N-CSRS 1 c57076anvcsrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-4646 RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 8/31 Date of reporting period: 2/28 Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND RIVERSOURCE MINNESOTA TAX-EXEMPT FUND RIVERSOURCE NEW YORK TAX-EXEMPT FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED FEBRUARY 28, 2010 EACH FUND SEEKS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF INCOME GENERALLY EXEMPT FROM FEDERAL INCOME TAX AS WELL AS FROM THE RESPECTIVE STATE AND LOCAL INCOME TAX. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance........................ 2 RiverSource California Tax-Exempt Fund..... 2 RiverSource Minnesota Tax-Exempt Fund...... 7 RiverSource New York Tax-Exempt Fund....... 12 Fund Expenses Examples....................... 17 Portfolios of Investments.................... 21 Statements of Assets and Liabilities......... 49 Statements of Operations..................... 51 Statements of Changes in Net Assets.......... 52 Financial Highlights......................... 55 Notes to Financial Statements................ 67 Proxy Voting................................. 84
RiverSource California Tax-Exempt Fund, RiverSource Minnesota Tax-Exempt Fund and RiverSource New York Tax-Exempt Fund are, singularly and collectively, where the context requires, referred to as either "the Fund," "each Fund" or "the Funds." -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) RiverSource California Tax-Exempt Fund FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource California Tax-Exempt Fund's Class A shares, excluding sales charge, rose 4.51% for the six months ended Feb. 28, 2010. > The Fund outperformed the Barclays Capital Municipal Bond California 2 Plus Year Index which advanced 3.83% for the same period. > The Fund underperformed the Lipper California Municipal Debt Funds Index, which gained 5.38% for the same period. > A broad barometer applicable to each of the Funds, the Barclays Capital Municipal Bond Index was up 4.13% for the same six month period. ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------------------------------------- RiverSource California Tax- Exempt Fund Class A (excluding sales charge) +4.51% +11.51% +2.88% +3.46% +4.87% ---------------------------------------------------------------------------- Barclays Capital Municipal Bond California 2 Plus Year Index(1) (unmanaged) +3.83% +9.89% +3.60% +4.13% +5.75% ---------------------------------------------------------------------------- Barclays Capital Municipal Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83% ---------------------------------------------------------------------------- Lipper California Municipal Debt Funds Index(3) +5.38% +12.64% +2.15% +3.15% +4.92% ----------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The -------------------------------------------------------------------------------- 2 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource California Tax-Exempt Fund performance of other classes may vary from that shown because of differences in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Barclays Capital Municipal Bond California 2 Plus Year Index, an unmanaged index, is a market value-weighted index of California investment- grade fixed-rate municipal bonds with maturities of two years or more. (2) The Barclays Capital Municipal Bond Index, an unmanaged index, is made up of a representative list of general obligation, revenue, insured and pre- refunded bonds. The index is frequently used as a general measure of tax- exempt bond market performance. The Barclays Capital indices reflect reinvestment of all distributions and changes in market prices. (3) The Lipper California Municipal Debt Funds Index includes the 30 largest municipal debt funds in California tracked by Lipper Inc. The Lipper index's returns include net reinvested dividends. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource California Tax-Exempt Fund AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT FEB. 28, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 8/18/86) +4.51% +11.51% +2.88% +3.46% +4.87% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) +3.92% +10.46% +2.04% +2.65% +4.07% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +4.13% +10.45% +2.04% +2.65% N/A +3.84% ------------------------------------------------------------------------------------ With sales charge Class A (inception 8/18/86) -0.46% +6.21% +1.22% +2.46% +4.36% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) -1.08% +5.46% +1.12% +2.30% +4.07% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +3.13% +9.45% +2.04% +2.65% N/A +3.84% ------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. *Not annualized. **For class with less than 10 years performance. -------------------------------------------------------------------------------- 4 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource California Tax-Exempt Fund STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG X HIGH MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS -------------------------------------------------------------------------------- Weighted average life(1) 19.5 years -------------------------------------- Effective duration(2) 8.0 years -------------------------------------- Weighted average bond rating(3) A+ --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. There are risks associated with an investment in a municipal bond fund, including credit risk, interest rate risk, prepayment and extension risk, and geographic concentration risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities. Non-investment grade securities, commonly called "high- yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. Because the Fund concentrates its investments in municipal securities issued by a single state and its municipalities, specific events or factors affecting a particular state can cause more volatility in the Fund than a fund that is more geographically diversified. Income from tax-exempt funds may be subject to state and local taxes and a portion of income may be subject to the federal and/or state alternative minimum tax for certain investors. Federal income tax rules will apply to any capital gains distribution. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource California Tax-Exempt Fund QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at Feb. 28, 2010) ---------------------------------------------------------------------
AAA rating 7.4% ------------------------------------------------ AA rating 32.4% ------------------------------------------------ A rating 43.0% ------------------------------------------------ BBB rating 13.3% ------------------------------------------------ Non-investment grade 2.6% ------------------------------------------------ Non-rated 1.3% ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Cash & Cash Equivalents). Ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 4.6% of the bond portfolio assets were determined through internal analysis. -------------------------------------------------------------------------------- 6 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) RiverSource Minnesota Tax-Exempt Fund FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Minnesota Tax-Exempt Fund's Class A shares, excluding sales charge, gained 4.80% for the six months ended Feb. 28, 2010. > The Fund outperformed the Barclays Capital Municipal Bond Minnesota 3 Plus Year Enhanced Index which rose 3.98%. > The Fund also outperformed the Lipper Minnesota Municipal Debt Funds Index, which was up 4.62%, for the same period. > A broad barometer applicable to each of the Funds, the Barclays Capital Municipal Bond Index was up 4.13% for the same six month period. ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------- RiverSource Minnesota Tax- Exempt Fund Class A (excluding sales charge) +4.80% +11.37% +4.19% +3.96% +5.03% ----------------------------------------------------------------------------- Barclays Capital Municipal Bond Minnesota 3 Plus Year Enhanced Index(1) (unmanaged) +3.98% +8.81% +5.40% +4.95% +6.10% ----------------------------------------------------------------------------- Barclays Capital Municipal Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83% ----------------------------------------------------------------------------- Lipper Minnesota Municipal Debt Funds Index(3) +4.62% +10.99% +3.80% +3.89% +5.14% -----------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 7 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Minnesota Tax-Exempt Fund in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Barclays Capital Municipal Bond Minnesota 3 Plus Year Enhanced Index, an unmanaged index, is a market value-weighted index of Minnesota investment- grade fixed-rate municipal bonds with maturities of three years or more. (2) The Barclays Capital Municipal Bond Index, an unmanaged index, is made up of a representative list of general obligation, revenue, insured and pre- refunded bonds. The index is frequently used as a general measure of tax- exempt bond market performance. The Barclays Capital indices reflect reinvestment of all distributions and changes in market prices. (3) The Lipper Minnesota Municipal Debt Funds Index includes the 10 largest municipal debt funds in Minnesota tracked by Lipper Inc. The Lipper index's returns include net reinvested dividends. -------------------------------------------------------------------------------- 8 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT FEB. 28, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 8/18/86) +4.80% +11.37% +4.19% +3.96% +5.03% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) +4.41% +10.54% +3.41% +3.18% +4.25% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +4.41% +10.55% +3.41% +3.18% N/A +4.12% ------------------------------------------------------------------------------------ With sales charge Class A (inception 8/18/86) -0.17% +6.09% +2.52% +2.95% +4.52% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) -0.59% +5.54% +2.47% +2.82% +4.25% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +3.41% +9.55% +3.41% +3.18% N/A +4.12% ------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. *Not annualized. **For classes with less than 10 years performance. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 9 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource Minnesota Tax-Exempt Fund STYLE MATRIX --------------------------------------------------------------------------------
QUALITY SHORT INT. LONG X HIGH MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS --------------------------------------------------------------------------------
Weighted average life(1) 16.3 years -------------------------------------- Effective duration(2) 6.8 years -------------------------------------- Weighted average bond rating(3) AA- --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. -------------------------------------------------------------------------------- 10 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at Feb. 28, 2010) ---------------------------------------------------------------------
AAA rating 22.6% ------------------------------------------------ AA rating 18.8% ------------------------------------------------ A rating 41.3% ------------------------------------------------ BBB rating 10.7% ------------------------------------------------ Non-investment grade 4.9% ------------------------------------------------ Non-rated 1.7% ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Cash & Cash Equivalents). Ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 7.3% of the bond portfolio assets were determined through internal analysis. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 11 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) RiverSource New York Tax-Exempt Fund FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource New York Tax-Exempt Fund's Class A shares, excluding sales charge, advanced 4.55% for the six months ended Feb. 28, 2010. > The Fund slightly underperformed the Barclays Capital Municipal Bond New York 4 Plus Year Index which rose 4.58% for the same period. > The Fund also underperformed the Lipper New York Municipal Debt Funds Index, which gained 4.99% for the same period. > A broad barometer applicable to each of the Funds, the Barclays Capital Municipal Bond Index was up 4.13% for the same six month period. ANNUALIZED TOTAL RETURNS (for period ended Feb. 28, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------- RiverSource New York Tax- Exempt Fund Class A (excluding sales charge) +4.55% +11.87% +3.55% +3.63% +4.92% ----------------------------------------------------------------------------- Barclays Capital Municipal Bond New York 4 Plus Year Index(1) (unmanaged) +4.58% +11.09% +4.83% +4.75% +6.23% ----------------------------------------------------------------------------- Barclays Capital Municipal Bond Index(2) (unmanaged) +4.13% +9.98% +4.56% +4.50% +5.83% ----------------------------------------------------------------------------- Lipper New York Municipal Debt Funds Index(3) +4.99% +12.91% +3.23% +3.65% +5.15% -----------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting riversource.com/funds or calling 1(800) 221-2450. The 4.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences -------------------------------------------------------------------------------- 12 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource New York Tax-Exempt Fund in fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Barclays Capital Municipal Bond New York 4 Plus Year Index, an unmanaged index, is a market value-weighted index of New York investment-grade fixed- rate municipal bonds with maturities of four years or more. (2) The Barclays Capital Municipal Bond Index, an unmanaged index, is made up of a representative list of general obligation, revenue, insured and pre- refunded bonds. The index is frequently used as a general measure of tax- exempt bond market performance. The Barclays Capital indices reflect reinvestment of all distributions and changes in market prices. (3) The Lipper New York Municipal Debt Funds Index includes the 30 largest municipal debt funds in New York tracked by Lipper Inc. The Lipper index's returns include net reinvested dividends. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 13 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource New York Tax-Exempt Fund AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT FEB. 28, 2010 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** Class A (inception 8/18/86) +4.55% +11.87% +3.55% +3.63% +4.92% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) +4.16% +11.03% +2.78% +2.86% +4.13% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +3.96% +10.81% +2.71% +2.82% N/A +3.96% ------------------------------------------------------------------------------------ With sales charge Class A (inception 8/18/86) -0.41% +6.56% +1.89% +2.63% +4.41% N/A ------------------------------------------------------------------------------------ Class B (inception 3/20/95) -0.84% +6.03% +1.84% +2.51% +4.13% N/A ------------------------------------------------------------------------------------ Class C (inception 6/26/00) +2.96% +9.81% +2.71% +2.82% N/A +3.96% ------------------------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 4.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. *Not annualized. **For classes with less than 10 years performance. -------------------------------------------------------------------------------- 14 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource New York Tax-Exempt Fund STYLE MATRIX --------------------------------------------------------------------------------
QUALITY SHORT INT. LONG X HIGH MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO STATISTICS --------------------------------------------------------------------------------
Weighted average life(1) 18.3 years -------------------------------------- Effective duration(2) 6.3 years -------------------------------------- Weighted average bond rating(3) AA- --------------------------------------
(1) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into consideration the possibility that the issuer may call the bond before its maturity date. (2) EFFECTIVE DURATION measures the sensitivity of a security's price to parallel shifts in the yield curve (the graphical depiction of the levels of interest rates from two years out to 30 years). Positive duration means that as rates rise, the price decreases, and negative duration means that as rates rise, the price increases. (3) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the underlying bonds in the portfolio. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 15 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- RiverSource New York Tax-Exempt Fund QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at Feb. 28, 2010) ---------------------------------------------------------------------
AAA rating 20.4% ------------------------------------------------ AA rating 44.2% ------------------------------------------------ A rating 17.1% ------------------------------------------------ BBB rating 8.3% ------------------------------------------------ Non-investment grade 10.0% ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Cash & Cash Equivalents). Ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 1.5% of the bond portfolio assets were determined through internal analysis. -------------------------------------------------------------------------------- 16 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT FUND EXPENSES EXAMPLES --------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Feb. 28, 2010 ACTUAL EXPENSES The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare each 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in each table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 17 FUND EXPENSES EXAMPLES (continued) --------------------------------------------- RiverSource California Tax-Exempt Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,045.10 $3.96 .79% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.65 $3.91 .79% ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,039.20 $7.70 1.54% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.97 $7.62 1.54% ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,041.30 $7.71 1.54% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.97 $7.62 1.54% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Feb. 28, 2010: +4.51% for Class A, +3.92% for Class B and +4.13% for Class C. -------------------------------------------------------------------------------- 18 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,048.00 $3.97 .79% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.65 $3.91 .79% ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,044.10 $7.77 1.55% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.92 $7.67 1.55% ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,044.10 $7.72 1.54% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.97 $7.62 1.54% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Feb. 28, 2010: +4.80% for Class A, +4.41% for Class B and +4.41% for Class C. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 19 FUND EXPENSES EXAMPLES (continued) --------------------------------------------- RiverSource New York Tax-Exempt Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED SEPT. 1, 2009 FEB. 28, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,045.50 $3.96 .79% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.65 $3.91 .79% ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,041.60 $7.71 1.54% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.97 $7.62 1.54% ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,039.60 $7.70 1.54% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.97 $7.62 1.54% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Feb. 28, 2010: +4.55% for Class A, +4.16% for Class B and +3.96% for Class C. -------------------------------------------------------------------------------- 20 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- RiverSource California Tax-Exempt Fund FEB. 28, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
MUNICIPAL BONDS (94.7%) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) ADVANCED REFUNDED (0.6%) Los Angeles Harbor Department Revenue Bonds Series 1988 Escrowed to Maturity 10-01-18 7.60% $725,000 $885,515 ------------------------------------------------------------------------------------- AIRPORT (1.4%) County of Sacramento Revenue Bonds Series 2009B 07-01-39 5.75 2,000,000 2,137,780 ------------------------------------------------------------------------------------- CITY (1.0%) City of Martinez Unlimited General Obligation Bonds Election of 2008 Series 2009A 08-01-34 5.00 1,560,000 1,606,051 ------------------------------------------------------------------------------------- COLLEGE (12.2%) California Municipal Finance Authority Revenue Bonds Biola University Series 2008 10-01-28 5.80 2,000,000 2,055,760 California Municipal Finance Authority Revenue Bonds Loma Linda University Series 2007 04-01-32 4.75 2,300,000 2,142,013 California State University Revenue Bonds Systemwide Series 2009A 11-01-29 5.25 3,000,000 3,133,051 Chabot-Las Positas Community College District Unlimited General Obligation Bonds Capital Appreciation Election of 2004 Zero Coupon Series 2006B (AMBAC) 08-01-19 4.75 1,000,000(b) 639,460 Los Angeles Community College District Unlimited General Obligation Bonds Election of 2001 Series 2008E-1 08-01-28 5.00 2,000,000 2,086,560 Merced Community College District Refunding Revenue Bonds School Facilities Financing Authority Series 2006 (NPFGC) 08-01-21 5.00 700,000 787,514 San Bernardino Community College District Unlimited General Obligation Bonds Election of 2002 Series 2008A 08-01-33 6.25 1,000,000 1,118,640 San Diego Community College District Unlimited General Obligation Bonds Election of 2006 Series 2007 (AGM) 08-01-30 5.00 2,500,000 2,567,000 San Mateo County Community College District Unlimited General Obligation Bonds Election of 2001 Series 2002A (NPFGC/FGIC) 09-01-18 5.38 1,000,000 1,096,030 University of California Revenue Bonds Series 2008D 05-15-27 5.00 1,500,000 1,553,175
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource California Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) COLLEGE (CONT.) University of California Revenue Bonds Series 2009Q 05-15-34 5.00% $1,750,000 $1,820,420 --------------- Total 18,999,623 ------------------------------------------------------------------------------------- COUNTY (0.7%) California Statewide Communities Development Authority Revenue Bonds Thomas Jefferson School of Law Series 2008A 10-01-38 7.25 1,000,000 1,021,990 ------------------------------------------------------------------------------------- ELECTRIC (4.1%) California State Department of Water Resources Revenue Bonds Power Supply Series 2008H 05-01-22 5.00 2,000,000 2,193,820 City of Vernon Revenue Bonds Series 2009A 08-01-21 5.13 1,500,000 1,582,320 Walnut Energy Center Authority Revenue Bonds Series 2004A (AMBAC) 01-01-29 5.00 2,500,000 2,511,125 --------------- Total 6,287,265 ------------------------------------------------------------------------------------- HEALTH CARE -- HOSPITAL (21.5%) California Health Facilities Financing Authority Refunding Revenue Bonds Cedars-Sinai Medical Center Series 2005 11-15-34 5.00 1,525,000 1,434,263 California Health Facilities Financing Authority Revenue Bonds Adventist Health System West Series 2009A 09-01-39 5.75 3,000,000 3,041,640 California Health Facilities Financing Authority Revenue Bonds Cedars-Sinai Medical Center Series 2009 08-15-39 5.00 1,500,000 1,403,595 California Health Facilities Financing Authority Revenue Bonds Providence Health & Services Series 2008C 10-01-28 6.25 500,000 567,510 10-01-38 6.50 1,500,000 1,693,590 California Health Facilities Financing Authority Revenue Bonds Providence Health & Services Series 2009B 10-01-39 5.50 3,200,000 3,350,432 California Health Facilities Financing Authority Revenue Bonds Scripps Health Series 2008A 10-01-22 5.00 3,250,000 3,426,280 California Health Facilities Financing Authority Revenue Bonds Sutter Health Series 2008A 08-15-30 5.00 2,500,000 2,403,925 California Municipal Finance Authority Revenue Bonds Community Hospital Center Series 2009 02-01-39 5.50 3,250,000 2,847,065 California Statewide Communities Development Authority Revenue Bonds Catholic Healthcare West Series 2008B 07-01-30 5.50 1,975,000 2,004,625 California Statewide Communities Development Authority Revenue Bonds Daughters of Charity Health Series 2005A 07-01-30 5.25 3,015,000 2,744,464
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) HEALTH CARE -- HOSPITAL (CONT.) California Statewide Communities Development Authority Revenue Bonds John Muir Health Series 2006A 08-15-32 5.00% $2,450,000 $2,347,884 California Statewide Communities Development Authority Revenue Bonds Kaiser Permanente Series 2006B 03-01-45 5.25 1,000,000 955,370 City of Turlock Certificate of Participation Emanuel Medical Center Series 2007A 10-15-31 5.13 3,930,000 3,314,680 Sierra View Local Health Care District Revenue Bonds Series 2007 07-01-37 5.25 2,000,000 1,797,000 --------------- Total 33,332,323 ------------------------------------------------------------------------------------- HOUSING -- OTHER (1.0%) California Statewide Communities Development Authority Revenue Bonds CHF -- Irvine LLC -- UCI East Campus Series 2008 05-15-32 5.75 1,500,000 1,497,975 ------------------------------------------------------------------------------------- HOUSING -- SINGLE FAMILY (1.4%) California Housing Finance Agency Revenue Bonds Home Mortgage Series 2006H (FGIC) A.M.T. 08-01-30 5.75 1,255,000 1,346,677 California Housing Finance Agency Revenue Bonds Home Mortgage Series 2006K A.M.T. 02-01-42 5.50 720,000 764,626 --------------- Total 2,111,303 ------------------------------------------------------------------------------------- LEASE (3.2%) Eastern Municipal Water District Certificate of Participation Series 2008H 07-01-33 5.00 1,000,000 1,010,820 Los Angeles Municipal Improvement Corporation Revenue Bonds Series 2008B 09-01-38 5.00 3,000,000 2,881,140 San Mateo County Board of Education Refunding Certificate of Participation Series 2009 06-01-35 5.25 1,000,000 1,007,210 --------------- Total 4,899,170 ------------------------------------------------------------------------------------- MISCELLANEOUS REVENUE (5.9%) California Infrastructure & Economic Development Bank Revenue Bonds Walt Disney Family Museum Series 2008 02-01-33 5.25 2,600,000 2,630,160 Golden State Tobacco Securitization Corporation Asset-backed Revenue Bonds Series 2007A-1 06-01-47 5.13 6,000,000 4,014,179 Golden State Tobacco Securitization Corporation Prerefunded Revenue Bonds Series 2003A-1 06-01-40 6.63 750,000 880,358 Oakley Redevelopment Agency Subordinated Revenue Bonds Oakley Redevelopment Project Area Series 2008A (AMBAC) 09-01-38 5.00 1,750,000 1,505,998 --------------- Total 9,030,695 ------------------------------------------------------------------------------------- PORT DISTRICT (0.7%) Port of Oakland Refunding Revenue Bonds Series 2000K (NPFGC/FGIC) A.M.T. 11-01-18 5.63 1,000,000 1,001,570 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource California Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) SCHOOL (11.2%) Alhambra Unified School District Unlimited General Obligation Bonds Capital Appreciation Zero Coupon Series 1999A (AGM) 09-01-22 5.95% $1,055,000(b) $534,189 California Statewide Communities Development Authority Revenue Bonds Polytechnic School Series 2009 12-01-34 5.00 500,000 490,215 Centinela Valley Union High School District Unlimited General Obligation Bonds Series 2002A (NPFGC) 08-01-31 5.25 2,000,000 2,005,040 Encinitas Union School District Unlimited General Obligation Bonds Capital Appreciation Zero Coupon Series 1996 (NPFGC) 08-01-15 5.85 2,500,000(b) 2,083,524 Lakeside Union Elementary School District Unlimited General Obligation Bonds Series 2009 08-01-33 5.00 1,750,000 1,765,663 Lammersville School District #2002 Community Facilities Special Tax Bonds Mountain House Series 2006 09-01-35 5.13 1,000,000 762,040 Los Angeles Unified School District Unlimited General Obligation Bonds Election of 2002 Series 2007B (AMBAC) 07-01-22 5.00 1,395,000 1,495,831 Menifee Union School District Unlimited General Obligation Bonds Election of 2008 Series 2008A 08-01-33 5.50 3,125,000 3,281,718 San Juan Unified School District Unlimited General Obligation Bonds Capital Appreciation Zero Coupon Series 1999 (AGM) 08-01-21 5.68 820,000(b) 444,875 08-01-24 5.70 1,810,000(b) 803,676 Simi Valley School Financing Authority Refunding Revenue Bonds Unified School District Series 2007 (AGM) 08-01-23 5.00 1,500,000 1,651,890 Twin Rivers Unified School District Unlimited General Obligation Bonds Election of 2006 Series 2008 (AGM) 08-01-25 5.00 1,000,000 1,057,000 Western Placer Unified School District Certificate of Participation Series 2008 (Assured Guaranty) 08-01-32 4.75 1,000,000 943,310 --------------- Total 17,318,971 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- ASSESSMENT (1.9%) Palmdale Civic Authority Refunding Revenue Bonds Redevelopment Project #1 Series 2009A 07-01-27 6.00 2,780,000 2,905,100 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- SPECIAL TAX (4.2%) Anaheim Community Facilities District #06-2 Special Tax Bonds Stadium Lofts Series 2007 09-01-37 5.00 1,000,000 767,220 Beaumont Financing Authority Prerefunded Revenue Bonds Series 2000A 09-01-32 7.38 1,955,000 2,064,519
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) SPECIAL DISTRICT -- SPECIAL TAX (CONT.) Orange Unified School District #2005-2 Community Facilities Special Tax Bonds Del Rio School Facilities Series 2007 09-01-37 5.00% $1,000,000 $752,430 Pittsburg Redevelopment Agency Tax Allocation Bonds Los Medanos Community Development Project Zero Coupon Series 1999 (AMBAC) 08-01-24 6.05 2,100,000(b) 857,262 Rancho Cucamonga Redevelopment Agency Tax Allocation Bonds Housing Set Aside Series 2007A (NPFGC) 09-01-34 5.00 2,200,000 1,963,346 --------------- Total 6,404,777 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- TAX ALLOCATION (3.6%) Bakersfield Redevelopment Agency Tax Allocation Bonds Old Town Kern Pioneer Series 2009A 08-01-29 7.50 1,650,000 1,625,036 Bakersfield Redevelopment Agency Tax Allocation Bonds Southeast Bakersfield Series 2009B 08-01-29 7.25 740,000 744,958 Folsom Redevelopment Agency Tax Allocation Bonds Central Folsom Redevelopment Project Series 2009 08-01-29 5.13 800,000 775,568 08-01-36 5.50 800,000 780,384 Inglewood Redevelopment Agency Refunding Tax Allocation Bonds Merged Redevelopment Project Series 1998A (AMBAC) 05-01-23 5.25 1,100,000 1,087,361 San Francisco City & County Redevelopment Agency Tax Allocation Bonds Mission Bay South Redevelopment Series 2009D 08-01-29 6.38 500,000 522,110 --------------- Total 5,535,417 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- TAX INCREMENT (1.7%) San Francisco City & County Redevelopment Agency Tax Allocation Bonds Mission Bay North Redevelopment Series 2009C 08-01-29 6.00 500,000 513,370 08-01-39 6.50 1,625,000 1,707,858 San Francisco City & County Redevelopment Agency Tax Allocation Bonds Redevelopment Projects Series 2009B 08-01-28 6.13 310,000 327,128 --------------- Total 2,548,356 ------------------------------------------------------------------------------------- STATE (9.9%) State of California Refunding Unlimited General Obligation Bonds Series 2007 08-01-30 4.50 3,340,000 2,863,349 State of California Unlimited General Obligation Bonds Series 2002 02-01-15 6.00 1,000,000 1,149,420 State of California Unlimited General Obligation Bonds Series 2003 02-01-21 5.00 3,000,000 3,077,099 State of California Unlimited General Obligation Bonds Series 2004 02-01-22 5.00 1,000,000 1,020,900
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource California Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) STATE (CONT.) State of California Unlimited General Obligation Bonds Various Purpose Series 2003 11-01-24 5.13% $2,000,000 $2,024,240 State of California Unlimited General Obligation Bonds Veterans Series 2000BJ-RMKT A.M.T. 12-01-12 4.95 1,000,000 1,022,900 12-01-13 5.05 1,435,000 1,464,389 12-01-14 5.15 2,535,000 2,585,751 State of California Unrefunded Unlimited General Obligation Bonds Series 2004 04-01-29 5.30 2,000 1,986 --------------- Total 15,210,034 ------------------------------------------------------------------------------------- WATER & SEWER (8.5%) Anaheim Public Financing Authority Revenue Bonds Series 2007 (NPFGC) 02-01-33 4.75 3,500,000 3,461,324 Eastern Municipal Water District Special Tax Bonds District #2004-27 Cottonwood Series 2006 09-01-27 5.00 200,000 165,072 09-01-36 5.00 500,000 378,730 Los Angeles Department of Water & Power Revenue Bonds Series 2009A 07-01-34 5.38 2,495,000 2,694,326 Rowland Water District Certificate of Participation Recycled Water Project Series 2008 12-01-39 6.25 2,235,000 2,411,342 Semitropic Improvement District Revenue Bonds Series 2004A (XLCA) 12-01-28 5.00 2,000,000 2,033,740 Turlock Public Financing Authority Revenue Bonds Series 2008 05-01-32 4.75 2,000,000 1,959,560 --------------- Total 13,104,094 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (Cost: $143,999,561) $145,838,009 ------------------------------------------------------------------------------------- MUNICIPAL NOTES (1.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUE DESCRIPTION (c,d,e) YIELD MATURITY VALUE(a) City of Irvine Limited Obligation Special Assessment Bonds District #93-14 V.R.D.N. Series 2000 (Bank of America) 09-02-25 0.12% $1,900,000 $1,900,000 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL NOTES (Cost: $1,900,000) $1,900,000 -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.1%) SHARES VALUE(a) JPMorgan Tax-Free Money Market Fund 1,710,850 $1,710,850 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $1,710,850) $1,710,850 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $147,610,411)(f) $149,448,859 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 26 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) For zero coupons, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (c) The Fund is entitled to receive principal and interest from the party, if indicated in parentheses, after a day or a week's notice or upon maturity. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Feb. 28, 2010. (d) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AGM -- Assured Guaranty Municipal Corporation AMBAC -- Ambac Assurance Corporation BHAC -- Berkshire Hathaway Assurance Corporation BIG -- Bond Investors Guarantee BNY -- Bank of New York CGIC -- Capital Guaranty Insurance Company CIFG -- IXIS Financial Guaranty FGIC -- Financial Guaranty Insurance Company FHA -- Federal Housing Authority FHLMC -- Federal Home Loan Mortgage Corporation FNMA -- Federal National Mortgage Association GNMA -- Government National Mortgage Association MGIC -- Mortgage Guaranty Insurance Corporation NPFGC -- National Public Finance Guarantee Corporation TCRS -- Transferable Custodial Receipts XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value of securities subject to alternative minimum tax represented 5.32% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note
-------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource California Tax-Exempt Fund NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) At Feb. 28, 2010, the cost of securities for federal income tax purposes was approximately $147,610,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $5,550,000 Unrealized depreciation (3,711,000) ---------------------------------------------------------- Net unrealized appreciation $1,839,000 ----------------------------------------------------------
-------------------------------------------------------------------------------- 28 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource California Tax-Exempt Fund FAIR VALUE MEASUREMENTS (CONTINUED) inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Feb. 28, 2010:
FAIR VALUE AT FEB. 28, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Bonds Municipal Bonds $-- $145,838,009 $-- $145,838,009 --------------------------------------------------------------------------------------------- Total Bonds -- 145,838,009 -- 145,838,009 --------------------------------------------------------------------------------------------- Other Municipal Notes -- 1,900,000 -- 1,900,000 Unaffiliated Money Market Fund(a) 1,710,850 -- -- 1,710,850 --------------------------------------------------------------------------------------------- Total Other 1,710,850 1,900,000 -- 3,610,850 --------------------------------------------------------------------------------------------- Investments in Securities $1,710,850 $147,738,009 $-- $149,448,859 ---------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Feb. 28, 2010. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 30 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund FEB. 28, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
MUNICIPAL BONDS (96.3%) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) AIRPORT (0.7%) Minneapolis-St. Paul Metropolitan Airports Commission Refunding Revenue Bonds Series 2009B A.M.T. 01-01-22 5.00% $2,200,000 $2,244,000 ------------------------------------------------------------------------------------- COLLEGE (12.1%) Minnesota Higher Education Facilities Authority Revenue Bonds Bethel University 6th Series 2007R 05-01-37 5.50 6,000,000 5,630,220 Minnesota Higher Education Facilities Authority Revenue Bonds Carleton College 6th Series 2008T 01-01-28 5.00 3,000,000 3,177,390 Minnesota Higher Education Facilities Authority Revenue Bonds Macalester College 6th Series 2004B 03-01-17 5.00 2,395,000 2,613,113 Minnesota Higher Education Facilities Authority Revenue Bonds St. Benedict College Series 2008V 03-01-18 5.00 500,000 537,895 03-01-23 4.75 800,000 810,104 Minnesota Higher Education Facilities Authority Revenue Bonds St. John's University 6th Series 2005G 10-01-22 5.00 3,000,000 3,155,910 Minnesota Higher Education Facilities Authority Revenue Bonds St. John's University 6th Series 2008U 10-01-28 4.75 1,000,000 1,013,350 10-01-33 4.75 825,000 802,139 Minnesota Higher Education Facilities Authority Revenue Bonds University of St. Thomas 6th Series 2008W 10-01-30 6.00 3,625,000 3,874,654 Minnesota Higher Education Facilities Authority Revenue Bonds University of St. Thomas 6th Series 2009X 04-01-39 5.25 4,900,000 4,986,828 Minnesota Higher Education Facilities Authority Revenue Bonds University of St. Thomas Series 2009-7A 10-01-39 5.00 3,000,000 3,015,750 University of Minnesota Revenue Bonds Series 1996A Escrowed to Maturity 07-01-21 5.50 8,500,000 10,036,630 University of Minnesota Revenue Bonds Series 2009A 04-01-34 5.13 1,000,000 1,066,340 --------------- Total 40,720,323 ------------------------------------------------------------------------------------- COUNTY (5.1%) County of Hennepin Prerefunded Unlimited General Obligation Bonds Series 2003 12-01-23 4.75 2,000,000 2,146,860
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 31 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) COUNTY (CONT.) County of Hennepin Unlimited General Obligation Bonds Series 2008D 12-01-28 5.00% $9,355,000 $10,117,057 County of Ramsey Unlimited General Obligation Bonds Capital Improvement Plan Series 2007A 02-01-21 5.00 1,035,000 1,173,266 02-01-22 5.00 1,080,000 1,216,609 02-01-23 5.00 1,125,000 1,260,158 02-01-24 5.00 1,170,000 1,302,374 --------------- Total 17,216,324 ------------------------------------------------------------------------------------- ELECTRIC (18.6%) City of Chaska Refunding Revenue Bonds Generating Facilities Series 2005A 10-01-20 5.25 1,165,000 1,245,164 10-01-30 5.00 3,800,000 3,877,862 Minnesota Municipal Power Agency Revenue Bonds Series 2004A 10-01-29 5.13 5,500,000 5,627,325 Minnesota Municipal Power Agency Revenue Bonds Series 2005 10-01-30 5.00 3,000,000 3,051,090 Minnesota Municipal Power Agency Revenue Bonds Series 2007 10-01-32 4.75 3,000,000 3,015,060 Northern Municipal Power Agency Refunding Revenue Bonds Series 1998B (AMBAC) 01-01-20 4.75 5,000,000 5,013,850 Northern Municipal Power Agency Revenue Bonds Series 2007A (AMBAC) 01-01-26 5.00 2,500,000 2,628,975 Northern Municipal Power Agency Revenue Bonds Series 2008A (Assured Guaranty) 01-01-21 5.00 2,500,000 2,715,925 Puerto Rico Electric Power Authority Prerefunded Revenue Bonds Series 2003NN (NPFGC) 07-01-32 5.00 2,820,000(b) 3,190,378 Southern Minnesota Municipal Power Agency Revenue Bonds Capital Appreciation Zero Coupon Series 1994A (NPFGC) 01-01-19 6.67 17,000,000(c) 12,216,369 01-01-26 5.19 12,500,000(c) 6,042,500 Southern Minnesota Municipal Power Agency Revenue Bonds Series 2002A (AMBAC) 01-01-17 5.25 6,000,000 6,825,780 Western Minnesota Municipal Power Agency Revenue Bonds Series 2003A (NPFGC) 01-01-26 5.00 7,250,000 7,401,090 --------------- Total 62,851,368 ------------------------------------------------------------------------------------- HEALTH CARE -- HOSPITAL (25.5%) City of Breckenridge Revenue Bonds Catholic Health Initiatives Series 2004A 05-01-30 5.00 4,300,000 4,385,742 City of Maple Grove Revenue Bonds Maple Grove Hospital Corporation Series 2007 05-01-20 5.00 1,000,000 1,043,420 05-01-21 5.00 1,500,000 1,559,490 05-01-37 5.25 4,715,000 4,454,213
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 32 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) HEALTH CARE -- HOSPITAL (CONT.) City of Minneapolis Revenue Bonds Fairview Health Services Series 2002B (NPFGC) 05-15-15 5.50% $2,160,000 $2,288,412 05-15-16 5.50 2,200,000 2,312,200 City of Minneapolis Revenue Bonds Fairview Health Services Series 2008A 11-15-32 6.75 5,240,000 5,826,356 City of Shakopee Revenue Bonds St. Francis Regional Medical Center Series 2004 09-01-25 5.10 6,300,000 6,075,531 City of St. Cloud Revenue Bonds Centracare Health System Series 2010A 05-01-30 5.13 4,000,000 3,967,400 City of St. Louis Park Refunding Revenue Bonds Park Nicollet Health Services Series 2009 07-01-39 5.75 3,000,000 2,991,300 City of Winona Refunding Revenue Bonds Winona Health Obligation Group Series 2007 07-01-31 5.15 2,000,000 1,785,680 County of Chippewa Revenue Bonds Montevideo Hospital Project Series 2007 03-01-20 5.38 1,940,000 1,965,414 03-01-21 5.38 1,045,000 1,052,576 County of Meeker Revenue Bonds Memorial Hospital Project Series 2007 11-01-27 5.75 1,000,000 1,000,520 11-01-37 5.75 2,250,000 2,156,738 Minnesota Agricultural & Economic Development Board Prerefunded Revenue Bonds Health Care System Series 2000A 11-15-22 6.38 4,845,000 5,106,678 Minnesota Agricultural & Economic Development Board Unrefunded Revenue Bonds Benedictine Health System Series 1999A (NPFGC) 02-15-16 4.75 755,000 762,490 Northfield Revenue Bonds Series 2006 11-01-31 5.38 1,500,000 1,385,280 St. Louis Park Revenue Bonds Park Nicollet Health Services Series 2008C 07-01-26 5.63 3,000,000 3,093,420 St. Paul Housing & Redevelopment Authority Revenue Bonds Allina Health Systems Series 2007A (NPFGC) 11-15-22 5.00 3,000,000 3,053,610 St. Paul Housing & Redevelopment Authority Revenue Bonds Allina Health Systems Series 2009A-1 11-15-29 5.25 5,750,000 5,742,525 St. Paul Housing & Redevelopment Authority Revenue Bonds Gillette Children's Specialty Series 2009 02-01-27 5.00 6,145,000 6,000,777 02-01-29 5.00 2,475,000 2,398,349
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 33 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) HEALTH CARE -- HOSPITAL (CONT.) St. Paul Housing & Redevelopment Authority Revenue Bonds Healtheast Project Series 2005 11-15-25 6.00% $2,000,000 $1,942,400 11-15-35 6.00 1,500,000 1,365,060 St. Paul Housing & Redevelopment Authority Revenue Bonds HealthPartners Obligation Group Project Series 2006 05-15-23 5.25 1,000,000 1,000,480 05-15-26 5.25 1,000,000 977,820 05-15-36 5.25 7,500,000 6,871,575 Staples United Hospital District Unlimited General Obligation Bonds Health Care Facilities-Lakewood Series 2004 12-01-34 5.00 3,525,000 3,572,411 --------------- Total 86,137,867 ------------------------------------------------------------------------------------- HEALTH CARE -- LIFE CARE CENTER (0.5%) City of Stillwater Revenue Bonds Health System Obligation Group Series 2005 06-01-25 5.00 1,750,000 1,754,848 ------------------------------------------------------------------------------------- HEALTH CARE -- NURSING HOME (2.1%) Annandale Economic Development Authority Revenue Bonds Annandale Care Center Project Series 2007A 11-01-37 5.90 3,385,000 2,980,357 City of North Oaks Revenue Bonds Presbyterian Homes Series 2007 10-01-27 6.00 1,250,000 1,235,213 10-01-33 6.00 3,000,000 2,958,840 --------------- Total 7,174,410 ------------------------------------------------------------------------------------- HOUSING -- MULTI-FAMILY (2.2%) Austin Housing & Redevelopment Authority Revenue Bonds Courtyard Residence Project Series 2000A 01-01-32 7.25 2,000,000 2,000,960 City of Rochester Refunding Revenue Bonds Madonna Towers Incorporated Project Series 2007A 11-01-28 5.88 2,050,000 1,730,508 Duluth Housing & Redevelopment Authority Revenue Bonds Benedictine Health Center Project Series 2007 11-01-33 5.88 1,500,000 1,388,175 Steele County Revenue Bonds Elderly Housing Project Series 2000 06-01-30 6.88 2,205,000 2,238,052 --------------- Total 7,357,695 ------------------------------------------------------------------------------------- HOUSING -- SINGLE FAMILY (5.4%) Minneapolis/St. Paul Housing Finance Board Revenue Bonds Mortgage-backed City Living Series 2006A-5 (GNMA/FNMA/FHLMC) 04-01-27 5.45 1,765,886 1,832,689 Minneapolis/St. Paul Housing Finance Board Revenue Bonds Single Family Housing Series 2005A-4 (GNMA/FNMA/FHLMC) A.M.T. 12-01-37 4.70 91,737 89,215 Minnesota Housing Finance Agency Revenue Bonds Residential Housing Finance Series 2002B A.M.T. 07-01-33 5.65 2,120,000 2,135,116
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 34 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) HOUSING -- SINGLE FAMILY (CONT.) Minnesota Housing Finance Agency Revenue Bonds Residential Housing Finance Series 2006B A.M.T. 07-01-26 4.75% $1,890,000 $1,864,523 07-01-31 4.85 2,555,000 2,482,029 Minnesota Housing Finance Agency Revenue Bonds Residential Housing Finance Series 2006I A.M.T. 07-01-26 5.05 3,510,000 3,541,590 Minnesota Housing Finance Agency Revenue Bonds Residential Housing Finance Series 2006M A.M.T. 01-01-37 5.75 2,540,000 2,742,540 Minnesota Housing Finance Agency Revenue Bonds Residential Housing Finance Series 2007D A.M.T. 01-01-38 5.50 3,310,000 3,518,431 --------------- Total 18,206,133 ------------------------------------------------------------------------------------- LEASE (4.9%) St. Paul Port Authority Revenue Bonds Office Building at Cedar Street Series 2003-12 12-01-23 5.00 5,000,000 5,242,650 12-01-27 5.13 10,815,000 11,239,381 --------------- Total 16,482,031 ------------------------------------------------------------------------------------- MISCELLANEOUS REVENUE (2.8%) City of Minneapolis Limited Tax Revenue Bonds Common Bond Fund Series 2007-2A A.M.T. 06-01-22 5.13 1,035,000 1,033,520 06-01-28 5.00 1,500,000 1,407,540 Minneapolis Community Planning & Economic Development Department Limited Tax Revenue Bonds Common Bond Fund Series 1996-1 06-01-11 6.00 450,000 455,121 Minneapolis Community Planning & Economic Development Department Prerefunded Limited Tax Revenue Bonds Common Bond Fund Series 2001-2A A.M.T. 06-01-19 5.88 1,000,000 1,065,780 St. Cloud Housing & Redevelopment Authority Revenue Bonds State University Foundation Project Series 2002 05-01-18 5.13 3,000,000 3,138,690 St. Paul Port Authority Tax Allocation Bonds River Bend Project Lot 1 Series 2007-5 02-01-32 6.38 2,660,000 2,483,296 --------------- Total 9,583,947 ------------------------------------------------------------------------------------- SALES OR USE TAX (2.8%) County of Hennepin Revenue Bonds 2nd Lien Ballpark Project Series 2008B 12-15-27 4.75 4,205,000 4,437,452 12-15-29 5.00 1,825,000 1,953,754 County of Hennepin Revenue Bonds Sales Tax Series 2007 12-15-33 4.75 3,000,000 3,072,510 --------------- Total 9,463,716 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 35 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) SCHOOL (9.1%) City of Maple Grove Revenue Bonds North Memorial Health Care Series 2005 09-01-35 5.00% $2,500,000 $2,269,250 Duluth Independent School District #709 Certificate of Participation Series 2008B (School District Credit Enhancement Program) 02-01-26 4.75 4,000,000 4,211,040 Edina Independent School District #273 Unlimited General Obligation Bonds Series 2004 02-01-24 4.50 3,400,000 3,494,622 Lake Superior Independent School District #381 Prerefunded Unlimited General Obligation Bonds Building Series 2002A (AGM) (School District Credit Enhancement Program) 04-01-13 5.00 65,000 73,079 Lake Superior Independent School District #381 Unrefunded Unlimited General Obligation Bonds Building Series 2002A (AGM) (School District Credit Enhancement Program) 04-01-13 5.00 1,730,000 1,946,717 Rocori Area Schools Independent School District #750 Unlimited General Obligation Bonds School Building Series 2009B (School District Credit Enhancement Program) 02-01-34 4.75 9,200,000 9,462,752 St. Paul Housing & Redevelopment Authority Prerefunded Revenue Bonds Community of Peace Academy Project Series 2001A 12-01-30 7.88 2,390,000 2,574,556 St. Paul Housing & Redevelopment Authority Refunding Revenue Bonds St. Paul Academy & Summit School Series 2007 10-01-24 5.00 5,000,000 5,241,100 White Bear Lake Independent School District #624 Unlimited General Obligation Refunding Bonds Series 2002B (NPFGC/FGIC) (School District Credit Enhancement Program) 02-01-14 5.00 1,480,000 1,592,643 --------------- Total 30,865,759 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- SPECIAL TAX (1.2%) City of Lakeville Revenue Bonds Series 2007 02-01-22 5.00 175,000 155,300 02-01-27 5.00 225,000 204,840 Territory of Guam Revenue Bonds Section 30 Series 2009A 12-01-34 5.75 3,500,000(b) 3,543,995 --------------- Total 3,904,135 ------------------------------------------------------------------------------------- SPECIAL PURPOSE CERTIFICATES -- GENERAL OBLIGATIONS (--%) Minneapolis Community Planning & Economic Development Department Limited Tax Revenue Bonds Common Bond Fund Series 1997-7A 06-01-12 5.50 135,000 136,158 ------------------------------------------------------------------------------------- STATE (3.3%) State of Minnesota Unlimited General Obligation Bonds Series 2002 11-01-15 5.25 3,575,000 3,937,398
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 36 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (d,e) RATE AMOUNT VALUE(a) STATE (CONT.) State of Minnesota Unlimited General Obligation Refunding Bonds Various Purpose Series 2009F 08-01-21 5.00% $6,105,000 $7,284,242 --------------- Total 11,221,640 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (Cost: $312,681,712) $325,320,354 ------------------------------------------------------------------------------------- MUNICIPAL NOTES (1.9%) AMOUNT EFFECTIVE PAYABLE AT ISSUE DESCRIPTION (d,e,f) YIELD MATURITY VALUE(a) Minneapolis & St. Paul Housing & Redevelopment Authority Revenue Bonds Allina Health Systems V.R.D.N. Series 2009B-1 (JP Morgan Chase Bank) 11-15-35 0.13% $4,100,000 $4,100,000 Minnesota Higher Education Facilities Authority Revenue Bonds St. Olaf College V.R.D.N. 5th Series 2000H (Harris Trust & Savings Bank) 10-01-30 0.14 1,700,000 1,700,000 Minnesota Higher Education Facilities Authority Revenue Bonds St. Olaf College V.R.D.N. 5th Series 2002M1 (Harris) 10-01-32 0.14 500,000 500,000 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL NOTES (Cost: $6,300,000) $6,300,000 -------------------------------------------------------------------------------------
MONEY MARKET FUND (0.7%) SHARES VALUE(a) JPMorgan Tax-Free Money Market Fund 2,333,049 $2,333,049 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $2,333,049) $2,333,049 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $321,314,761)(g) $333,953,403 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States. Municipal securities of territories, possessions, or sovereign nations within the territorial boundaries of the United States represented 1.99% of net assets at Feb. 28, 2010. (c) For zero coupons, the interest rate disclosed represents the annualized effective yield on the date of acquisition. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 37 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource Minnesota Tax-Exempt Fund NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (d) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AGM -- Assured Guaranty Municipal Corporation AMBAC -- Ambac Assurance Corporation BHAC -- Berkshire Hathaway Assurance Corporation BIG -- Bond Investors Guarantee BNY -- Bank of New York CGIC -- Capital Guaranty Insurance Company CIFG -- IXIS Financial Guaranty FGIC -- Financial Guaranty Insurance Company FHA -- Federal Housing Authority FHLMC -- Federal Home Loan Mortgage Corporation FNMA -- Federal National Mortgage Association GNMA -- Government National Mortgage Association MGIC -- Mortgage Guaranty Insurance Corporation NPFGC -- National Public Finance Guarantee Corporation TCRS -- Transferable Custodial Receipts XLCA -- XL Capital Assurance
(e) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value of securities subject to alternative minimum tax represented 6.55% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note
(f) The Fund is entitled to receive principal and interest from the party, if indicated in parentheses, after a day or a week's notice or upon maturity. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Feb. 28, 2010. (g) At Feb. 28, 2010, the cost of securities for federal income tax purposes was approximately $321,315,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $14,848,000 Unrealized depreciation (2,210,000) ----------------------------------------------------------- Net unrealized appreciation $12,638,000 -----------------------------------------------------------
-------------------------------------------------------------------------------- 38 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 39 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource Minnesota Tax-Exempt Fund FAIR VALUE MEASUREMENTS (CONTINUED) inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Feb. 28, 2010:
FAIR VALUE AT FEB. 28, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Bonds Municipal Bonds $-- $325,320,354 $-- $325,320,354 --------------------------------------------------------------------------------------------- Total Bonds -- 325,320,354 -- 325,320,354 --------------------------------------------------------------------------------------------- Other Municipal Notes -- 6,300,000 -- 6,300,000 Unaffiliated Money Market Fund(a) 2,333,049 -- -- 2,333,049 --------------------------------------------------------------------------------------------- Total Other 2,333,049 6,300,000 -- 8,633,049 --------------------------------------------------------------------------------------------- Total $2,333,049 $331,620,354 $-- $333,953,403 ---------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Feb. 28, 2010. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 40 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- RiverSource New York Tax-Exempt Fund FEB. 28, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENT IN SECURITIES
MUNICIPAL BONDS (97.7%) COUPON PRINCIPAL ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a) ADVANCED REFUNDED (2.6%) Metropolitan Transportation Authority Prerefunded Revenue Bonds Series 1998A (FGIC) 04-01-28 4.75% $1,000,000 $1,166,530 New York State Dormitory Authority Prerefunded Revenue Bonds Series 1990B 05-15-11 7.50 230,000 233,379 --------------- Total 1,399,909 ------------------------------------------------------------------------------------- CITY (2.0%) City of New York Unrefunded Unlimited General Obligation Bonds Series 2002E 08-01-16 5.75 1,000,000 1,098,830 ------------------------------------------------------------------------------------- COLLEGE (26.2%) Dutchess County Industrial Development Agency Refunding Revenue Bonds Bard College Civic Facilities Series 2007-A1 08-01-22 5.00 500,000 507,105 Nassau County Industrial Development Agency Refunding Revenue Bonds New York Institute of Technology Project Series 2010A 03-01-26 4.75 485,000(e) 478,574 New York State Dormitory Authority Revenue Bonds Brooklyn Law School Series 2003B (XLCA) 07-01-30 5.13 1,000,000 1,000,690 New York State Dormitory Authority Revenue Bonds Columbia University Series 2007C 07-01-29 5.00 1,250,000 1,351,974 New York State Dormitory Authority Revenue Bonds Cornell University Series 2006A 07-01-26 5.00 1,000,000 1,079,350 07-01-31 5.00 1,000,000 1,053,800 New York State Dormitory Authority Revenue Bonds Education Series 2008B 03-15-38 5.25 1,000,000 1,061,350 New York State Dormitory Authority Revenue Bonds Manhattan Marymount College Series 2009 07-01-29 5.25 500,000 499,360 New York State Dormitory Authority Revenue Bonds North Shore-Long Island Jewish Health System Series 2009A 05-01-37 5.50 750,000 758,558 New York State Dormitory Authority Revenue Bonds Rochester Institute of Technology Series 2008A 07-01-33 6.00 1,000,000 1,098,250 New York State Dormitory Authority Revenue Bonds Rockefeller University Series 2009C 07-01-40 5.00 1,000,000 1,049,430 New York State Dormitory Authority Revenue Bonds Teacher's College Series 2009 03-01-39 5.50 500,000 520,535
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 41 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource New York Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a) COLLEGE (CONT.) New York State Dormitory Authority Revenue Bonds University of Rochester Series 2009A 07-01-39 5.13% $900,000 $929,295 New York State Dormitory Authority Revenue Bonds Yeshiva University Series 2009 09-01-38 5.00 1,500,000 1,530,734 Seneca County Industrial Development Agency Revenue Bonds New York Chiropractic College Series 2007 10-01-27 5.00 750,000 667,628 Town of Hempstead Local Development Corporation Revenue Bonds Molloy College Project Series 2009 07-01-39 5.75 800,000 802,224 --------------- Total 14,388,857 ------------------------------------------------------------------------------------- COUNTY (2.7%) County of Monroe Unlimited General Obligation Refunding & Public Improvement Bonds Series 1996 (NPFGC) 03-01-15 6.00 1,250,000 1,457,400 ------------------------------------------------------------------------------------- ELECTRIC (1.5%) Long Island Power Authority Revenue Bonds Series 2009A 04-01-23 5.00 750,000 803,033 ------------------------------------------------------------------------------------- HEALTH CARE -- HOSPITAL (8.5%) Albany Industrial Development Agency Revenue Bonds St. Peters Hospital Project Series 2008A 11-15-27 5.25 1,000,000 972,940 New York State Dormitory Authority Revenue Bonds New York University Hospital Center Series 2007B 07-01-24 5.25 690,000 683,783 New York State Dormitory Authority Revenue Bonds Orange Regional Medical Center Series 2008 12-01-29 6.13 1,250,000 1,178,250 New York State Dormitory Authority Revenue Bonds Sloan-Kettering Memorial Center Series 2006-1 07-01-35 5.00 1,000,000 1,017,890 Ulster County Industrial Development Agency Revenue Bonds Series 2007A 09-15-42 6.00 1,000,000 796,070 --------------- Total 4,648,933 ------------------------------------------------------------------------------------- HOUSING -- MULTI-FAMILY (0.9%) New York City Housing Development Corporation Revenue Bonds Series 2009M 11-01-45 5.15 500,000 501,775 ------------------------------------------------------------------------------------- HOUSING -- OTHER (1.9%) New York State Dormitory Authority Revenue Bonds Consolidated City University System 5th General Resolution Series 2008B 07-01-27 5.00 1,000,000 1,051,470 ------------------------------------------------------------------------------------- HOUSING -- SINGLE FAMILY (4.3%) New York Mortgage Agency Revenue Bonds Series 2002-101 A.M.T. 04-01-32 5.40 1,200,000 1,204,848
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 42 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a) HOUSING -- SINGLE FAMILY (CONT.) New York Mortgage Agency Revenue Bonds Series 2007-140 A.M.T. 10-01-21 4.60% $500,000 $501,485 New York Mortgage Agency Revenue Bonds Series 2007-143 A.M.T. 10-01-27 4.85 675,000 650,963 --------------- Total 2,357,296 ------------------------------------------------------------------------------------- LEASE (9.0%) New York City Industrial Development Agency Revenue Bonds Terminal One Group Association Project Series 2005 A.M.T. 01-01-24 5.50 500,000 508,450 New York State Dormitory Authority Revenue Bonds Consolidated City University System Series 1993A 07-01-13 5.75 3,000,000 3,234,810 New York State Dormitory Authority Revenue Bonds New York University Hospital Center Series 2006A 07-01-20 5.00 500,000 504,025 New York State Dormitory Authority Unrefunded Revenue Bonds Series 1990B 05-15-11 7.50 645,000 696,361 --------------- Total 4,943,646 ------------------------------------------------------------------------------------- MISCELLANEOUS (3.2%) New York City Trust for Cultural Resources Revenue Bonds Lincoln Center Series 2008C 12-01-18 5.25 750,000 852,345 New York State Dormitory Authority Revenue Bonds Mt. Sinai School of Medicine New York University Series 2007 (NPFGC) 07-01-37 4.50 1,000,000 888,260 --------------- Total 1,740,605 ------------------------------------------------------------------------------------- MISCELLANEOUS REVENUE (9.4%) Metropolitan Transportation Authority Revenue Bonds Series 2006A 11-15-22 5.00 750,000 806,160 Metropolitan Transportation Authority Revenue Bonds Series 2009A 11-15-26 5.30 700,000 775,082 New York City Industrial Development Agency Revenue Bonds Queens Baseball Stadium Pilot Series 2006 (AMBAC) 01-01-24 5.00 500,000 496,025 New York City Industrial Development Agency Revenue Bonds Yankee Stadium Pilot Series 2009 (Assured Guaranty) 03-01-49 7.00 250,000 287,413 New York City Trust for Cultural Resources Revenue Bonds Julliard School Series 2009A 01-01-34 5.00 1,000,000 1,054,770 New York State Thruway Authority Revenue Bonds Transportation Series 2008A 03-15-28 5.00 1,000,000 1,074,810
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 43 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource New York Tax-Exempt Fund
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a) MISCELLANEOUS REVENUE (CONT.) Seneca Nation Indians Capital Improvements Authority Revenue Bonds Series 2007A 12-01-16 5.25% $500,000(d) $469,925 12-01-23 5.00 250,000(d) 206,775 --------------- Total 5,170,960 ------------------------------------------------------------------------------------- PORT DISTRICT (3.7%) Port Authority of New York & New Jersey Revenue Bonds Consolidated 143rd Series 2006 (AGM) A.M.T. 10-01-21 5.00 1,000,000 1,024,650 Port Authority of New York & New Jersey Revenue Bonds Consolidated 146th Series 2006 (AGM) A.M.T. 12-01-23 4.50 500,000 494,410 Port Authority of New York & New Jersey Revenue Bonds Consolidated 147th Series 2007 (NPFGC/FGIC) A.M.T. 10-15-26 5.00 500,000 504,750 --------------- Total 2,023,810 ------------------------------------------------------------------------------------- SPECIAL DISTRICT -- SPECIAL TAX (5.2%) Metropolitan Transportation Authority Revenue Bonds Series 2009B 11-15-34 5.00 1,500,000 1,560,810 New York City Transitional Finance Authority Revenue Bonds Series 2009S-5 01-15-32 5.00 1,000,000 1,033,280 New York State Dormitory Authority Revenue Bonds Education Series 2005F 03-15-23 5.00 250,000 267,415 --------------- Total 2,861,505 ------------------------------------------------------------------------------------- TOLL ROAD (6.2%) Metropolitan Transportation Authority Revenue Bonds Series 2005F 11-15-35 5.00 500,000 501,935 New York State Thruway Authority Revenue Bonds Series 2007H (NPFGC/FGIC) 01-01-23 5.00 500,000 539,305 New York State Thruway Authority Revenue Bonds Series 2009A-1 04-01-29 5.00 1,000,000 1,058,380 Triborough Bridge & Tunnel Authority Refunding Revenue Bonds Series 2002B 11-15-29 5.13 1,000,000 1,038,470 Triborough Bridge & Tunnel Authority Revenue Bonds Series 2008C 11-15-38 5.00 250,000 259,465 --------------- Total 3,397,555 ------------------------------------------------------------------------------------- WATER & SEWER (10.4%) Erie County Water Authority Revenue Bonds 4th Resolution Series 2007 (NPFGC) 12-01-34 4.75 500,000 504,490 New York City Municipal Water Finance Authority Revenue Bonds Fiscal 2009 Series 2008A 06-15-40 5.75 1,000,000 1,118,790 New York City Municipal Water Finance Authority Revenue Bonds Series 2008CC 06-15-34 5.00 1,500,000 1,553,490 New York City Municipal Water Finance Authority Revenue Bonds Series 2008DD 06-15-38 4.50 500,000 489,000
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 44 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED) COUPON PRINCIPAL ISSUE DESCRIPTION (b,c) RATE AMOUNT VALUE(a) WATER & SEWER (CONT.) New York State Environmental Facilities Corporation Revenue Bonds Revolving Funds New York City Municipal Water Project Series 2002B 06-15-31 5.00% $1,000,000 $1,020,630 New York State Environmental Facilities Corporation Revenue Bonds Revolving Funds New York City Municipal Water Project Series 2002K 06-15-28 5.00 1,000,000 1,025,500 --------------- Total 5,711,900 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (Cost: $51,453,219) $53,557,484 ------------------------------------------------------------------------------------- MUNICIPAL NOTES (0.4%) AMOUNT EFFECTIVE PAYABLE AT ISSUE DESCRIPTION (B,C,F) YIELD MATURITY VALUE(a) City of New York Unlimited General Obligation Bonds V.R.D.N. Sub Series 2005E-2 (Bank of America) 08-01-34 0.14% $200,000 $200,000 ------------------------------------------------------------------------------------- TOTAL MUNICIPAL NOTES (Cost: $200,000) $200,000 -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.6%) SHARES VALUE(a) JPMorgan Tax-Free Money Market Fund 893,570 $893,570 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $893,570) $893,570 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $52,546,789)(g) $54,651,054 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) The following abbreviations may be used in the portfolio security descriptions to identify the insurer of the issue: ACA -- ACA Financial Guaranty Corporation AGM -- Assured Guaranty Municipal Corporation AMBAC -- Ambac Assurance Corporation BHAC -- Berkshire Hathaway Assurance Corporation BIG -- Bond Investors Guarantee BNY -- Bank of New York CGIC -- Capital Guaranty Insurance Company CIFG -- IXIS Financial Guaranty FGIC -- Financial Guaranty Insurance Company FHA -- Federal Housing Authority FHLMC -- Federal Home Loan Mortgage Corporation FNMA -- Federal National Mortgage Association GNMA -- Government National Mortgage Association MGIC -- Mortgage Guaranty Insurance Corporation NPFGC -- National Public Finance Guarantee Corporation TCRS -- Transferable Custodial Receipts XLCA -- XL Capital Assurance
-------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 45 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource New York Tax-Exempt Fund NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (c) The following abbreviations may be used in the portfolio descriptions: A.M.T. -- Alternative Minimum Tax -- At Feb. 28, 2010, the value of securities subject to alternative minimum tax represented 8.92% of net assets. B.A.N. -- Bond Anticipation Note C.P. -- Commercial Paper R.A.N. -- Revenue Anticipation Note T.A.N. -- Tax Anticipation Note T.R.A.N. -- Tax & Revenue Anticipation Note V.R. -- Variable Rate V.R.D.B. -- Variable Rate Demand Bond V.R.D.N. -- Variable Rate Demand Note
(d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Trustees. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Feb. 28, 2010, the value of these securities amounted to $676,700 or 1.23% of net assets. (e) At Feb. 28, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $474,364. See Note 2 to the financial statements. (f) The Fund is entitled to receive principal and interest from the party, if indicated in parentheses, after a day or a week's notice or upon maturity. The maturity date disclosed represents the final maturity. Interest rate varies to reflect current market conditions; rate shown is the effective rate on Feb. 28, 2010. (g) At Feb. 28, 2010, the cost of securities for federal income tax purposes was approximately $52,547,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,727,000 Unrealized depreciation (623,000) ---------------------------------------------------------- Net unrealized appreciation $2,104,000 ----------------------------------------------------------
-------------------------------------------------------------------------------- 46 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 47 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- RiverSource New York Tax-Exempt Fund FAIR VALUE MEASUREMENTS (CONTINUED) inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Feb. 28, 2010:
FAIR VALUE AT FEB. 28, 2010 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Bonds Municipal Bonds $-- $53,557,484 $-- $53,557,484 -------------------------------------------------------------------------------------------- Total Bonds -- 53,557,484 -- 53,557,484 -------------------------------------------------------------------------------------------- Other Municipal Notes -- 200,000 -- 200,000 Unaffiliated Money Market Fund(a) 893,570 -- -- 893,570 -------------------------------------------------------------------------------------------- Total Other 893,570 200,000 -- 1,093,570 -------------------------------------------------------------------------------------------- Total Investment in Securities $893,570 $53,757,484 $-- $54,651,054 --------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Feb. 28, 2010. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 48 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES -------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE CALIFORNIA MINNESOTA NEW YORK TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT FEB. 28, 2010 (UNAUDITED) FUND FUND FUND ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $145,899,561, $318,981,712 and $51,653,219) $147,738,009 $331,620,354 $53,757,484 Money market fund (identified cost $1,710,850, $2,333,049 and $893,570) 1,710,850 2,333,049 893,570 ---------------------------------------------------------------------------------------------------------- Total investments in securities (identified cost $147,610,411, $321,314,761 and $52,546,789) 149,448,859 333,953,403 54,651,054 Capital shares receivable 6,135 201,096 12,342 Accrued interest receivable 1,756,880 3,936,940 722,085 Receivable for investment securities sold 5,243,078 -- -- ---------------------------------------------------------------------------------------------------------- Total assets 156,454,952 338,091,439 55,385,481 ---------------------------------------------------------------------------------------------------------- LIABILITIES Dividends payable to shareholders 133,316 264,743 42,919 Capital shares payable 2,241,112 141,233 8,943 Payable for investment securities purchased -- -- 474,364 Accrued investment management services fees 1,733 3,730 616 Accrued distribution fees 31,264 66,975 10,927 Accrued transfer agency fees 157 460 88 Accrued administrative services fees 296 647 105 Other accrued expenses 37,033 45,866 32,091 ---------------------------------------------------------------------------------------------------------- Total liabilities 2,444,911 523,654 570,053 ---------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding shares $154,010,041 $337,567,785 $54,815,428 ---------------------------------------------------------------------------------------------------------- REPRESENTED BY Shares of beneficial interest -- $.01 par value $ 310,764 $ 637,419 $ 110,171 Additional paid-in capital 155,002,095 326,261,570 53,641,468 Undistributed net investment income 75,942 130,787 23,416 Accumulated net realized gain (loss) (3,217,208) (2,100,633) (1,063,892) Unrealized appreciation (depreciation) on investments 1,838,448 12,638,642 2,104,265 ---------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding shares $154,010,041 $337,567,785 $54,815,428 ----------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 49 STATEMENT OF ASSETS AND LIABILITIES (continued) --------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE CALIFORNIA MINNESOTA NEW YORK TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT FEB. 28, 2010 (UNAUDITED) FUND FUND FUND Net assets applicable to outstanding shares: Class A $148,203,598 $311,630,694 $51,716,756 Class B $ 2,608,638 $ 9,134,164 $ 2,095,401 Class C $ 3,197,805 $ 16,802,927 $ 1,003,271 Outstanding shares of beneficial interest: Class A 29,905,492 58,845,158 10,394,226 Class B 526,499 1,724,022 421,161 Class C 644,455 3,172,670 201,677 Net asset value per share: Class A(1) $ 4.96 $ 5.30 $ 4.98 Class B $ 4.95 $ 5.30 $ 4.98 Class C $ 4.96 $ 5.30 $ 4.97 ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A for RiverSource California Tax-Exempt Fund, RiverSource Minnesota Tax-Exempt Fund and RiverSource New York Tax-Exempt Fund is $5.21, $5.56 and $5.23, respectively. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 4.75%. The accompanying Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- 50 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT STATEMENTS OF OPERATIONS -------------------------------------------------------
RIVERSOURCE RIVERSOURCE RIVERSOURCE CALIFORNIA MINNESOTA NEW YORK TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT SIX MONTHS ENDED FEB. 28, 2010 (UNAUDITED) FUND FUND FUND INVESTMENT INCOME Income: Interest $4,170,998 $ 7,983,326 $1,330,910 Income distributions from money market fund 206 391 79 -------------------------------------------------------------------------------------------------------- Total income 4,171,204 7,983,717 1,330,989 -------------------------------------------------------------------------------------------------------- Expenses: Investment management services fees 326,019 655,407 111,286 Distribution fees Class A 191,712 376,638 64,040 Class B 13,321 44,886 10,427 Class C 15,001 71,304 4,845 Transfer agency fees Class A 27,372 75,135 14,928 Class B 544 2,483 669 Class C 567 3,702 299 Administrative services fees 55,662 113,592 19,000 Compensation of board members 2,486 5,080 848 Custodian fees 1,472 2,761 1,685 Printing and postage 10,260 6,625 4,920 Registration fees 25,015 27,060 27,810 Professional fees 11,660 13,334 10,943 Other 6,976 13,048 3,987 -------------------------------------------------------------------------------------------------------- Total expenses 688,067 1,411,055 275,687 Expenses waived/reimbursed by the Investment Manager and its affiliates (38,643) (41,698) (49,804) -------------------------------------------------------------------------------------------------------- Total net expenses 649,424 1,369,357 225,883 -------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 3,521,780 6,614,360 1,105,106 -------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (7,600) 1,117,652 46,410 Futures contracts (62,369) (122,135) (22,109) -------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments (69,969) 995,517 24,301 Net change in unrealized appreciation (depreciation) on investments 3,591,427 7,566,987 1,318,254 -------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 3,521,458 8,562,504 1,342,555 -------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $7,043,238 $15,176,864 $2,447,661 --------------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 51 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND SIX MONTHS ENDED YEAR ENDED FEB. 28, 2010 AUG. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 3,521,780 $ 7,304,681 Net realized gain (loss) on investments (69,969) (934,821) Net change in unrealized appreciation (depreciation) on investments 3,591,427 (1,875,989) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 7,043,238 4,493,871 -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (3,398,263) (7,049,353) Class B (48,958) (149,044) Class C (55,008) (93,719) -------------------------------------------------------------------------------------------------- Total distributions (3,502,229) (7,292,116) -------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS Proceeds from sales Class A shares 5,986,971 19,923,096 Class B shares 73,039 443,125 Class C shares 929,210 472,755 Reinvestment of distributions at net asset value Class A shares 2,404,604 4,800,389 Class B shares 40,264 124,705 Class C shares 46,995 77,165 Conversions from Class B to Class A Class A shares -- 1,139,538 Class B shares -- (1,139,538) Payments for redemptions Class A shares (20,134,785) (38,756,535) Class B shares (312,193) (1,267,870) Class C shares (479,082) (698,645) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from share transactions (11,444,977) (14,881,815) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (7,903,968) (17,680,060) Net assets at beginning of period 161,914,009 179,594,069 -------------------------------------------------------------------------------------------------- Net assets at end of period $154,010,041 $161,914,009 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 75,942 $ 56,391 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- 52 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
RIVERSOURCE MINNESOTA TAX-EXEMPT FUND SIX MONTHS ENDED YEAR ENDED FEB. 28, 2010 AUG. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 6,614,360 $ 12,926,170 Net realized gain (loss) on investments 995,517 909,145 Net change in unrealized appreciation (depreciation) on investments 7,566,987 1,703,901 -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 15,176,864 15,539,216 -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (6,192,763) (12,286,856) Class B (150,756) (461,961) Class C (239,591) (334,186) -------------------------------------------------------------------------------------------------- Total distributions (6,583,110) (13,083,003) -------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS Proceeds from sales Class A shares 19,610,557 41,948,263 Class B shares 279,514 1,076,993 Class C shares 4,430,422 4,828,068 Reinvestment of distributions at net asset value Class A shares 5,150,167 10,050,436 Class B shares 131,757 407,559 Class C shares 204,752 292,939 Conversions from Class B to Class A Class A shares -- 3,807,793 Class B shares -- (3,807,793) Payments for redemptions Class A shares (22,548,988) (45,969,582) Class B shares (579,347) (2,591,129) Class C shares (792,067) (1,143,172) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from share transactions 5,886,767 8,900,375 -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 14,480,521 11,356,588 Net assets at beginning of period 323,087,264 311,730,676 -------------------------------------------------------------------------------------------------- Net assets at end of period $337,567,785 $323,087,264 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 130,787 $ 99,537 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 53 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
RIVERSOURCE NEW YORK TAX-EXEMPT FUND SIX MONTHS ENDED YEAR ENDED FEB. 28, 2010 AUG. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,105,106 $ 2,283,385 Net realized gain (loss) on investments 24,301 (739,903) Net change in unrealized appreciation (depreciation) on investments 1,318,254 702,309 -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,447,661 2,245,791 -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (1,050,860) (2,138,780) Class B (34,943) (113,911) Class C (16,251) (26,205) -------------------------------------------------------------------------------------------------- Total distributions (1,102,054) (2,278,896) -------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS Proceeds from sales Class A shares 1,287,391 6,574,142 Class B shares 128,254 259,408 Class C shares 168,488 322,075 Reinvestment of distributions at net asset value Class A shares 868,376 1,749,901 Class B shares 29,432 95,703 Class C shares 14,802 24,460 Conversions from Class B to Class A . Class A shares -- 1,435,523 Class B shares -- (1,435,523) Payments for redemptions Class A shares (4,707,637) (9,315,791) Class B shares (164,043) (350,063) Class C shares (134,147) (140,906) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from share transactions (2,509,084) (781,071) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,163,477) (814,176) Net assets at beginning of period 55,978,905 56,793,081 -------------------------------------------------------------------------------------------------- Net assets at end of period $54,815,428 $55,978,905 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 23,416 $ 20,364 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- 54 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand each Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year. RiverSource California Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS A FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 $5.11 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11 .21 .20 .20 .03 .19 .20 Net gains (losses) (both realized and unrealized) .11 (.05) (.09) (.13) .10 (.15) .23 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .22 .16 .11 .07 .13 .04 .43 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) (.21) (.20) (.20) (.03) (.19) (.20) Distributions from realized gains -- -- (.04) -- -- (.06) (.07) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.11) (.21) (.24) (.20) (.03) (.25) (.27) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.96 $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.51% 3.59% 2.13% 1.35% 2.63% .81% 8.53% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A .86% .87% .88% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(d),(e) N/A .82% .80% .80% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) .84%(f) .83% .86% .87% .87%(f) .88% .86% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(d),(e) .79%(f) .79% .79% .79% .79%(f) .81% .86% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.46%(f) 4.54% 4.01% 3.89% 3.81%(f) 3.69% 3.71% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $148 $157 $172 $164 $170 $171 $190 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 55 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource California Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS B FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 $5.11 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .18 .16 .16 .03 .15 .16 Net gains (losses) (both realized and unrealized) .10 (.06) (.09) (.13) .10 (.15) .23 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .19 .12 .07 .03 .13 -- .39 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.17) (.16) (.16) (.03) (.15) (.16) Distributions from realized gains -- -- (.04) -- -- (.06) (.07) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.17) (.20) (.16) (.03) (.21) (.23) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.95 $4.85 $4.90 $5.03 $5.16 $5.06 $5.27 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 3.92% 2.81% 1.37% .59% 2.50% .05% 7.72% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.61% 1.62% 1.63% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(d),(e) N/A 1.57% 1.55% 1.55% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.59%(f) 1.58% 1.61% 1.62% 1.62%(f) 1.63% 1.61% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(d),(e) 1.54%(f) 1.54% 1.54% 1.54% 1.55%(f) 1.57% 1.61% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.70%(f) 3.78% 3.27% 3.12% 3.01%(f) 2.92% 2.95% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $5 $6 $9 $11 $16 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 56 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource California Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS C FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.85 $4.91 $5.04 $5.17 $5.07 $5.28 $5.12 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .18 .16 .16 .03 .15 .16 Net gains (losses) (both realized and unrealized) .11 (.07) (.09) (.13) .10 (.15) .23 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .20 .11 .07 .03 .13 -- .39 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.17) (.16) (.16) (.03) (.15) (.16) Distributions from realized gains -- -- (.04) -- -- (.06) (.07) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.17) (.20) (.16) (.03) (.21) (.23) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.96 $4.85 $4.91 $5.04 $5.17 $5.07 $5.28 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.13% 2.60% 1.38% .60% 2.50% .06% 7.71% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.61% 1.62% 1.63% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(d),(e) N/A 1.57% 1.55% 1.55% N/A N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.59%(f) 1.58% 1.61% 1.62% 1.63%(f) 1.64% 1.62% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(d),(e) 1.54%(f) 1.54% 1.54% 1.54% 1.55%(f) 1.58% 1.62% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.69%(f) 3.78% 3.18% 3.13% 3.05%(f) 2.93% 2.94% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $3 $2 $2 $2 $3 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 15% 49% 49% 62% 7% 20% 28% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 57 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource California Tax-Exempt Fund NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006, the Fund's fiscal year end was changed from June 30 to Aug. 31. (b) In addition to the fees and expenses the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) Ratios include interest and fee expense related to the Fund's participation in certain inverse floater programs. Due to an equal increase in interest income from fixed rate municipal bonds held in trust, there is no impact on the Fund's net assets, net asset value per share, total return or net investment income. (d) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (e) Expense ratio is before the reduction for earnings/bank fee credits on cash balances. For the year ended Aug. 31, 2008, earnings/bank fee credits lowered the expense ratio by 0.01% of average daily net assets. (f) Annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 58 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS A FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $5.16 $5.11 $5.14 $5.27 $5.17 $5.35 $5.20 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11 .21 .21 .19 .03 .18 .18 Net gains (losses) (both realized and unrealized) .14 .05 (.03) (.13) .10 (.17) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .25 .26 .18 .06 .13 .01 .35 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) (.21) (.21) (.19) (.03) (.18) (.18) Distributions from realized gains -- -- -- -- -- (.01) (.02) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.11) (.21) (.21) (.19) (.03) (.19) (.20) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.30 $5.16 $5.11 $5.14 $5.27 $5.17 $5.35 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.80% 5.50% 3.50% 1.26% 2.56% .29% 6.73% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A .88% .99% 1.05% 1.06%(d) 1.01% .95% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A .84% .95%(f) .99% .98%(d) .96% .95% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) .82%(d) .83% .83% .85% .87%(d) .86% .85% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) .79%(d) .79% .79%(f) .79% .79%(d) .81% .85% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.13%(d) 4.31% 4.05% 3.70% 3.60%(d) 3.52% 3.37% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $312 $301 $289 $288 $309 $303 $341 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 59 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS B FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 $5.20 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .18 .17 .15 .03 .14 .14 Net gains (losses) (both realized and unrealized) .14 .04 (.03) (.11) .10 (.17) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .23 .22 .14 .04 .13 (.03) .31 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.18) (.17) (.16) (.03) (.14) (.14) Distributions from realized gains -- -- -- -- -- (.01) (.02) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.18) (.17) (.16) (.03) (.15) (.16) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.30 $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.41% 4.50% 2.72% .70% 2.42% (.47%) 5.94% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE DAILY NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.63% 1.75% 1.80% 1.81%(d) 1.77% 1.70% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A 1.59% 1.70%(f) 1.75% 1.74%(d) 1.72% 1.70% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.57%(d) 1.58% 1.59% 1.60% 1.62%(d) 1.62% 1.60% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) 1.55%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.57% 1.60% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.38%(d) 3.56% 3.29% 2.93% 2.81%(d) 2.75% 2.62% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $9 $14 $20 $29 $34 $49 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 60 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS C FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 $5.20 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .18 .17 .15 .03 .14 .14 Net gains (losses) (both realized and unrealized) .14 .04 (.03) (.11) .10 (.17) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .23 .22 .14 .04 .13 (.03) .31 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.18) (.17) (.16) (.03) (.14) (.14) Distributions from realized gains -- -- -- -- -- (.01) (.02) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.18) (.17) (.16) (.03) (.15) (.16) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.30 $5.16 $5.12 $5.15 $5.27 $5.17 $5.35 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.41% 4.51% 2.72% .70% 2.42% (.47%) 5.94% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.63% 1.75% 1.80% 1.82%(d) 1.77% 1.71% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A 1.59% 1.70%(f) 1.75% 1.74%(d) 1.72% 1.71% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.57%(d) 1.58% 1.59% 1.60% 1.63%(d) 1.62% 1.61% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.57% 1.61% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.38%(d) 3.55% 3.29% 2.94% 2.84%(d) 2.76% 2.62% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $17 $13 $8 $7 $8 $8 $9 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 10% 33% 23% 26% 3% 13% 15% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 61 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource Minnesota Tax-Exempt Fund NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006, the Fund's fiscal year end was changed from June 30 to Aug. 31. (b) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) Ratios include interest and fee expense related to the Fund's participation in certain inverse floater programs, if any. Due to an equal increase in interest income from fixed rate municipal bonds held in trust, there is no impact on the Fund's net assets, net asset value per share, total return or net investment income. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Expense ratio is before the reduction for earnings/bank fee credits on cash balances. For the year ended Aug. 31, 2008, earnings/bank fee credits lowered the expense ratio by 0.01% of average daily net assets. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 62 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource New York Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED JULY 31, 30, CLASS A FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 $5.07 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10 .20 .20 .19 .03 .19 .18 Net gains (losses) (both realized and unrealized) .12 .01 (.07) (.11) .10 (.18) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .22 .21 .13 .08 .13 .01 .35 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.20) (.20) (.19) (.03) (.19) (.18) Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.10) (.20) (.21) (.20) (.03) (.24) (.24) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.98 $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.55% 4.62% 2.59% 1.53% 2.67% .20% 7.04% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.02% 1.12% 1.18% 1.20%(d) 1.13% 1.02% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A .81% .93%(f) 1.00% .98%(d) .98% .98% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) .97%(d) 1.00% .98% .97% 1.01%(d) .96% .92% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) .79%(d) .79% .79%(f) .79% .79%(d) .81% .88% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 4.11%(d) 4.30% 4.03% 3.81% 3.77%(d) 3.75% 3.47% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $52 $53 $53 $58 $63 $63 $73 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 63 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource New York Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS B FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 $5.07 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .17 .16 .15 .03 .15 .14 Net gains (losses) (both realized and unrealized) .12 -- (.07) (.11) .10 (.18) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .20 .17 .09 .04 .13 (.03) .31 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.16) (.16) (.15) (.03) (.15) (.14) Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.08) (.16) (.17) (.16) (.03) (.20) (.20) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.98 $4.86 $4.85 $4.93 $5.05 $4.95 $5.18 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.16% 3.83% 1.83% .76% 2.54% (.55%) 6.23% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.77% 1.87% 1.93% 1.95%(d) 1.88% 1.77% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A 1.56% 1.68%(f) 1.76% 1.74%(d) 1.75% 1.74% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.73%(d) 1.75% 1.73% 1.72% 1.76%(d) 1.71% 1.67% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.58% 1.64% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.36%(d) 3.54% 3.28% 3.05% 2.98%(d) 2.98% 2.70% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $4 $5 $7 $8 $11 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 64 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource New York Tax-Exempt Fund
YEAR ENDED JUNE SIX MONTHS ENDED YEAR ENDED AUG. 31, 30, CLASS C FEB. 28, 2010 ---------------------------------------- ---------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006(a) 2006 2005 Net asset value, beginning of period $4.86 $4.85 $4.92 $5.05 $4.95 $5.18 $5.07 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08 .17 .16 .15 .03 .15 .14 Net gains (losses) (both realized and unrealized) .11 -- (.06) (.12) .10 (.18) .17 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .19 .17 .10 .03 .13 (.03) .31 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.16) (.16) (.15) (.03) (.15) (.14) Distributions from realized gains -- -- (.01) (.01) -- (.05) (.06) -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.08) (.16) (.17) (.16) (.03) (.20) (.20) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.97 $4.86 $4.85 $4.92 $5.05 $4.95 $5.18 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 3.96% 3.84% 2.04% .56% 2.54% (.55%) 6.23% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement (including interest and fee expense)(c) N/A 1.77% 1.87% 1.93% 1.97%(d) 1.89% 1.78% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (including interest and fee expense)(c),(e) N/A 1.56% 1.68%(f) 1.76% 1.74%(d) 1.75% 1.74% -------------------------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (excluding interest and fee expense) 1.72%(d) 1.75% 1.73% 1.72% 1.78%(d) 1.72% 1.68% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement (excluding interest and fee expense)(e) 1.54%(d) 1.54% 1.54%(f) 1.55% 1.55%(d) 1.58% 1.64% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 3.37%(d) 3.55% 3.28% 3.05% 3.01%(d) 2.99% 2.70% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $1 $1 $1 $1 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 5% 34% 31% 28% 7% 17% 30% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 65 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- RiverSource New York Tax-Exempt Fund NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from July 1, 2006 to Aug. 31, 2006. Effective Aug. 31, 2006, the Fund's fiscal year end was changed from June 30 to Aug. 31. (b) In addition to the fees and expenses the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (c) Ratios include interest and fee expense related to the Fund's participation in certain inverse floater programs, if any. Due to an equal increase in interest income from fixed rate municipal bonds held in trust, there is no impact on the Fund's net assets, net asset value per share, total return or net investment income. (d) Annualized. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Expense ratio is before the reduction for earnings/bank fee credits on cash balances. For the year ended Aug. 31, 2008, earnings/bank fee credits lowered the expense ratio by 0.01% of average daily net assets. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 66 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF FEB. 28, 2010) 1. ORGANIZATION RiverSource California Tax-Exempt Trust and RiverSource Special Tax-Exempt Series Trust are organized as Massachusetts business trusts. RiverSource California Tax-Exempt Trust includes only RiverSource California Tax-Exempt Fund. RiverSource Special Tax-Exempt Series Trust is a "series fund" that is currently composed of individual state tax-exempt funds, including RiverSource Minnesota Tax-Exempt Fund and RiverSource New York Tax-Exempt Fund (together with RiverSource California Tax-Exempt Fund, herein after referred to as the Funds). The Funds are non-diversified, open-end management investment companies as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Each Fund has unlimited authorized shares of beneficial interest. Each Fund's goal is to provide a high level of income generally exempt from federal income tax as well as from the respective state and local income tax. A portion of each Fund's assets may be invested in bonds whose interest is subject to the alternative minimum tax computation. The Funds concentrate their investments in a single state and therefore may have more credit risk related to the economic conditions of the respective state than funds that have a broader geographical diversification. Each Fund offers Class A, Class B and Class C shares. - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. - Class C shares may be subject to a CDSC. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 67 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Funds' financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price from the primary exchange. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. The procedures adopted by each Fund's Board of Trustees (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in -------------------------------------------------------------------------------- 68 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At Feb. 28, 2010, RiverSource New York Tax-Exempt Fund has outstanding when-issued securities of $474,364. INVERSE FLOATER PROGRAM TRANSACTIONS Each Fund may enter into transactions in which it transfers to trusts fixed rate municipal bonds in exchange for cash and residual interests in the trusts' assets and cash flows, which are in the form of inverse floating rate securities. The trusts fund the purchases of the municipal bonds by issuing short-term floating rate notes to third parties. The residual interests held by each Fund (inverse floating rate securities) include the right of each Fund (i) to cause the holders of the short-term floating rate notes to tender their notes at par, and (ii) to transfer the municipal bonds from the trusts to each Fund, thereby collapsing the trusts. The municipal bonds transferred to the trusts, if any, remain in each Fund's investments in securities and the related short-term floating rate notes are reflected as Fund liabilities under the caption "Short- term floating rate notes outstanding" in the Statements of Assets and Liabilities. The notes issued by the trusts have interest rates that are multi- modal, which means that they can be reset to a new or different mode at the reset date (e.g., mode can be daily, weekly, monthly, or a fixed specific date) at the discretion of the holder of the inverse floating rate security. The floating rate note holders have the option to tender their notes to the trusts for redemption at par at each reset date. The income received by the inverse floating rate security holder varies inversely with the short-term rate paid to the floating rate note holders, and in most circumstances the inverse floating rate security holder bears substantially all of the underlying bond's downside investment risk and also benefits disproportionately from any potential appreciation of the underlying bond's value. The inverse floating rate security holder will be subject to greater interest rate risk than if they were to hold the underlying bond because the interest rate is dependent on both the fixed coupon rate of the underlying bond and the short-term interest rate paid on the floating rate notes. The inverse floating rate security holder is also subject to the credit risk, liquidity risk and market risk associated with the underlying bond. The bonds held by the trusts serve as collateral for the short- term floating rate -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 69 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- notes outstanding. Contractual maturities and interest rates of the municipal bonds held in trust, if any, are presented in the Portfolio of Investments. The inclusion of interest and fee expense related to the short-term floating rate notes corresponds to an equal increase in interest income from the fixed rate municipal bonds held in trust. At Feb. 28, 2010, the Funds had no outstanding short-term floating rate notes. GUARANTEES AND INDEMNIFICATIONS Under each Fund's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to each Fund. In addition, certain of each Fund's contracts with its service providers contain general indemnification clauses. Each Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against each Fund cannot be determined and each Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES Each Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) and tax- exempt ordinary income to shareholders. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Management of each Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis -------------------------------------------------------------------------------- 70 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Funds are evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS TO SHAREHOLDERS Dividends from net investment income, declared daily and payable monthly, when available, are reinvested in additional shares of each Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. OTHER Security transactions are accounted for on the date securities are purchased or sold. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES Each Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. Each Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose each Fund to certain additional risks, including those detailed below. FUTURES TRANSACTIONS Each Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. Each Fund may also buy and write put and call options on these futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, each Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by each Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 71 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Each Fund recognizes a realized gain or loss when the contract is closed or expires. Upon entering into futures contracts, each Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, each Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. At Feb. 28, 2010, the Funds had no outstanding futures contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of each Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on each Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. RiverSource California Tax-Exempt Fund FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010 At Feb. 28, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEB. 28, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $(62,369) ----------------------------------------------------------------- Total $(62,369) -----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $-- ----------------------------------------------------------------- Total $-- -----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FUTURES At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly average gross notional amount for short contracts was $1.7 million for the six months ended Feb. 28, 2010. -------------------------------------------------------------------------------- 72 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- RiverSource Minnesota Tax-Exempt Fund FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010 At Feb. 28, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEB. 28, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $(122,135) ----------------------------------------------------------------- Total $(122,135) -----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $-- ----------------------------------------------------------------- Total $-- -----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FUTURES At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly average gross notional amount for short contracts was $4.2 million for the six months ended Feb. 28, 2010. RiverSource New York Tax-Exempt Fund FAIR VALUES OF DERIVATIVE INSTRUMENTS AT FEB. 28, 2010 At Feb. 28, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEB. 28, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $(22,109) ----------------------------------------------------------------- Total $(22,109) -----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Interest rate contracts $-- ----------------------------------------------------------------- Total $-- -----------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 73 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- VOLUME OF DERIVATIVE ACTIVITY FUTURES At Feb. 28, 2010, the Fund had no outstanding futures contracts. The monthly average gross notional amount for short contracts was $700,000 for the six months ended Feb. 28, 2010. 4. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, RiverSource Investments, LLC (the Investment Manager) determines which securities will be purchased, held or sold. The management fee is an annual fee that is equal to a percentage of each Fund's average daily net assets that declines from 0.41% to 0.25% as each Fund's net assets increase. The management fee for the six months ended Feb. 28, 2010 was 0.41% of RiverSource California Tax-Exempt Fund and RiverSource New York Tax-Exempt Fund's average daily net assets and 0.40% of RiverSource Minnesota Tax-Exempt Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, each Fund pays Ameriprise Financial, Inc., parent company of the Investment Manager, an annual fee for administration and accounting services equal to a percentage of each Fund's average daily net assets that declines from 0.07% to 0.04% as each Fund's net assets increase. The fee for the six months ended Feb. 28, 2010 was 0.07% of each Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Funds or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Funds and the Board. For the six months ended Feb. 28, 2010, other expenses paid to this company were as follows:
FUND AMOUNT ----------------------------------------------------------- RiverSource California Tax-Exempt Fund $ 706 RiverSource Minnesota Tax-Exempt Fund 1,406 RiverSource New York Tax-Exempt Fund 242
COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of each Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of each Fund or other funds in the RiverSource Family of Funds. Each Fund's liability for these amounts is adjusted for market -------------------------------------------------------------------------------- 74 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. Each Fund pays the Transfer Agent an annual account-based fee at a rate equal to $20.50 for Class A, $21.50 for Class B and $21.00 for Class C for this service. The Transfer Agent also charges an annual fee of $3 per account serviced directly by each Fund or its designated agent for Class A, Class B and Class C shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. These fees are included in the transfer agency fees in the Statements of Operations. DISTRIBUTION FEES Each Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays a fee at an annual rate of up to 0.25% of each Fund's average daily net assets attributable to Class A shares and a fee at an annual rate of up to 1.00% of each Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) for each Fund was approximately as follows:
FUND CLASS B CLASS C ---------------------------------------------------------------- RiverSource California Tax-Exempt Fund $ 83,000 $ 32,000 RiverSource Minnesota Tax-Exempt Fund 221,000 144,000 RiverSource New York Tax-Exempt Fund 63,000 11,000
These amounts are based on the most recent information available as of Jan. 31, 2010, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 75 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- SALES CHARGES Sales charges, including front-end and CDSCs, received by the Distributor for distributing the Funds' shares for the six months ended Feb. 28, 2010 were as follows:
FUND CLASS A CLASS B CLASS C ------------------------------------------------------------------- RiverSource California Tax-Exempt Fund $ 50,829 $ 920 $334 RiverSource Minnesota Tax-Exempt Fund 296,017 1,125 526 RiverSource New York Tax-Exempt Fund 11,956 307 4
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended Feb. 28, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that the Funds' net expenses (excluding interest and fee expenses related to each Fund's participation in certain inverse floater programs and fees and expenses of acquired funds*) were as follows:
FUND CLASS A CLASS B CLASS C ------------------------------------------------------------------- RiverSource California Tax-Exempt Fund 0.79% 1.54% 1.54% RiverSource Minnesota Tax-Exempt Fund 0.79 1.55 1.54 RiverSource New York Tax-Exempt Fund 0.79 1.54 1.54
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows:
FUND CLASS A CLASS B CLASS C ------------------------------------------------------------------- RiverSource California Tax-Exempt Fund $ 4,367 $144 $117 RiverSource Minnesota Tax-Exempt Fund 14,873 443 850 RiverSource New York Tax-Exempt Fund 4,682 252 105
The management fees waived/reimbursed at the Fund level were as follows:
FUND AMOUNT ------------------------------------------------------------ RiverSource California Tax-Exempt Fund $34,015 RiverSource Minnesota Tax-Exempt Fund 25,532 RiverSource New York Tax-Exempt Fund 44,765
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Oct. 31, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding interest and fee expenses related to each Fund's participation in certain inverse floater programs -------------------------------------------------------------------------------- 76 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- and fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets:
FUND CLASS A CLASS B CLASS C ------------------------------------------------------------------- RiverSource California Tax-Exempt Fund 0.79% 1.54% 1.54% RiverSource Minnesota Tax-Exempt Fund 0.79 1.55 1.54 RiverSource New York Tax-Exempt Fund 0.79 1.54 1.54
* In addition to the fees and expenses which each Fund bears directly, each Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and each Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by each Fund will vary. 5. SECURITIES TRANSACTIONS For the six months ended Feb. 28, 2010, cost of purchases and proceeds from sales (other than short-term obligations) aggregated for each Fund are as follows:
FUND PURCHASES PROCEEDS ------------------------------------------------------------------ RiverSource California Tax-Exempt Fund $22,884,549 $40,325,895 RiverSource Minnesota Tax-Exempt Fund 31,923,183 34,274,319 RiverSource New York Tax-Exempt Fund 2,927,378 5,854,220
Realized gains and losses are determined on an identified cost basis. 6. SHARE TRANSACTIONS Transactions in shares for each Fund for the periods indicated are as follows:
CALIFORNIA TAX-EXEMPT FUND MINNESOTA TAX-EXEMPT FUND NEW YORK TAX-EXEMPT FUND ---------------------------- ---------------------------- ---------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 ------------------------------------------------------------------------------------------------------------ CLASS A Sold 1,210,788 4,355,164 3,723,520 8,539,717 259,826 1,430,554 Converted from Class B* -- 240,409 -- 748,093 -- 300,948 Reinvested distributions 484,818 1,037,102 976,301 2,034,376 174,878 377,970 Redeemed (4,071,525) (8,449,034) (4,290,221) (9,451,083) (945,993) (2,046,046) ------------------------------------------------------------------------------------------------------------ Net increase (decrease) (2,375,919) (2,816,359) 409,600 1,871,103 (511,289) 63,426 ------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 77 NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
CALIFORNIA TAX-EXEMPT FUND MINNESOTA TAX-EXEMPT FUND NEW YORK TAX-EXEMPT FUND ---------------------------- ---------------------------- ---------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 FEB. 28, 2010 AUG. 31, 2009 ------------------------------------------------------------------------------------------------------------ CLASS B Sold 14,716 96,134 53,222 218,554 26,031 56,152 Reinvested distributions 8,121 27,005 24,968 82,625 5,928 20,715 Converted to Class A* -- (240,917) -- (748,093) -- (300,948) Redeemed (62,850) (277,603) (110,152) (527,471) (33,056) (76,176) ------------------------------------------------------------------------------------------------------------ Net increase (decrease) (40,013) (395,381) (31,962) (974,385) (1,097) (300,257) ------------------------------------------------------------------------------------------------------------ CLASS C Sold 187,077 100,253 840,740 964,981 34,130 68,512 Reinvested distributions 9,473 16,658 38,818 59,157 2,981 5,278 Redeemed (95,592) (152,756) (150,363) (234,610) (27,083) (30,213) ------------------------------------------------------------------------------------------------------------ Net increase (decrease) 100,958 (35,845) 729,195 789,528 10,028 43,577 ------------------------------------------------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. BANK BORROWINGS Each Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby each Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between each Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. Each Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility -------------------------------------------------------------------------------- 78 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- agreement, which was a collective agreement between each Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Funds had no borrowings during the six months ended Feb. 28, 2010. 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, post-October losses and market discount. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. For federal income tax purposes, capital loss carry-overs at Aug. 31, 2009 were as follows:
FUND CARRY-OVER ------------------------------------------------------------- RiverSource California Tax-Exempt Fund $1,607,252 RiverSource Minnesota Tax-Exempt Fund 2,322,451 RiverSource New York Tax-Exempt Fund 344,679
At the end of the most recent fiscal year, if the capital loss carry-overs are not offset by subsequent capital gains, they will expire as follows:
FUND 2013 2014 2015 2016 2017 --------------------------------------------------------------------------------- RiverSource California Tax- Exempt Fund $ -- $ -- $ -- $359,905 $1,247,347 RiverSource Minnesota Tax- Exempt Fund 1,199,755 913,006 3,601 -- 206,089 RiverSource New York Tax- Exempt Fund -- -- -- 3,664 341,015
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, each Fund is permitted to treat net capital losses realized between Nov. 1, 2008, and their fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Aug. 31, 2009, post- -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 79 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- October losses that are treated for income purposes as occurring on Sept. 1, 2009 were as follows:
FUND POST-OCTOBER LOSS ----------------------------------------------------------------- RiverSource California Tax-Exempt Fund $1,014,807 RiverSource New York Tax-Exempt Fund 553,244
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-overs have been offset or expire. There is no assurance that the Funds will be able to utilize all of their capital loss carry-overs before they expire. 9. RISKS RELATING TO CERTAIN INVESTMENTS NON-DIVERSIFICATION RISK Each Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on each Fund's performance, each Fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. GEOGRAPHIC CONCENTRATION RISK Because state-specific tax-exempt funds invest primarily in the municipal securities issued by the state and political sub-divisions of the state, each Fund will be particularly affected by political and economic conditions and developments in the state in which it invests. This vulnerability to factors affecting the state fund's tax-exempt investments will be significantly greater than that of a more geographically diversified fund, which may result in greater losses and volatility. The value of municipal securities owned by a Fund also may be adversely affected by future changes in federal or state income tax laws. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statements of Assets and Liabilities through the date of issuance of each Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in each Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that -------------------------------------------------------------------------------- 80 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 81 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required -------------------------------------------------------------------------------- 82 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT 83 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which each Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting riversource.com/funds (for RiverSource or Threadneedle funds) or seligman.com (for Seligman funds); or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how each Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds (for RiverSource or Threadneedle funds) or seligman.com (for Seligman funds); or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 84 RIVERSOURCE STATE TAX-EXEMPT FUNDS -- 2010 SEMIANNUAL REPORT RIVERSOURCE STATE TAX-EXEMPT FUNDS 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C)2010 RiverSource Investments, LLC. S-6329 AA (4/10)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The complete schedule of investments is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource California Tax-Exempt Trust By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date May 3, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date May 3, 2010 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date May 3, 2010