distributions Investment income (loss) -- net $ 5,898,839 $ 11,680,771 $ 1,800,262 $ 3,840,113 Net realized gain (loss) on investments (83,158) (1,830,748) 341,382 124,201 Net change in unrealized appreciation (depreciation) on investments 522,690 8,710,217 23,808 2,441,440 ------- --------- ------ --------- Net increase (decrease) in net assets resulting from operations 6,338,371 18,560,240 2,165,452 6,405,754 --------- ---------- --------- --------- Distributions to shareholders from: Net investment income Class A (5,419,050) (10,760,792) (1,430,839) (3,110,622) Class B (459,901) (893,383) (352,918) (705,659) Class C (29,387) (16,198) (16,504) (25,202) ------- ------- ------- ------- Total distributions (5,908,338) (11,670,373) (1,800,261) (3,841,483) ---------- ----------- ---------- ---------- Share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 20,144,041 39,718,956 4,511,031 10,931,282 Class B shares 2,416,260 6,533,410 3,637,577 3,986,974 Class C shares 1,586,282 1,283,535 334,889 401,630 Reinvestment of distributions at net asset value Class A shares 3,411,367 7,119,547 1,090,939 2,494,457 Class B shares 325,990 682,053 262,201 547,285 Class C shares 25,007 12,648 15,248 25,164 Payments for redemptions Class A shares (18,414,519) (35,050,333) (4,264,050) (10,097,344) Class B shares (Note 2) (1,536,588) (4,535,825) (1,226,644) (2,202,984) Class C shares (Note 2) (165,864) (199,923) (10,015) (7,584) -------- -------- ------- ------ Increase (decrease) in net assets from share transactions 7,791,976 15,564,068 4,351,176 6,078,880 --------- ---------- --------- --------- Total increase (decrease) in net assets 8,222,009 22,453,935 4,716,367 8,643,151 Net assets at beginning of period 256,215,903 233,761,968 83,983,450 75,340,299 ----------- ----------- ---------- ---------- Net assets at end of period $264,437,912 $256,215,903 $88,699,817 $ 83,983,450 ============ ============ =========== ============ Undistributed (excess of distributions over) net investment income $ 899 $ 10,398 $ (1) $ (2) ------------ ------------ ----------- ------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 21 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of changes in net assets AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust Michigan Tax-Exempt Fund Minnesota Tax-Exempt Fund Dec. 31, 2001 June 30, 2001 Dec. 31, 2001 June 30, 2001 Six months ended Year ended Six months ended Year ended (Unaudited) (Unaudited) Operations and distributions Investment income (loss) -- net $ 1,719,972 $ 3,600,202 $ 10,331,729 $ 21,052,341 Net realized gain (loss) on investments 251,255 191,171 2,361,670 (1,943,976) Net change in unrealized appreciation (depreciation) on investments (408,937) 2,276,366 (3,154,194) 12,884,312 -------- --------- ---------- ---------- Net increase (decrease) in net assets resulting from operations 1,562,290 6,067,739 9,539,205 31,992,677 --------- --------- --------- ---------- Distributions to shareholders from: Net investment income Class A (1,576,925) (3,327,020) (9,177,755) (18,810,469) Class B (132,967) (262,535) (1,203,061) (2,219,057) Class C (10,095) (3,631) (50,851) (32,460) ------- ------ ------- ------- Total distributions (1,719,987) (3,593,186) (10,431,667) (21,061,986) ---------- ---------- ----------- ----------- Share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 4,863,219 8,519,696 33,946,922 72,638,585 Class B shares 978,681 1,208,719 8,964,088 12,617,886 Class C shares 1,008,941 216,679 1,302,902 1,721,901 Reinvestment of distributions at net asset value Class A shares 1,166,479 2,517,943 6,966,722 14,979,095 Class B shares 95,422 198,272 952,423 1,846,453 Class C shares 4,405 1,174 43,540 28,344 Payments for redemptions Class A shares (4,792,983) (11,731,757) (32,580,421) (79,888,353) Class B shares (Note 2) (214,868) (1,047,810) (3,552,822) (7,009,477) Class C shares (Note 2) (40,381) -- (197,793) (29,028) ------- -------- -------- ------- Increase (decrease) in net assets from share transactions 3,068,915 (117,084) 15,845,561 16,905,406 --------- -------- ---------- ---------- Total increase (decrease) in net assets 2,911,218 2,357,469 14,953,099 27,836,097 Net assets at beginning of period 73,681,937 71,324,468 412,099,213 384,263,116 ---------- ---------- ----------- ----------- Net assets at end of period $76,593,155 $ 73,681,937 $427,052,312 $412,099,213 =========== ============ ============ ============ Undistributed net investment income $ -- $ 15 $ 155 $ 100,093 ----------- ------------ ------------ ------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 22 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
Statements of changes in net assets AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust New York Tax-Exempt Fund Ohio Tax-Exempt Fund Dec. 31, 2001 June 30, 2001 Dec. 31, 2001 June 30, 2001 Six months ended Year ended Six months ended Year ended (Unaudited) (Unaudited) Operations and distributions Investment income (loss) -- net $ 2,251,836 $ 4,809,815 $ 1,697,910 $ 3,478,451 Net realized gain (loss) on investments 1,246 561,832 129,321 (117,724) Net change in unrealized appreciation (depreciation) on investments (809,901) 3,325,987 (50,583) 1,999,088 -------- --------- ------- --------- Net increase (decrease) in net assets resulting from operations 1,443,181 8,697,634 1,776,648 5,359,815 --------- --------- --------- --------- Distributions to shareholders from: Net investment income Class A (1,948,148) (4,229,578) (1,516,530) (3,170,105) Class B (294,334) (585,710) (164,587) (303,547) Class C (9,326) (5,568) (15,292) (4,799) ------ ------ ------- ------ Total distributions (2,251,808) (4,820,856) (1,696,409) (3,478,451) ---------- ---------- ---------- ---------- Share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 5,272,077 10,426,775 7,668,883 13,023,386 Class B shares 2,323,459 4,013,030 1,877,929 2,015,019 Class C shares 372,216 357,049 301,102 686,081 Reinvestment of distributions at net asset value Class A shares 1,402,611 3,190,608 1,115,027 2,420,796 Class B shares 212,024 433,889 118,192 231,940 Class C shares 7,916 3,471 14,408 4,639 Payments for redemptions Class A shares (5,198,497) (13,763,371) (8,670,314) (10,236,659) Class B shares (Note 2) (1,582,973) (2,300,461) (502,219) (937,170) Class C shares (Note 2) (54,446) (61,242) (12,116) -- ------- ------- ------- Increase (decrease) in net assets from share transactions 2,754,387 2,299,748 1,910,892 7,208,032 --------- --------- --------- --------- Total increase (decrease) in net assets 1,945,760 6,176,526 1,991,131 9,089,396 Net assets at beginning of period 104,981,830 98,805,304 75,729,500 66,640,104 ----------- ---------- ---------- ---------- Net assets at end of period $106,927,590 $104,981,830 $77,720,631 $75,729,500 ============ ============ =========== =========== Undistributed (excess of distributions over) net investment income $ 12 $ (16) $ 1,500 $ (1) ------------ ------------ ----------- -----------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- 23 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Notes to Financial Statements AXP California Tax-Exempt Trust AXP Special Tax-Exempt Series Trust (Unaudited as to Dec. 31, 2001) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AXP California Tax-Exempt Trust and AXP Special Tax-Exempt Series Trust were organized as Massachusetts business trusts. AXP California Tax-Exempt Trust includes only AXP California Tax-Exempt Fund. AXP Special Tax-Exempt Series Trust is a "series fund" that is currently composed of individual state tax-exempt funds and one insured national tax-exempt fund, including AXP Massachusetts Tax-Exempt Fund, AXP Michigan Tax-Exempt Fund, AXP Minnesota Tax-Exempt Fund, AXP New York Tax-Exempt Fund and AXP Ohio Tax-Exempt Fund (the Funds). The Funds are non-diversified, open-end management investment companies as defined in the Investment Company Act of 1940 (as amended). Each Fund has unlimited authorized shares of beneficial interest. Each Fund's goal is to provide a high level of income generally exempt from federal income tax as well as from the respective state and local income tax. A portion of each Fund's assets may be invested in bonds whose interest is subject to the alternative minimum tax computation. The Funds concentrate their investments in a single state and therefore may have more credit risk related to the economic conditions of the respective state than Funds that have a broader geographical diversification. Each Fund offers Class A, Class B and Class C shares. o Class A shares are sold with a front-end sales charge. o Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth calendar 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 incremental transfer agency fee (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 accounting principles generally accepted in the United States of America 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. 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. - ------------------------------------------------------------------------------- 24 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT 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. Securities purchased on a when-issued or forward-commitment basis Delivery and payment for securities that have been purchased by the Funds on a when-issued or forward-commitment basis can take place one month or more after the transaction date. During this period, when-issued 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 commitment. As of Dec. 31, 2001, AXP California Tax-Exempt Fund, AXP Michigan Tax-Exempt Fund, AXP Minnesota Tax-Exempt Fund and AXP New York Tax Exempt Fund have entered into outstanding when-issued or forward-commitments of $1,475,218, $637,738, $3,821,823 and $1,160,891, respectively. Federal taxes Each Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. 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 level-yield amortization of premium and discount, is accrued daily. 2. EXPENSES AND SALES CHARGES Each Fund has agreements with AEFC to manage its portfolio and provide administrative services. Under an Investment Management Services Agreement, AEFC determines which securities will be purchased, held or sold. The management fee is a percentage of each Fund's average daily net assets in reducing percentages from 0.47% to 0.38% annually. Under an Administrative Services Agreement, each Fund pays AEFC a fee for administration and accounting services at a percentage of each Fund's average daily net assets in reducing percentages from 0.04% to 0.02% annually. A minor portion of additional administrative service expenses paid by the Funds are consultants' fees and fund office expenses. Under this agreement, the Funds also pay taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Funds and approved by the board. Under a separate Transfer Agency Agreement, American Express Client Service Corporation (AECSC) maintains shareholder accounts and records. Each Fund pays AECSC an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 Each Fund has agreements with American Express Financial Advisors Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution, each Fund pays a distribution fee at an annual rate up to 0.25% of each Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. - ------------------------------------------------------------------------------- 25 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Sales charges received by the Distributor for distributing the Funds' shares for the six months ended Dec. 31, 2001, are as follows: Fund Class A Class B Class C California Tax-Exempt Fund $233,733 $10,618 $757 Massachusetts Tax-Exempt Fund 65,571 13,386 99 Michigan Tax-Exempt Fund 68,074 1,824 381 Minnesota Tax-Exempt Fund 367,944 17,147 82 New York Tax-Exempt Fund 67,268 11,190 233 Ohio Tax-Exempt Fund 51,856 5,098 116 During the six months ended Dec. 31, 2001, the Funds' custodian and transfer agency fees were reduced as a result of earnings credits from overnight cash balances as follows: Fund Reduction California Tax-Exempt Fund $13,859 Massachusetts Tax-Exempt Fund 5,598 Michigan Tax-Exempt Fund 1,873 Minnesota Tax-Exempt Fund 14,019 New York Tax-Exempt Fund 2,294 Ohio Tax-Exempt Fund 5,617 3. SECURITIES TRANSACTIONS For the six months ended Dec. 31, 2001, 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 $13,971,825 $ 3,916,356 Massachusetts Tax-Exempt Fund 13,771,620 9,962,600 Michigan Tax-Exempt Fund 4,197,030 5,025,770 Minnesota Tax-Exempt Fund 68,046,799 56,377,849 New York Tax-Exempt Fund 7,008,249 3,839,100 Ohio Tax-Exempt Fund 6,763,913 5,667,000 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 Dec. 31, 2001 Class A Class B Class C Sold 3,837,607 459,664 301,370 Issued for reinvested distributions 649,880 62,106 4,763 Redeemed (3,519,424) (292,867) (31,676) ---------- -------- ------- Net increase (decrease) 968,063 228,903 274,457 ------- ------- ------- Year ended June 30, 2001 Class A Class B Class C Sold 7,659,300 1,263,236 246,520 Issued for reinvested distributions 1,376,078 131,813 2,434 Redeemed (6,761,420) (879,873) (38,657) ---------- -------- ------- Net increase (decrease) 2,273,958 515,176 210,297 --------- ------- ------- - ------------------------------------------------------------------------------- 26 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Massachusetts Tax-Exempt Fund Six months ended Dec. 31, 2001 Class A Class B Class C Sold 843,209 678,688 62,328 Issued for reinvested distributions 204,137 49,066 2,853 Redeemed (796,315) (229,100) (1,897) -------- -------- ------ Net increase (decrease) 251,031 498,654 63,284 ------- ------- ------ Year ended June 30, 2001 Class A Class B Class C Sold 2,084,519 761,081 77,464 Issued for reinvested distributions 476,839 104,628 4,807 Redeemed (1,929,278) (422,594) (1,437) ---------- -------- ------ Net increase (decrease) 632,080 443,115 80,834 ------- ------- ------ Michigan Tax-Exempt Fund Six months ended Dec. 31, 2001 Class A Class B Class C Sold 912,935 183,494 189,273 Issued for reinvested distributions 219,070 17,912 829 Redeemed (899,073) (40,210) (7,520) -------- ------- ------ Net increase (decrease) 232,932 161,196 182,582 ------- ------- ------- Year ended June 30, 2001 Class A Class B Class C Sold 1,627,887 230,545 41,029 Issued for reinvested distributions 483,154 38,031 223 Redeemed (2,251,346) (201,446) -- ---------- -------- ------ Net increase (decrease) (140,305) 67,130 41,252 -------- ------ ------ Minnesota Tax-Exempt Fund Six months ended Dec. 31, 2001 Class A Class B Class C Sold 6,551,002 1,730,100 251,141 Issued for reinvested distributions 1,345,824 183,957 8,408 Redeemed (6,289,138) (687,532) (37,948) ---------- -------- ------- Net increase (decrease) 1,607,688 1,226,525 221,601 --------- --------- ------- Year ended June 30, 2001 Class A Class B Class C Sold 14,211,979 2,466,687 336,562 Issued for reinvested distributions 2,933,370 361,533 5,526 Redeemed (15,653,720) (1,377,164) (5,658) ----------- ---------- ------ Net increase (decrease) 1,491,629 1,451,056 336,430 --------- --------- ------- New York Tax-Exempt Fund Six months ended Dec. 31, 2001 Class A Class B Class C Sold 1,026,189 450,149 72,079 Issued for reinvested distributions 272,466 41,199 1,541 Redeemed (1,008,011) (306,494) (10,625) ---------- -------- ------- Net increase (decrease) 290,644 184,854 62,995 ------- ------- ------ Year ended June 30, 2001 Class A Class B Class C Sold 2,061,413 789,717 70,172 Issued for reinvested distributions 631,197 85,801 680 Redeemed (2,729,151) (456,854) (12,150) ---------- -------- ------- Net increase (decrease) (36,541) 418,664 58,702 ------- ------- ------ - ------------------------------------------------------------------------------- 27 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Ohio Tax-Exempt Fund Six months ended Dec. 31, 2001 Class A Class B Class C Sold 1,438,541 353,204 56,322 Issued for reinvested distributions 209,692 22,230 2,709 Redeemed (1,629,954) (94,524) (2,269) ---------- ------- ------ Net increase (decrease) 18,279 280,910 56,762 ------ ------- ------ Year ended June 30, 2001 Class A Class B Class C Sold 2,487,537 385,003 130,184 Issued for reinvested distributions 462,347 44,290 880 Redeemed (1,957,754) (179,453) -- ---------- -------- ------- Net increase (decrease) 992,130 249,840 131,064 ------- ------- ------- 5. MUNICIPAL INTEREST RATE FUTURES CONTRACTS Investments in securities as of Dec. 31, 2001, included securities that were valued and pledged as collateral to cover initial margin deposits (see "Summary of significant accounting policies") are as follows: Market value Open purchase Fund of collateral (sale) contracts California Tax-Exempt Fund $398,616 (107) Minnesota Tax-Exempt Fund 547,408 (99) New York Tax-Exempt Fund 124,847 (2) Ohio Tax-Exempt Fund 220,372 (2) The market value of the open sale contracts as of Dec. 31, 2001, are as follows: Market value Net unrealized Fund of futures gain (loss) California Tax-Exempt Fund $10,994,250 $(170,709) Minnesota Tax-Exempt Fund 10,172,250 (158,146) New York Tax-Exempt Fund 205,500 (2,946) Ohio Tax-Exempt Fund 205,500 (2,946) The Funds maintain, in a segregated account with their custodian, bonds with at least a market value equal to the value of open long futures contracts, if any. 6. CAPITAL LOSS CARRY-OVER For federal income tax purposes, capital loss carry-overs were as follows as of June 30, 2001: Fund Carry-over Expiration date California Tax-Exempt Fund $6,561,937 2007-2010 Massachusetts Tax-Exempt Fund 899,068 2008-2010 Michigan Tax-Exempt Fund 1,687,209 2008-2010 Minnesota Tax-Exempt Fund 7,573,386 2005-2010 New York Tax-Exempt Fund 2,160,266 2005-2010 Ohio Tax-Exempt Fund 1,276,710 2005-2010 It is unlikely the board will authorize a distribution of any net realized capital gains for a Fund until the respective capital loss carry-over has been offset or expires. 7. BANK BORROWINGS Each Fund has a revolving credit agreement with U.S. Bank, N.A., whereby each Fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each Fund must have asset coverage for borrowings not to exceed the aggregate of 333% of advances equal to or less than five business days plus 367% of advances over five business days. The agreement, which enables each Fund to participate with other American Express mutual funds, permits borrowings up to $200 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 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 0.05% per annum. Each Fund had no borrowings outstanding during the six months ended Dec. 31, 2001. - ------------------------------------------------------------------------------- 28 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating each Fund's results.
AXP California Tax-Exempt Trust AXP California Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.18 $5.03 $5.18 $5.35 $5.24 Income from investment operations: Net investment income (loss) .11 .25 .26 .27 .29 Net gains (losses) (both realized and unrealized) .01 .15 (.15) (.17) .11 Total from investment operations .12 .40 .11 .10 .40 Less distributions: Dividends from net investment income (.11) (.25) (.26) (.27) (.29) Net asset value, end of period $5.19 $5.18 $5.03 $5.18 $5.35 Ratios/supplemental data Net assets, end of period (in millions) $237 $231 $213 $246 $239 Ratio of expenses to average daily net assets(c) .85%(d) .85% .82% .79% .75% Ratio of net investment income (loss) to average daily net assets 4.46%(d) 4.79% 5.18% 4.97% 5.24% Portfolio turnover rate (excluding short-term securities) 2% 11% 18% 16% 15% Total return(e) 2.48% 8.00% 2.19% 1.80% 7.72% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.17 $5.03 $5.18 $5.35 $5.24 Income from investment operations: Net investment income (loss) .09 .21 .22 .22 .25 Net gains (losses) (both realized and unrealized) .02 .14 (.15) (.17) .11 Total from investment operations .11 .35 .07 .05 .36 Less distributions: Dividends from net investment income (.09) (.21) (.22) (.22) (.25) Net asset value, end of period $5.19 $5.17 $5.03 $5.18 $5.35 Ratios/supplemental data Net assets, end of period (in millions) $25 $24 $21 $21 $15 Ratio of expenses to average daily net assets(c) 1.60%(d) 1.60% 1.58% 1.53% 1.50% Ratio of net investment income (loss) to average daily net assets 3.70%(d) 3.99% 4.43% 4.23% 4.50% Portfolio turnover rate (excluding short-term securities) 2% 11% 18% 16% 15% Total return(e) 2.29% 6.98% 1.44% 1.03% 6.94%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 29 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP California Tax-Exempt Trust AXP California Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.18 $5.03 $5.02 Income from investment operations: Net investment income (loss) .09 .21 -- Net gains (losses) (both realized and unrealized) .01 .15 .01 Total from investment operations .10 .36 .01 Less distributions: Dividends from net investment income (.09) (.21) -- Net asset value, end of period $5.19 $5.18 $5.03 Ratios/supplemental data Net assets, end of period (in millions) $3 $1 $-- Ratio of expenses to average daily net assets(c) 1.61%(d) 1.60% 1.58%(d) Ratio of net investment income (loss) to average daily net assets 3.74%(d) 4.04% 4.43%(d) Portfolio turnover rate (excluding short-term securities) 2% 11% 18% Total return(e) 2.10% 7.20% .20%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 30 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Massachusetts Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.28 $5.11 $5.39 $5.56 $5.42 Income from investment operations: Net investment income (loss) .11 .27 .27 .27 .29 Net gains (losses) (both realized and unrealized) .03 .17 (.27) (.17) .14 Total from investment operations .14 .44 -- .10 .43 Less distributions: Dividends from net investment income (.11) (.27) (.28) (.27) (.29) Net asset value, end of period $5.31 $5.28 $5.11 $5.39 $5.56 Ratios/supplemental data Net assets, end of period (in millions) $66 $65 $59 $70 $67 Ratio of expenses to average daily net assets(c) .91%(d) .95% .93% .81% .82% Ratio of net investment income (loss) to average daily net assets 4.26%(d) 5.04% 5.28% 4.99% 5.17% Portfolio turnover rate (excluding short-term securities) 13% 4% 7% 5% 9% Total return(e) 2.76% 8.64% .04% 1.72% 8.13% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.28 $5.11 $5.39 $5.56 $5.42 Income from investment operations: Net investment income (loss) .09 .23 .24 .23 .24 Net gains (losses) (both realized and unrealized) .03 .17 (.28) (.17) .14 Total from investment operations .12 .40 (.04) .06 .38 Less distributions: Dividends from net investment income (.09) (.23) (.24) (.23) (.24) Net asset value, end of period $5.31 $5.28 $5.11 $5.39 $5.56 Ratios/supplemental data Net assets, end of period (in millions) $21 $18 $16 $17 $13 Ratio of expenses to average daily net assets(c) 1.67%(d) 1.70% 1.69% 1.56% 1.57% Ratio of net investment income (loss) to average daily net assets 3.51%(d) 4.28% 4.53% 4.25% 4.43% Portfolio turnover rate (excluding short-term securities) 13% 4% 7% 5% 9% Total return(e) 2.37% 7.83% (.71%) .96% 7.32%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 31 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Massachusetts Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.28 $5.11 $5.10 Income from investment operations: Net investment income (loss) .09 .23 -- Net gains (losses) (both realized and unrealized) .03 .17 .01 Total from investment operations .12 .40 .01 Less distributions: Dividends from net investment income (.09) (.23) -- Net asset value, end of period $5.31 $5.28 $5.11 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $-- Ratio of expenses to average daily net assets(c) 1.66%(d) 1.70% 1.69%(d) Ratio of net investment income (loss) to average daily net assets 3.52%(d) 4.30% 4.53%(d) Portfolio turnover rate (excluding short-term securities) 13% 4% 7% Total return(e) 2.38% 7.84% .20%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 32 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Michigan Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.27 $5.09 $5.38 $5.57 $5.44 Income from investment operations: Net investment income (loss) .12 .27 .27 .28 .29 Net gains (losses) (both realized and unrealized) (.01) .18 (.29) (.17) .13 Total from investment operations .11 .45 (.02) .11 .42 Less distributions: Dividends from net investment income (.12) (.27) (.27) (.28) (.29) Distributions from realized gains -- -- -- (.02) -- Total distributions (.12) (.27) (.27) (.30) (.29) Net asset value, end of period $5.26 $5.27 $5.09 $5.38 $5.57 Ratios/supplemental data Net assets, end of period (in millions) $68 $67 $65 $77 $77 Ratio of expenses to average daily net assets(c) .94%(d) .95% .89% .83% .82% Ratio of net investment income (loss) to average daily net assets 4.58%(d) 5.09% 5.30% 5.00% 5.19% Portfolio turnover rate (excluding short-term securities) 6% 4% 12% 20% 10% Total return(e) 2.15% 8.90% (.14%) 1.92% 7.66% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.27 $5.09 $5.38 $5.57 $5.44 Income from investment operations: Net investment income (loss) .10 .23 .23 .24 .25 Net gains (losses) (both realized and unrealized) (.01) .18 (.29) (.17) .13 Total from investment operations .09 .41 (.06) .07 .38 Less distributions: Dividends from net investment income (.10) (.23) (.23) (.24) (.25) Distributions from realized gains -- -- -- (.02) -- Total distributions (.10) (.23) (.23) (.26) (.25) Net asset value, end of period $5.26 $5.27 $5.09 $5.38 $5.57 Ratios/supplemental data Net assets, end of period (in millions) $7 $6 $6 $7 $5 Ratio of expenses to average daily net assets(c) 1.69%(d) 1.70% 1.64% 1.59% 1.57% Ratio of net investment income (loss) to average daily net assets 3.83%(d) 4.34% 4.55% 4.25% 4.44% Portfolio turnover rate (excluding short-term securities) 6% 4% 12% 20% 10% Total return(e) 1.76% 8.09% (.92%) 1.17% 6.86%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 33 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Michigan Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.27 $5.09 $5.08 Income from investment operations: Net investment income (loss) .10 .22 -- Net gains (losses) (both realized and unrealized) (.01) .18 .01 Total from investment operations .09 .40 .01 Less distributions: Dividends from net investment income (.10) (.22) -- Net asset value, end of period $5.26 $5.27 $5.09 Ratios/supplemental data Net assets, end of period (in millions) $1 $-- $-- Ratio of expenses to average daily net assets(c) 1.69%(d) 1.70% 1.64%(d) Ratio of net investment income (loss) to average daily net assets 3.78%(d) 4.36% 4.23%(d) Portfolio turnover rate (excluding short-term securities) 6% 4% 12% Total return(e) 1.77% 8.02% .20%
Notes to finanacial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 34 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Minnesota Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.14 $5.00 $5.26 $5.41 $5.30 Income from investment operations: Net investment income (loss) .12 .28 .29 .29 .30 Net gains (losses) (both realized and unrealized) -- .14 (.27) (.15) .11 Total from investment operations .12 .42 .02 .14 .41 Less distributions: Dividends from net investment income (.13) (.28) (.28) (.29) (.30) Net asset value, end of period $5.13 $5.14 $5.00 $5.26 $5.41 Ratios/supplemental data: Net assets, end of period (in millions) $365 $357 $340 $406 $385 Ratio of expenses to average daily net assets(c) .83%(d) .84% .82% .78% .75% Ratio of net investment income (loss) to average daily net assets 4.91%(d) 5.45% 5.68% 5.37% 5.61% Portfolio turnover rate (excluding short-term securities) 15% 4% 18% 13% 8% Total return(e) 2.34% 8.53% .60% 2.62% 7.96% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.14 $5.00 $5.26 $5.41 $5.30 Income from investment operations: Net investment income (loss) .11 .24 .25 .25 .26 Net gains (losses) (both realized and unrealized) (.01) .14 (.26) (.15) .11 Total from investment operations .10 .38 (.01) .10 .37 Less distributions: Dividends from net investment income (.11) (.24) (.25) (.25) (.26) Net asset value, end of period $5.13 $5.14 $5.00 $5.26 $5.41 Ratios/supplemental data Net assets, end of period (in millions) $59 $53 $44 $46 $31 Ratio of expenses to average daily net assets(c) 1.59%(d) 1.60% 1.58% 1.54% 1.50% Ratio of net investment income (loss) to average daily net assets 4.14%(d) 4.70% 4.94% 4.61% 4.86% Portfolio turnover rate (excluding short-term securities) 15% 4% 18% 13% 8% Total return(e) 1.95% 7.72% (.16%) 1.85% 7.17%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 35 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Minnesota Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.14 $5.00 $4.99 Income from investment operations: Net investment income (loss) .11 .24 -- Net gains (losses) (both realized and unrealized) -- .14 .01 Total from investment operations .11 .38 .01 Less distributions: Dividends from net investment income (.11) (.24) -- Net asset value, end of period $5.14 $5.14 $5.00 Ratios/supplemental data Net assets, end of period (in millions) $3 $2 $-- Ratio of expenses to average daily net assets(c) 1.59%(d) 1.59% 1.58%(d) Ratio of net investment income (loss) to average daily net assets 4.12%(d) 4.74% 4.94%(d) Portfolio turnover rate (excluding short-term securities) 15% 4% 18% Total return(e) 2.15% 7.75% .20%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 36 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP New York Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.12 $4.92 $5.15 $5.29 $5.15 Income from investment operations: Net investment income (loss) .11 .25 .27 .25 .27 Net gains (losses) (both realized and unrealized) (.04) .20 (.23) (.14) .14 Total from investment operations .07 .45 .04 .11 .41 Less distributions: Dividends from net investment income (.11) (.25) (.27) (.25) (.27) Net asset value, end of period $5.08 $5.12 $4.92 $5.15 $5.29 Ratios/supplemental data Net assets, end of period (in millions) $89 $88 $85 $102 $105 Ratio of expenses to average daily net assets(c) .92%(d) .91% .88% .82% .79% Ratio of net investment income (loss) to average daily net assets 4.30%(d) 4.90% 5.27% 4.93% 5.22% Portfolio turnover rate (excluding short-term securities) 5% 13% 11% 8% 10% Total return(e) 1.40% 9.28% .77% 2.04% 8.20% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.12 $4.92 $5.15 $5.29 $5.15 Income from investment operations: Net investment income (loss) .09 .21 .23 .21 .23 Net gains (losses) (both realized and unrealized) (.04) .20 (.23) (.14) .14 Total from investment operations .05 .41 -- .07 .37 Less distributions: Dividends from net investment income (.09) (.21) (.23) (.21) (.23) Net asset value, end of period $5.08 $5.12 $4.92 $5.15 $5.29 Ratios/supplemental data Net assets, end of period (in millions) $17 $16 $13 $14 $10 Ratio of expenses to average daily net assets(c) 1.67%(d) 1.66% 1.63% 1.57% 1.55% Ratio of net investment income (loss) to average daily net assets 3.48%(d) 4.14% 4.54% 4.20% 4.47% Portfolio turnover rate (excluding short-term securities) 5% 13% 11% 8% 10% Total return(e) 1.01% 8.47% .01% 1.28% 7.35%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 37 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP New York Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.11 $4.92 $4.91 Income from investment operations: Net investment income (loss) .09 .21 -- Net gains (losses) (both realized and unrealized) (.03) .19 .01 Total from investment operations .06 .40 .01 Less distributions: Dividends from net investment income (.09) (.21) -- Net asset value, end of period $5.08 $5.11 $4.92 Ratios/supplemental data Net assets, end of period (in millions) $1 $-- $-- Ratio of expenses to average daily net assets(c) 1.69%(d) 1.66% 1.63%(d) Ratio of net investment income (loss) to average daily net assets 3.56%(d) 4.09% 4.54%(d) Portfolio turnover rate (excluding short-term securities) 5% 13% 11% Total return(e) 1.21% 8.26% .20%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 38 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Ohio Tax-Exempt Fund Class A Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.27 $5.13 $5.36 $5.50 $5.38 Income from investment operations: Net investment income (loss) .11 .27 .27 .27 .29 Net gains (losses) (both realized and unrealized) .01 .14 (.23) (.14) .12 Total from investment operations .12 .41 .04 .13 .41 Less distributions: Dividends from net investment income (.11) (.27) (.27) (.27) (.29) Net asset value, end of period $5.28 $5.27 $5.13 $5.36 $5.50 Ratios/supplemental data Net assets, end of period (in millions) $67 $67 $60 $69 $67 Ratio of expenses to average daily net assets(c) .93%(d) .93% .88% .88% .83% Ratio of net investment income (loss) to average daily net assets 4.37%(d) 4.98% 5.31% 5.02% 5.22% Portfolio turnover rate (excluding short-term securities) 8% 3% 13% 5% 10% Total return(e) 2.43% 7.95% .91% 2.50% 7.79% Class B Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000 1999 1998 Net asset value, beginning of period $5.27 $5.13 $5.36 $5.50 $5.38 Income from investment operations: Net investment income (loss) .09 .23 .23 .23 .24 Net gains (losses) (both realized and unrealized) .01 .14 (.23) (.14) .13 Total from investment operations .10 .37 -- .09 .37 Less distributions: Dividends from net investment income (.09) (.23) (.23) (.23) (.25) Net asset value, end of period $5.28 $5.27 $5.13 $5.36 $5.50 Ratios/supplemental data Net assets, end of period (in millions) $10 $8 $7 $8 $5 Ratio of expenses to average daily net assets(c) 1.68%(d) 1.68% 1.64% 1.63% 1.59% Ratio of net investment income (loss) to average daily net assets 3.61%(d) 4.23% 4.55% 4.27% 4.47% Portfolio turnover rate (excluding short-term securities) 8% 3% 13% 5% 10% Total return(e) 2.04% 7.15% .14% 1.75% 6.98%
See accompanying notes to financial highlights. - ------------------------------------------------------------------------------- 39 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT
AXP Special Tax-Exempt Series Trust AXP Ohio Tax-Exempt Fund Class C Per share income and capital changes(a) Fiscal period ended June 30, 2001(f) 2001 2000(b) Net asset value, beginning of period $5.28 $5.13 $5.12 Income from investment operations: Net investment income (loss) .09 .22 -- Net gains (losses) (both realized and unrealized) -- .15 .01 Total from investment operations .09 .37 .01 Less distributions: Dividends from net investment income (.09) (.22) -- Net asset value, end of period $5.28 $5.28 $5.13 Ratios/supplemental data Net assets, end of period (in millions) $1 $1 $-- Ratio of expenses to average daily net assets(c) 1.68%(d) 1.68% 1.64%(d) Ratio of net investment income (loss) to average daily net assets 3.62%(d) 4.26% 4.55%(d) Portfolio turnover rate (excluding short-term securities) 8% 3% 13% Total return(e) 1.85% 7.27% .20%
Notes to financial highlights (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date was June 26, 2000. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Six months ended Dec. 31, 2001 (Unaudited). - ------------------------------------------------------------------------------- 40 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP California Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (91.4%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) ABAG Financial Authority for Nonprofit Corporations Certificates of Participation International School Series 1996 05-01-26 7.38% $2,200,000 $2,335,762 ABAG Financial Authority for Nonprofit Corporations Revenue Bonds San Diego Hospital Association Series 2001A 08-15-20 6.13 1,000,000 1,015,360 Alhambra City Elementary School District Los Angeles County Election of 1999 General Obligation Bonds Zero Coupon Series 1999A (FSA Insured) 09-01-22 5.95 1,055,000(e) 333,960 Alta Loma School District Unlimited Tax Capital Appreciation General Obligation Bonds Zero Coupon Series 1999A (FGIC Insured) 08-01-23 5.69 2,600,000(e) 777,842 Anaheim Public Financing Authority Lease Capital Appreciation Improvement Revenue Bonds Zero Coupon Series 1997C (FSA Insured) 09-01-25 5.61 2,170,000(e) 572,511 Anaheim Public Financing Authority Revenue Bonds Electric Utilities San Juan 2nd Series 1993 (FGIC Insured) 10-01-22 5.75 11,100,000 11,372,615 Arcade Certificate of Participation Water District Revenue Bonds Series 1997 (FGIC Insured) 11-01-27 5.00 1,200,000 1,173,024 Beaumont Financing Authority Local Agency Revenue Bonds Series 2000A 09-01-32 7.38 1,955,000 2,018,068 Brea Public Financing Authority Water Refunding Bonds Series 1998 (FGIC Insured) 07-01-21 4.75 1,000,000 956,600 Brea Redevelopment Agency Tax Allocation Refunding Bonds Redevelopment Project AB Series 1993 (MBIA Insured) 08-01-17 5.50 1,800,000 1,832,652 Burbank Redevelopment Agency Tax Allocation Bonds Golden State Series 1993A 12-01-23 6.00 2,000,000 2,060,220 Community Development Authority Health Facilities Unihealth America Certificate of Participation Series 1993 Inverse Floater (AMBAC Insured) 10-01-11 9.50 5,000,000(f) 5,912,500 Contra Costa County Residential Rent Facility Multi-family Housing Revenue Bonds Cypress Meadows Series 1998E A.M.T. 09-01-28 7.00 2,000,000 1,729,840 El Monte Department Public Social Services Facility Certificates of Participation Series 1999 (AMBAC Insured) 06-01-30 4.75 1,500,000 1,400,310 Encinitas Unified School District Unlimited General Obligation Bonds Zero Coupon Series 1996 (MBIA Insured) 08-01-15 5.85 2,500,000(e) 1,239,875 08-01-16 5.85 1,000,000(e) 463,690 Folsom Special Tax Refunding Bonds Community Facilities District #10 Series 1999 09-01-24 7.00 3,000,000 3,178,920 Fontana Redevelopment Agency Refunding Certificate of Participation Police Facility Series 1993 04-01-16 5.63 4,500,000 4,570,875 Fontana Unified School District San Bernardino County General Obligation Convertible Capital Appreciation Bonds Series 1995C (FGIC Insured) 05-01-20 6.15 3,470,000 3,751,313 Fontana Unified School District Unlimited Tax General Obligation Bonds Series1997D (FGIC Insured) 05-01-22 5.75 2,000,000 2,122,900 Foothill/Eastern Transportation Corridor Agency Toll Road Senior Lien Revenue Bonds Series 1995A 01-01-34 6.00 1,775,000 1,981,237 Fresno Unified School District Fresno County Refunding General Obligation Bonds Series 1999C (MBIA Insured) 08-01-22 5.90 2,000,000 2,240,680 Garden Grove Agency Community Development Tax Allocation Refunding Bonds Garden Grove Community Series 1993 10-01-23 5.88 3,000,000 3,025,350 Garden Grove Certificate of Participation Bahia Village/Emerald Isle Series 1993 (FSA Insured) 08-01-23 5.70 2,660,000 2,723,069 Hemet Redevelopment Agency Tax Allocation Bonds Series 1999A (AMBAC Insured) 09-15-28 4.75 2,390,000 2,238,785 Infrastructure & Economic Development Bank Revenue Bonds American Center for Wine, Foods & Arts Series 1999 (ACA Insured) 12-01-19 5.70 2,500,000 2,516,800 Inglewood Redevelopment Agency Revenue Bonds Series 1998A (AMBAC Insured) 05-01-23 5.25 1,100,000 1,138,676 Intercommunity Hospital Finance Authority Certificate of Participation Series 1998 (ACA Insured) 11-01-19 5.25 2,000,000 1,885,380 Irwindale Redevelopment Agency Sub Lien Tax Allocation Bonds Series 1996 12-01-19 7.00 1,700,000 1,824,287 Janesville Union School District Lassen County General Obligation Bonds Series 1996 08-01-21 6.45 855,000(d) 905,086 La Mirada Redevelopment Agency Special Tax Refunding Revenue Bonds Community Facilities District #89-1 Series 1998 10-01-20 5.70 1,000,000 966,180 La Palma Community Development Commission Refunding Tax Allocation Bonds Series 2001 (ACA Insured) 06-01-21 5.50 1,830,000 1,802,019 Lake Elsinore Public Finance Authority Local Agency Revenue Bonds Series 1997F 09-01-20 7.10 2,945,000 3,124,998 Lake Elsinore Public Finance Authority Tax Allocation Revenue Bonds Series 1999A 09-01-30 5.50 2,500,000 2,375,525 Lake Elsinore Redevelopment Agency Community Facilities District #90 Tuscany Hills Public Improvements Special Tax Parity Bonds Series 1999A 10-01-24 6.05 2,000,000 1,921,560 Lake Elsinore School Finance Authority Revenue Bonds Series 1997 09-01-19 6.13 1,235,000 1,275,743 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 41 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP California Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Las Virgenes Unified School District Los Angeles County Capital Appreciation General Obligation Bonds Zero Coupon Series 1999 (FSA Insured) 11-01-21 5.67% $1,800,000(e) $598,464 11-01-22 5.68 2,300,000(e) 720,475 11-01-23 5.68 2,945,000(e) 868,834 Los Angeles County Schools Regionalized Business Services Pooled Financing Program Certificate of Participation Zero Coupon Series 1999A (AMBAC Insured) 08-01-27 5.97 2,410,000(e) 568,254 Los Angeles Department of Water & Power Waterworks Refunding Revenue Bonds 2nd Issue Series1993 (Secondary FGIC Insured) 05-15-18 4.50 3,000,000 2,807,970 Los Angeles Department of Water & Power Revenue Bonds Series 2001A (FSA Insured) 07-01-18 5.25 2,000,000 2,038,960 Los Angeles Multi-family Housing Revenue Bonds Park Parthenia Series 1986 (GNMA Insured) A.M.T. 01-20-22 7.40 1,000,000 1,007,660 Los Angeles Single Family Home Mortgage Revenue Bonds Series 1991A (GNMA & FNMA Insured) A.M.T. 06-01-25 6.88 640,000 650,182 Los Angeles State Harbor Revenue Bonds Series 1988 Escrowed to Maturity 10-01-18 7.60 1,000,000 1,215,760 Los Angeles State Harbor Revenue Bonds Series 1996B (MBIA Insured) A.M.T. 11-01-19 5.38 2,000,000 2,020,900 11-01-23 5.38 1,300,000 1,301,001 Los Angeles Unified School District General Obligation Bonds Series 2001A (FSA Insured) 07-01-21 5.00 2,000,000 1,985,240 Millbrae Residential Facility Revenue Bonds Magnolia of Millbrae Series 1997A A.M.T. 09-01-27 7.38 2,500,000 2,577,800 Modesto Irrigation District Finance Authority Refunding Revenue Bonds Domestic Water Series 1998D (AMBAC Insured) 09-01-22 4.75 2,000,000 1,906,180 Northern California Transmission Select Auction Variable Rate Security & Residual Interest Revenue Bonds Series 1993 (MBIA Insured) 04-29-24 5.50 4,500,000(h) 4,647,600 Novato Community Facility District #1 Vintage Oaks Public Improvement Special Tax Refunding Bonds Series 1994 08-01-21 7.25 2,000,000 2,101,780 Orange County Special Tax Community Facilities Pre-refunded Bonds Aliso Veijo District 88-1 Series 1992A 08-15-18 7.35 3,000,000 3,166,620 Pittsburg Infrastructure Finance Authority Reassessment Improvement Revenue Bonds Series 1998A 09-02-24 5.60 1,440,000 1,393,934 Pittsburg Redevelopment Agency Tax Allocation Bonds Los Medanos Community Development Zero Coupon Series 1999 (AMBAC Insured) 08-01-24 6.05 2,100,000(e) 591,486 Pleasanton Joint Powers Financing Authority Reassessment Revenue Bonds Series 1993A 09-02-12 6.15 1,765,000 1,840,189 Port of Oakland Miscellaneous Revenue Bonds Series 2000K (FGIC Insured) A.M.T. 11-01-18 5.63 1,000,000 1,032,460 Port of Oakland Refunding Revenue Bonds Series 1997G (MBIA Insured) A.M.T. 11-01-25 5.38 3,080,000 3,106,211 Poway Unified School District Special Tax Refunding Bonds Community Facilities District #1 Series 1998 (MBIA Insured) 10-01-23 4.75 2,500,000 2,373,025 Rancho Mirage Joint Powers Finance Authority Certificate of Participation Eisenhower Memorial Hospital Series 1992 03-01-22 7.00 4,250,000 4,373,845 Redding Redevelopment Agency Tax Allocation Refunding Bonds Canby Hilltop Cypress Series 1993D (CGIC Insured) 09-01-23 5.00 4,700,000 4,632,414 Redwood City Elementary School District Capital Appreciation General Obligation Bonds San Mateo County Zero Coupon Series 1997 (FGIC Insured) 08-01-20 5.65 5,475,000(e) 1,958,189 Richmond Elementary School District Lassen County General Obligation Bonds Series 1996 08-01-21 6.50 649,000 677,128 Richmond Joint Powers Financing Authority Lease & Gas Tax Refunding Revenue Bonds Series 1995A 05-15-13 5.25 2,000,000 2,045,480 Riverside County Certificate of Participation Series 1998 (MBIA Insured) 12-01-21 5.00 1,530,000 1,516,597 Rural Home Mortgage Financing Authority Single Family Mortgage Revenue Bonds 2nd Series 1997A (GNMA Insured) A.M.T. 09-01-29 7.00 1,425,000 1,596,855 Rural Home Mortgage Financing Authority Single Family Mortgage Revenue Bonds 5th Series 1998B (FNMA/GNMA Insured) A.M.T. 12-01-29 6.35 1,430,000 1,564,377 Sacramento Cogeneration Authority Pre-refunded Revenue Bonds Procter & Gamble Series 1995 07-01-10 6.38 500,000 567,915 Sacramento Cogeneration Authority Un-refunded Revenue Bonds Procter & Gamble Series 1995 07-01-10 6.38 500,000(d) 533,065 Sacramento Power Authority Cogeneration Revenue Bonds Campbell Soup Series 1995 07-01-22 6.00 1,000,000 1,037,510 San Diego Convention Center Expansion Financing Authority Revenue Bonds Series 1998A (AMBAC Insured) 04-01-28 4.75 3,250,000 3,045,998 San Diego County Capital Asset Lease Certificate of Participation Series 1993 Inverse Floater (AMBAC Insured) 09-01-07 8.32 3,200,000(f) 3,804,000 San Diego County Water Authority Revenue Bonds Certificates of Participation Series 1998A (FGIC Insured) 05-01-24 4.50 6,475,000 5,881,502 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 42 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP California Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) San Diego Water Utility Systems Undivided Interest Revenue Bonds Series 1998 (FGIC Insured) 08-01-28 4.75% $2,695,000 $2,524,919 San Francisco City & County Airport Commission International Airport Refunding Revenue Bonds Issue 20 2nd Series 1998 05-01-26 4.50 2,250,000 2,025,225 San Francisco City & County Airport Commission International Airport Revenue Bonds Issue 15B 2nd Series 1998 (MBIA Insured) 05-01-25 4.50 1,500,000 1,358,925 San Jose Redevelopment Agency Merged Area Redevelopment Tax Allocation Bonds Series 1993 (MBIA Insured) 08-01-24 4.75 3,055,000 2,892,841 San Jose Redevelopment Agency Merged Area Redevelopment Tax Allocation Bonds Series 1999 (AMBAC Insured) 08-01-23 4.75 3,000,000 2,840,880 San Jose Redevelopment Agency Merged Area Tax Allocation Bonds Series 1993 Inverse Floater (MBIA Insured) 08-01-14 7.75 3,000,000(f) 3,277,500 San Juan Unified School District Unlimited Tax General Obligation Bonds Zero Coupon Series 1999 08-01-21 5.68 820,000(e) 276,438 08-01-23 5.70 1,820,000(d,e) 544,489 08-01-24 5.70 1,810,000(e) 509,805 San Ramon Certificate of Participation Refunding Bonds Series 2001 (AMBAC Insured) 03-01-21 5.00 1,835,000 1,819,237 San Ysidro School District General Obligation Bonds San Diego County Series 1997 (AMBAC Insured) 08-01-21 6.13 1,000,000 1,119,610 Santa Clara County Mountain View Los Altos Union High School District Unlimited Tax General Obligation Bonds Series 1995A 08-01-15 5.75 1,200,000 1,263,408 Santa Cruz Certificate of Participation Series 1987 08-01-07 8.38 845,000 850,214 Santa Monica-Malibu Unified School District Capital Appreciation General Obligation Bonds Los Angeles County Zero Coupon Series 1999 (FGIC Insured) 08-01-22 5.38 7,300,000(e) 2,318,772 South Tahoe Joint Powers Financing Authority Refunding Revenue Bonds Series 1995B 10-01-20 6.25 2,700,000 2,765,016 Southern California Metropolitan Water District Waterworks Revenue Bonds Series 1997A 07-01-26 5.00 3,700,000 3,613,161 Southern California Public Power Authority Transmission Special Bonds Series 1992 07-01-12 6.00 2,700,000 2,789,046 Southern California Tobacco Securitization Authority Asset Backed Revenue Bonds Series 2002A 06-01-36 5.50 1,500,000(i) 1,483,920 State Department Water Resource Water Systems Revenue Bonds Center Valley Series 1993L 12-01-23 5.50 3,000,000 3,037,680 State Department Water Resource Water Systems Revenue Bonds Center Valley Series 1995O 12-01-18 4.75 2,000,000 1,934,420 State Educational Facilities Authority Revenue Bonds Keck Graduate Institute of Applied Life Sciences Series 2000 06-01-20 6.63 1,490,000 1,582,320 State Educational Facilities Authority Revenue Bonds Pomona College Series 1992 02-15-17 6.00 3,000,000 3,072,780 State Educational Facilities Authority Revenue Bonds Series 1997B 04-01-21 6.30 1,000,000 1,054,280 State for Previous Veterans Unlimited General Obligation Bonds Series 2000B A.M.T. 12-01-12 4.95 2,250,000 2,232,495 12-01-13 5.05 1,435,000 1,417,249 12-01-14 5.15 2,535,000 2,500,347 State General Obligation Bonds Series 2000 05-01-30 5.75 2,000,000 2,092,400 State Public Works Board California Community Colleges Lease Pre-refunded Revenue Bonds Series 1994 03-01-19 7.00 2,000,000 2,229,060 State Public Works Board Lease Revenue Bonds Department of Correction Substance Abuse Treatment Facility & State Prison Corcoran Series 1996A (AMBAC Insured) 01-01-21 5.25 1,870,000 1,877,761 State Refunding Unlimited General Obligation Bonds Series 2001 11-01-04 4.00 4,000,000 4,106,640 State University Multi-purpose Revenue Bonds Series 2000K (FGIC Insured) 09-01-20 5.00 1,830,000 1,821,088 State University Refunding Revenue Bonds Series 1993C (AMBAC Insured) 09-01-23 5.00 2,000,000 1,973,820 State Unlimited Tax General Obligation Bonds Series 1993 (FGIC Insured) 09-01-23 4.75 1,075,000 1,012,489 Statewide Communities Development Authority Certificates of Participation St. Joseph Health System Group Series 1994 07-01-15 6.50 5,500,000 6,136,184 Statewide Communities Development Authority Multi-family Housing Revenue Bonds Magnolia City Lights Series 1999X A.M.T. 07-01-30 6.65 1,595,000 1,434,750 Statewide Communities Development Authority Revenue Bonds Thomas Jefferson School of Law Series 2001 10-01-31 7.75 2,500,000 2,440,050 Stockton Single Family Mortgage Revenue Bonds Series 1990A (GNMA Insured) A.M.T. 02-01-23 7.50 70,000 74,061 Upland Certificate of Participation Water System Refunding Bonds Series 1992 (FGIC Insured) 08-01-16 6.60 1,000,000 1,049,810 Vallejo Certificate of Participation Touro University Series 1999 06-01-29 7.38 2,000,000 2,042,620 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 43 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP California Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) West Sacramento Financing Authority Special Tax Revenue Bonds Series 1999F 09-01-29 6.10% $3,000,000 $2,870,190 Western Hills Water District Special Tax Bonds Diablo Grande Community Facilities Series 2001 09-01-31 6.88 2,500,000 2,417,250 Windsor Civic Center Joint Powers Financing Authority Lease Revenue Bonds Series 2001A (FSA Insured) 10-01-24 5.00 2,555,000 2,513,865 Total municipal bonds (Cost: $225,378,883) $241,717,087 Municipal notes (9.0%) Issuer(c,g) Effective Amount Value(a) yield payable at maturity Bay Area Toll Bridge Authority Revenue Bonds San Francisco Bay Area Series 2001A V.R. 04-01-36 1.60% $6,500,000 $6,500,000 Orange County Improvement District #88 Special Assessment Bonds Series 1988 V.R. 09-02-18 1.70 300,000 300,000 Orange County Sanitation District Certificate of Participation Series 2000B V.R. 08-01-30 1.70 4,200,000 4,200,000 State Health Facilities Financing Authority Revenue Bonds Sutter Health Series 1996B V.R. 03-01-12 1.70 1,800,000 1,800,000 State Pollution Control Financing Authority Revenue Bonds ExxonMobil Series 2000 V.R. 04-01-17 1.65 1,000,000 1,000,000 Statewide Community Development Authority Certificate of Participation John Muir/Mt Diablo Health Series 1997 V.R. 08-15-27 1.65 2,500,000 2,500,000 Statewide Community Development Authority Certificate of Participation Series 1998 V.R. 04-01-28 1.65 3,900,000 3,900,000 Statewide Community Development Authority Certificate of Participation Sutter Health Group Series 1995 V.R. 07-01-15 1.70 700,000 700,000 Total municipal notes (Cost: $20,900,000) $20,900,000 Total investments in securities (Cost: $246,278,883)(j) $262,617,087 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 44 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP California Tax-Exempt Fund Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AMBAC -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 9.2% 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 (d) 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 Municipal Bonds, March 2002 $10,700,000 (e) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (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 Dec. 31, 2001. (g) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (i) At Dec. 31, 2001, the cost of securities purchased, including interest purchased, on a when-issued basis was $1,475,218. (j) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $246,279,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $17,541,000 Unrealized depreciation (1,203,000) ---------- Net unrealized appreciation $16,338,000 ----------- - ------------------------------------------------------------------------------- 45 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP Massachusetts Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (89.1%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Bay Transportation Authority General Transportation System Refunding Revenue Bonds Series 1992B 03-01-16 6.20% $1,500,000 $1,702,335 Bay Transportation Authority Pre-refunded Revenue Bonds Series 1992B (FSA Insured) 03-01-21 5.50 15,000 15,574 Boston City Hospital Refunding Revenue Bonds Series 1993B (FHA Insured) 02-15-23 5.75 3,000,000 3,003,959 Boston General Obligation Refunding Bonds Series 1993A (AMBAC Insured) 02-01-09 5.65 1,500,000 1,582,725 Boston Industrial Development Financing Authority Revenue Bonds Massachusetts College of Pharmacy Series 1994A (Connie Lee Insured) 10-01-26 5.25 1,000,000 973,310 Boston Water & Sewer Commission General Revenue Bonds Series 1998D (FGIC Insured) 11-01-22 4.75 1,000,000 924,170 Development Finance Agency New England Center for Children Revenue Bonds Series 1998 11-01-18 5.88 475,000 403,437 Development Finance Agency Refunding Revenue Bonds Briarwood Retirement Community Series 2001B 12-01-30 8.25 750,000 765,308 Development Finance Agency Revenue Bonds 1st Mortgage Berkshire Retirement Community Lennox Series 1999 07-01-29 5.63 1,500,000 1,273,830 Development Finance Agency Revenue Bonds Boston Biomedical Research Institute Series 1999 02-01-29 5.75 1,000,000 916,810 Development Finance Agency Revenue Bonds Boston University Series 1999P 05-15-29 6.00 1,400,000 1,483,944 Development Finance Agency Revenue Bonds Devens Electric System Series 2001 12-01-30 6.00 1,000,000 1,000,770 Development Finance Agency Revenue Bonds Landmank School Series 1999 (Asset Guaranty) 06-01-29 5.25 1,000,000 951,200 Development Finance Agency Revenue Bonds Massachusetts College of Pharmacy Series 1999B 07-01-20 6.63 1,000,000 1,040,450 Development Finance Agency Revenue Bonds SeMass Systems Series 2001B (MBIA Insured) A.M.T. 01-01-05 5.00 2,000,000 2,072,040 Development Finance Agency Revenue Bonds Suffolk University Series 1999 07-01-29 5.85 1,000,000 990,820 Development Finance Agency Revenue Bonds The May Institute Issue Series 1999 (Asset Guaranty) 09-01-29 5.75 1,000,000 1,013,970 East Longmeadow General Obligation Bonds Series 2001 (AMBAC Insured) 08-01-03 4.00 1,160,000 1,190,659 Greater Lawrence Regional Vocational Technical High School District General Obligation Bonds (MBIA Insured) 03-15-03 5.00 2,500,000 2,584,325 Haverhill City Unlimited Tax General Obligation Bonds Series 1997 (FGIC Insured) 06-15-17 5.00 250,000 249,728 Health & Educational Facilities Authority College Revenue Bonds Brandeis University Series 1998I (MBIA Insured) 10-01-28 4.75 2,000,000 1,809,380 Health & Educational Facilities Authority Hospital Revenue Bonds Harvard Pilgrim Health Series 1998A (FSA Insured) 07-01-22 4.75 1,000,000 906,190 Health & Educational Facilities Authority Hospital Revenue Bonds Milford-Whitinsville Regional Hospital Series 1998C 07-15-28 5.38 1,065,000 893,290 Health & Educational Facilities Authority Pre-refunded Revenue Bonds Melrose-Wakefield Hospital Series 1992B 07-01-16 6.38 1,000,000 1,084,230 Health & Educational Facilities Authority Pre-refunded Revenue Bonds New England Deaconess Hospital Series 1992D 04-01-12 6.63 1,000,000 1,032,650 Health & Educational Facilities Authority Pre-refunded Revenue Bonds Northeastern University Series 1992E (MBIA Insured) 10-01-22 6.55 1,000,000 1,048,330 Health & Educational Facilities Authority Pre-refunded Revenue Bonds Series 1992D (MBIA Insured) 07-01-22 6.50 495,000 517,057 Health & Educational Facilities Authority Refunding Revenue Bonds Caritas Christi Obligated Group Series 1999A 07-01-15 5.70 1,000,000 988,890 Health & Educational Facilities Authority Refunding Revenue Bonds Christopher House Series 1999A 01-01-29 6.88 1,000,000 931,340 Health & Educational Facilities Authority Revenue Bonds Berkshire Health Systems Series 1994C 10-01-11 5.90 900,000 903,591 Health & Educational Facilities Authority Revenue Bonds Boston College Series 1998L 06-01-31 4.75 1,000,000 901,980 Health & Educational Facilities Authority Revenue Bonds Cape Cod Health System Series 1993A (Connie Lee Insured) 11-15-21 5.25 2,500,000 2,454,475 Health & Educational Facilities Authority Revenue Bonds Holyoke Hospital Series 1994B 07-01-15 6.50 1,000,000 972,910 Health & Educational Facilities Authority Revenue Bonds Learning Center for Deaf Children Series 1999C 07-01-29 6.13 1,000,000 860,400 Health & Educational Facilities Authority Revenue Bonds North Adams Regional Hospital Series 1996C 07-01-18 6.63 1,000,000 980,860 Health & Educational Facilities Authority Revenue Bonds South Shore Hospital Series 1999F 07-01-29 5.75 1,000,000 974,410 Health & Educational Facilities Authority Revenue Bonds Southcoast Health System Series 1998A (MBIA Insured) 07-01-27 4.75 1,000,000 894,050 Health & Educational Facilities Authority Revenue Bonds Suffolk University Series 1992B (Connie Lee Insured) 07-01-22 6.35 2,495,000 2,591,481 Health & Educational Facilities Authority Revenue Bonds Valley Regional Health System Series 1994C (Connie Lee Insured) 07-01-18 5.75 1,000,000 1,020,610 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 46 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Massachusetts Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Health & Educational Facilities Authority Un-refunded Revenue Bonds Boston College Series 1991J (FGIC Insured) 07-01-21 6.63% $60,000 $61,423 Health & Educational Facilities Authority Un-refunded Revenue Bonds Series 1992D (MBIA Insured) 07-01-22 6.50 505,000 524,776 Housing Finance Agency Authority Residential Development Bonds Series 1992A (FNMA Insured) 11-15-11 6.88 1,000,000 1,030,350 Lynn General Obligation Bonds Series 2001 (FGIC Insured) 08-15-03 4.00 1,000,000 1,026,570 Mansfield Pre-refunded General Obligation Bonds Series 1991 (AMBAC Insured) 01-15-11 6.70 1,000,000 1,022,000 Municipal Wholesale Electric Power Supply System Pre-refunded Revenue Bonds Series 1992B 07-01-17 6.75 1,395,000 1,458,891 Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds Series 1994B (MBIA Insured) 07-01-11 4.75 1,750,000 1,863,173 Municipal Wholesale Electric Power Supply System Revenue Bonds Special Parts & Inflows Series 1993 (AMBAC Insured) 07-01-18 5.45 1,600,000 1,614,352 Nantucket General Obligation Bonds Series 1991 12-01-11 6.80 60,000 61,510 New England Educational Loan Marketing Revenue Bonds Series 1993G 08-01-02 5.20 1,000,000 1,018,130 Route 3 North Transit Improvement Lease Bonds Inverse Floater Series 2000 (MBIA Insured) 06-15-19 10.15 500,000(e) 535,670 South Hadley Unlimited General Obligation Refunding Bonds Series 2001 (AMBAC Insured) 06-15-03 4.00 1,440,000 1,475,222 Southeastern University Building Authority Refunding Revenue Bonds Series 1995A (AMBAC Insured) 05-01-16 5.75 1,250,000 1,298,050 Springfield General Obligation Bonds Series 2001 (FGIC Insured) 08-01-04 4.00 1,000,000 1,028,680 State Education Loan Authority Educational Loan Revenue Bonds Issue E Series 1994B (AMBAC Insured) A.M.T. 01-01-12 6.00 605,000 651,851 State Industrial Finance Agency Assisted Living Facility Revenue Bonds Longmeadow Series 1997 A.M.T. 09-01-27 8.00 1,160,000 1,249,923 State Industrial Finance Agency Assisted Living Facility Revenue Bonds Marina Bay Series 1997 A.M.T. 12-01-27 7.50 1,000,000 1,032,330 State Industrial Finance Agency Assumption College Revenue Bonds Series 1996 (Connie Lee Insured) 07-01-26 6.00 1,000,000 1,041,970 State Industrial Finance Agency College Revenue Bonds Tufts University Series 1998H (MBIA Insured) 02-15-28 4.75 1,000,000 906,120 State Industrial Finance Agency Hampshire College Revenue Bonds Series 1997 10-01-17 5.80 1,105,000 1,082,569 State Industrial Finance Agency Miscellaneous Revenue Bonds Cambridge Friends School Series 1998 09-01-28 5.80 700,000 664,769 State Industrial Finance Agency Pollution Control Refunding Revenue Bonds Eastern Edison Series 1993 08-01-08 5.88 2,000,000 2,057,320 State Industrial Finance Agency Resource Recovery Revenue Bonds SeMass Series 1991A 07-01-15 9.00 1,500,000 1,547,955 State Industrial Finance Agency School Bonds St. John's High School of Worcester County Series 1998 06-01-28 5.35 500,000 457,415 State Pre-refunded General Obligation Bonds Series 1995B (AMBAC Insured) 07-01-13 5.50 1,500,000 1,625,760 State Turnpike Authority Metro Highway System Senior Lien Revenue Bonds Toll Road Series 1997A (MBIA Insured) 01-01-37 5.00 2,000,000 1,848,320 State Water Resources Authority Pre-refunded Revenue Bonds Series 1992A (MBIA Insured) 07-15-22 5.50 1,100,000 1,123,320 Taunton General Obligation Refunding Notes Series 1999 (FSA Insured) 05-01-19 4.75 1,000,000 954,100 University of Massachusetts Building Authority Revenue Bonds Series 1976 Escrowed to Maturity 05-01-11 7.50 90,000 103,219 Water Resource Authority General Revenue Bonds Series 1993B (MBIA Insured) 03-01-22 5.00 1,000,000 970,020 Westfield General Obligation Bonds Series 2001 (MBIA Insured) 12-15-04 4.00 750,000 774,488 Worcester General Obligation Bonds Series 2001A (FGIC Insured) 08-15-03 4.50 1,000,000 1,033,190 Total municipal bonds (Cost: $77,035,397) $79,048,924 Municipal notes (9.0%) Issuer(c,d) Effective Amount Value(a) yield payable at maturity State Health & Educational Facilities Authority Revenue Bonds Capital Asset V.R. Series 1985C 07-01-05 1.85% $1,200,000 $1,200,000 State Health & Educational Facilities Authority Revenue Bonds Capital Asset V.R. Series 1985D 01-01-35 1.90 500,000 500,000 State Health & Educational Facilities Authority Revenue Bonds Capital Asset V.R. Series 1985E 01-01-35 1.90 6,300,000 6,300,000 Total municipal notes (Cost: $8,000,000) $8,000,000 Total investments in securities (Cost: $85,035,397)(f) $87,048,924 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 47 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Massachusetts 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 -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 5.6% 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) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (e) 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 Dec. 31, 2001. (f) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $85,035,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 3,055,000 Unrealized depreciation (1,041,000) ---------- Net unrealized appreciation $ 2,014,000 ----------- - ------------------------------------------------------------------------------- 48 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP Michigan Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (89.2%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Allegan Hospital Finance Authority Refunding Revenue Bonds Allegan General Hospital Series 1999 11-15-21 7.00% $1,000,000 $982,020 Auburn Hills Limited Tax General Obligation Street Improvement Bonds Series 1989 05-01-04 6.00 200,000 202,482 Battle Creek Calhoun County Downtown Development Authority Pre-refunded Bonds Series 1994 05-01-22 7.65 1,250,000 1,405,113 Big Rapids Public School District Unlimited General Obligation Bonds Series 1999 (FSA Insured) 05-01-25 4.75 1,500,000 1,369,005 Central University Pre-refunded Revenue Bonds Series 1997 (FGIC Insured) 10-01-26 5.50 750,000 811,808 Central University Revenue Bonds Series 1998 (FGIC Insured) 10-01-27 5.00 1,000,000 953,440 Chippewa County Hospital Financial Authority Hospital Refunding Revenue Bonds Chippewa County War Memorial Hospital Series 1997B 11-01-14 5.63 500,000 470,545 Chippewa Valley School District Unlimited Tax General Obligation Bonds Series 1993 (FGIC Insured) 05-01-21 5.00 1,000,000 971,800 Concord Academy Certificates of Participation Series 1998 10-01-19 7.00 1,000,000 915,590 Detroit Downtown Development Authority Development Area Project #1 Junior Lien Tax Increment Pre-refunded Bonds Series 1996D 07-01-25 6.50 1,000,000 1,134,730 Detroit Sewer Disposal Pre-refunded Revenue Bonds Series 1993 (FGIC Insured) 07-01-23 5.70 1,600,000 1,710,080 Detroit Sewer Disposal Un-refunded Revenue Bonds Series 1993 (FGIC Insured) 07-01-23 5.70 400,000 409,412 Detroit Unlimited Tax General Obligation Pre-refunded Bonds Series 1995A 04-01-15 6.80 1,000,000 1,117,130 Detroit Water Supply System Second Lien Revenue Bonds Series 1995A (MBIA Insured) 07-01-25 5.50 1,500,000 1,513,965 Eaton Rapids Public Schools Unlimited Tax General Obligation Refunding Bonds Series 1999 (MBIA Insured) 05-01-25 4.75 1,000,000 912,670 Farmington Hills Hospital Finance Authority Pre-refunded Revenue Bonds Botsford General Hospital Series 1992A (MBIA Insured) 02-15-22 6.50 1,500,000 1,539,030 Ferris State University Board of Trustees General Refunding Revenue Bonds Series 1995 (MBIA Insured) 10-01-20 5.25 1,000,000 1,001,250 Fowlerville Community Schools Unlimited Tax General Obligation Refunding Bonds Series 1999 (FSA Insured) 05-01-26 4.75 1,310,000 1,191,550 Garden City Hospital Finance Authority Hospital Revenue Bonds Series 1998A 09-01-17 5.75 1,000,000 726,280 Garden City School District Unlimited General Obligation Refunding Bonds Series 2001 05-01-31 5.13 1,000,000 966,810 Genesee County General Obligation Bonds Sewer Disposal System Series 1996A (AMBAC Insured) 04-01-15 5.40 1,000,000 1,023,750 Gogebic County Hospital Finance Authority Hospital Refunding Revenue Bonds Grandview Health System Series 1999 10-01-16 5.88 1,000,000 897,410 Grand Ledge Public Schools Unlimited Tax General Obligation Refunding Bonds Eaton, Clinton & Ionia Counties Series 1995 (MBIA Insured) 05-01-24 5.38 2,000,000 2,008,299 Grand Rapids & Kent County Joint Building Authority Limited General Obligation Bonds Devos Place Series 2001 12-01-04 5.00 790,000 834,698 Grand Rapids Community College Limited Tax General Obligation Bonds Series 1996 (MBIA Insured) 05-01-19 5.38 1,000,000 1,010,880 Grand Rapids Sanitary Sewer System Refunding Revenue Bonds Series 1998A (FGIC Insured) 01-01-28 4.75 1,000,000 905,220 Grand Rapids Tax Increment Revenue Bonds Series 1994 (MBIA Insured) 06-01-24 6.88 380,000 418,220 Huron Valley School District Unlimited General Obligation Bonds Series 2001 05-01-04 2.75 1,000,000 993,380 Iosco County Water Supply System Limited Tax General Obligation Bonds Series 1990 (AMBAC Insured) 05-01-08 5.50 175,000 177,482 05-01-09 5.50 200,000 202,734 05-01-10 5.50 200,000 202,654 Jackson General Obligation Capital Appreciation Downtown Development Bonds Zero Coupon Series 2001 (FSA Insured) 06-01-21 5.58 1,450,000(f) 490,579 Lake Orion School District General Obligation Bonds Series 1995 (AMBAC Insured) 05-01-20 5.50 1,000,000 1,013,250 Lincoln Park School District Wayne County School Building & Site Unlimited Tax Pre-refunded General Obligation Bonds Series 1996 (FGIC Insured) 05-01-26 5.90 1,000,000 1,100,880 Midland County Economic Development Authority Unlimited Tax General Obligation Refunding Revenue Bonds Series 2000A A.M.T. 07-23-09 6.88 1,000,000 1,035,550 Muskegon Heights Public Schools Unlimited Tax General Obligation Bonds Series 1999 (MBIA Insured) 05-01-29 5.00 750,000 713,190 Oakland County Building Authority Revenue Bonds Series 2002 09-01-05 4.00 625,000(e) 639,319 Ovid-Elsie School District Unlimited Tax General Obligation Pre-refunded Bonds Series 1995 (MBIA Insured) 05-01-21 5.60 1,000,000 1,083,270 Plymouth Educational Center Certificates of Participation Series 1999 07-01-29 7.00 1,250,000 1,165,363 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 49 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Michigan Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Plymouth-Canton Community School District Unlimited Tax General Obligation Bonds Series 1999 (FSA Insured) 05-01-23 4.75% $1,000,000 $920,200 Portland Public Schools Unlimited General Obligation Bonds Series 2001 05-01-04 3.00 695,000 696,230 Redford General Obligation Bonds Series 1995 (MBIA Insured) 04-01-16 5.25 1,450,000 1,469,140 Richmond Limited Obligation Refunding Revenue Bonds Kmart Series 1994 01-01-07 6.63 530,000 530,917 Romulus Township School District Unlimited Tax General Obligation Refunding Bonds Series 1993 (FGIC Insured) 05-01-22 5.75 2,500,000 2,541,924 Schoolcraft Community School District Unlimited Tax General Obligation Pre-refunded Bonds Series 1996 (FGIC Insured) 05-01-26 5.38 1,000,000 1,069,360 South Redford School District Unlimited Tax General Obligation Pre-refunded Bonds Series 1996 (FGIC Insured) 05-01-22 5.50 310,000 333,349 South Redford School District Unlimited Tax General Obligation Un-refunded Bonds Series 1996 (FGIC Insured) 05-01-22 5.50 690,000 699,067 State Hospital Finance Authority Hospital Refunding Revenue Bonds Detroit Medical Center Series 1993A 08-15-13 6.25 1,200,000 1,176,636 State Hospital Finance Authority Hospital Refunding Revenue Bonds Memorial Healthcare Center Obligated Group Series 1999 11-15-21 5.88 1,000,000 937,070 State Hospital Finance Authority Hospital Un-refunded Revenue Bonds Detroit Medical Center Series 1988 08-15-12 8.13 40,000 40,050 State Hospital Finance Authority Refunding Revenue Bonds Presbyterian Villages Obligated Group Series 1995 01-01-25 6.50 1,000,000 950,900 State Hospital Finance Authority Revenue Bonds Central Michigan Community Hospital Series 1996 10-01-27 6.25 1,000,000 867,350 State Hospital Finance Authority Revenue Bonds Presbyterian Villages of Michigan Obligated Group Series 1997 01-01-25 6.38 700,000 651,847 State Municipal Bond Authority Revenue Bonds Public School Academy YMCA Service Learning Academy Series 2001 10-01-21 7.63 750,000 766,140 State Public Power Agency Belle River Refunding Revenue Bonds Series 1993A 01-01-18 5.25 1,000,000 995,720 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Detroit Edison Series 1990BB (MBIA Insured) 07-15-08 7.00 1,000,000 1,156,280 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Detroit Edison Series 1992BB (FGIC Insured) 02-15-16 6.50 1,500,000 1,536,825 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Ford Motor Series 1991A 02-01-06 7.10 1,650,000 1,791,784 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Oxford Institute Series 1987A Escrowed to Maturity 08-15-05 7.88 95,000 103,301 State Strategic Fund Nursing Home Refunding Revenue Bonds Holland Home Series 1998 11-15-28 5.75 1,000,000 876,200 State Trunk Line Bonds Series 1994A (FGIC Insured) 11-15-20 5.75 1,065,000 1,167,730 State Trunk Line Refunding Revenue Bonds Series 1998A (MBIA Insured) 11-01-20 4.75 1,000,000 927,260 State University Pre-refunded Revenue Bonds Series 1992A 08-15-22 5.50 560,000 573,306 Summit Academy Certificates of Participation Pre-refunded Revenue Bonds Junior High School Facility Series 1999 09-01-29 7.00 695,000 790,653 Summit Academy Certificates of Participation Series 1998 08-01-18 7.00 1,110,000 1,025,851 Summit Academy Certificates of Participation Series 2001 07-01-30 7.38 750,000 743,565 Taylor Tax Increment Finance Authority Bonds Series 2001 (FSA Insured) 05-01-19 5.00 1,000,000 976,150 Troy City Downtown Development Authority County of Oakland Development Pre-refunded Revenue Bonds Series 1995A (Asset Guaranty) 11-01-18 6.38 1,500,000 1,691,535 Van Buren Township Tax Increment Revenue Bonds Series 1994 10-01-16 8.40 980,000 1,072,159 Wayne County Charter Airport Revenue Bonds Detroit Metropolitan Airport Series 1990A (AMBAC Insured) A.M.T. 12-01-20 7.00 1,080,000 1,094,926 Wayne County Charter Airport Revenue Bonds Detroit Metropolitan Airport Series 1998B (MBIA Insured) 12-01-23 4.88 1,000,000 927,040 Wayne State University Revenue Bonds University Board of Governors Series 1999 (FGIC Insured) 11-15-29 5.13 1,000,000 967,670 Total municipal bonds (Cost: $64,956,087) $68,288,973 Municipal notes (9.7%) Issuer(c,d) Effective Amount Value(a) yield payable at maturity State Strategic Fund Refunding Revenue Bonds Dow Chemical V.R. Series 1994 02-01-09 1.90% $500,000 $500,000 State Strategic Fund Revenue Bonds Dow Chemical V.R. Series 1992 A.M.T. 12-01-14 2.00 3,300,000 3,300,000 University of Michigan Hospital Refunding Revenue Bonds V.R. Series 1992A 12-01-19 1.90 500,000 500,000 University of Michigan Hospital Revenue Bonds V.R. Series 1995A 12-01-27 1.90 3,100,000 3,100,000 Total municipal notes (Cost: $7,400,000) $7,400,000 Total investments in securities (Cost: $72,356,087)(g) $75,688,973 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 50 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Michigan 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 -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 7.1% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note (d) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (e) At Dec. 31, 2001, the cost of securities purchased, including interest purchased, on a when-issued basis was $637,738. (f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (g) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $72,356,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 4,357,000 Unrealized depreciation (1,024,000) ---------- Net unrealized appreciation $ 3,333,000 ----------- - ------------------------------------------------------------------------------- 51 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP Minnesota Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (90.1%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Albert Lea Independent School District #241 Unlimited Tax General Obligation Bonds Series 1998 (MBIA Insured) 02-01-16 4.80% $1,555,000 $1,517,618 Anoka County Housing & Redevelopment Authority Revenue Bonds Epiphany Assisted Living LLC Series 1999 12-01-29 7.40 3,560,000 3,477,657 Austin Housing & Redevelopment Authority Revenue Bonds Courtyard Residence Series 2000A 01-01-32 7.25 3,000,000 3,047,190 Big Lake Independent School District #727 Unlimited General Obligation Bonds Series 2001D (FSA Insured) 02-01-04 3.00 1,220,000 1,225,258 Bloomington Housing & Redevelopment Authority Housing Revenue Bonds Senior Summerhouse Bloomington Series 1998 05-01-35 6.13 3,400,000 2,791,128 Brooklyn Center Tax Credit Investor Refunding Revenue Bonds Four Courts Apartments Series 1995B A.M.T. 06-15-09 7.58 2,450,000 2,450,735 Buffalo Independent School District #877 Unlimited Tax General Obligation Refunding Bonds Series 1999 (MBIA Insured) 02-01-18 4.80 1,710,000 1,632,041 Carlton Health Care & Housing Facilities Revenue Bonds Inter-Faith Social Services Series 2000 04-01-29 7.75 2,500,000 2,601,725 Chaska Multi-family Housing Revenue Bonds West Suburban Housing Partners Series 1999 A.M.T. 09-01-19 5.75 175,000(e) 154,450 03-01-31 5.88 2,115,000 1,797,539 Duluth Economic Development Authority Health Care Facilities Revenue Bonds BSM Properties Series 1998A 12-01-28 5.88 500,000(e) 425,835 Eden Prairie Multi-family Housing Refunding Revenue Bonds Sterling Ponds Series 1999A A.M.T. 12-01-29 6.25 5,215,000 4,779,287 Eden Prairie Multi-family Housing Refunding Revenue Bonds Sterling Ponds Series 1999B A.M.T. 12-01-29 6.25 665,000 609,439 Faribault Rice & Goodhue Counties Independent School District #656 General Obligation School Building Bonds Series 1995 (FSA Insured) 06-01-15 5.75 6,900,000 7,330,145 Faribault Single Family Housing Mortgage Refunding Revenue Bonds Series 1991A 12-01-11 7.50 410,000 419,405 Farmington Independent School District #192 Unlimited Tax General Obligation Capital Appreciation School Building Bonds Zero Coupon Series 1998B (FSA Insured) 02-01-15 5.30 2,070,000(f) 1,033,510 Fergus Falls Health Care Facilities Revenue Bonds LRHC Long-term Care Facility Series 1995 12-01-25 6.50 1,500,000 1,515,990 Fridley Senior Housing Revenue Bonds Banfill Crossing Homes Series 1999 09-01-34 6.75 3,090,000 2,897,277 Golden Valley Governmental Facilities Local Government Information Systems Association Revenue Bonds Series 1997 12-01-17 6.10 1,125,000 1,129,185 Golden Valley Revenue Bonds Covenant Retirement Communities Series 1999A 12-01-29 5.50 6,250,000 5,844,813 Harmony Multi-family Housing Refunding Revenue Bonds Zedakah Foundation Series 1997A 09-01-20 5.95 1,240,000 1,245,171 Hastings Healthcare Tax-Exempt Nursing Home Revenue Bonds Regina Medical Center Series 1998 (ACA Insured) 09-15-28 5.30 4,100,000 3,803,570 Hastings Housing & Redevelopment Authority Housing & Health Care Revenue Bonds Arbor Oaks Assisted Living Series 2000A 01-01-32 8.25 2,000,000 2,036,500 Hennepin County Regional Railroad Authority Limited General Obligation Bonds Series 2001 12-01-03 3.00 840,000 850,004 12-01-04 3.00 865,000 867,872 12-01-05 3.25 895,000 892,378 Hopkins Pre-refunded Revenue Bonds Blake School Series 1994 09-01-24 6.70 3,120,000 3,416,338 Hubbard County Solid Waste Disposal Revenue Bonds Potlatch Series 1989 A.M.T. 08-01-13 7.38 5,610,000 5,613,590 International Falls Solid Waste Disposal Refunding Revenue Bonds Boise Cascade Series 1999 A.M.T. 12-01-29 6.85 4,000,000 4,096,480 Lakeview Independent School District #2167 Unlimited General Obligation Bonds Series 2001 (MBIA Insured) 02-01-19 5.00 555,000 546,647 Lakeville Independent School District #194 General Obligation Bonds Series 1997A 02-01-22 5.13 2,400,000 2,359,704 Little Canada Multi-family Housing Revenue Bonds Housing Alternatives Development Company Series 1997A 12-01-27 6.25 4,900,000 4,435,921 Little Canada Multi-family Housing Revenue Bonds Little Canada Series 1996 A.M.T. 02-01-27 7.00 3,700,000 3,601,802 Mahtomedi Multi-family Housing Refunding Revenue Bonds Briarcliff Series 1996 A.M.T. 06-01-36 7.35 2,210,000 2,220,984 Mankato Unlimited General Obligation Public Improvement Revenue Bonds Series 2001A (FGIC Insured) 02-01-04 3.50 1,085,000 1,100,581 02-01-05 3.50 1,065,000 1,074,447 Maplewood Elder Care Facilities Revenue Bonds Care Institute Series 1994 01-01-24 7.75 3,775,000 3,406,447 Maplewood Multi-family Housing Refunding Revenue Bonds Carefree Cottages of Maplewood III Series 1995 A.M.T. 11-01-32 7.20 2,865,000 2,861,075 Metropolitan Council Minneapolis & St. Paul Metropolitan Area Transit Unlimited General Obligation Bonds Series 2001B 02-01-03 4.00 4,300,000 4,393,998 02-01-04 4.00 7,440,000 7,636,341 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Group Health Plan Series 1992 12-01-13 6.75 10,500,000 10,706,009 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 52 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Minnesota Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Healthspan Series 1993A (AMBAC Insured) 11-15-18 4.75% $13,500,000 $12,706,604 Minneapolis & St Paul Metropolitan Airports Commission Revenue Bonds Series 2000B (FGIC Insured) A.M.T. 01-01-03 5.50 1,000,000 1,031,150 Minneapolis & St Paul Metropolitan Airports Commission Revenue Bonds Series 2001B (FGIC Insured) A.M.T. 01-01-04 5.00 1,000,000 1,030,490 Minneapolis & St Paul Metropolitan Airports Commission Revenue Bonds Series 2001D (FGIC Insured) A.M.T. 01-01-05 5.00 2,680,000 2,774,229 Minneapolis & St Paul Metropolitan Airports Commission Unlimited General Obligation Refunding Bonds 14th Series 2001 (Municipal Government Guarantee) A.M.T. 01-01-04 5.50 2,415,000 2,524,182 Minneapolis & St. Paul Metropolitan Airports Commission Airport Revenue Bonds Series 1998A (AMBAC Insured) 01-01-22 5.00 3,730,000 3,619,890 Minneapolis & St. Paul Metropolitan Airports Commission Special Facilities Revenue Bonds Northwest Airlines Series 2001A A.M.T. 04-01-25 7.00 2,000,000 1,549,300 Minneapolis Community Development Agency Limited Tax Supported Development Refunding Revenue Bonds Common Bond Fund 2nd Series 2001A A.M.T. 06-01-19 5.88 1,000,000 1,005,250 Minneapolis Community Development Agency Limited Tax Supported Development Refunding Revenue Bonds Common Bond Fund 7th Series 1997A 06-01-12 5.50 250,000 256,298 Minneapolis Community Development Agency Limited Tax Supported Development Revenue Bonds Common Bond Fund 1st Series 1996 06-01-11 6.00 980,000 1,020,445 Minneapolis Community Development Agency Limited Tax Supported Development Revenue Bonds Common Bond Fund 2nd Series 1998A A.M.T. 06-01-16 5.20 290,000 268,758 06-01-19 5.25 500,000 480,130 Minneapolis Community Development Agency Limited Tax Supported Development Revenue Bonds Common Bond Fund 5th Series 1997 12-01-27 5.70 420,000 415,771 Minneapolis Community Development Agency Tax Increment Refunding Revenue Bonds Zero Coupon Series 1990 (MBIA Insured) 09-01-04 2.95 3,000,000(f) 2,752,140 Minneapolis Nursing Home Pre-refunded Revenue Bonds Walker Cityview & Southview Series 1992 07-01-22 8.50 5,125,000 5,446,594 Minneapolis Special School District #1 Certificates of Participation Series 2001B (FGIC Insured) 02-01-04 3.50 2,475,000 2,510,541 Minneapolis Unlimited General Obligation Public Improvement Revenue Bonds Series 2001 12-01-03 5.00 2,000,000 2,099,100 12-01-21 5.00 2,125,000 2,085,456 Minnetonka Senior Housing Revenue Bonds Westridge Senior Housing Series 1997 09-01-27 7.00 1,775,000 1,708,420 Monticello Independent School District #882 Unlimited General Obligation Refunding Bonds Series 2001D 02-01-04 3.25 1,015,000 1,025,729 Moorhead Economic Development Authority Multi-family Housing Development Refunding Revenue Bonds Eventide Senior Housing Series 1999B 06-01-19 5.90 500,000 452,455 06-01-29 6.00 1,400,000 1,219,708 New Brighton Tax Credit Investor Revenue Bonds Polynesian Village Apartments Series 1995B A.M.T. 07-15-09 7.75 2,355,000 2,416,960 New Hope Housing & Healthcare Facilities Revenue Bonds Minnesota Masonic Home North Ridge Series 1999 03-01-29 5.88 5,750,000 5,043,153 North St. Paul & Maplewood Independent School District #622 General Obligation Refunding Bonds Series 1996A 02-01-25 5.13 2,910,000 2,853,517 Northern Minnesota Municipal Power Agency Electric System Refunding Revenue Bonds Series 1998B (AMBAC Insured) 01-01-20 4.75 5,000,000 4,722,300 Oakdale Multi-family Housing Refunding Revenue Bonds Oakdale Village Apartments Series 1998 A.M.T. 11-01-28 6.00 3,650,000 3,358,767 Olmsted County Health Care Facilities Refunding Revenue Bonds Olmsted Medical Center Series 1998 07-01-19 5.55 1,125,000(e) 990,101 Olmsted County Housing & Redevelopment Authority Public Facilities Refunding Revenue Bonds Series 2002B 02-01-05 4.00 1,215,000(h) 1,238,571 Olmsted County Resource Recovery Unlimited General Obligation Refunding Bonds Series 2002A 02-01-05 4.00 1,900,000(h) 1,944,536 Park Rapids Independent School District #309 Unlimited Tax General Obligation Bonds Series 1999 (MBIA Insured) 02-01-21 4.75 3,000,000 2,813,220 Plymouth Multi-family Housing Revenue Bonds Harbor Lane Apartments Series 1993 (Asset Guaranty) A.M.T. 09-01-13 5.90 2,325,000 2,374,453 Princeton Independent School District #477 General Obligation Bonds Series 1997 (FSA Insured) 02-01-24 5.13 1,000,000 982,310 Prior Lake Independent School District #719 Unlimited General Obligation Bonds Series 2002A (FGIC Insured) 02-01-05 4.00 640,000(h) 655,002 Richfield Independent School District #280 General Obligation Bonds Series 1993 Inverse Floater (FGIC Insured) 02-01-10 5.30 6,600,000(g) 6,671,873 02-01-12 5.35 5,020,000(g) 5,181,544 Richfield Multi-family Housing Refunding Revenue Bonds Village Shores Apartments Series 1996 08-01-31 7.63 2,955,000 2,987,091 Richfield Senior Housing Revenue Bonds Series 2000A 02-01-35 7.75 3,000,000 3,056,340 Robbinsdale Multi-family Housing Revenue Bonds Copperfield Hill Series 1996A 12-01-31 7.35 3,260,000 3,190,301 Rochester Health Care Facilities Revenue Bonds Mayo Foundation Series 1992 11-15-19 4.95 5,000,000 4,744,350 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 53 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Minnesota Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Rochester Multi-family Housing Development Revenue Bonds Wedum Shorewood Campus Series 1999 06-01-36 6.60% $5,000,000 $4,514,750 Roseville Housing Facilities Nursing Home Refunding Revenue Bonds College Properties Series 1998 10-01-28 5.88 5,000,000 4,146,500 Sartell Health Care & Housing Facilities Nursing Home Revenue Bonds Series 2001A 09-01-30 8.00 1,000,000 1,004,090 Sartell Health Care & Housing Facilities Revenue Bonds The Foundation for Health Care Continuums Series 1999A 09-01-29 6.63 3,000,000 2,663,580 Shoreview Senior Housing Revenue Bonds Series 1996 02-01-26 7.25 3,200,000 3,210,592 South Washington County Independent School District #833 Unlimited General Obligation Bonds Series 2001B (FSA Insured) 02-01-04 3.50 990,000 1,004,216 Southeastern Minnesota Multi-county Housing & Redevelopment Authority Winona County Unlimited Tax General Obligation Bonds Series 1997 01-01-28 5.35 1,170,000 1,141,768 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Series 1992A 01-01-18 5.75 370,000 389,022 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Series 1992A (MBIA Insured) 01-01-18 5.75 1,600,000 1,682,256 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Series 1993A (MBIA Insured) 01-01-16 4.75 9,165,000 8,829,010 Southern Minnesota Municipal Power Agency Power Supply System Refunding Revenue Bonds Zero Coupon Series 1994A (MBIA Insured) 01-01-19 6.67 19,500,000(f) 7,752,614 01-01-22 6.88 12,000,000(f) 4,014,960 01-01-24 6.08 5,150,000(f) 1,527,954 Southern Minnesota Municipal Power Agency Power Supply System Un-refunded Revenue Bonds Series 1992A 01-01-18 5.75 1,895,000 1,922,042 St. Cloud Certificates of Participation Series 1997 12-01-17 5.90 400,000(e) 405,100 St. Cloud Hospital Facility Refunding Revenue Bonds Series 1993C (AMBAC Insured) 10-01-20 5.30 1,515,000 1,507,743 St. Cloud Infrastructure Management Unlimited General Obligation Bonds Series 2001B (FSA Insured) 02-01-05 3.50 1,130,000 1,138,825 St. Louis Park Health Care Facilities Revenue Bonds Healthsystem Minnesota Obligated Group Series 1993A (AMBAC Insured) 07-01-23 5.10 3,250,000 3,167,905 St. Louis Park Health Care Facilities Revenue Bonds Healthsystem Minnesota Series 1993 07-01-13 5.10 14,000,000 14,048,859 St. Louis Park Multi-family Housing Refunding Revenue Bonds Park Boulevard Towers Series 1996 04-01-31 7.00 3,905,000 3,910,272 St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue Bonds Lyngblomsten Care Center Series 1993 11-01-06 7.13 665,000 679,989 11-01-17 7.13 1,720,000 1,721,496 St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue Bonds Lyngblomsten Multi-family Rental Housing Series 1993 11-01-24 7.00 1,815,000 1,772,384 St. Paul Housing & Redevelopment Authority Health Care Facilities Revenue Bonds Regions Hospital Series 1998 05-15-28 5.30 1,550,000 1,388,273 St. Paul Housing & Redevelopment Authority Lease Revenue Bonds Community of Peace Academy Series 2001A 12-01-30 7.88 2,390,000 2,361,559 St. Paul Housing & Redevelopment Authority Lease Revenue Bonds Minnesota Business Academy Series 2000 03-01-30 8.00 3,745,000 3,711,258 St. Paul Housing & Redevelopment Authority Sales Tax Revenue Bonds Civic Center Escrowed to Maturity Series 1993 (MBIA Insured) 11-01-23 5.55 7,500,000 7,594,799 St. Paul Housing & Redevelopment Authority Single Family Housing Mortgage Refunding Revenue Mortgage-backed Bonds Middle Income Series 1995 (FNMA Insured) 03-01-28 6.80 3,345,000 3,533,691 St. Paul Independent School District #625 Certificates of Participation Series 1999A 02-01-19 4.75 1,000,000 949,970 St. Paul Port Authority Revenue Bonds Hotel Facilities Radisson Kellogg 2nd Series 1999 08-01-29 7.38 3,500,000 3,314,710 St. Paul Port Authority Unlimited Tax General Obligation Bonds Series 1994 03-01-24 5.13 4,770,000 4,684,712 State Agricultural & Economic Development Board Health Care Facilities Refunding Revenue Bonds Benedictine Health System St. Mary's Health System Duluth Clinic Obligated Group Series 1999A (MBIA Insured) 02-15-16 4.75 1,000,000 955,320 02-15-23 5.00 1,295,000 1,247,176 State Higher Education Facilities Authority Gustavus Adolphus College Revenue Bonds 4th Series 1998X 10-01-24 4.80 2,340,000 2,120,204 State Higher Education Facilities Authority Northwestern College of Chiropractic Mortgage Revenue Bonds 4th Series 1999Z 10-01-13 5.20 275,000 268,975 State Housing Finance Agency Single Family Housing Mortgage Revenue Bonds Series 1992A 07-01-16 6.95 1,665,000 1,699,749 State Housing Finance Agency Single Family Housing Mortgage Revenue Bonds Series 1994L A.M.T. 07-01-20 6.70 590,000 612,916 State Housing Finance Agency Single Family Housing Mortgage Revenue Bonds Series 1996J A.M.T. 07-01-21 5.60 255,000 255,615 State Housing Finance Agency Single Family Housing Mortgage Revenue Bonds Series 1997K A.M.T. 01-01-26 5.75 2,935,000 2,963,440 State Public Facilities Authority Water Pollution Control Refunding Revenue Bonds Series 1997A-B 03-01-04 5.00 1,285,000 1,344,123 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 54 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Minnesota Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) State Public Facilities Authority Water Pollution Control Refunding Revenue Bonds Series 2001A 03-01-05 4.00% $1,500,000 $1,536,045 State Public Facilities Authority Water Pollution Control Revenue Bonds Series 1998A 03-01-16 4.75 3,500,000 3,408,230 State Unlimited General Obligation Public Improvement Revenue Bonds Series 1996 11-01-03 5.00 1,500,000 1,571,145 Steele County Health Care Facilities Revenue Bonds Elderly Housing Project Series 2000 06-01-30 6.88 2,205,000 2,379,217 Suburban Hennepin Regional Park District Unlimited General Obligation Bonds Series 2001 02-01-05 4.50 1,025,000 1,063,960 University of Minnesota Refunding Revenue Bonds Inverse Floater Series 1993 08-15-03 7.80 5,000,000(g) 5,275,000 University of Minnesota Refunding Revenue Bonds Series 1986A 02-01-11 6.00 4,625,000 4,664,498 University of Minnesota Refunding Revenue Bonds Series 1996A 07-01-21 5.50 12,500,000 13,160,749 Vadnais Heights Multi-family Housing Refunding Revenue Bonds Cottages of Vadnais Heights Series 1995 A.M.T. 12-01-31 7.00 3,055,000 3,047,149 Vadnais Heights Multi-family Housing Tax Credit Refunding Revenue Bonds Series 1997 A.M.T. 07-15-09 7.00 1,080,000 1,059,588 Washington County Housing & Redevelopment Authority Refunding Revenue Bonds Woodbury Multi-family Housing Series 1996 12-01-23 6.95 1,875,000 1,852,013 Washington County Unlimited General Obligation Refunding Revenue Bonds Series 2001A 02-01-03 3.50 1,425,000 1,447,472 Western Minnesota Municipal Power Agency Refunding Revenue Bonds Series 1987A 01-01-15 5.50 5,000,000 5,000,800 Western Minnesota Municipal Power Agency Refunding Revenue Bonds Series 1987A (MBIA Insured) 01-01-15 5.50 6,250,000 6,269,875 Woodbury Senior Housing Revenue Bonds Summer House of Woodbury Series 1999 07-01-34 6.40 5,145,000 4,851,221 Total municipal bonds (Cost: $378,406,468) $384,802,494 Municipal notes (9.3%) Issuer(c,d) Annualized Amount Value(a) yield on date payable at of purchase maturity Arden Hills Housing & Health Care Facilities Refunding Revenue Bonds Presbyterian Homes V.R. Series 1999A 09-01-29 2.05% $2,000,000(i) $2,000,000 Arden Hills Housing & Health Care Facilities Revenue Bonds Presbyterian Homes V.R. Series 1999B 09-01-29 2.05 1,890,000(i) 1,890,000 Duluth Economic Development Authority Health Care Facilities Refunding Revenue Bonds Miller-Dwan V.R. Series 1997 06-01-19 2.05 7,395,000(i) 7,395,000 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Refunding Revenue Bonds Children's Health Care V.R. Series 1995B 08-15-25 2.00 6,020,000(i) 6,020,000 Minneapolis & St. Paul Metropolitan Airports Commission Airport Revenue Bonds Anticipation Notes Series 2001A 08-01-02 3.47 3,000,000 3,027,780 Rochester Health Care Facilities Revenue Bonds (Mayo Clinic) C.P. Series 1992A 01-10-02 1.85 1,000,000 1,000,000 Rochester Mayo C.P. Series 1988F 01-07-02 1.85 5,000,000 5,000,000 Rochester Mayo C.P. Series 2000B 01-03-02 1.90 4,000,000 4,000,000 Rochester Mayo Medical Center C.P. Series 1992C 01-10-02 1.85 1,500,000 1,500,000 Southern Minnesota Municipal Power C.P. Series B 01-07-02 1.60 2,000,000 2,000,000 01-11-02 1.55 2,000,000 2,000,000 State Higher Education Facilities Authority Revenue Bonds (Macalester College) V.R. 3rd Series 1994Z 03-01-24 1.60 1,600,000(i) 1,600,000 State Higher Education Facilities Authority Revenue Bonds (St. Olaf College) V.R. 5th Series 2000H 10-01-30 1.95 2,300,000(i) 2,300,000 Total municipal notes (Cost: $39,721,132) $39,732,780 Total investments in securities (Cost: $418,127,600)(j) $424,535,274 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 55 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Minnesota Tax-Exempt Fund Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AMBAC -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 12.9% 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) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. (e) 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 Municipal Bonds, March 2002 $9,900,000 (f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (g) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a multiple of, a decline (increase) in market short-term rates. Interest rate disclosed is the rate in effect on Dec. 31, 2001. (h) At Dec. 31, 2001, the cost of securities purchased, including interest purchased, on a when-issued basis was $3,821,823. (i) Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (j) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $418,128,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $14,011,000 Unrealized depreciation (7,604,000) ---------- Net unrealized appreciation $ 6,407,000 ----------- - ------------------------------------------------------------------------------- 56 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP New York Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (90.5%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Albany County Airport Authority Airport Revenue Bonds Series 1997 (FSA Insured) A.M.T. 12-15-19 5.50% $250,000 $252,075 Broome County Certificates of Participation Public Safety Facilities Series 1994 (MBIA Insured) 04-01-22 5.25 1,300,000 1,285,518 Buffalo Municipal Water Finance Authority Water System Revenue Bonds Series 1995 (FGIC Insured) 07-01-25 5.00 1,000,000(g) 959,300 Erie County Unlimited Tax General Obligation Bonds Series 1995B (FGIC Insured) 06-15-25 5.50 700,000 706,405 Erie County Water Authority Water Works System Revenue Bonds Series 1990A Escrowed to Maturity (AMBAC Insured) 12-01-08 6.00 1,765,000 1,941,941 Huntington Housing Authority Senior Housing Facilities Revenue Bonds Gurwin Jewish Senior Residences Series 1999A 05-01-39 6.00 1,750,000 1,471,138 Kenmore Housing Authority Multi-family Housing Revenue Bonds State University Buffalo Student Apartments Series 1999A (Asset Guaranty) 08-01-24 5.50 1,000,000 999,950 Long Island Power Authority Electronic Systems Revenue Bonds Sub Series 1998A (AMBAC Insured) 04-01-09 5.25 1,000,000 1,061,000 Metropolitan Transportation Authority Commuter Facilities Service Contract Refunding Revenue Bonds 5th Series 1991 07-01-16 6.50 1,775,000 1,815,701 Metropolitan Transportation Authority Dedicated Tax Revenue Bonds Series 1998A (FGIC Insured) 04-01-28 4.75 1,000,000 906,410 Metropolitan Transportation Authority Transportation Facilities Revenue Bonds Series 1998A (MBIA Insured) 07-01-24 4.75 1,500,000 1,375,710 Monroe County Airport Authority Airport Refunding Revenue Bonds Greater Rochester International Airport Series 1999 (MBIA Insured) A.M.T. 01-01-16 5.88 1,500,000 1,613,760 Mount Vernon Industrial Development Agency Civic Facilities Revenue Bonds Wartburg Senior Housing Meadowview Series 1999 06-01-29 6.20 1,000,000 869,290 New York City Health & Hospital Revenue Bonds Series 1993A 02-15-20 6.30 870,000 928,151 New York City Industrial Development Agency Civic Facilities Refunding Revenue & Improvement Bonds Lighthouse International Series 1998 (MBIA Insured) 07-01-23 4.50 200,000 176,018 New York City Industrial Development Agency Civic Facilities Revenue Bonds Riverdale Country School Series 1997 (MBIA Insured) 06-01-17 5.25 1,000,000 1,009,740 New York City Industrial Development Agency Civic Facilities Revenue Bonds Rockefeller Foundation Series 1993 07-01-23 5.38 2,000,000 2,014,240 New York City Industrial Development Agency Civic Facilities Revenue Bonds Touro College Series 1999A 06-01-29 6.35 1,000,000 877,380 New York City Industrial Development Agency Civic Facilities Revenue Bonds Trinity Episcopal School Series 1997 (MBIA Insured) 06-15-27 5.25 1,000,000 989,580 New York City Industrial Development Agency Civic Facilities Revenue Bonds YMCA Series 1997 08-01-16 5.80 1,000,000 1,008,460 New York City Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1993 Inverse Floater (MBIA Insured) 06-15-09 7.72 2,000,000(f) 2,150,000 New York City Municipal Water Finance Authority Water & Sewer System Revenue Bonds Series 1996B (MBIA Insured) 06-15-26 5.75 500,000 534,915 New York City Transitional Cultural Resources Revenue Bonds Museum of American Folk Art Series 2000 (ACA Insured) 07-01-22 6.00 1,000,000 1,028,420 New York City Transitional Finance Authority Future Secured Sales Tax Revenue Bonds Series 1998B 11-15-23 4.75 1,500,000 1,368,105 New York City Transitional Finance Authority Future Secured Sales Tax Revenue Bonds Series 1999C 05-01-25 5.50 1,000,000 1,013,760 New York City Transitional Finance Authority Future Secured Sales Tax Revenue Bonds Series 2001C 02-01-08 5.50 1,500,000 1,602,585 New York City Unlimited Tax General Obligation Bonds Series 1996G 02-01-17 5.75 1,000,000 1,039,940 New York City Unlimited Tax General Obligation Bonds Series 1996J 02-15-19 5.88 1,000,000 1,029,130 New York City Unlimited Tax General Obligation Bonds Series 1999I (MBIA Insured) 04-15-29 5.00 1,000,000 951,360 New York City Unlimited Tax General Obligation Bonds Series 2000R Inverse Floater (FGIC Insured) 05-15-16 13.11 1,000,000(f) 1,182,250 New York City Unlimited Tax General Obligation Bonds Series 2001A 11-01-03 3.50 1,000,000 1,016,890 New York City Unlimited Tax General Obligation Pre-refunded Revenue Bonds Series 1994B-1 08-15-16 7.00 1,500,000 1,680,540 New York Unlimited Tax General Obligation Bonds Series 1997D 08-01-03 5.25 1,000,000 1,041,620 North Hempstead Unlimited Tax General Obligation Various Purpose Bonds Series 1998A (FGIC Insured) 01-15-23 4.75 1,000,000 924,760 Oneida County Industrial Development Agency Civic Facilities Revenue Bonds Mohawk Valley Handicapped Services Series 1999 (ACA Insured) 03-15-19 5.30 500,000 477,680 Port Authority Refunding Revenue Bonds 124th Series 2001 A.M.T. 08-01-03 4.00 2,750,000 2,797,410 Port Authority Special Obligation Revenue Bonds KIAC Partners 4th Series 1996 A.M.T. 10-01-19 6.75 1,500,000 1,531,920 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 57 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP New York Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Rockland Tobacco Asset Backed Revenue Bonds Series 2001 08-15-35 5.63% $1,000,000 $1,000,320 State Dormitory Authority College Revenue Bonds Barnard College Series 1996 (AMBAC Insured) 07-01-16 5.25 1,140,000 1,155,504 State Dormitory Authority College Revenue Bonds Consolidated City University System Series 1993A 07-01-13 5.75 3,000,000 3,238,979 State Dormitory Authority College Revenue Bonds Cooper Union Series 1996 (AMBAC Insured) 07-01-20 5.38 860,000 865,857 State Dormitory Authority College Revenue Bonds Culinary Institute of America Series 1997 (MBIA Insured) 07-01-17 5.00 500,000 496,275 State Dormitory Authority College Revenue Bonds Long Island University Series 1999 (Asset Guaranty) 09-01-28 5.25 1,400,000 1,369,046 State Dormitory Authority College Revenue Bonds Siena College Series 2001 (MBIA Insured) 07-01-03 4.25 330,000 339,237 State Dormitory Authority College Revenue Bonds St. Thomas Aquinas College Series 1998 (Asset Guaranty) 07-01-14 5.00 1,125,000 1,118,801 State Dormitory Authority Municipal Health Facilities Improvement Program Revenue Bonds 1st Series 2001 (FSA Insured) 01-15-05 5.00 1,000,000 1,051,270 State Dormitory Authority Pre-refunded College Revenue Bonds Consolidated City University System 3rd General Resolution 2nd Series 1994 (MBIA Insured) 07-01-19 6.25 1,500,000 1,633,215 State Dormitory Authority Pre-refunded Revenue Bonds Series 1990B 05-15-11 7.50 415,000 509,491 State Dormitory Authority Revenue Bonds Frances Schervier Home Series 1997 (Asset Guaranty) 07-01-17 5.50 1,000,000 1,011,940 State Dormitory Authority Revenue Bonds Mount Sinai Health Series 2000A 07-01-25 6.50 500,000 531,295 State Dormitory Authority Revenue Bonds NYACK Hospital Series 1996 07-01-13 6.25 1,000,000 837,570 State Dormitory Authority Revenue Bonds Pratt Institute Series 1999 (Asset Guaranty) 07-01-20 6.00 1,500,000 1,593,690 State Dormitory Authority Revenue Bonds St. Francis Hospital Series 1999A (MBIA Insured) 07-01-29 5.50 1,000,000 1,008,100 State Dormitory Authority State University Educational Facilities Refunding Revenue Bonds Series 1993A (AMBAC Insured) 05-15-15 5.25 1,000,000 1,045,580 05-15-19 5.50 2,000,000 2,115,060 State Dormitory Authority Un-refunded Revenue Bonds Series 1990B 05-15-11 7.50 1,485,000 1,740,806 State Energy Research & Development Authority Gas Facilities Revenue Bonds Residual Certificates Series 2000 Inverse Floater (MBIA Insured) 01-01-21 13.60 330,000(f) 340,504 State Energy Research & Development Authority Gas Facilities Revenue Bonds Brooklyn Union Gas Series 1996 (MBIA Insured) 01-01-21 5.50 1,000,000 1,012,730 State Energy Research & Development Authority Pollution Control Refunding Revenue Bonds Rochester Gas & Electric Series 1992B (MBIA Insured) A.M.T. 05-15-32 6.50 2,500,000 2,561,125 State Energy Research & Development Authority Solid Waste Disposal Revenue Bonds State Electric & Gas Company Series 1993A (MBIA Insured) A.M.T. 12-01-28 5.70 3,000,000 3,033,450 State Environmental Facilities State Water Revolving Fund Pollution Control Revenue Bonds Series 1990A 06-15-12 7.50 3,000,000 3,086,550 State Local Government Assistance Sales Tax Refunding Revenue Bonds Series 1997B (MBIA Insured) 04-01-20 4.88 1,000,000 951,720 State Local Government Assistance Sales Tax Revenue Bonds Series 1992C 04-01-22 5.50 1,500,000 1,500,510 State Medical Care Facilities Finance Agency Mental Health Services Revenue Bonds Series 1994A (FSA Insured) 08-15-23 5.25 1,500,000 1,482,720 State Urban Development Capital Correctional Facilities Refunding Lease Revenue Bonds Series 1994A (FSA Insured) 01-01-21 5.25 2,500,000 2,479,225 State Urban Development Capital Correctional Facilities Revenue Bonds 5th Series 1995 (MBIA Insured) 01-01-25 5.50 750,000(g) 756,480 Suffolk County Industrial Development Agency Continuing Care Retirement Revenue Bonds Jeffersons Ferry Series 1999A 11-01-28 7.25 1,500,000 1,559,625 Syracuse Unlimited Tax General Obligation Bonds Series 2002C (FGIC Insured) A.M.T. 01-01-05 4.25 1,150,000 1,175,024 Troy Municipal Assistance General Obligation Revenue Bonds Series 1996A (MBIA Insured) 01-15-22 5.00 1,250,000 1,210,013 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 58 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP New York Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Ulster County Independent Development Agency Civic Facilities Revenue Bonds Benedictine Hospital Series 1999A 06-01-24 6.45% $1,950,000 $1,729,241 United Nations Development Senior Lien Pre-refunded Revenue Bonds Series 1992A 07-01-26 6.00 4,500,000 4,838,039 Utica Industrial Development Agency Civic Facilities Revenue Bonds Munson-Williams-Proctor Series 1996A (MBIA Insured) 07-15-16 5.50 750,000 766,110 Westchester County Industrial Development Agency Continuing Care Retirement Revenue Bonds Hebrew Hospital Senior Housing Series 2000A 07-01-30 7.38 1,000,000 1,002,600 Yonkers Unlimited Tax General Obligation Bonds Series 2001B (AMBAC Insured) 12-15-07 3.88% $1,010,000 $1,005,041 Total municipal bonds (Cost: $91,984,955) $96,785,795 Municipal notes (9.0%) Issuer(c,d) Effective Amount Value(a) yield payable at maturity Long Island Power Authority Electric Systems Revenue Bonds V.R. Series 1998B-2 05-01-33 1.80% $500,000 $500,000 New York City Municipal Water Finance Authority Water & Sewer System Revenue Bonds V.R. Series 1994G 06-15-24 1.80 5,700,000 5,700,000 New York City Transitional Finance Authority Future Secured Tax Revenue Bonds V.R. Series 2001B 11-01-26 1.85 300,000 300,000 11-01-27 1.85 1,700,000 1,700,000 New York General Obligation Bonds V.R. Series 1993A-7 08-01-20 1.80 1,000,000 1,000,000 New York General Obligation Bonds V.R. Series 2001H-2 08-01-13 1.80 400,000 400,000 Total municipal notes (Cost: $9,600,000) $9,600,000 Total investments in securities (Cost: $101,584,955)(h) $106,385,795 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 59 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP New York Tax-Exempt Fund Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AMBAC -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 12.1% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note (d) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (e) At Dec. 31, 2001, the cost of securities purchased, including interest purchased, on a when-issued basis was $1,160,891. (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 Dec. 31, 2001. (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 Municipal Bonds, March 2002 $200,000 (h) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $101,585,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 5,903,000 Unrealized depreciation (1,102,000) ---------- Net unrealized appreciation $ 4,801,000 ----------- - ------------------------------------------------------------------------------- 60 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT Investments in Securities AXP Ohio Tax-Exempt Fund Dec. 31, 2001 (Unaudited) (Percentages represent value of investments compared to net assets) Municipal bonds (90.8%) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Akron Bath Copley Joint Township Hospital District Revenue Bonds Summa Hospital Series 1998A 11-15-24 5.38% $1,500,000 $1,328,145 Avon Lake General Obligation Refunding Bonds Series 2001 (AMBAC Insured) 12-01-20 5.00 500,000(f) 489,265 Barberton Limited Tax Various Purpose General Obligation Bonds Series 1989 12-01-09 7.35 560,000 562,968 Bellefontaine Hospital Facility Refunding Revenue Bonds Mary Rutan Health Association of Logan County Series 1993 12-01-13 6.00 1,000,000 977,510 Buckeye Valley Local School District School Improvement Unlimited Tax General Obligation Bonds Series 1995A (MBIA Insured) 12-01-20 5.25 1,000,000 1,002,520 Butler County Hospital Facility Improvement Pre-refunded Revenue Bonds Fort Hamilton-Hughes Memorial Center Series 1991 01-01-10 7.50 1,750,000 1,785,000 Carroll Water & Sewer District Unlimited Tax General Obligation Bonds Series 1998 12-01-10 6.25 385,000 394,379 Carroll Water & Sewer District Water System Improvement Unlimited Tax General Obligation Bonds Series 1996 12-01-10 6.25 830,000 848,144 Celina Local School District Unlimited General Obligation Bonds Series 1996 (FGIC Insured) 12-01-20 5.25 1,000,000 1,003,530 Cincinnati School District School Improvement General Obligation Bonds Series 2001 (MBIA Insured) 12-01-02 4.00 805,000 821,575 Cleveland Airport Systems Revenue Bonds Series 1997A (FSA Insured) A.M.T. 01-01-17 5.13 1,000,000 971,970 Cleveland Waterworks Improvement 1st Mtge Refunding Revenue Bonds Series F 1992B (AMBAC Insured) 01-01-16 6.25 1,000,000 1,020,000 Columbus Tax Increment Finance Revenue Bonds Easton Series 1999 (AMBAC Insured) 12-01-24 4.88 1,000,000 942,810 Coshocton County Solid Waste Disposal Refunding Revenue Bonds Stone Container Series 1992 08-01-13 7.88 1,000,000 1,012,370 Cuyahoga County Health Care Facilities Refunding Revenue Bonds Judson Retirement Community Series 1996A 11-15-18 7.25 1,000,000 1,030,340 Cuyahoga County Hospital Facilities Revenue Bonds Canton Series 2000 01-01-30 7.50 1,000,000 1,065,280 Cuyahoga County Hospital Improvement Pre-refunded Revenue Bonds University Hospitals Health System Series 1992 (AMBAC Insured) 01-15-11 6.50 500,000 510,960 Cuyahoga County Hospital Refunding Revenue Bonds Cleveland Clinic Foundation Series 1992C (MBIA Insured) 11-15-11 5.50 1,500,000 1,571,025 Cuyahoga County Hospital Revenue Bonds University Hospitals Health System Series 1999 (AMBAC Insured) 01-15-19 5.40 1,000,000 1,014,570 Cuyahoga County Limited Tax General Obligation Bonds Series 1993 05-15-13 5.60 500,000 539,860 Cuyahoga County Port Authority Special Assessment Tax Increment Revenue Bonds Series 2001 12-01-31 7.35 1,000,000 1,001,480 Dayton Water System Refunding Revenue Bonds Series 1999 (FSA Insured) 12-01-02 4.00 1,000,000 1,020,590 Delaware County Sewer Improvement Limited Tax General Obligation Bonds Series 1995 12-01-15 5.25 1,000,000 1,014,210 Dover Limited Tax Improvement General Obligation Bonds Municipal Sewer System Series 1989 12-01-09 7.10 855,000 872,237 Erie County Hospital Improvement Refunding Revenue Bonds Firelands Community Hospital Series 1992 01-01-15 6.75 2,000,000 2,041,679 Franklin County Health Care Facilities Refunding Revenue Bonds Lutheran Senior City Incorporated Series 1999 12-15-28 6.13 1,250,000 1,053,525 Franklin County Multi-family Housing Refunding Revenue Bonds Jefferson Chase Apartments Series 1998B A.M.T. 11-01-35 6.40 1,000,000 912,950 Franklin County Multi-family Housing Refunding Revenue Bonds West Bay Apartments Series 1998 A.M.T. 12-01-25 6.38 990,000(b) 695,416 Gateway Economic Development Greater Cleveland Excise Tax Refunding Revenue Bonds Senior Lien Series 2001 (FSA Insured) A.M.T. 09-01-05 5.13 1,750,000 1,833,458 Hamilton County Hospital Facilities Revenue Bonds Children's Hospital Medical Center Series 1998G (MBIA Insured) 05-15-28 4.75 500,000 450,655 Hamilton County Sales Tax Revenue Bonds Hamilton County Football Series 1998A (MBIA Insured) 12-01-17 4.75 1,000,000 962,010 Hamilton County Sales Tax Revenue Bonds Hamilton County Football Series 1998B (MBIA Insured) 12-01-27 5.00 1,000,000 960,660 Hamilton General Obligation Bonds One Renaissance Center Series 2001A (AMBAC Insured) 11-01-02 2.40 150,000 150,851 Hamilton General Obligation Bonds One Renaissance Center Series 2001B (AMBAC Insured) 11-01-02 2.40 255,000 256,446 11-01-03 2.60 275,000 275,534 Hilliard County School District Unlimited Tax General Obligation Bonds Series 1996A (FGIC Insured) 12-01-20 5.00 1,000,000 978,530 Jackson County Hospital Facilities Revenue Bonds Consolidated Health System Jackson Hospital Series 1999 (Asset Guaranty) 10-01-20 6.13 1,000,000 1,045,470 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 61 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Ohio Tax-Exempt Fund Municipal bonds (continued) Name of Coupon Principal Value(a) issuer and rate amount title of issue(b,c) Lakota Local School District Unlimited Tax Improvement General Obligation Pre-refunded Bonds Series 1994 (AMBAC Insured) 12-01-14 6.25% $2,000,000 $2,214,879 Lorain County Hospital Facilities Refunding Revenue Bonds EMH Regional Medical Center Series 1995 (AMBAC Insured) 11-01-21 5.38 2,000,000 2,003,320 Lorain County Independent Living & Hospital Facilities Refunding Revenue Bonds Elyria United Methodist Series 1996C 06-01-22 6.88 1,000,000 1,029,360 Mahoning Valley Sanitary District Water Refunding Revenue Bonds Series 1999 (FSA Insured) 11-15-18 5.75 1,000,000 1,048,370 Marion County Health Care Facilities Improvement Refunding Revenue Bonds United Church Homes Series 1993 11-15-10 6.38 820,000 811,464 Marysville Sewer System 1st Mortgage Revenue Bonds Series 1988 (BIG Insured) 02-15-08 7.85 300,000 300,810 Montgomery County Hospital Facilities Refunding Revenue Bonds Kettering Medical Center Series 1999 04-01-22 6.75 1,000,000 1,041,010 Montgomery County Water Revenue Bonds Greater Moraine-Beavercreek District Series 1992 (FGIC Insured) 11-15-17 6.25 1,000,000 1,049,730 North Olmstead County General Obligation Bonds Series 1996 (AMBAC Insured) 12-01-16 5.00 1,500,000 1,502,850 12-01-21 5.00 200,000 195,090 Oak Hills Local School District Unlimited Tax General Obligation Bonds Series 1997 (MBIA Insured) 12-01-25 5.13 1,000,000 980,500 Orrville Electric System Refunding Revenue & Improvement Mortgage Bonds Series 1997 (AMBAC Insured) 12-01-17 5.10 1,000,000 1,002,730 Stark County Health Care Facilities Refunding Revenue Bonds Rose Lane Series 1998 (GNMA/FHA Insured) 07-20-33 5.45 215,000(f) 212,123 State Air Quality Development Authority Refunding Revenue Bonds JMG Funding Limited Partnership Series 1994 (AMBAC Insured) A.M.T. 01-01-29 6.38 2,000,000 2,162,239 04-01-29 6.38 500,000 540,560 State Air Quality Development Authority Revenue Bonds Columbus & Southern Series 1985A (FGIC Insured) 12-01-20 6.38 1,000,000 1,052,910 State Department of Administrative Services Certificate of Participation Ohio Center Series 1998 (AMBAC Insured) 07-15-28 5.00 550,000 528,138 State Infrastructure Revenue Bonds Series 2001 06-15-03 4.50 1,000,000 1,029,580 State Municipal Electric Generation Agency Revenue Bonds Joint Venture #5 Series 1993 (AMBAC Insured) 02-15-24 5.38 2,000,000 2,001,240 State Public Facilities Commissions Higher Education Capital Facilities Revenue Bonds 2nd Series 1999A 11-01-03 4.50 1,000,000 1,036,870 State Turnpike Commission Revenue Bonds Series 1998B (FGIC Insured) 02-15-24 4.50 1,000,000 889,530 02-15-28 4.75 800,000 732,824 State Turnpike Pre-refunded Revenue Bonds Series 1994A 02-15-24 5.75 1,000,000 1,077,570 State Turnpike Pre-refunded Revenue Bonds Series 1996A (MBIA Insured) 02-15-26 5.50 1,000,000 1,091,420 State Valley School District School Improvement Unlimited Tax General Obligation Bonds Counties of Adams & Highland Series 1995 (MBIA Insured) 12-01-21 5.25 2,000,000 2,004,039 State Water Development Authority Pollution Control Refunding Revenue Bonds Cleveland Electric Illuminating Series 1995 08-01-25 7.70 1,000,000 1,080,280 State Water Development Authority Pollution Control Refunding Revenue Bonds Toledo Edison Series 1994A A.M.T. 10-01-23 8.00 1,000,000 1,075,840 State Water Development Authority Refunding & Improvement Revenue Bonds Pure Water Series 1992 (AMBAC Insured) 12-01-18 5.50 750,000 758,003 State Water Development Authority Solid Waste Disposal Revenue Bonds Northstar BHP Steel Cargill Series 1995 A.M.T. 09-01-20 6.30 500,000 515,525 State Water Development Authority Water Pollution Control Refunding Revenue Bonds Series 2001 06-01-03 3.50 1,150,000 1,168,561 Streetsboro City School District School Improvement Unlimited Tax General Obligation Bonds Series 2001 (MBIA Insured) 12-01-25 5.00 1,000,000 963,620 Swanton Local School District School Improvement Unlimited Tax General Obligation Bonds Series 2001 (FGIC Insured) 12-01-02 3.10 550,000 556,842 University of Cincinnati Certificates of Participation Student Recreation Center Series 1996 (MBIA Insured) 06-01-24 5.13 1,000,000 972,810 Warren County Various Purpose Limited Tax General Obligation Bonds Series 1992 12-01-12 6.10 500,000 562,955 Youngstown State University General Receipts College Revenue Bonds Series 1998 (AMBAC Insured) 12-15-16 4.75 1,000,000 971,810 Total municipal bonds (Cost: $67,637,589) $70,583,324 See accompanying notes to investments in securities. - ------------------------------------------------------------------------------- 62 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP Ohio Tax-Exempt Fund Municipal notes (8.1%) Issuer(c,d,e) Effective Amount Value(a) yield payable at maturity Cuyahoga County Economic Development Recreational Facilities Revenue Bonds The Cleveland Orchestra V.R. Series 1998 04-01-28 1.90% $2,000,000 $2,000,000 State Air Quality Development Authority Pollution Control Refunding Revenue Bonds Ohio Edison V.R. Series 2000C 06-01-23 1.90 400,000 400,000 State Air Quality Development Authority Pollution Control Refunding Revenue Bonds Toledo V.R. Series 2000A 04-01-24 1.90 1,000,000 1,000,000 State Air Quality Development Authority Pollution Control Revenue Bonds Gas & Electric V.R. Series 1985B 12-01-15 1.90 300,000 300,000 State Air Quality Development Authority Pollution Control Revenue Bonds V.R. Series 1998C A.M.T. 09-01-18 2.00 1,200,000 1,200,000 State Water Development Authority Pollution Control Facilities Refunding Revenue Bonds Toledo Edison V.R. Series 2000A 04-01-24 1.90 400,000 400,000 University of Ohio General Receipts Revenue Bonds V.R. Series 2001 (FSA Insured) 12-01-26 1.65 1,000,000 1,000,000 Total municipal notes (Cost: $6,300,000) $6,300,000 Total investments in securities (Cost: $73,937,589)(g) $76,883,324 Notes to investments in securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (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 -- American Municipal Bond Association Corporation BIG -- Bond Investors Guarantee CGIC -- Capital Guaranty Insurance Company FGIC -- Financial Guarantee Insurance Corporation FHA -- Federal Housing Authority FNMA -- Federal National Mortgage Association FSA -- Financial Security Assurance GNMA -- Government National Mortgage Association MBIA -- Municipal Bond Investors Assurance (d) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 2001, the value of securities subject to alternative minimum tax represented 12.7% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note (e) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parentheses, after a day or a week's notice. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2001. (f) 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 Municipal Bonds, March 2002 $200,000 (g) At Dec. 31, 2001, the cost of securities for federal income tax purposes was approximately $73,938,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $3,699,000 Unrealized depreciation (754,000) -------- Net unrealized appreciation $2,945,000 ---------- - ------------------------------------------------------------------------------- 63 AXP STATE TAX-EXEMPT FUNDS -- SEMIANNUAL REPORT AXP State Tax-Exempt Funds PRSRT STD AUTO 70100 AXP Financial Center U.S. POSTAGE Minneapolis, MN 55474 PAID AMERICAN americanexpress.com EXPRESS
Ticker Symbol AXP California Tax-Exempt Fund Class A: ICALX Class B: N/A Class C: N/A AXP Massachusetts Tax-Exempt Fund Class A: IDMAX Class B: N/A Class C: N/A AXP Michigan Tax-Exempt Fund Class A: INMIX Class B: N/A Class C: N/A AXP Minnesota Tax-Exempt Fund Class A: IMNTX Class B: IDSMX Class C: N/A AXP New York Tax-Exempt Fund Class A: INYKX Class B: N/A Class C: N/A AXP Ohio Tax-Exempt Fund Class A: IOHIX Class B: N/A Class C: N/A
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