-----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, JWGD1nEXer+Jq3ArwtgT2RXyvOtClZFmUuc4rRYABSEVp842U43mR1/zeNQOx8sD lxOi23Y50JY4DNVyrZ+k/A== 0000820027-99-000681.txt : 19990908 0000820027-99-000681.hdr.sgml : 19990908 ACCESSION NUMBER: 0000820027-99-000681 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP CALIFORNIA TAX-EXEMPT TRUST CENTRAL INDEX KEY: 0000792717 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04646 FILM NUMBER: 99706741 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP SPECIAL TAX-EXEMPT SERIES TRUST CENTRAL INDEX KEY: 0000792719 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04647 FILM NUMBER: 99706742 BUSINESS ADDRESS: STREET 1: IDS TOWER 10 STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 FORMER COMPANY: FORMER CONFORMED NAME: IDS SPECIAL TAX EXEMPT SERIES TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 AXP STATE TAX-EXEMPT FUNDS AXP(SM) State Tax-Exempt Funds 1999 ANNUAL REPORT (PROSPECTUS INCLUDED) (icon of) padlock Tax-exempt funds from the following states: California Massachusetts Michigan Minnesota New York Ohio The goal of each AXP State Tax-Exempt Fund is to provide shareholders with a high level of income generally exempt from federal income tax as well as from the respective state and local tax. (This annual report includes a prospectus that describes in detail each Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospects carefully before you invest or send money.) Distributed by American Express Financial Advisors Inc. AMERICAN EXPRESS Financial Advisors 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 eliminate state tax, too, you can invest in municipal bonds in the state in which you reside. This double tax-exemption makes this 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. Table of Contents 1999 ANNUAL REPORT The purpose of this annual report is to tell investors how the Fund performed. From the Chairman 4 From the Portfolio Manager 4 Fund Facts 6 California Tax-Exempt Fund 12 The 10 Largest Holdings 12 The Fund's Long-term Performance 13 Massachusetts Tax-Exempt Fund 14 The 10 Largest Holdings 14 The Fund's Long-term Performance 15 Michigan Tax-Exempt Fund 16 The 10 Largest Holdings 16 The Fund's Long-term Performance 17 Minnesota Tax-Exempt Fund 18 The 10 Largest Holdings 18 The Fund's Long-term Performance 19 New York Tax-Exempt Fund 20 The 10 Largest Holdings 20 The Fund's Long-term Performance 21 Ohio Tax-Exempt Fund 22 The 10 Largest Holdings 22 The Fund's Long-term Performance 23 All Funds 24 Making the Most of a Fund 24 Independent Auditors' Report 25 Financial Statements 26 Notes to Financial Statements 33 Investments in Securities 41 Federal Income Tax Information 91 1999 PROSPECTUS The prospectus, which is bound into the middle of this annual report, describes the Fund in detail. The Funds 3p Goal 3p Investment Strategy 3p Risks 4p Past Performance 6p Fees and Expenses 11p Management 13p Buying and Selling Shares 14p Valuing Fund Shares 14p Investment Options 14p Purchasing Shares 15p Sales Charges 18p Exchanging/Selling Shares 21p Distributions and Taxes 25p Personalized Shareholder Information 26p About the Company 27p Quick Telephone Reference 28p Financial Highlights 29p Appendix 35p From the Chairman (picture of) Arne H. Carlson Arne H. Carlson Chairman of the board American Express(R) Funds held shareholder meetings in June 1999. Shareholders approved all of the proposals advanced by management. Among the proposals were: o The election of Board members and the selection of KPMG LLP as independent auditors. o Change in the Fund name from "IDS" to "AXP." o A new shareholder service and distribution plan. o Changes with respect to fundamental investment policies. No other business was presented at the meeting, which was concluded by a report to shareholders from the Investment Department of American Express Financial Corporation. Thanks to all of you for your effort in reviewing the proxy material and voting your proxies. (signature of) Arne H. Carlson Arne H. Carlson From the Portfolio Manager (picture of) Paul Hylle Paul Hylle Portfolio manager Despite being penalized by rising interest rates in the second half of the fiscal year, the AXP State Tax-Exempt Funds produced positive results for the period as a whole while providing tax-free income well above the rate of inflation. For investors in the Funds' Class A shares, the total returns (which include net asset value change and interest income) ranged from 1.72% to 2.62% for the fiscal year -- July 1998 through June 1999. The low rate of inflation that has dominated the investment environment in recent years remained in place early in the period, providing reassurance for the bond market. But this time the market got an additional boost from another outbreak of the so-called "Asian flu," the financial malady that first struck Asia in the fall of 1997. In 1998, it was Russia and Latin America that were affected. The result was a flood of money into the U.S. bond market from investors who were seeking what they believed to be a safe haven for investment. This "flight to quality" drove down long-term interest rates until mid-fall, boosting bond prices along the way. Although U.S. Treasury issues got the great bulk of the attention, municipal bonds benefited modestly from the declining-rate trend. INFLATION CONCERN MOUNTS But in the winter, the environment began to change. As the U.S. economy continued to show remarkable strength, investors became concerned that a spike in inflation -- a bondholder's worst enemy -- might be just around the corner. The result: They began selling bonds, which in turn drove interest rates up and bond prices down over the ensuing months. While the sell-off did hurt the municipal market, the damage was less than that in the Treasury market. Looking at other fundamental factors, the supply/demand situation was quite comfortable over the period, especially during the final half when the overall supply declined by some 20 percent. As for dividends, they fell somewhat as the period progressed. That's because when interest rates fell in 1998, many bonds were called (bought back) by the issuers and replaced by issues paying lower interest. Therefore, additions to the Funds' portfolios simply provided less income than previous holdings. On the whole, I kept the Funds' durations somewhat shorter than average, a strategy that resulted in less volatility in the Funds' net asset values. Late in the fiscal year, the duration began lengthening a bit as I reduced the level of cash reserves by adding some new bonds to the portfolio. Looking at the Funds on an individual basis, all of the states continued to reap the benefits of a strong national economy, including fiscal health and overall upgradings of their bonds' quality. More specifically, in New York and Minnesota, the supply of bonds was down considerably, which was especially good for prices. (signature of) Paul Hylle Fund Facts AXP California Tax-Exempt Fund Class A -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.18 June 30, 1998 $5.35 Decrease $0.17 Distributions -- July 1, 1998 - June 30, 1999 From income $0.27 From capital gains $ -- Total distributions $0.27 Total return* +1.80%** Class B -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.18 June 30, 1998 $5.35 Decrease $0.17 Distributions -- July 1, 1998 - June, 30, 1999 From income $0.22 From capital gains $ -- Total distributions $0.22 Total return* +1.03%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. AXP Massachusetts Tax-Exempt Fund Class A -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.39 June 30, 1998 $5.56 Decrease $0.17 Distributions -- July 1, 1998 - June 30, 1999 From income $0.27 From capital gains $ -- Total distributions $0.27 Total return* +1.72%** Class B --12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.39 June 30, 1998 $5.56 Decrease $0.17 Distributions -- July 1, 1998 - June 30, 1999 From income $0.23 From capital gains $ -- Total distributions $0.23 Total return* +0.96%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. AXP Michigan Tax-Exempt Fund Class A -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.38 June 30, 1998 $5.57 Decrease $0.19 Distributions -- July 1, 1998 - June 30, 1999 From income $0.28 From capital gains $0.02 Total distributions $0.30 Total return* +1.92%* Class B -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.38 June 30, 1998 $5.57 Decrease $0.19 Distributions -- July 1, 1998 - June 30, 1999 From income $0.24 From capital gains $0.02 Total distributions $0.26 Total return* +1.17%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. AXP Minnesota Tax-Exempt Fund Class A -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.26 June 30, 1998 $5.41 Decrease $0.15 Distributions -- July 1, 1998 - June 30, 1999 From income $0.29 From capital gains $ -- Total distributions $0.29 Total return* +2.62%** Class B -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.26 June 30, 1998 $5.41 Decrease $0.15 Distributions -- July 1, 1998 - June 30, 1999 From income $0.25 From capital gains $ -- Total distributions $0.25 Total return* +1.85%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. AXP New York Tax-Exempt Fund Class A --12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.15 June 30, 1998 $5.29 Decrease $0.14 Distributions -- July 1, 1998 - June 30, 1999 From income $0.25 From capital gains $ -- Total distributions $0.25 Total return* +2.04%** Class B -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.15 June 30, 1998 $5.29 Decrease $0.14 Distributions -- July 1, 1998 - June 30, 1999 From income $0.21 From capital gains $ -- Total distributions $0.21 Total return* +1.28%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested. AXP Ohio Tax-Exempt Fund Class A -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.36 June 30, 1998 $5.50 Decrease $0.14 Distributions -- July 1, 1998 - June 30, 1999 From income $0.27 From capital gains $ -- Total distributions $0.27 Total return* +2.50%** Class B -- 12-month performance (All figures per share) Net asset value (NAV) June 30, 1999 $5.36 June 30, 1998 $5.50 Decrease $0.14 Distributions -- July 1, 1998 - June 30, 1999 From income $0.23 From capital gains $ -- Total distributions $0.23 Total return* +1.75%** *The prospectus discusses the effect of sales charges, if any, on the various classes. **The total return is a hypothetical investment in the Fund with all distributions reinvested.
The 10 Largest Holdings AXP California Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) Anaheim Public Finance Authority Revenue Bonds Electric Utilities San Juan Series 2 5.75% 2022 4.27% $11,389,154 Los Angeles Water & Power Electric Plant Revenue Bonds Series 1990 7.13% 2030 2.55 6,816,159 Statewide Community Development Authority Revenue Certificate of Participation St. Joseph Health System Group 6.50% 2015 2.29 6,117,814 Community Development Authority Health Facilities Unihealth America Certificate of Participation Series 1993 Inverse Floater 7.93% 2011 2.01 5,362,499 State Unlimited Tax General Obligation Refunding Bonds 4.50% 2028 1.98 5,273,749 University of Southern California Educational Facilities Authority Pre-refunded Revenue Bonds Series 1989B 6.75% 2015 1.92 5,136,249 Los Angeles Convention & Exhibition Center Pre-refunded Certificate of Participation Series 1989A 7.00% 2020 1.91 5,097,700 Rancho Mirage Joint Powers Finance Authority Certificate of Participation Eisenhower Memorial Hospital 7.00% 2022 1.73 4,630,418 Fontana Redevelopment Agency Refunding Certificate of Participation Police Facility Series 1993 5.63% 2016 1.71 4,560,165 Northern California Transmission Select Auction Variable Rate Security & Residual Interest Revenue Bonds Inverse Floater 5.50% 2024 1.69 4,504,050 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." (icon of) pie chart The 10 holdings listed here make up 22.06% of net assets
The Fund's Long-term Performance AXP California Tax-Exempt Fund How your $10,000 has grown in AXP California Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $17,770 $10,000 AXP California Tax-Exempt Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -3.28% +4.86% +5.92% --% Class B -2.84% --% --% +4.42%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $7,853. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP California Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund.
The 10 Largest Holdings AXP Massachusetts Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) Boston City Hospital Refunding Revenue Bonds Series B 5.75% 2023 3.47% $3,032,189 Health & Educational Facilities Authority Revenue Bonds Suffolk University Series B 6.35% 2022 3.03 2,649,565 Health & Educational Facilities Authority Revenue Bonds Cape Cod Health System Series 1993A 5.25% 2021 2.73 2,385,925 State Health & Education Facilities Authority Pre-refunded Revenue Bonds Boston College Series 1991J 6.63% 2021 2.37 2,068,661 Industrial Finance Agency Pollution Control Refunding Revenue Bonds Eastern Edison Series 1993 5.88% 2008 2.32 2,023,300 Health & Educational Facilities Authority Revenue Bonds Charlton Memorial Hospital Series 1991B 7.25% 2013 2.16 1,884,418 State Turnpike Authority Metro Highway System Senior Lien Revenue Bonds Toll Road Series 1997A 5.00% 2037 2.08 1,818,500 State Health & Education Facilities Authority Revenue Bonds Boston College Series L 4.75% 2031 1.99 1,735,140 Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds Series 1994B 4.75% 2011 1.90 1,659,368 Bay Transportation Authority General Transportation System Refunding Bonds Series 1992B 6.20% 2016 1.89 1,655,115 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." (icon of) pie chart The 10 holdings listed here make up 23.94% of net assets
The Fund's Long-term Performance AXP Massachusetts Tax-Exempt Fund How your $10,000 has grown in AXP Massachusetts Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $17,990 $10,000 AXP Massachusetts Tax-Exempt Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -3.37% +4.92% +6.05% --% Class B -2.92% --% --% +4.54%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $7,765. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP Massachusetts Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund.
The 10 Largest Holdings AXP Michigan Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) Romulus Township School District Unlimited Tax General Obligation Refunding Bonds 5.75% 2022 3.07% $2,551,874 State Building Authority Refunding Revenue Bonds Series 1991I 6.25% 2020 2.78 2,315,389 Detroit Sewer Disposal Revenue Bonds 5.70% 2023 2.52 2,098,444 Grand Ledge Public Schools Unlimited Tax General Obligation Refunding Bonds Eaton, Clinton & Ionia Counties Series 1995 5.38% 2024 2.37 1,968,859 State Hospital Finance Authority Hospital Pre-refunded Revenue Bonds McLaren Obligated Group Series 1991A 7.50% 2021 2.29 1,906,239 State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds Ford Motor Series 1991A 7.10% 2006 2.23 1,855,986 Wayne Charter County Airport Revenue Bonds Detroit Metropolitan Airport Series 1998A 5.00% 2028 2.20 1,827,820 Monroe County Pollution Control Revenue Bonds Detroit Edison Fermi 2 Plants Series CC A.M.T. 7.50% 2019 2.20 1,826,615 Anchor Bay School District Unlimited Tax General Obligation Refunding Bonds 4.75% 2026 2.00 1,667,124 Buena Vista School District Saginaw County School Building & Site Unlimited Tax General Obligation Pre-refunded Bonds Series 1991 7.20% 2016 1.94 1,611,135 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." (icon of) pie chart The 10 holdings listed here make up 23.60% of net assets
The Fund's Long-term Performance AXP Michigan Tax-Exempt Fund How your $10,000 has grown in AXP Michigan Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $18,020 $10,000 AXP Michigan Tax-Exempt Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -3.18% +4.83% +6.07% --% Class B -2.70% --% --% +4.39%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $7,969. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP Michigan Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund.
The 10 Largest Holdings AXP Minnesota Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) State University Board of Regents General Obligation Bonds Series 1996A 5.50% 2021 2.84% $12,838,874 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Healthspan Series 1993A 4.75% 2018 2.75 12,422,564 Minneapolis & St. Paul Housing & Redevelopment Authority Health Care System Revenue Bonds Group Health Plan Series 1992 6.75% 2013 2.47 11,128,529 State Housing Finance Agency Single Family Housing Mortgage Revenue Bonds Series 1997E A.M.T. 5.90% 2029 1.97 8,909,687 Southern Minnesota Municipal Power Agency Revenue Bonds 4.75% 2016 1.89 8,538,663 State General Obligation Various Purpose Pre-refunded Bonds Series 1991 6.70% 2011 1.87 8,426,239 State General Obligation Various Purpose Pre-refunded Bonds Series 1990 7.00% 2009 1.80 8,139,743 Hennepin County Lease Revenue Certificates of Participation Series 1991 6.80% 2017 1.70 7,695,004 St. Paul Housing & Redevelopment Authority Sales Tax Revenue Bonds Civic Center Escrowed to Maturity 5.55% 2023 1.69 7,627,499 Edina Multi-family Housing Revenue Bonds Walker Assisted Living Series 1991 9.00% 2031 1.65 7,460,837 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." (icon of) pie chart The 10 holdings listed here make up 20.63% of net assets
The Fund's Long-term Performance AXP Minnesota Tax-Exempt Fund How your $10,000 has grown in AXP Minnesota Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $17,972 $10,000 AXP Minnesota Tax-Exempt Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -2.52% +5.18% +6.04% --% Class B -2.05% --% --% +4.80%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $8,071. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP Minnesota Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund.
The 10 Largest Holdings AXP New York Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) State Energy Research & Development Authority Electric Facilities Revenue Bonds Consolidated Edison Series 1990A A.M.T. 7.50% 2025 4.37% $5,063,899 United Nations Development Senior Lien Pre-refunded Revenue Bonds Series 1992A 6.00% 2026 4.19 4,856,219 State Urban Development Capital Correctional Facilities Pre-refunded Revenue Bonds 1st Series 1990 7.50% 2020 4.04 4,682,250 State Local Government Assistance Pre-refunded Sales Tax Revenue Bonds Series 1991A 7.00% 2016 3.69 4,277,600 State Mortgage Agency Homeowner Mortgage Refunding Revenue Bonds Series 1991TT 7.50% 2015 3.63 4,211,760 State Mortgage Agency Homeowner Mortgage Revenue Bonds 27th Series 1992 6.90% 2015 2.79 3,238,890 Triborough Bridge & Tunnel Authority General Purpose Pre-refunded Revenue Bonds Series 1990S 7.00% 2021 2.74 3,174,210 State Environmental Facilities State Water Revolving Fund Pollution Control Revenue Bonds Series 1990A 7.50% 2012 2.72 3,157,620 State Dormitory Authority College Revenue Bonds Consolidated City University System Series 1993A 5.75% 2013 2.68 3,111,210 State Energy Research & Development Authority Solid Waste Disposal Revenue Bonds New York State Electric & Gas Company Series 1993A A.M.T. 5.70% 2028 2.60 3,019,050 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." (icon of) pie chart The 10 holdings listed here make up 33.45% of net assets
The Fund's Long-term Performance AXP New York Tax-Exempt Fund How your $10,000 has grown in AXP New York Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $17,853 $10,000 AXP New York Tax-Exempt Fund Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -3.06% +4.60% +5.97% --% Class B -2.61% --% --% +4.27%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $7,814. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP New York Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund.
The 10 Largest Holdings AXP Ohio Tax-Exempt Fund Percent Value (of net assets) (as of June 30, 1999) Lakota Local School District Unlimited Tax Improvement General Obligation Bonds 6.25% 2014 2.85% $2,187,360 State Air Quality Development Authority Refunding Revenue Bonds Series 1994 A.M.T. 6.38% 2029 2.81 2,154,400 Erie County Hospital Improvement Refunding Revenue Bonds Firelands Community Hospital Series 1992 6.75% 2015 2.76 2,117,220 State Municipal Electric Generation Agency Revenue Bonds Joint Venture 5 5.38% 2024 2.59 1,987,700 Lorain County Hospital Facilities Refunding Revenue Bonds EMH Regional Medical Center Series 1995 5.38% 2021 2.57 1,965,400 State Valley School District School Improvement Unlimited Tax General Obligation Bonds Counties of Adams & Highland Series 1995 5.25% 2021 2.56 1,963,720 Butler County Hospital Facility Improvement Refunding Revenue Bonds Fort Hamilton-Hughes Memorial Center Series 1991 7.50% 2010 2.42 1,854,388 Franklin County Convention Facilities Authority Tax & Lease Revenue Anticipation Pre-refunded Bonds 7.00% 2019 2.08 1,596,060 State Housing Finance Agency Mortgage Revenue Bonds Aristocrat South Board & Care Series 1991A A.M.T. 7.30% 2031 2.05 1,570,260 Cuyahoga County Hospital Refunding Revenue Bonds Cleveland Clinic Foundation Series 1992 5.50% 2011 2.01 1,542,705 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." (icon of) pie chart The 10 holdings listed here make up 24.70% of net assets
The Fund's Long-term Performance AXP Ohio Tax-Exempt Fund How your $10,000 has grown in AXP Ohio Tax-Exempt Fund $30,000 $20,000 Lehman Brothers Municipal Bond Index $17,875 $10,000 AXP Ohio Tax-Exempt Fund Fund Class A $9,500 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 Average annual total return (as of June 30, 1999): 1 year 5 years 10 years Since inception Class A -2.62% +4.84% +5.98% --% Class B -2.15% --% --% +4.43%* * Inception date was March 20, 1995. Assumes: Holding period from 7/1/89 to 6/30/99. Returns do not reflect taxes payable on distributions. Reinvestment of all income and capital gain distributions for the Fund, with a value of $7,764. Also see "Past Performance" in the Fund's current prospectus. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Brothers Municipal Bond Index. In comparing AXP Ohio Tax-Exempt Fund (Class A) to the index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. Lehman Brothers Municipal Bond Index, an unmanaged index made up of a representative list of general obligation, revenue, insured and pre-refunded bonds. The index is frequently used as a general measure of tax-exempt bond market performance. However, the securities used to create the index may not be representative of the bonds held in a Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. However, the securities used to create the index may not be representative of the bonds held in the Fund. Making the Most of the Fund BUILD YOUR ASSETS SYSTEMATICALLY One of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. The chart below shows how dollar-cost averaging works. In these three hypothetical scenarios, you will see six months of share price fluctuations. This strategy does not ensure a profit or avoid a loss if the market declines. But, if you can continue to invest regularly through changing market conditions even when the price of your shares fall or the market declines, it can be an effective way to accumulate shares to meet your long-term goals. How dollar-cost averaging works Jan Feb Mar Apr May Jun $15 $16 $18 $20 $10 $10 $12 $14 $ 5 Accumulated shares* Average market Your average price per share cost per share 42.25 $15 $14.20 - ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $10 $ 5 $8 $5 $5 $8 Accumulated shares* Average market Your average price per share cost per share 85.0 $7.66 $7.05 - ------------------------------------------------------------------------------- Jan Feb Mar Apr May Jun $15 $10 $10 $8 $6 $7 $ 5 $4 $4 Accumulated shares* Average market Your average price per share cost per share 103.5 $6.50 $5.80 - ------------------------------------------------------------------------------- $100 invested per month. Total invested: $600. *Shares purchased is determined by dividing the amount invested per month by the current share price. THREE WAYS TO BENEFIT FROM A MUTUAL FUND: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. You potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund. The financial statements contained in Post-Effective Amendment #32 to Registration Statement No. 33-5102 filed on or about August 26, 1999, are incorporated herein by reference. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP California Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02325 Aug. 26, 1998 0.02141 Sept. 24, 1998 0.02126 Oct. 26, 1998 0.02312 Nov. 24, 1998 0.02218 Dec. 22, 1998 0.02028 Jan. 25, 1999 0.02420 Feb. 25, 1999 0.02300 March 24, 1999 0.02005 April 26, 1999 0.02418 May 27, 1999 0.02263 June 23, 1999 0.01983 Total distibutions $0.26539 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.01970 Aug. 26, 1998 0.01809 Sept. 24, 1998 0.01805 Oct. 26, 1998 0.01952 Nov. 24, 1998 0.01907 Dec. 22, 1998 0.01636 Jan. 25, 1999 0.02042 Feb. 25, 1999 0.01954 March 24, 1999 0.01703 April 26, 1999 0.02051 May 27, 1999 0.01922 June 23, 1999 0.01689 Total distributions $0.22440 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on California municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP Massachusetts Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02433 Aug. 26, 1998 0.02269 Sept. 24, 1998 0.02261 Oct. 26, 1998 0.02392 Nov. 24, 1998 0.02205 Dec. 22, 1998 0.02059 Jan. 25, 1999 0.02465 Feb. 25, 1999 0.02370 March 24, 1999 0.02045 April 26, 1999 0.02496 May 27, 1999 0.02242 June 23, 1999 0.01777 Total $0.27014 Taxable dividend -- taxable as long-term capital gain. Payable date Per share Dec. 22, 1998 $0.00263 Total distributions $0.27277 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02065 Aug. 26, 1998 0.01924 Sept. 24, 1998 0.01928 Oct. 26, 1998 0.02021 Nov. 24, 1998 0.01871 Dec. 22, 1998 0.01736 Jan. 25, 1999 0.02072 Feb. 25, 1999 0.01994 March 24, 1999 0.01736 April 26, 1999 0.02119 May 27, 1999 0.01890 June 23, 1999 0.01475 Total $0.22831 Taxable dividend -- taxable as long-term capital gain. Payable date Per share Dec. 22, 1998 $0.00263 Total distributions $0.23094 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on Massachusetts municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP Michigan Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02422 Aug. 26, 1998 0.02268 Sept. 24, 1998 0.02229 Oct. 26, 1998 0.02410 Nov. 24, 1998 0.02258 Dec. 22, 1998 0.02138 Jan. 25, 1999 0.02611 Feb. 25, 1999 0.02420 March 24, 1999 0.02100 April 26, 1999 0.02469 May 27, 1999 0.02302 June 23, 1999 0.02012 Total $0.27639 Taxable dividend --short-term capital gain taxable as dividend income. Payable date Per share Dec. 22, 1998 $0.00333 Taxable dividend -- taxable as long-term capital gain. Payable date Per share Dec. 22, 1998 $0.01984 Total distributions $0.29956 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02057 Aug. 26, 1998 0.01923 Sept. 24, 1998 0.01892 Oct. 26, 1998 0.02039 Nov. 24, 1998 0.01926 Dec. 22, 1998 0.01814 Jan. 25, 1999 0.02223 Feb. 25, 1999 0.02011 March 24, 1999 0.01789 April 26, 1999 0.02095 May 27, 1999 0.01950 June 23, 1999 0.01710 Total $0.23429 Taxable dividend -- short-term capital gain taxable as dividend income. Payable date Per share Dec. 22, 1998 $0.00333 Taxable dividend -- taxable as long term-capital gain. Payable date Per share Dec. 22, 1998 $0.01984 Total distributions $0.25746 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on Michigan municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP Minnesota Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02569 Aug. 26, 1998 0.02430 Sept. 24, 1998 0.02671 Oct. 26, 1998 0.02618 Nov. 24, 1998 0.02383 Dec. 22, 1998 0.02250 Jan. 25, 1999 0.02598 Feb. 25, 1999 0.02354 March 24, 1999 0.02087 April 26, 1999 0.02498 May 27, 1999 0.02368 June 23, 1999 0.02080 Total $0.28906 Taxable dividend -- income distribution taxable as dividend income. Payable date Per share Dec. 22, 1998 $0.00003 Total distributions $0.28909 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02212 Aug. 26, 1998 0.02096 Sept. 24, 1998 0.02345 Oct. 26, 1998 0.02257 Nov. 24, 1998 0.02059 Dec. 22, 1998 0.01897 Jan. 25, 1999 0.02218 Feb. 25, 1999 0.02006 March 24, 1999 0.01785 April 26, 1999 0.02130 May 27, 1999 0.02025 June 23, 1999 0.01785 Total $0.24815 Taxable dividend -- income distribution taxable as dividend income. Payable date Per share Dec. 22, 1998 $0.00003 Total distributions $0.24818 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on Minnesota municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP New York Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02374 Aug. 26, 1998 0.02201 Sept. 24, 1998 0.02189 Oct. 26, 1998 0.02159 Nov. 24, 1998 0.01934 Dec. 22, 1998 0.01955 Jan. 25, 1999 0.02345 Feb. 25, 1999 0.02120 March 24, 1999 0.01843 April 26, 1999 0.02254 May 27, 1999 0.02137 June 23, 1999 0.01859 Total $0.25370 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02023 Aug. 26, 1998 0.01872 Sept. 24, 1998 0.01870 Oct. 26, 1998 0.01804 Nov. 24, 1998 0.01616 Dec. 22, 1998 0.01642 Jan. 25, 1999 0.01971 Feb. 25, 1999 0.01779 March 24 1999 0.01547 April 26, 1999 0.01891 May 27, 1999 0.01800 June 23, 1999 0.01569 Total $0.21384 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on New York municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. Federal Income Tax Information The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on your year-end statement. AXP Ohio Tax-Exempt Fund Fiscal year ended June 30, 1999 Class A Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02461 Aug. 26, 1998 0.02295 Sept. 24, 1998 0.02263 Oct. 26, 1998 0.02407 Nov. 24, 1998 0.02188 Dec. 22, 1998 0.02126 Jan. 25, 1999 0.02604 Feb. 25, 1999 0.02365 March 24, 1999 0.02077 April 26, 1999 0.02546 May 27, 1999 0.02304 June 23, 1999 0.01830 Total distributions $0.27466 Class B Exempt-interest dividends -- taxable status explained below. Payable date Per share July 27, 1998 $0.02099 Aug. 26, 1998 0.01954 Sept. 24, 1998 0.01930 Oct. 26, 1998 0.02040 Nov. 24, 1998 0.01855 Dec. 22, 1998 0.01790 Jan. 25, 1999 0.02215 Feb. 25, 1999 0.02010 March 24, 1999 0.01768 April 26, 1999 0.02170 May 27, 1999 0.01954 June 23, 1999 0.01529 Total distributions $0.23314 Source of distributions 100% of exempt-interest distributions during the fiscal year ended June 30, 1999 was derived from interest on Ohio municipal securities. Federal taxation Exempt-interest dividends are exempt from federal income taxes and should not be included in shareholders' gross income. Other taxation Exempt-interest dividends may be subject to state and local taxes. Each shareholder should consult a tax advisor about reporting this income for state and local tax purposes. This page left blank intentionally. S-6328 N (8/99) AXP State Tax-Exempt Funds IDS Tower 10 Minneapolis, MN 55440-0010 AMERICAN EXPRESS Financial Advisors STATEMENT OF DIFFERENCES Difference Description 1) The layout is different 1) Some of the layout in the throughout the annual report. annual report to shareholders is in two columns. 2) There are pictures, icons 2) Each picture, icon and and graphs throughout the graph is described in annual report. parentheses. 3) There are footnotes. 3) There are footnotes labeling the annual report and containing page numbers. -----END PRIVACY-ENHANCED MESSAGE-----