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 811-5522
RIVERSOURCE SECTOR SERIES, INC.
(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: 06/30
Date of reporting period: 06/30
Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
DIVIDEND OPPORTUNITY FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JUNE 30, 2009
(Prospectus also enclosed)
RIVERSOURCE DIVIDEND OPPORTUNITY FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF CURRENT
INCOME. SECONDARY OBJECTIVE IS GROWTH OF INCOME AND
CAPITAL.
<Table>
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges,
fees and other matters of interest. Please
read the prospectus carefully before you
invest or send money. (SINGLE STRATEGY FUNDS ICON)
</Table>
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Manager Commentary................. 5
The Fund's Long-term Performance... 12
Fund Expenses Example.............. 14
Portfolio of Investments........... 17
Statement of Assets and
Liabilities...................... 25
Statement of Operations............ 26
Statements of Changes in Net
Assets........................... 28
Financial Highlights............... 30
Notes to Financial Statements...... 39
Report of Independent Registered
Public Accounting Firm........... 56
Federal Income Tax Information..... 57
Board Members and Officers......... 58
Approval of Investment Management
Services Agreement............... 62
Proxy Voting....................... 65
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Dividend Opportunity Fund Class A shares declined 23.98%
(excluding sales charge) for the 12 months ended June 30, 2009.
> The Fund outperformed the Russell 1000(R) Value Index, which decreased 29.03%.
> The Fund outperformed its peer group, as represented by the Lipper Equity
Income Funds Index, which fell 25.42% during the same period.
ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
RiverSource Dividend Opportunity
Fund Class A (excluding sales
charge) -23.98% -7.37% +0.65% -1.32%
- ---------------------------------------------------------------------
Russell 1000 Value Index
(unmanaged) -29.03% -11.11% -2.13% -0.15%
- ---------------------------------------------------------------------
Lipper Equity Income Funds Index -25.42% -8.68% -1.62% -0.23%
- ---------------------------------------------------------------------
</Table>
(See "The Fund's Long-term Performance" for Index descriptions)
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,
or visiting riversource.com/funds or calling 1(800) 221-2450.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
sales charge and expenses. The Fund's returns reflect the effect of fee
waivers/expenses 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.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT JUNE 30, 2009
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION*
Class A (inception
8/1/88) -23.98% -7.37% +0.65% -1.32% N/A
- ---------------------------------------------------------------------------
Class B (inception
3/20/95) -24.60% -8.10% -0.13% -2.08% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) -24.51% -8.07% -0.12% N/A -2.65%
- ---------------------------------------------------------------------------
Class I (inception
3/4/04) -23.66% -7.04% +1.02% N/A +0.61%
- ---------------------------------------------------------------------------
Class R2 (inception
8/1/08) N/A N/A N/A N/A -23.53%**
- ---------------------------------------------------------------------------
Class R3 (inception
8/1/08) N/A N/A N/A N/A -23.34%**
- ---------------------------------------------------------------------------
Class R4 (inception
3/20/95) -23.86% -7.13% +0.87% -1.11% N/A
- ---------------------------------------------------------------------------
Class R5 (inception
8/1/08) N/A N/A N/A N/A -23.10%**
- ---------------------------------------------------------------------------
Class W (inception
12/1/06) -24.01% N/A N/A N/A -12.80%
- ---------------------------------------------------------------------------
With sales charge
Class A (inception
8/1/88) -28.35% -9.18% -0.53% -1.90% N/A
- ---------------------------------------------------------------------------
Class B (inception
3/20/95) -28.21% -8.95% -0.49% -2.08% N/A
- ---------------------------------------------------------------------------
Class C (inception
6/26/00) -25.23% -8.07% -0.12% N/A -2.65%
- ---------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. 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. Sales charges do
not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares.
Class I, Class R2, Class R3, Class R4 and Class R5 are available to
institutional investors only. Class W shares are offered through qualifying
discretionary accounts.
*For classes with less than 10 years performance.
**Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</Table>
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.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
Dear Shareholders:
RiverSource Dividend Opportunity Fund (the Fund) Class A shares declined 23.98%
(excluding sales charge) for the 12 months ended June 30, 2009. The Fund
outperformed the Russell 1000(R) Value Index (Russell Index), which decreased
29.03%. The Fund also outperformed its peer group, as represented by the Lipper
Equity Income Funds Index, which fell 25.42% during the same period.
SIGNIFICANT PERFORMANCE FACTORS
The performance of the U.S. equity markets can be divided into two distinct
portions during the 12 months ended June 30, 2009 -- the second largest equity
market correction ever and then the fifth biggest equity market recovery ever.
It was the end of one era and the start of a new one. Indeed, it would be an
understatement to call this fiscal year a tumultuous time, and it was certainly
one during which all equity investors were forced to re-think what was "normal"
market behavior.
SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Consumer Discretionary 7.0%
- ------------------------------------------------
Consumer Staples 9.0%
- ------------------------------------------------
Energy 16.8%
- ------------------------------------------------
Financials 12.2%
- ------------------------------------------------
Health Care 11.0%
- ------------------------------------------------
Industrials 6.0%
- ------------------------------------------------
Information Technology 4.6%
- ------------------------------------------------
Materials 8.7%
- ------------------------------------------------
Telecommunication Services 14.6%
- ------------------------------------------------
Utilities 9.6%
- ------------------------------------------------
Other(2) 0.5%
- ------------------------------------------------
</Table>
(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan) as of June
30, 2009. The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
Through early March 2009, the U.S. equity markets were characterized by
negativity and soaring volatility, as the equity markets reacted to a litany of
bad economic news. Investor concerns were fostered by rising unemployment and a
still-fragile housing market as well as by continued financial disruptions.
Underlying this uncertainty were signs that U.S. economic growth was moving into
a recession, as evidenced by a waning consumer and a dimming export sector,
which, until recently, had been a rare bright spot in the U.S. economic picture.
Global financial institutions cut back lending as other major financial
institutions either went bankrupt, were forced to merge or were taken over by
the U.S. government. Together, these factors fostered heightened investor risk
aversion and fear. The result was that investors sold off all types of equity
assets in a flight to the relative safety of U.S. Treasuries.
Then, economic news became less pessimistic and, in early March, "green shoots"
began to appear. Investor sentiment improved. The Treasury Department finally
revealed details on key parts of its financial rescue plans, and investors
recognized that the U.S. government was not interested in nationalizing
companies that could be viable as privately-owned enterprises. Consumer
confidence took an upturn, and U.S. equities rallied strongly. Although the
equity markets stalled somewhat as
TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Chevron 3.8%
- ------------------------------------------------
BP ADR 3.4%
- ------------------------------------------------
Lorillard 3.2%
- ------------------------------------------------
AT&T 3.1%
- ------------------------------------------------
Verizon Communications 2.9%
- ------------------------------------------------
Pfizer 2.7%
- ------------------------------------------------
Bristol-Myers Squibb 2.6%
- ------------------------------------------------
Enbridge 2.0%
- ------------------------------------------------
Philip Morris Intl 1.8%
- ------------------------------------------------
Bank of America 1.8%
- ------------------------------------------------
</Table>
Excludes cash & cash equivalents.
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
the annual period came to a close, most of the major equity indices enjoyed
gains through June, marking the fourth month in a row of equity gains. Despite
growing concerns about building inflationary pressures, including oil prices
that jumped more than 56% since the start of 2009, the equity markets' big push
since early March primarily reflected a belief among investors that the economy
was positioning for recovery.
Still, the late-period rally in the equity markets was not enough to recoup
prior months' losses, and so virtually all equity asset classes generated steep
double-digit declines for the 12-month period overall. Cyclical sectors within
the Russell Index performed worst, including basic materials, energy,
industrials and financials. More defensive sectors, such as consumer staples,
health care and utilities held up best. Perhaps most surprisingly, the
technology sector also generated strong returns, relative to the Russell Index,
for the fiscal year.
Importantly, the Fund continued to increase its dividend payout at a rate
greater than inflation during the annual period, despite economic weakness and
market turmoil. The Fund was able to largely avoid the dividend cuts faced by
the broader equity market (as represented by the S&P 500 Index). Also, the Fund
maintained a net dividend yield at a level in excess of 150% of the broader
market yield (as represented by the S&P 500 Index) during the annual period. The
net dividend yield is the dividend yield after the deduction of fund expenses.
The Fund's absolute returns were certainly disappointing. While its strong
relative results may be of limited solace, they do serve as testament to
Importantly, the Fund continued to increase its dividend payout at a rate
greater than inflation during the annual period, despite economic weakness and
market turmoil.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
our emphasis on both risk management and investment opportunity. The Fund's
relative results benefited from both effective sector allocation and individual
stock selection during the annual period. Having a significant exposure to
consumer staples helped most, as this sector fulfilled its defensive role,
particularly during the period from September through early March when market
volatility was at its highest. Tobacco giant LORILLARD was a meaningful
outperformer within this sector. Similarly, a sizable allocation to utilities
helped, especially positions in telecommunications companies QWEST
COMMUNICATIONS INTERNATIONAL and EMBARQ, which proved to be stable cash flow
companies able to withstand the economic decline. Having only a modest
allocation to the comparatively weaker performing capital goods industry group
also boosted the Fund's results, as did stock selection within capital goods.
For example, the Fund established a sizable position in construction machinery
giant CATERPILLAR and increased its position in aerospace and defense
manufacturer HONEYWELL INTERNATIONAL, both of which were standout performers
during the annual period. The Fund held only a small position in GENERAL
ELECTRIC, which declined substantially. We subsequently eliminated the Fund's
position in General Electric by the end of the period. Stock selection was also
effective in the health care sector, where pharmaceuticals companies BRISTOL-
MYERS SQUIBB and BIOVAIL performed especially well. Elsewhere, positions in
automotive parts and accessories manufacturer JOHNSON CONTROLS and digital in-
network theatres provider NATIONAL CINEMEDIA were especially strong performers.
Having only a modest allocation to large commercial banks and other financials-
related firms, which led the equity market rally during the latter months of the
annual period, detracting from performance most. Positioning in U.S. BANCORP,
WELLS FARGO, JPMORGAN CHASE and GOLDMAN SACHS particularly disappointed. Having
a sizable allocation to chemicals also hurt, as a slowdown in global industrial
production brought demand for these companies' products to a crawl. Positions in
DOW CHEMICAL and E.I. DU PONT DE NEMOURS performed especially poorly. Elsewhere,
positions in oil services firms HALLIBURTON and TRANSOCEAN detracted from the
Fund's results.
- --------------------------------------------------------------------------------
8 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CHANGES TO THE FUND'S PORTFOLIO
We increased the Fund's exposure to the capital goods industry group, a strategy
which buoyed the Fund's results during the latter months of the annual period.
We also increased the Fund's allocation to the technology sector, adding to the
Fund's positions in semiconductor companies INTEL and TAIWAN SEMICONDUCTOR
MANUFACTURING and establishing a new position in rigid disc drive manufacturer
SEAGATE TECHNOLOGY.
We correspondingly reduced the Fund's exposure to the food and beverage products
industry, trimming the Fund's positions in such companies as KRAFT FOODS and
COCA-COLA. We also decreased the Fund's allocation to banks as they reduced
their dividends and thus no longer fit with the Fund's investment strategy.
Other than these noted changes, we made no meaningful changes to the Fund's
portfolio during the period, maintaining a low 21% turnover rate.
OUR FUTURE STRATEGY
While certainly encouraged by the late-period equity market rally, we believe
that the equity market will likely trade in a rather range-bound manner for the
remainder of the calendar year, with the potential for volatility to spike
again, depending on the ambitiousness of the U.S. government's agenda and the
clarity of economic data. Valuations, we believe, remained modestly attractive
at the end of June but certainly not as attractive as they were just a few
months prior. Our view, therefore, remains positive going forward, though
somewhat neutralized by both the robustness of the March-through-June rally and
by our belief that the market will need to see better corporate revenues and
earnings before achieving a more sustained upward trend.
Our longer-term view is a bit more bullish and so we intend to maintain the
Fund's stance as more offensive rather than defensive. We believe that equity
valuations at the end of June were still relatively attractive from a longer-
term perspective and that returns on equity could be quite good. At the end of
June, we were biased toward sectors and companies that we believe will be the
beneficiaries of global economic growth, not just U.S. economic growth. For
example, given our view of the lack of alternative energy sources as a viable
realistic option for several years ahead, we intend to maintain an emphasis on
natural gas companies and oil services companies within the energy sector. We
expect to maintain an emphasis
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
on technology, especially semiconductors, given its appealing long-term
dynamics. While capital expenditures may have declined as of late, the demand
for data on a global basis has not and we anticipate a rebound within several of
these technology companies. We also favored basic materials and other
industrial-related areas of the market at the end of June, given the development
of infrastructure anticipated under various government stimulus packages. We
expect to maintain the Fund's more modest exposure to traditionally defensive
sectors, such as consumer staples and utilities.
Overall, we believe that individual stock selection will continue to be key to
investment performance. As always, we intend to take positions in individual
stocks across all of the industries and sectors in which the Fund invests when
we believe we have identified factors that other investors have either missed,
ignored or strongly disagree with, and whose share prices we believe have the
potential to move higher. We intend to focus on larger-cap stocks and to
continue to add stocks offering greater dividend-yield potential. Of course, we
intend to continue carefully monitoring economic data and shifts in market
conditions as we seek stock-specific and industry-level opportunities to add
value for the Fund's shareholders.
Even with the media focus on dividend cuts among financial companies and the
U.S. equity market more broadly, we continue to believe that companies with a
consistent high dividend payout and a commitment to growing its dividend will be
among those most attractive to risk-tolerant investors seeking yield. We
therefore intend to continue to seek opportunities for yield from investments in
companies across a wide variety of sectors, including health care and utilities,
in an effort to mitigate the risk of dividend cuts seen during the period among
several companies within the financials sector. Indeed, as has been our strategy
- --------------------------------------------------------------------------------
10 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
for some time now, we continue to seek a diversified mix of dividend-paying
stocks, with a focus on large-cap, value-oriented companies.
<Table>
(PHOTO - WARREN SPITZ) (PHOTO - STEVE SCHROLL)
Warren Spitz Steve Schroll
Senior Portfolio Manager Portfolio Manager
(PHOTO - LATON SPAHR) (PHOTO - PAUL STOCKING)
Laton Spahr, CFA(R) Paul Stocking
Portfolio Manager Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource fund.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Dividend Opportunity Fund Class A shares (from 7/1/99
to 6/30/09) as compared to the performance of two widely cited performance
indices, the Russell 1000 Value Index and the Lipper Equity Income Funds Index.
In comparing the Fund's Class A shares to these indices, you should take into
account the fact that the Fund's performance reflects the maximum sales charge
of 5.75%, while such charges are not reflected in the performance of the
indices. Returns for the Fund include the reinvestment of any distributions paid
during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. 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 or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at June 30, 2009
1 YEAR 3 YEARS 5 YEARS 10 YEARS
RIVERSOURCE DIVIDEND OPPORTUNITY FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $7,165 $7,491 $9,738 $8,252
- ------------------------------------------------------------------------------------------
Average annual total return -28.35% -9.18% -0.53% -1.90%
- ------------------------------------------------------------------------------------------
RUSSELL 1000 VALUE INDEX(1)
Cumulative value of $10,000 $7,097 $7,024 $8,979 $9,855
- ------------------------------------------------------------------------------------------
Average annual total return -29.03% -11.11% -2.13% -0.15%
- ------------------------------------------------------------------------------------------
LIPPER EQUITY INCOME FUNDS INDEX(2)
Cumulative value of $10,000 $7,458 $7,615 $9,216 $9,767
- ------------------------------------------------------------------------------------------
Average annual total return -25.42% -8.68% -1.62% -0.23%
- ------------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 3.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DIVIDEND OPPORTUNITY
FUND LINE GRAPH)
<Table>
<Caption>
RIVERSOURCE DIVIDEND
OPPORTUNITY FUND
CLASS A LIPPER EQUITY
(INCLUDES SALES RUSSELL 1000 INCOME FUNDS
CHARGE) VALUE INDEX(1) INDEX(2)
-------------------- -------------- -----------------
06/30/99 $ 9,425 $10,000 $10,000
9/99 8,932 9,020 9,183
12/99 9,695 9,511 9,556
3/00 10,029 9,557 9,479
6/00 9,585 9,109 9,343
9/00 11,266 9,825 9,926
12/00 11,343 10,179 10,268
3/01 10,628 9,583 9,642
6/01 10,173 10,051 10,062
9/01 9,077 8,950 9,050
12/01 8,735 9,610 9,734
3/02 8,624 10,003 10,018
6/02 7,733 9,151 9,077
9/02 6,370 7,433 7,535
12/02 6,859 8,118 8,134
3/03 6,597 7,723 7,723
6/03 7,546 9,057 8,906
9/03 7,410 9,244 9,078
12/03 7,995 10,556 10,235
3/04 7,965 10,876 10,470
6/04 7,988 10,972 10,597
9/04 8,268 11,141 10,629
12/04 9,092 12,297 11,566
3/05 9,174 12,308 11,512
6/05 9,409 12,514 11,666
9/05 9,718 13,000 12,066
12/05 9,767 13,165 12,239
3/06 10,230 13,946 12,836
6/06 10,383 14,028 12,828
9/06 11,099 14,901 13,525
12/06 12,037 16,093 14,491
3/07 12,403 16,293 14,681
6/07 13,151 17,096 15,574
9/07 13,211 17,055 15,585
12/07 12,681 16,066 14,923
3/08 11,379 14,665 13,643
6/08 10,854 13,886 13,097
9/08 10,124 13,038 12,100
12/08 8,127 10,146 9,639
3/09 7,107 8,445 8,442
6/09 8,252 9,855 9,767
</Table>
(1) The Russell 1000 Value Index, an unmanaged index, measures the performance
of those stocks in the Russell 1000 Index with lower price-to-book ratios
and lower forecasted growth values. The index reflects reinvestment of all
distributions and changes in market prices.
(2) The Lipper Equity Income Funds Index includes the 30 largest equity income
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends. The Fund's performance is currently measured against this index
for purposes of determining the performance incentive adjustment.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 13
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. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the 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 ongoing expenses of any funds in which the Fund
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 ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended June 30, 2009.
ACTUAL EXPENSES
The first line of the 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 the table provides information about hypothetical account
values and hypothetical expenses based on the 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 this 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 the 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 the 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.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,015.40 $5.30(c) 1.06%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.54 $5.31(c) 1.06%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,011.50 $9.08(c) 1.82%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.77 $9.10(c) 1.82%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,011.70 $9.08(c) 1.82%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.77 $9.10(c) 1.82%
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,017.40 $3.40(c) .68%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.42 $3.41(c) .68%
- ------------------------------------------------------------------------------------------
Class R2
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,013.60 $7.34(c) 1.47%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.50 $7.35(c) 1.47%
- ------------------------------------------------------------------------------------------
Class R3
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,015.00 $6.00(c) 1.20%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.84 $6.01(c) 1.20%
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,015.90 $4.80(c) .96%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.03 $4.81(c) .96%
- ------------------------------------------------------------------------------------------
Class R5
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,017.10 $3.65(c) .73%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.17 $3.66(c) .73%
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 15
FUND EXPENSES EXAMPLES (continued) --------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class W
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,015.00 $5.50(c) 1.10%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.34 $5.51(c) 1.10%
- ------------------------------------------------------------------------------------------
</Table>
(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 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2009: +1.54%
for Class A, +1.15% for Class B, +1.17% for Class C, +1.74% for Class I,
+1.36% for Class R2, +1.50% for Class R3, +1.59 for Class R4, +1.71 for
Class R5 and +1.50% for Class W.
(c) RiverSource Investments, LLC (the Investment Manager) and its affiliates
have contractually agreed to waive certain fees and to absorb certain
expenses until Aug. 31, 2010, unless sooner terminated at the discretion of
the Fund's Board, such that net expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment, will not exceed 1.08% for Class A, 1.85% for Class B, 1.84% for
Class C, 0.65% for Class I, 1.45% for Class R2, 1.20% for Class R3, 0.95%
for Class R4, 0.70% for Class R5 and 1.10% for Class W. Any amounts waived
will not be reimbursed by the Fund. This change was effective July 1, 2009.
Had this change been in place for the entire six month period ended June 30,
2009, the actual expenses paid would have been $5.40 for Class A, $9.23 for
Class B, $9.18 for Class C, $3.25 for Class I, $7.24 for Class R2, $4.75 for
Class R4 and $3.50 for Class R5; the hypothetical expenses paid would have
been $5.41 for Class A, $9.25 for Class B, $9.20 for Class C, $3.26 for
Class I, $7.25 for Class R2, $4.76 for Class R4 and $3.51 for Class R5. The
actual and hypothetical expenses paid for Class R3 and Class W would have
been the same as those expenses presented in the table above.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JUNE 30, 2009
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (95.7%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (0.9%)
Honeywell Intl 297,086 $9,328,500
- -------------------------------------------------------------------------------------
BEVERAGES (1.5%)
Coca-Cola 145,825 6,998,142
Diageo ADR 149,171(c) 8,540,040
---------------
Total 15,538,182
- -------------------------------------------------------------------------------------
CHEMICALS (4.3%)
Air Products & Chemicals 119,714 7,732,327
Dow Chemical 502,960(e) 8,117,774
Eastman Chemical 154,320(e) 5,848,728
EI du Pont de Nemours & Co 808,540 20,714,795
Olin 238,318(e) 2,833,601
---------------
Total 45,247,225
- -------------------------------------------------------------------------------------
COMMERCIAL BANKS (2.6%)
HSBC Holdings 860,586(c) 7,168,824
Natl Australia Bank 597,044(c) 10,753,779
Regions Financial 375,881 1,518,559
US Bancorp 449,050 8,046,976
---------------
Total 27,488,138
- -------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (1.7%)
Deluxe 341,054(e) 4,368,902
Pitney Bowes 293,809 6,443,231
RR Donnelley & Sons 329,031 3,823,340
Waste Management 138,085(e) 3,888,474
---------------
Total 18,523,947
- -------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (0.7%)
Seagate Technology 703,775(c) 7,361,487
- -------------------------------------------------------------------------------------
CONTAINERS & PACKAGING (1.0%)
Packaging Corp of America 627,860 10,171,332
- -------------------------------------------------------------------------------------
DISTRIBUTORS (0.5%)
Genuine Parts 171,426(e) 5,753,057
- -------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (3.6%)
Bank of America 1,622,424(e) 21,415,997
JPMorgan Chase & Co 487,463(e) 16,627,363
---------------
Total 38,043,360
- -------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (14.1%)
AT&T 1,493,603 37,101,098
BT Group 3,330,789(c) 5,580,049
Deutsche Telekom ADR 640,068(c,e) 7,552,802
Embarq 401,506 16,887,342
FairPoint Communications 468,751(e) 281,251
Frontier Communications 1,107,095(e) 7,904,658
Qwest Communications Intl 3,717,579(e) 15,427,953
Telefonos de Mexico ADR Series L 424,305(c,e) 6,877,984
Telmex Internacional ADR 424,305(c,e) 5,367,458
Telstra 2,515,371(c) 6,862,278
Verizon Communications 1,153,920 35,459,962
Windstream 499,550 4,176,238
---------------
Total 149,479,073
- -------------------------------------------------------------------------------------
ELECTRIC UTILITIES (3.9%)
American Electric Power 185,711 5,365,191
Duke Energy 685,100(e) 9,995,608
Pepco Holdings 334,393 4,494,242
Pinnacle West Capital 208,570(e) 6,288,386
Progress Energy 166,822 6,310,876
Southern 199,992 6,231,751
UIL Holdings 98,748 2,216,893
---------------
Total 40,902,947
- -------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.8%)
Hubbell Cl B 253,041 8,112,494
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
ENERGY EQUIPMENT & SERVICES (2.5%)
Halliburton 401,010 $8,300,907
Schlumberger 122,751(e) 6,642,057
Transocean 157,832(b,c) 11,725,339
---------------
Total 26,668,303
- -------------------------------------------------------------------------------------
FOOD PRODUCTS (1.7%)
B&G Foods Cl A 580,215 4,879,608
ConAgra Foods 416,517 7,938,815
Kraft Foods Cl A 139,810 3,542,785
Sara Lee 207,578 2,025,961
---------------
Total 18,387,169
- -------------------------------------------------------------------------------------
GAS UTILITIES (1.1%)
Nicor 350,456 12,132,787
- -------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (1.5%)
Newell Rubbermaid 221,517(e) 2,305,992
Tupperware Brands 537,596(e) 13,988,248
---------------
Total 16,294,240
- -------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.3%)
Tomkins 1,415,646(c) 3,452,762
- -------------------------------------------------------------------------------------
INSURANCE (3.0%)
Allstate 282,620 6,895,928
Lincoln Natl 108,115 1,860,659
Marsh & McLennan Companies 129,185 2,600,494
Montpelier Re Holdings 561,705(c) 7,465,059
Unitrin 87,568 1,052,567
XL Capital Cl A 1,019,319(c) 11,681,397
---------------
Total 31,556,104
- -------------------------------------------------------------------------------------
MACHINERY (1.7%)
Caterpillar 345,901(e) 11,428,569
Harsco 226,525(e) 6,410,658
---------------
Total 17,839,227
- -------------------------------------------------------------------------------------
MARINE (--%)
Aries Maritime Transport 415,529(b,c,e) 286,715
- -------------------------------------------------------------------------------------
MEDIA (2.6%)
Cinemark Holdings 182,103 2,061,406
GateHouse Media 328,856(b) 57,550
Natl CineMedia 720,843(e) 9,918,800
Regal Entertainment Group Cl A 1,187,380 15,780,280
---------------
Total 27,818,036
- -------------------------------------------------------------------------------------
METALS & MINING (2.4%)
Compass Minerals Intl 242,420(e) 13,311,282
Rio Tinto ADR 25,925(c) 4,248,330
Southern Copper 243,373 4,974,544
United States Steel 82,303(e) 2,941,509
---------------
Total 25,475,665
- -------------------------------------------------------------------------------------
MULTILINE RETAIL (0.6%)
Macy's 539,764 6,347,625
- -------------------------------------------------------------------------------------
MULTI-UTILITIES (4.6%)
Ameren 92,246(e) 2,296,003
CH Energy Group 75,884(e) 3,543,783
Consolidated Edison 253,080(e) 9,470,253
Dominion Resources 219,711 7,342,742
DTE Energy 174,514 5,584,448
Natl Grid 1,128,249(c) 10,179,758
NiSource 275,657 3,214,161
NSTAR 54,931(e) 1,763,834
Public Service Enterprise Group 158,685 5,177,892
---------------
Total 48,572,874
- -------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (14.2%)
BP ADR 866,801(c) 41,329,071
Chevron 684,890 45,373,962
Enbridge 685,900(c) 23,821,306
Enbridge Energy Management LLC 57,217(b) 21
Eni 418,657(c) 9,928,932
General Maritime 123,486(e) 1,221,277
Kinder Morgan Management LLC 2,471(b) 1
Royal Dutch Shell ADR 282,636(c) 14,185,501
Ship Finance Intl 165,376(c,e) 1,824,097
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
OIL, GAS & CONSUMABLE FUELS (CONT.)
Spectra Energy 357,952(e) $6,056,548
TransCanada 257,533(c,e) 6,930,213
---------------
Total 150,670,929
- -------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (1.1%)
MeadWestvaco 334,122 5,482,942
Weyerhaeuser 194,514 5,919,061
---------------
Total 11,402,003
- -------------------------------------------------------------------------------------
PHARMACEUTICALS (10.6%)
Biovail 615,342(c,e) 8,276,350
Bristol-Myers Squibb 1,537,223 31,220,999
Johnson & Johnson 250,440(e) 14,224,992
Merck & Co 755,789(e) 21,131,860
Pfizer 2,164,316(e) 32,464,740
Wyeth 105,224 4,776,117
---------------
Total 112,095,058
- -------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.1%)
LaSalle Hotel Properties 670,434(e) 8,273,156
ProLogis 304,735(e) 2,456,164
Ventas 36,019(e) 1,075,527
---------------
Total 11,804,847
- -------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.9%)
Intel 650,882 10,772,097
Microchip Technology 725,604(e) 16,362,371
Taiwan Semiconductor Mfg ADR 1,527,289(c) 14,371,789
---------------
Total 41,506,257
- -------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Capitol Federal Financial 97,582(e) 3,740,318
- -------------------------------------------------------------------------------------
TOBACCO (5.8%)
Lorillard 576,904 39,096,784
Philip Morris Intl 507,459 22,135,362
---------------
Total 61,232,146
- -------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.5%)
Babcock & Brown Air ADR 705,550(c,e) 5,489,179
- -------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.5%)
Vodafone Group ADR 260,064(c,e) 5,068,647
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $1,287,003,973) $1,013,790,633
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
BONDS (1.1%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(a)
BROKERAGE
Goldman Sachs Group
Cv
12-11-09 20.00% $12,001,751(d,g,h) $11,150,932
- -------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $12,001,751) $11,150,932
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PREFERRED STOCKS (2.5%)
ISSUER SHARES VALUE(a)
AUTOMOTIVE (1.6%)
Johnson Controls 11.50% Cv 160,000(e) $17,313,600
- -------------------------------------------------------------------------------------
PHARMACEUTICALS (0.4%)
Schering-Plough
6.00% Cv 20,400 4,621,875
- -------------------------------------------------------------------------------------
PROPERTY & CASUALTY (0.5%)
XL Capital
10.75% Cv 250,000(c) 4,875,000
- -------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost: $19,350,000) $26,810,475
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (0.5%)
SHARES VALUE(a)
RiverSource Short-Term
Cash Fund, 0.30% 5,310,624(f) $5,310,624
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $5,310,624) $5,310,624
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 19
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON
LOAN (14.2%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND
JPMorgan Prime Money Market Fund 150,695,279 $150,695,279
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $150,695,279) $150,695,279
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,474,361,627)(i) $1,207,757,943
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the
value of foreign securities represented 23.7% of net assets.
(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 Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At June 30,
2009, the value of these securities amounted to $11,150,932 or 1.1% of net
assets.
(e) At June 30, 2009, security was partially or fully on loan. See Note 7 to
the financial statements.
(f) Affiliated Money Market Fund -- See Note 8 to the financial statements. The
rate shown is the seven-day current annualized yield at June 30, 2009.
(g) This privately issued security is an aggregate mandatory exchangeable note
whose investment results are designed to correspond generally to the
performance of a single Metals & Mining common stock, Freeport-McMoRan
Copper & Gold. Upon maturity, the security will be exchanged for either
cash or at the option of the issuer, the issuer may deliver shares of the
referenced security.
(h) Identifies issues considered to be illiquid as to their marketability (see
Note 2 to the financial statements). The aggregate value of such securities
at June 30, 2009, was $11,150,932 representing 1.1% of net assets.
Information concerning such security holdings at June 30, 2009, is as
follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
-----------------------------------------------------------------
Goldman Sachs Group
20.00% Cv 2009 06-04-09 $12,001,751
</Table>
- --------------------------------------------------------------------------------
20 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(i) At June 30, 2009, the cost of securities for federal income tax purposes
was $1,477,853,837 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $58,361,734
Unrealized depreciation (328,457,628)
------------------------------------------------------------
Net unrealized depreciation $(270,095,894)
------------------------------------------------------------
</Table>
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 21
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) requires
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.
SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair
value 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. When a valuation uses multiple inputs from
varying levels of the hierarchy, the hierarchy level is determined based on the
lowest level input or inputs that are significant to the fair value measurement
in its entirety. 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.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect fair value at the
close of the NYSE or require adjustment, as described in Note 2 to the financial
statements -- Valuation of securities.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
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 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 flow, and
comparable company data.
The following table is a summary of the inputs used to value the Fund's
investments as of June 30, 2009:
<Table>
<Caption>
FAIR VALUE AT JUNE 30, 2009
-----------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- ---------------------------------------------------------------------------------------
Equity Securities
Common Stocks $1,013,790,633(a) $-- $-- $1,013,790,633
Preferred Stocks & Other
Pharmaceuticals -- 4,621,875 -- 4,621,875
Property & Casualty -- 4,875,000 -- 4,875,000
Other 17,313,600(a) -- -- 17,313,600
- ---------------------------------------------------------------------------------------
Total Equity Securities 1,031,104,233 9,496,875 -- 1,040,601,108
- ---------------------------------------------------------------------------------------
Bonds
Corporate Debt
Securities -- 11,150,932 -- 11,150,932
- ---------------------------------------------------------------------------------------
Total Bonds -- 11,150,932 -- 11,150,932
- ---------------------------------------------------------------------------------------
Other
Affiliated Money Market
Fund 5,310,624(b) -- -- 5,310,624
Investments of Cash
Collateral Received
for Securities on Loan 150,695,279 -- -- 150,695,279
- ---------------------------------------------------------------------------------------
Total Other 156,005,903 -- -- 156,005,903
- ---------------------------------------------------------------------------------------
Total $1,187,110,136 $20,647,807 $-- $1,207,757,943
- ---------------------------------------------------------------------------------------
</Table>
(a) All other industry classifications are identified in the Portfolio of
Investments.
(b) Money market fund that is a sweep investment for cash balances in the Fund
at June 30, 2009.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 23
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
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.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------
JUNE 30, 2009
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $1,318,355,724) $1,051,752,040
Affiliated money market fund (identified cost $5,310,624) 5,310,624
Investments of cash collateral received for securities on loan
(identified cost $150,695,279) 150,695,279
- ---------------------------------------------------------------------------------
Total investments in securities (identified cost $1,474,361,627) 1,207,757,943
Capital shares receivable 433,719
Dividends and accrued interest receivable 3,893,652
- ---------------------------------------------------------------------------------
Total assets 1,212,085,314
- ---------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 1,304,348
Payable upon return of securities loaned 150,695,279
Accrued investment management services fees 17,435
Accrued distribution fees 378,183
Accrued transfer agency fees 5,669
Accrued administrative services fees 1,670
Accrued plan administration services fees 216
Other accrued expenses 159,266
- ---------------------------------------------------------------------------------
Total liabilities 152,562,066
- ---------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $1,059,523,248
- ---------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 1,900,966
Additional paid-in capital 1,857,007,303
Undistributed net investment income 6,148,297
Accumulated net realized gain (loss) (538,925,170)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (266,608,148)
- ---------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $1,059,523,248
- ---------------------------------------------------------------------------------
*Including securities on loan, at value $ 145,537,603
- ---------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $793,420,879 142,297,299 $5.58(1)
Class B $ 91,922,474 16,598,559 $5.54
Class C $ 14,770,403 2,672,956 $5.53
Class I $158,905,085 28,437,503 $5.59
Class R2 $ 3,648 653 $5.59
Class R3 $ 3,648 653 $5.59
Class R4 $ 490,289 87,730 $5.59
Class R5 $ 3,648 653 $5.59
Class W $ 3,174 568 $5.59
- -----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $5.92. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 25
STATEMENT OF OPERATIONS -------------------------------------------------------
YEAR ENDED JUNE 30, 2009
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 57,148,562
Interest 3,170,460
Income distributions from affiliated money market fund 194,115
Fee income from securities lending 510,146
Less foreign taxes withheld (1,226,990)
- --------------------------------------------------------------------------------
Total income 59,796,293
- --------------------------------------------------------------------------------
Expenses:
Investment management services fees 6,381,215
Distribution fees
Class A 2,154,545
Class B 1,012,961
Class C 150,461
Class R2 18
Class R3 9
Class W 8
Transfer agency fees
Class A 1,887,490
Class B 237,604
Class C 34,008
Class R2 2
Class R3 2
Class R4 305
Class R5 2
Class W 7
Administrative services fees 642,082
Plan administration services fees
Class R2 9
Class R3 9
Class R4 1,525
Compensation of board members 34,062
Custodian fees 74,285
Printing and postage 159,650
Registration fees 90,792
Professional fees 40,817
Other 56,749
- --------------------------------------------------------------------------------
Total expenses 12,958,617
Expenses waived/reimbursed by the Investment Manager and its
affiliates (952,010)
Earnings and bank fee credits on cash balances (7,027)
- --------------------------------------------------------------------------------
Total net expenses 11,999,580
- --------------------------------------------------------------------------------
Investment income (loss) -- net 47,796,713
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
26 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $(194,361,921)
Foreign currency transactions (199,553)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (194,561,474)
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies (203,392,348)
- --------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (397,953,822)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(350,157,109)
- --------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 27
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED JUNE 30, 2009 2008
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 47,796,713 $ 62,167,305
Net realized gain (loss) on investments (194,561,474) 56,219,781
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies (203,392,348) (471,877,412)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (350,157,109) (353,490,326)
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (41,690,044) (42,059,205)
Class B (4,082,961) (4,705,394)
Class C (624,127) (577,096)
Class I (8,198,831) (8,053,021)
Class R2 (182) --
Class R3 (191) --
Class R4 (30,301) (37,117)
Class R5 (203) --
Class W (163) (149)
- -------------------------------------------------------------------------------------------------
Total distributions (54,627,003) (55,431,982)
- -------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
28 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED JUNE 30, 2009 2008
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 191,628,175 $ 333,666,137
Class B shares 19,032,766 30,861,475
Class C shares 4,995,272 6,798,093
Class I shares 47,886,548 55,427,460
Class R2 shares 5,000 --
Class R3 shares 5,000 --
Class R4 shares 43,818 308,726
Class R5 shares 5,000 --
Reinvestment of distributions at net asset value
Class A shares 39,394,145 39,955,948
Class B shares 3,923,540 4,536,786
Class C shares 568,183 525,590
Class I shares 8,198,356 8,052,561
Class R4 shares 30,301 37,117
Conversions from Class B to Class A
Class A shares 29,662,452 --
Class B shares (29,662,452) --
Payments for redemptions
Class A shares (324,393,842) (353,444,406)
Class B shares (35,231,647) (122,803,455)
Class C shares (6,810,008) (6,247,970)
Class I shares (41,642,097) (56,505,344)
Class R4 shares (233,031) (550,381)
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (92,594,521) (59,381,663)
- -------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (497,378,633) (468,303,971)
Net assets at beginning of year 1,556,901,881 2,025,205,852
- -------------------------------------------------------------------------------------------------
Net assets at end of year $1,059,523,248 $1,556,901,881
- -------------------------------------------------------------------------------------------------
Undistributed net investment income $ 6,148,297 $ 12,449,075
- -------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 29
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $7.72 $9.65 $7.83 $7.30 $6.39
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .25(b) .30(b) .26 .25 .22
Net gains (losses) (both realized and
unrealized) (2.10) (1.96) 1.81 .50 .91
- ------------------------------------------------------------------------------------------------------
Total from investment operations (1.85) (1.66) 2.07 .75 1.13
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.29) (.27) (.25) (.22) (.22)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.58 $7.72 $9.65 $7.83 $7.30
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $793 $1,167 $1,453 $907 $808
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.13% 1.11% 1.15% 1.16% 1.12%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.03% 1.11% 1.15% 1.16% 1.12%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.23% 3.31% 3.15% 3.27% 3.20%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17% 19% 24%
- ------------------------------------------------------------------------------------------------------
Total return(g) (23.98%) (17.46%) 26.66% 10.34% 17.79%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $7.67 $9.59 $7.78 $7.25 $6.35
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .21(b) .22(b) .19 .19 .17
Net gains (losses) (both realized and
unrealized) (2.10) (1.94) 1.80 .50 .89
- -----------------------------------------------------------------------------------------------------
Total from investment operations (1.89) (1.72) 1.99 .69 1.06
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.24) (.20) (.18) (.16) (.16)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.54 $7.67 $9.59 $7.78 $7.25
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $92 $171 $303 $275 $297
- -----------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.89% 1.87% 1.91% 1.93% 1.88%
- -----------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.79% 1.87% 1.91% 1.93% 1.88%
- -----------------------------------------------------------------------------------------------------
Net investment income (loss) 3.45% 2.48% 2.38% 2.50% 2.41%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17% 19% 24%
- -----------------------------------------------------------------------------------------------------
Total return(g) (24.60%) (18.15%) 25.76% 9.55% 16.84%
- -----------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 31
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $7.65 $9.57 $7.77 $7.25 $6.35
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .20(b) .23(b) .19 .18 .17
Net gains (losses) (both realized and
unrealized) (2.07) (1.95) 1.79 .50 .89
- -----------------------------------------------------------------------------------------------------
Total from investment operations (1.87) (1.72) 1.98 .68 1.06
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.25) (.20) (.18) (.16) (.16)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.53 $7.65 $9.57 $7.77 $7.25
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $15 $21 $26 $15 $12
- -----------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.88% 1.87% 1.91% 1.92% 1.89%
- -----------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.78% 1.87% 1.91% 1.92% 1.89%
- -----------------------------------------------------------------------------------------------------
Net investment income (loss) 3.46% 2.56% 2.40% 2.50% 2.43%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17% 19% 24%
- -----------------------------------------------------------------------------------------------------
Total return(g) (24.51%) (18.15%) 25.74% 9.47% 16.86%
- -----------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
32 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $7.73 $9.67 $7.85 $7.32 $6.41
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .27(b) .33(b) .30 .27 .25
Net gains (losses) (both realized and
unrealized) (2.10) (1.97) 1.80 .51 .91
- ------------------------------------------------------------------------------------------------------
Total from investment operations (1.83) (1.64) 2.10 .78 1.16
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.31) (.30) (.28) (.25) (.25)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.59 $7.73 $9.67 $7.85 $7.32
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $159 $197 $242 $46 $--
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) .66% .72% .76% .78% .70%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) .66% .72% .76% .78% .70%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.60% 3.70% 3.58% 3.52% 3.61%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17% 19% 24%
- ------------------------------------------------------------------------------------------------------
Total return (23.66%) (17.19%) 27.07% 10.78% 18.24%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 33
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED
JUNE 30, 2009(h)
Net asset value, beginning of period $7.67
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(b) .23
Net gains (losses) (both realized and
unrealized) (2.03)
- ---------------------------------------------------------------------
Total from investment operations (1.80)
- ---------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.28)
- ---------------------------------------------------------------------
Net asset value, end of period $5.59
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- ---------------------------------------------------------------------
Gross expenses prior to expense waiver/
reimbursement(c),(d) 1.46%(i)
- ---------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.33%(i)
- ---------------------------------------------------------------------
Net investment income (loss) 4.23%(i)
- ---------------------------------------------------------------------
Portfolio turnover rate 21%
- ---------------------------------------------------------------------
Total return (23.53%)(j)
- ---------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
34 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED
JUNE 30, 2009(h)
Net asset value, beginning of period $7.67
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(b) .24
Net gains (losses) (both realized and
unrealized) (2.03)
- ---------------------------------------------------------------------
Total from investment operations (1.79)
- ---------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.29)
- ---------------------------------------------------------------------
Net asset value, end of period $5.59
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- ---------------------------------------------------------------------
Gross expenses prior to expense waiver/
reimbursement(c),(d) 1.20%(i)
- ---------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.07%(i)
- ---------------------------------------------------------------------
Net investment income (loss) 4.49%(i)
- ---------------------------------------------------------------------
Portfolio turnover rate 21%
- ---------------------------------------------------------------------
Total return (23.34%)(j)
- ---------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 35
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $7.74 $9.67 $7.85 $7.32 $6.41
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .27(b) .33(b) .27 .26 .23
Net gains (losses) (both realized and
unrealized) (2.11) (1.95) 1.81 .50 .91
- ------------------------------------------------------------------------------------------------------
Total from investment operations (1.84) (1.62) 2.08 .76 1.14
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.31) (.31) (.26) (.23) (.23)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.59 $7.74 $9.67 $7.85 $7.32
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $1 $1 $1 $--
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) .96% 1.02% 1.03% .99% .94%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) .75% .76% 1.02% .99% .94%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.50% 3.62% 3.29% 3.37% 3.37%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17% 19% 24%
- ------------------------------------------------------------------------------------------------------
Total return (23.86%) (17.00%) 26.75% 10.56% 17.93%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
36 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED
JUNE 30, 2009(h)
Net asset value, beginning of period $7.67
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(b) .26
Net gains (losses) (both realized and
unrealized) (2.03)
- ---------------------------------------------------------------------
Total from investment operations (1.77)
- ---------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.31)
- ---------------------------------------------------------------------
Net asset value, end of period $5.59
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $--
- ---------------------------------------------------------------------
Gross expenses prior to expense waiver/
reimbursement(c),(d) .72%(i)
- ---------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) .72%(i)
- ---------------------------------------------------------------------
Net investment income (loss) 4.85%(i)
- ---------------------------------------------------------------------
Portfolio turnover rate 21%
- ---------------------------------------------------------------------
Total return (23.10%)(j)
- ---------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 37
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
Fiscal period ended June 30,
2009 2008 2007(k)
Net asset value, beginning of period $7.73 $9.67 $8.80
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .25(b) .29(b) .25
Net gains (losses) (both realized and
unrealized) (2.10) (1.97) .81
- ---------------------------------------------------------------------------------
Total from investment operations (1.85) (1.68) 1.06
- ---------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.29) (.26) (.19)
- ---------------------------------------------------------------------------------
Net asset value, end of period $5.59 $7.73 $9.67
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- ---------------------------------------------------------------------------------
Gross expenses prior to expense waiver/
reimbursement(c),(d) 1.09% 1.16% 1.19%(i)
- ---------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.09% 1.16% 1.19%(i)
- ---------------------------------------------------------------------------------
Net investment income (loss) 4.18% 3.27% 2.97%(i)
- ---------------------------------------------------------------------------------
Portfolio turnover rate 21% 20% 17%
- ---------------------------------------------------------------------------------
Total return (24.01%) (17.58%) 12.15%(j)
- ---------------------------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) 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
above reported expense ratios.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(f) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the years ended June 30, 2009 and 2008.
(g) Total return does not reflect payment of a sales charge.
(h) For the period from Aug. 1, 2008 (inception date) to June 30, 2009.
(i) Adjusted to an annual basis.
(j) Not annualized.
(k) For the period from Dec. 1, 2006 (inception date) to June 30, 2007.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
38 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
RiverSource Dividend Opportunity Fund (the Fund) is a series of RiverSource
Sector Series, Inc. and is registered under the Investment Company Act of 1940,
as amended (the 1940 Act) as a diversified, open-end management investment
company. RiverSource Sector Series, Inc. has 10 billion authorized shares of
capital stock that can be allocated among the separate series as designated by
the Board of Directors (the Board). The Fund invests primarily in dividend-
paying common and preferred stocks.
The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class
R4, Class R5 and Class W 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 approximately eight years after
their initial purchase date.
- - Class C shares may be subject to a CDSC.
- - Class I, Class R2, Class R3, Class R4 and Class R5 shares are offered without
a front-end sales charge or CDSC to qualifying institutional investors. Class
R2, Class R3 and Class R5 became available effective Aug. 1, 2008.
- - Class W shares are offered without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At June 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of
Class I shares and the Investment Manager owned 100% of Class R2, Class R3,
Class R5 and Class W shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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. 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. Foreign securities are valued based on quotations from
the principal market in which such securities are normally traded. The
procedures adopted by 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 (such as foreign 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.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the
Investment Manager, as administrator to the Fund, will fair value foreign
securities pursuant to procedures adopted by the Board, including utilizing a
third party pricing service to determine these fair values. These procedures
take into account multiple factors, including movements in the U.S. securities
markets, to determine a good faith estimate that reasonably reflects the current
market conditions as of the close of the NYSE.
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 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.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
At June 30, 2009, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. The aggregate value of such securities at June 30, 2009 was
$11,150,932 representing 1.05% of net assets. Certain illiquid securities may be
valued by management at fair value according to procedures approved, in good
faith, by the Board. According to Board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 15%
limitation specified above. Assets are liquid if they can be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the asset is valued by the Fund.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The 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) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the 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. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
3. INVESTMENTS IN DERIVATIVES
The 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. The Fund may also use derivative
instruments to mitigate certain investment risks, such as foreign currency
exchange rate risk, interest rate risk, and credit risk.
FORWARD FOREIGN CURRENCY CONTRACTS
The fund may enter into forward foreign currency contracts in connection with
settling purchases or sales of securities, to hedge the currency exposure
associated with some or all of the Fund's securities or as part of its
investment strategy. A foreign currency contract is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of a foreign currency contract fluctuates with changes in foreign currency
exchange rates. Foreign currency contracts are marked to market daily based upon
foreign currency exchange rates from an independent pricing service and the
change in value is recorded as unrealized appreciation or depreciation. The Fund
will record a realized gain or loss when the foreign currency contract is
closed.
The risks of foreign currency contracts include movement in the values of the
foreign currencies relative to the U.S. dollar (or other foreign currencies) and
the possibility that the counterparty will not complete its contractual
obligation, which may be in excess of the amount reflected in the Statement of
Assets and Liabilities. At June 30, 2009, the Fund had no outstanding forward
foreign currency 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 the 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 the 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.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2009
At June 30, 2009, the Fund had no outstanding derivatives.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2009
<Table>
<Caption>
AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- --------------------------------------------------------------------------
RISK EXPOSURE
CATEGORY FORWARD CURRENCY CONTRACTS
- --------------------------------------------------------------------
Foreign exchange contracts $55,465
- --------------------------------------------------------------------
Total $55,465
- --------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- --------------------------------------------------------------------------
RISK EXPOSURE
CATEGORY FORWARD CURRENCY CONTRACTS
- --------------------------------------------------------------------
Foreign exchange contracts $--
- --------------------------------------------------------------------
Total $--
- --------------------------------------------------------------------
</Table>
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is equal to a percentage of the Fund's average daily net assets that declines
from 0.61% to 0.375% annually as the Fund's net assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment determined
monthly by measuring the percentage difference over a rolling 12-month period
between the annualized performance of one Class A share of the Fund and the
annualized performance of the Lipper Equity Income Funds Index. In certain
circumstances, the Board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment decreased the management fee by
$350,345 for the year ended June 30, 2009. The management fee for the year ended
June 30, 2009 was 0.56% of the Fund's average daily net assets, including the
adjustment under the terms of the performance incentive arrangement.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services equal to a percentage of the
Fund's average daily net assets that declines from 0.06% to 0.03% annually as
the Fund's net assets increase. The fee for the year ended June 30, 2009 was
0.06% of the Fund's average daily net assets.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund 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 Fund and the Board. For the year ended June 30,
2009, other expenses paid to this company were $8,610.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the 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 the Fund or other funds in the RiverSource Family
of Funds. The Fund's liability for these amounts is adjusted for market 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 shareholder accounts and records. The Fund pays the Transfer
Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50
for Class B and $20.00 for Class C for this service. The Transfer Agent also
charges an annual fee of $3 per account serviced directly by the Fund or its
designated agent for Class A, Class B and Class C shares. The Fund also pays the
Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's
average daily net assets attributable to Class R2, Class R3, Class R4 and Class
R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average
daily net assets attributable to Class W shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees in the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares for the provision of
various administrative, recordkeeping, communication and educational services.
DISTRIBUTION FEES
The 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, the Fund pays a fee at an
annual rate of up to 0.25% of the Fund's average daily net assets attributable
to
- --------------------------------------------------------------------------------
44 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
Class A, Class R3 and Class W shares, a fee at an annual rate of up to 0.50% of
the Fund's average daily net assets attributable to Class R2 shares and a fee at
an annual rate of up to 1.00% of the 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) was approximately $3,647,000 and $172,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of April 30, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $717,666 for Class A, $76,876 for Class B and
$3,640 for Class C for the year ended June 30, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended June 30, 2009, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*), including the adjustment under the terms
of a performance incentive arrangement, were as follows:
<Table>
Class A............................................. 1.03%
Class B............................................. 1.79
Class C............................................. 1.78
Class I............................................. 0.66
Class R2............................................ 1.33
Class R3............................................ 1.07
Class R4............................................ 0.75
Class R5............................................ 0.72
Class W............................................. 1.09
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class A.......................................... $835,418
Class B.......................................... 100,768
Class C.......................................... 14,585
Class R4......................................... 172
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 45
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R2........................................... $4
Class R3........................................... 4
Class R4........................................... 1,059
</Table>
Under an agreement which was effective until June 30, 2009, the Investment
Manager and its affiliates contractually agreed to waive certain fees and
expenses such that net expenses (excluding fees and expenses of acquired
funds*), before giving effect to any performance incentive adjustment, would not
exceed the following percentage of the class' average daily net assets:
<Table>
Class A............................................. 1.06%
Class B............................................. 1.82
Class C............................................. 1.82
Class I............................................. 0.70
Class R2............................................ 1.50
Class R3............................................ 1.25
Class R4............................................ 0.96
Class R5............................................ 0.75
Class W............................................. 1.15
</Table>
Effective July 1, 2009, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and expenses until Aug. 31, 2010,
unless sooner terminated at the discretion of the Board, such that net expenses
(excluding fees and expenses of acquired funds*), before giving effect to any
performance incentive adjustment, will not exceed the following percentage of
the class average daily net assets:
<Table>
Class A............................................. 1.08%
Class B............................................. 1.85
Class C............................................. 1.84
Class I............................................. 0.65
Class R2............................................ 1.45
Class R3............................................ 1.20
Class R4............................................ 0.95
Class R5............................................ 0.70
Class W............................................. 1.10
</Table>
* 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 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 the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
BANK FEE CREDITS
During the year ended June 30, 2009, the Fund's transfer agency fees were
reduced by $7,027 as a result of bank fee credits from overnight cash balances.
CUSTODIAN FEES
Effective Dec. 15, 2008, the fund pays custodian fees to JPMorgan Chase Bank,
N.A. For the period from July 1, 2008 to Dec. 15, 2008, the Fund paid custodian
fees amounting to $75,739 to Ameriprise Trust Company, a subsidiary of
Ameriprise Financial.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $239,258,688 and $329,343,863 respectively, for the year
ended June 30, 2009. Realized gains and losses are determined on an identified
cost basis.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
JUNE 30, 2009 JUNE 30, 2008
- -------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------
Sold 34,619,366 36,055,477
Converted from Class B shares* 3,965,991 --
Reinvested distributions 6,860,461 4,660,694
Redeemed (54,301,681) (40,059,510)
- -------------------------------------------------------------------
Net increase (decrease) (8,855,863) 656,661
- -------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------
Sold 3,484,644 3,418,567
Reinvested distributions 690,329 533,508
Converted to Class A shares* (3,992,680) --
Redeemed (5,904,380) (13,264,038)
- -------------------------------------------------------------------
Net increase (decrease) (5,722,087) (9,311,963)
- -------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------
Sold 916,076 748,301
Reinvested distributions 100,294 61,937
Redeemed (1,131,028) (720,206)
- -------------------------------------------------------------------
Net increase (decrease) (114,658) 90,032
- -------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 47
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
<Table>
<Caption>
YEAR ENDED YEAR ENDED
JUNE 30, 2009 JUNE 30, 2008
- -------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------
Sold 8,521,127 5,941,045
Reinvested distributions 1,434,768 935,656
Redeemed (6,946,803) (6,461,387)
- -------------------------------------------------------------------
Net increase (decrease) 3,009,092 415,314
- -------------------------------------------------------------------
CLASS R2**
- -------------------------------------------------------------------
Sold 653 --
- -------------------------------------------------------------------
Net increase (decrease) 653 --
- -------------------------------------------------------------------
CLASS R3**
- -------------------------------------------------------------------
Sold 653 --
- -------------------------------------------------------------------
Net increase (decrease) 653 --
- -------------------------------------------------------------------
CLASS R4
- -------------------------------------------------------------------
Sold 7,910 34,110
Reinvested distributions 5,191 4,320
Redeemed (39,685) (61,365)
- -------------------------------------------------------------------
Net increase (decrease) (26,584) (22,935)
- -------------------------------------------------------------------
CLASS R5**
- -------------------------------------------------------------------
Sold 653 --
- -------------------------------------------------------------------
Net increase (decrease) 653 --
- -------------------------------------------------------------------
</Table>
* Automatic conversion of Class B shares to Class A shares.
** For the period from Aug. 1, 2008 (inception date) to June 30, 2009.
7. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending
Agreement (the Agreement) with JPMorgan Chase Bank, National Association
(JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend
securities to authorized borrowers in order to generate additional income on
behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured
by cash or U.S. government securities equal to at least 100% of the market value
of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities is delivered the
following business day. Cash collateral received is invested by the lending
agent on behalf of the Fund into authorized investments pursuant to the
Agreement. The investments made with the cash collateral are listed in the
Portfolio of Investments. The values of such investments and any uninvested cash
collateral balance are disclosed in the Statement of Assets and Liabilities
along with the
- --------------------------------------------------------------------------------
48 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
related obligation to return the collateral upon the return of the securities
loaned. At June 30, 2009, securities valued at $145,537,603 were on loan,
secured by cash collateral of $150,695,279 invested in short-term securities or
in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$385,107 earned from securities lending from Dec. 1, 2008 through June 30, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent
for the Fund under the Securities Lending Agency Agreement pursuant to which the
Fund agreed to reimburse the Investment Manager for expenses incurred by it in
connection with the lending program. Expenses paid to the Investment Manager as
securities lending agent were $8,337 through Nov. 30, 2008 and are included in
other expenses in the Statement of Operations. Cash collateral received on
loaned securities had been invested in an affiliated money market fund. Income
of $125,039 earned from securities lending from July 1, 2008 through Nov. 30,
2008 is included in the Statement of Operations.
8. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the funds in the
RiverSource Family of Funds and other institutional clients of RiverSource
Investments. The cost of the Fund's purchases and proceeds from sales of shares
of RiverSource Short-Term Cash Fund aggregated $332,771,550 and $369,130,096,
respectively, for the year ended June 30, 2009. The income distributions
received with respect to the Fund's investment in RiverSource Short-Term Cash
Fund can be found in the Statement of Operations and the Fund's
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 49
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be
found in the Portfolio of Investments.
9. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
16, 2008, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds in the
RiverSource Family of Funds, severally and not jointly, permits collective
borrowings up to $475 million. The borrowers shall have the right, upon written
notice to the Administrative Agent to request an increase of up to $175 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $650 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each Fund based on
its borrowings at a rate equal to the federal funds rate plus 0.75%. Each
borrowing under the credit facility matures no later than 60 days after the date
of borrowing. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.06% per annum, in addition to
an upfront fee equal to its pro rata share of 0.02% of the amount of the credit
facility. The Fund had no borrowings during the year ended June 30, 2009.
Under the prior credit facility which was effective until Oct. 15, 2008, the
Fund had entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow
for the temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The credit facility agreement, which was a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permitted collective borrowings up to $500 million. Interest was
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matured no later
than 60 days after the date of borrowing. The 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.
10. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of re-characterization of
REIT distributions, investments in partnerships, post-October losses and losses
- --------------------------------------------------------------------------------
50 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
deferred due to wash sales. 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 Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $529,512
and accumulated net realized loss has been increased by $327,630 resulting in a
net reclassification adjustment to decrease paid-in capital by $201,882.
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED JUNE 30,
2009 2008
------------------------- -------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAIN INCOME CAPITAL GAIN
- -----------------------------------------------------------------------------
Class A $41,690,044 $-- $42,059,205 $--
Class B $ 4,082,961 $-- $ 4,705,394 $--
Class C $ 624,127 $-- $ 577,096 $--
Class I $ 8,198,831 $-- $ 8,053,021 $--
Class R2 $ 182 $-- $ -- $--
Class R3 $ 191 $-- $ -- $--
Class R4 $ 30,301 $-- $ 37,117 $--
Class R5 $ 203 $-- $ -- $--
Class W $ 163 $-- $ 149 $--
</Table>
At June 30, 2009, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income................. $ 6,167,040
Undistributed accumulated long-term gain...... $ --
Accumulated realized loss..................... $(535,432,960)
Unrealized appreciation (depreciation)........ $(270,119,101)
</Table>
For federal income tax purposes, the Fund had a capital loss carry-over of
$380,900,342 at June 30, 2009, that if not offset by capital gains will expire
as follows:
<Table>
<Caption>
2011 2017
$343,927,468 $36,972,874
</Table>
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 51
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
tax distributions. As a result, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss)
as occurring on the first day of the following tax year. At June 30, 2009, the
Fund had a post-October loss of $154,532,618 that is treated for income tax
purposes as occurring on July 1, 2009.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires. There is no assurance that the Fund will be able to utilize all of its
capital loss carry-over before it expires.
11. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through Aug. 20, 2009, the date of issuance of the Fund's financial statements.
There were no events or transactions that occurred during the period that
materially impacted the amounts or disclosures in the Fund's financial
statements.
12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc. was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company (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
- --------------------------------------------------------------------------------
52 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 53
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 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.
- --------------------------------------------------------------------------------
54 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE DIVIDEND OPPORTUNITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Dividend Opportunity Fund (the
Fund) (one of the Portfolios constituting the RiverSource Sector Series, Inc).
as of June 30, 2009, and the related statement of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for each of the two years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the Fund
for the periods presented through June 30, 2007, were audited by other auditors
whose report dated August 21, 2007, expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of June 30, 2009, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 55
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of RiverSource Dividend Opportunity Fund of the RiverSource Sector
Series, Inc. at June 30, 2009, the results of its operations for the year then
ended, and changes in its net assets and the financial highlights for each of
the two years then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
August 20, 2009
- --------------------------------------------------------------------------------
56 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended June 30, 2009
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 100.00%
Dividends Received Deduction for corporations................ 90.66%
U.S. Government Obligations.................................. 0.00%
</Table>
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 57
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
The RiverSource Family of Funds that each Board member oversees consists of 138
funds, which includes 105 RiverSource funds and 33 Seligman funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2006 Attorney
Minneapolis, MN 55402
Age 55
- ------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None
901 S. Marquette Ave. 1999 Governor of Minnesota
Minneapolis, MN 55402
Age 74
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2007 Leadership (consulting company)
Minneapolis, MN 55402
Age 54
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 1985
Minneapolis, MN 55402
Age 74
- ------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2005 Insurance
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 2007, College Inc. (manufactures
Minneapolis, MN 55402 Board member since irrigation systems)
Age 70 2002
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
58 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member since Retired President and Chief Executive Officer and None
901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 66
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2004 real estate and asset management company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 67 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals,
Minneapolis, MN 55402 Biotech Inc.
Age 65 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 59
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005;
Financial Center Vice President since President, Chairman of the Board and Chief Investment
Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001;
Age 49 Director, President and Chief Executive Officer,
Ameriprise Certificate Company since 2006; Chairman of
the Board and Chief Executive Officer, RiverSource
Distributors, Inc. since 2006 and of RiverSource Fund
Distributors, Inc. since 2008; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc., 2001-2005
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling the RiverSource Family of
Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting
riversource.com/funds.
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center and Director and Vice President -- Asset Management,
Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc.
Age 43 since 2006 and of RiverSource Fund Distributors, Inc.
since 2008; Managing Director and Global Head of
Product, Morgan Stanley Investment Management, 2004-
2006; President, Touchstone Investments, 2002-2004
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
60 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 45 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments,
5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and
Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC,
55474 2006-2009; Vice President -- Operations and Compliance,
Age 43 RiverSource Investments, LLC, 2004-2006; Director of
Product Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006
Minneapolis, MN 55474
Age 54
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer
Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC
Age 50 since 2006; Chief Counsel, RiverSource Fund
Distributors, Inc. since 2008; Vice President, General
Counsel and Secretary, Ameriprise Certificate Company
since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc., 2004-2005;
Senior Vice President and Chief Compliance Officer,
USBancorp Asset Management, 2002-2004
- --------------------------------------------------------------------------------------------------------
Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC,
100 Park Avenue Officer since 2009 Kenwood Capital Management LLC, Ameriprise Certificate
New York, NY 10010 Company, RiverSource Service Corporation and Seligman
Age 58 Data Corp. since 2009; Chief Compliance Officer for
each of the Seligman funds since 2004 and all funds in
the RiverSource Family of Funds since 2009; Anti-Money
Laundering Prevention Officer and Identity Theft
Prevention Officer for each of the Seligman funds since
2008; Managing Director, J. & W. Seligman & Co.
Incorporated and Vice-President for each of the
Seligman funds, 2004-2008
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer,
Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance
Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008
Age 45
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 61
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
the IMS Agreement. RiverSource Investments prepared detailed reports for the
Board and its Contracts Committee in March and April 2009, including reports
based on data provided by independent organizations to assist the Board in
making this determination. In addition, throughout the year, the Board (or its
committees) reviews information prepared by RiverSource Investments addressing
the services RiverSource Investments provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts, Investment Review and Compliance Committees in determining whether to
continue the IMS Agreement. At the April 7-8, 2009 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved renewal
of the IMS Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services performed by RiverSource Investments, as well as its expertise,
resources and capabilities. The Board specifically considered many developments
during the past year concerning the services provided by RiverSource
Investments, including, in particular, the continued investment in, and
resources dedicated to, the Fund's operations, most notably, the large
investment made in the acquisition of J. & W. Seligman & Co. Incorporated,
including its portfolio management operations, personnel and infrastructure
(including the addition of two new offices in New York City and Palo Alto).
Further, in connection with the Board's evaluation of the overall package of
services provided by RiverSource Investments, the Board considered the quality
of the administrative and transfer agency services provided by RiverSource
Investments' affiliates to the Fund. The Board also reviewed the financial
condition of RiverSource Investments (and its affiliates) and each entity's
ability to carry out its responsibilities under the IMS
- --------------------------------------------------------------------------------
62 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
Agreement. Further, the Board considered RiverSource Investments' ability to
retain key personnel and its expectations in this regard. The Board also
discussed the acceptability of the terms of the IMS Agreement (including the
relatively broad scope of services required to be performed by RiverSource
Investments). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality, particularly in light of recent
market conditions.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates were in a position to continue to provide a high quality and
level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods, recent Fund inflows (and outflows) and
a comparison of the Fund's net assets from December 2007 to December 2008. The
Board observed that the Fund's investment performance reflected the
interrelationship of exceptionally challenging market conditions with the
investment strategies employed by the portfolio management team. Further, the
Board noted that appropriate measures have been taken to restructure the
portfolio management team, with increased emphasis on a collaborative team
management approach.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability. They also reviewed information in the
report comparing the fees charged to the Fund by RiverSource Investments to fees
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 63
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
charged to other client accounts (with similar investment strategies to those of
the Fund).
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund (excluding the effect of a performance incentive
adjustment, if applicable), with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was below the peer group's median expense ratio shown in the
reports. The Board also considered the Fund's performance incentive adjustment
and noted its continued appropriateness.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. The
Board also considered the services acquired by the investment manager through
the use of commission dollars paid by the Funds on portfolio transactions. The
Board noted that the fees paid by the Fund should permit the investment manager
to offer competitive compensation to its personnel, make necessary investments
in its business and earn an appropriate profit. The Board concluded that
profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 8, 2009, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement for an additional annual period.
- --------------------------------------------------------------------------------
64 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2009 ANNUAL REPORT 65
RIVERSOURCE DIVIDEND OPPORTUNITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Fund Distributors, Inc.,
Member FINRA, and managed by RiverSource Investments, LLC.
RiverSource is part of Ameriprise Financial, Inc. (C)2009
(RIVERSOURCE INVESTMENTS LOGO) RiverSource Investments, LLC. S-6341 AE (8/09)
</Table>
Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
REAL ESTATE FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JUNE 30, 2009
(Prospectus also enclosed)
RIVERSOURCE REAL ESTATE FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH TOTAL RETURN FROM BOTH CURRENT
INCOME AND CAPITAL APPRECIATION.
<Table>
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges,
fees and other matters of interest. Please
read the prospectus carefully before you
invest or send money. (SINGLE STRATEGY FUNDS ICON)
</Table>
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Manager Commentary................. 5
The Fund's Long-term Performance... 12
Fund Expenses Example.............. 14
Portfolio of Investments........... 16
Statement of Assets and
Liabilities...................... 20
Statement of Operations............ 21
Statements of Changes in Net
Assets........................... 22
Financial Highlights............... 24
Notes to Financial Statements...... 30
Report of Independent Registered
Public Accounting Firm........... 46
Federal Income Tax Information..... 48
Board Members and Officers......... 49
Approval of Investment Management
Services Agreement............... 53
Proxy Voting....................... 56
Results of Meeting of
Shareholders..................... 57
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Real Estate Fund (the Fund) Class A shares declined 43.23%
(excluding sales charge) for the 12 months ended June 30, 2009.
> The Fund outperformed its benchmark, the Dow Jones Wilshire Real Estate
Securities Index (Float-Weighted), which fell 45.74% during the same time
period.
> The Lipper Real Estate Funds Index, representing the Fund's peer group,
decreased 43.42% during the same time frame.
ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS 3/4/04
- ----------------------------------------------------------------------
RiverSource Real Estate Fund
Class A (excluding sales
charge) -43.23% -18.82% -2.72% -2.36%
- ----------------------------------------------------------------------
Dow Jones Wilshire Real Estate
Securities Index (Float-
Weighted) (unmanaged) -45.74% -19.96% -3.44% -3.55%
- ----------------------------------------------------------------------
Lipper Real Estate Funds Index -43.42% -17.46% -2.55% -2.89%
- ----------------------------------------------------------------------
</Table>
(See "The Fund's Long-term Performance" for Index descriptions)
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 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
sales charges and expenses. The Fund's returns reflect the effect of fee
waivers/expenses 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.
- --------------------------------------------------------------------------------
2 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT JUNE 30, 2009
SINCE
Without sales charge 1 YEAR 3 YEARS 5 YEARS INCEPTION
Class A (inception 3/4/04) -43.23% -18.82% -2.72% -2.36%
- -----------------------------------------------------------------------------
Class B (inception 3/4/04) -43.65% -19.42% -3.45% -3.10%
- -----------------------------------------------------------------------------
Class C (inception 3/4/04) -43.65% -19.42% -3.45% -3.10%
- -----------------------------------------------------------------------------
Class I (inception 3/4/04) -42.92% -18.41% -2.27% -1.94%
- -----------------------------------------------------------------------------
Class R4 (inception 3/4/04) -43.02% -18.49% -2.43% -2.07%
- -----------------------------------------------------------------------------
Class W (inception 12/1/06) -43.14% N/A N/A -26.71%
- -----------------------------------------------------------------------------
With sales charge
Class A (inception 3/4/04) -46.49% -20.41% -3.87% -3.44%
- -----------------------------------------------------------------------------
Class B (inception 3/4/04) -46.38% -20.05% -3.72% -3.23%
- -----------------------------------------------------------------------------
Class C (inception 3/4/04) -44.19% -19.42% -3.45% -3.10%
- -----------------------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. 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. Sales charges do
not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are
available to institutional investors only. Class W shares are offered through
qualifying discretionary accounts.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
</Table>
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.
The Fund is a narrowly-focused sector fund and may exhibit higher volatility
than funds with broader investment objectives. Investments in real estate
securities are subject to specific risks, such as market risk, issuer risk,
diversification risk, and sector/concentration risks. Investments in small- and
mid-capitalization companies involve greater risks and volatility than
investments in larger, more established companies. The Fund is a "non-
diversified" mutual fund and thus may hold fewer securities than other funds. A
decline in the value of those investments would cause the Fund's overall value
to decline to a greater degree than if the Fund held a more diversified
portfolio. See the Fund's prospectus for information on these and other risks
associated with the Fund.
Dividends paid by the Fund will be taxable as ordinary income. Distributions by
the Fund may include a return of capital. A return of capital is not net profits
of the Fund but instead a return of a portion of your original investment.
- --------------------------------------------------------------------------------
4 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
At June 30, 2009, approximately 65% of the Fund's total outstanding shares were
owned in aggregate by affiliated funds-of-funds managed by RiverSource
Investments, LLC (RiverSource). As a result of asset allocation decisions by
RiverSource, it is possible RiverSource Real Estate Fund may experience
relatively large purchases or redemptions from affiliated funds-of-funds (see
page 38, Class I capital share transactions for related activity during the most
recent fiscal period). RiverSource seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time. RiverSource
Real Estate Fund may experience increased expenses as it buys and sells
securities to manage transactions for affiliated funds-of-funds. For more
information on the Fund's expenses, see the discussions beginning on pages 14
and 34.
Dear Shareholders:
RiverSource Real Estate Fund (the Fund) Class A shares declined 43.23%
(excluding sales charge) for the 12 months ended June 30, 2009. The Fund
outperformed its benchmark, the Dow Jones Wilshire Real Estate Securities Index
(Float-Weighted) (Wilshire Index), which fell 45.74% during the same time
period. The Fund also outperformed the Lipper Real Estate Funds Index,
representing the Fund's peer group, which decreased 43.42% during the same time
frame.
SECTOR BREAKDOWN(1) (at June 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Apartments 15.9%
- ------------------------------------------------
Diversified Properties 8.6%
- ------------------------------------------------
Health Care 12.6%
- ------------------------------------------------
Hotels 7.6%
- ------------------------------------------------
Industrial 5.9%
- ------------------------------------------------
Manufactured Homes 1.8%
- ------------------------------------------------
Office Property 18.1%
- ------------------------------------------------
Other Property 0.5%
- ------------------------------------------------
Regional Malls 12.2%
- ------------------------------------------------
Shopping Centers 8.9%
- ------------------------------------------------
Storage 6.2%
- ------------------------------------------------
Other(2) 1.7%
- ------------------------------------------------
</Table>
(1) Percentages indicated are based upon total investments (excluding
Investments of Cash Collateral Received for Securities on Loan) as of June
30, 2009. The Fund's composition is subject to change.
(2) Cash & Cash Equivalents.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
SIGNIFICANT PERFORMANCE FACTORS
It would be an understatement to say that the annual period ended June 30, 2009
was one of unprecedented volatility in the equity market in general and in the
real estate market in particular. The annual period actually started off well
for real estate investments, with the Wilshire Index generating positive returns
and significantly outpacing the broader equity market from July through
September. However, from mid-September through mid-November, when the credit
markets were suddenly frozen and investors became concerned that most companies,
including real estate investment trusts (REITs) and real estate companies, would
not have access to credit at any price, real estate investments declined
precipitously. It was in mid-September that the financial turmoil culminated
with the bankruptcy of Lehman Brothers. At that point, all investments with
leverage, or debt, were shunned. As REITs typically use approximately 50%
leverage, the fear was that REITs would go bankrupt, too. Those REITs with the
highest leverage were punished most severely; those with lower leverage, less
so.
Volatility, with 5% or more intraday moves up or down in the Wilshire Index,
were relatively common in the ensuing months. The Wilshire Index reached its low
point for the fiscal year on March 5, 2009. From the start
TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Simon Property Group 8.3%
- ------------------------------------------------
Public Storage 5.0%
- ------------------------------------------------
Boston Properties 3.6%
- ------------------------------------------------
Vornado Realty Trust 3.6%
- ------------------------------------------------
Equity Residential 3.5%
- ------------------------------------------------
Host Hotels & Resorts 3.3%
- ------------------------------------------------
AvalonBay Communities 3.2%
- ------------------------------------------------
Ventas 3.1%
- ------------------------------------------------
HCP 3.1%
- ------------------------------------------------
Federal Realty Investment Trust 2.7%
- ------------------------------------------------
</Table>
Excludes cash & cash equivalents.
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
6 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
of the annual period through March 5(th), the Wilshire Index fell more than 64%.
The risk of REITs being forced to file for bankruptcy was highlighted when the
regional mall REIT General Growth Properties did indeed file for bankruptcy on
April 16, 2009 due to its inability to refinance near-term debt maturities.
Still, as the broad equity market rebounded from early March through the end of
June, the Wilshire Index rebounded approximately 50% from its March low through
June 30, 2009. Economic "green shoots" began to appear and balance sheet
concerns were reduced. Such concerns were reduced through government programs
such as Term Asset-Backed Securities Loan Facility (TALF), reduced credit
spreads (i.e. the difference in yields between non-Treasury securities and those
of duration-equivalent U.S. Treasuries), and a significant amount of equity
raising and debt repayment activity by REITs. Some of the greatest gains from
the Wilshire Index's March lows were seen in REITs that had suffered most from
balance sheet concerns, including many lower quality names.
The weakness in REITs for the annual period overall came despite a decline in
the 10-year Treasury yield, which fell from 3.99% on June 30, 2008 to a low of
2.11% on December 30, 2008, before rising to 3.53% at the end of June 2009.
REITs actually performed worse when Treasury yields declined and better when
Treasury yields increased, which was unusual from a historical perspective. The
reason for this historical anomaly was that the credit crisis-driven risk
aversion that drove down Treasury yields negatively impacted real estate assets,
which were perceived to be riskier investments. Similarly, when risk aversion
It is important to note that while underlying real estate fundamentals did
deteriorate with the economy, they remained relatively strong in select
subsectors.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
ebbed and investors shifted back to more "risky" assets in the last months of
the annual period, REITs benefited.
It is important to note that while underlying real estate fundamentals did
deteriorate with the economy, they remained relatively strong in select
subsectors. Health care and self-storage properties, for example, held up fairly
well. Health care properties proved to be a rather defensive area due to being
less tied to the economy than other segments of the real estate market. Self-
storage did well, as homeowners downsized. On the other hand, industrial
properties and regional malls performed poorly, as consumer spending turned down
sharply and factory orders dropped.
Against this challenging backdrop and the absolute losses experienced by the
Fund, it may be small solace that the Fund outperformed the Wilshire Index and
its peer group for the 12 months ended June 30, 2009. Still, such outperformance
is testament to our emphasis on both risk management and investment opportunity.
It also indicates that even in a broad sector decline, subsector allocation and
individual stock selection decisions can help.
Having comparatively modest exposure to the weakly-performing community shopping
center and regional mall REIT subsectors benefitted the Fund's results most
during the annual period. Stock selection within these two REIT subsectors as
well as in the apartment REIT subsector also helped. Within the retail
subsectors, a position in FEDERAL REALTY INVESTMENT TRUST performed well.
Federal Realty Investment Trust primarily owns, manages, develops and redevelops
retail and mixed-use properties in the Washington, D.C. area. We also
successfully steered away from several of the weakest performers in these
subsectors during the annual period. Within the apartment subsector, a sizable
position in MID-AMERICA APARTMENT COMMUNITIES, which owns, acquires and operates
multifamily apartment communities mainly in the southeastern U.S., was a strong
performer for the Fund. Mid-America Apartment Communities benefited from having
virtually no development in progress and thus was not compelled to take write-
downs on its balance sheets. The apartment REIT also benefited from its
comparatively low rent levels during the recessionary economy.
- --------------------------------------------------------------------------------
8 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
Significant allocations to several other individual stocks that performed well
further boosted the Fund's relative results. These included a position in
specialty office REIT DIGITAL REALTY TRUST, health care REIT SENIOR HOUSING
PROPERTIES TRUST and mixed-office REIT HIGHWOODS PROPERTIES. Digital Realty
Trust specializes in technology-related real estate, including buildings that
house servers, and as such, benefited as demand for Internet access continued to
expand. Senior Housing Properties Trust benefited from favorable demographic
trends and as part of the health care subsector more broadly. Highwoods
Properties performed well, due primarily to its strong management team.
Detracting from the Fund's performance most was stock selection in the
industrial REIT subsector and having only modest allocations to the better-
performing self-storage and health care REIT subsectors. From an individual
stock perspective, poor timing in its trades of industrial REIT PROLOGIS
detracted from the Fund's results. Having an underweighted position in HEALTH
CARE REIT, relative to the Wilshire Index, also hurt, as its shares outpaced the
Wilshire Index. Health Care REIT's investments include skilled nursing
facilities, independent living or continuing care retirement communities,
assisted living facilities and specialty care facilities. Sizable positions in
THE MACERICH COMPANY and in BROOKFIELD PROPERTIES detracted from the Fund's
results as well, as both of these real estate companies underperformed during
the period. The Macerich Company acquires, owns, redevelops, manages and leases
regional and community shopping centers. Brookfield Properties owns, develops
and manages office properties in the U.S. and Canada.
CHANGES TO THE FUND'S PORTFOLIO
Given extreme weakness in the real estate market, extraordinarily tight credit
conditions and heightened investor fears regarding the potential direction of
the economy, we continued to seek to upgrade the quality of the portfolio
overall. We eliminated various holdings with higher leverage and reduced
positions where we felt discomfort based on stock-specific or event-specific
concerns. We increased holdings in what we believe are higher quality companies
with strong balance sheets, low leverage, superior management teams and a
sustainable competitive advantage. We also made adjustments based on relative
valuation analysis and shifts in market conditions. Toward the end of the annual
period, we began to
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
establish or increase Fund positions in companies that we believe will be able
to take advantage of what many consider to be the best property buying
opportunities seen in several years. In doing so, our focus is on the quality
and skills of a real estate company's management team.
As a by-product of our bottom-up individual stock selection decisions, the
Fund's exposure to the regional mall REIT subsector decreased. The Fund's
exposure to the manufactured homes subsector increased, though this remains a
small percentage of both the Fund's total allocation and the Wilshire Index.
Further, by virtue of experiencing less depreciation than some other subsectors,
weightings in the health care subsector increased and, conversely, weightings in
areas that experienced greater depreciation, such as industrials, regional malls
and community shopping centers, decreased as a percentage of both the Wilshire
Index and the Fund.
At the end of the period, the Fund had significant exposure to the hotels,
manufactured homes and office subsectors compared to the Wilshire Index. The
Fund had more modest allocations than the Wilshire Index to the diversified
properties, health care, regional malls, community shopping center and self-
storage subsectors. As of June 30, 2009, the Fund was virtually equally-weighted
to the Wilshire Index in the apartment and industrial subsectors.
OUR FUTURE STRATEGY
We are generally constructive in our view for the real estate market going
forward. At the end of the annual period, property sales activity levels were
very low, making it difficult to assess current market values for real estate
assets. However, we feel that the REIT price decline had already fully priced in
any underlying property value declines. In addition, the rebound in REIT shares
from March through June 2009 may be indicating a bottom in the property market
in the near term. Many of the stronger REITs were active sellers of assets
during the peak of the market and have been raising capital to take advantage of
any distressed sales opportunities that may arise with more highly leveraged
buyers. Indeed, REITs raised $13 billion in equity year-to-date through June 30,
2009. Given the ability to issue equity to raise capital, we believe public
companies will likely have greater access to properties for sale at reasonable
prices than private companies with limited capital, thereby reducing
competition. While we expect property level fundamentals to
- --------------------------------------------------------------------------------
10 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
continue to decline for the remainder of the year, the limited amount of new
supply in most regional markets gives us further reason for optimism. With less
commercial real estate currently being built, when the economic recovery does
come and demand revives, the turnaround for existing real estate should be
relatively compelling. Of course, the timing of such a turnaround has yet to be
seen.
As we wait for more sustained signs of improvement, we will seek to take
advantage of stock-specific buying opportunities created by market weakness
during the annual period. We intend to look for select real estate companies and
REITs with experienced management teams, low leverage, strong balance sheets,
quality assets and credibility with their shareholders. We also intend to look
for real estate companies and REITs where we believe exaggerated valuation
declines or a sustainable competitive advantage puts them in a position to take
advantage of current market conditions. Our goal, as always, will be to use in-
depth, bottom-up analysis of real estate fundamentals and market performance to
find undervalued companies across the U.S. that have solid dividend-paying
abilities and attractive long-term growth potential.
<Table>
Julene Melquist
Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource fund.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Real Estate Fund Class A shares (from 3/4/04 to
6/30/09) as compared to the performance of two widely cited performance indices,
the Dow Jones Wilshire Real Estate Securities Index (Float-Weighted) and the
Lipper Real Estate Funds Index. In comparing the Fund's Class A shares to these
indices, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5.75%, while such charges are not reflected
in the performance of the indices. Returns for the Fund include the reinvestment
of any distributions paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. 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 or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at June 30, 2009
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS 3/4/04
RIVERSOURCE REAL ESTATE FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $5,351 $5,042 $8,883 $8,299
- -------------------------------------------------------------------------------------------
Average annual total return -46.49% -20.41% -3.87% -3.44%
- -------------------------------------------------------------------------------------------
DOW JONES WILSHIRE REAL ESTATE SECURITIES INDEX (FLOAT-WEIGHTED)(1)
Cumulative value of $10,000 $5,426 $5,128 $9,003 $8,249
- -------------------------------------------------------------------------------------------
Average annual total return -45.74% -19.96% -3.44% -3.55%
- -------------------------------------------------------------------------------------------
LIPPER REAL ESTATE FUNDS INDEX(2)
Cumulative value of $10,000 $5,658 $5,623 $9,254 $8,553
- -------------------------------------------------------------------------------------------
Average annual total return -43.42% -17.46% -2.55% -2.89%
- -------------------------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 3.
- --------------------------------------------------------------------------------
12 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE REAL ESTATE FUND LINE
GRAPH)
<Table>
<Caption>
RIVERSOURCE REAL
ESTATE FUND DOW JONES
CLASS A WILSHIRE REAL LIPPER REAL
(INCLUDES SALES ESTATE SECURITIES ESTATE FUNDS
CHARGE) INDEX (FLOAT)(1) INDEX(2)
---------------- ----------------- -----------------
03/04/04 $ 9,425 $10,000 $10,000
3/04 9,716 10,293 10,266
6/04 9,525 9,827 9,732
9/04 10,044 10,628 10,512
12/04 11,659 12,378 12,154
3/05 10,954 11,561 11,467
6/05 12,508 13,200 12,904
9/05 13,037 13,677 13,299
12/05 13,504 14,090 13,646
3/06 15,485 16,257 15,398
6/06 15,513 16,088 15,213
9/06 16,804 17,554 16,406
12/06 18,271 19,118 17,938
3/07 18,746 19,829 18,530
6/07 17,061 17,975 17,237
9/07 17,486 18,234 17,492
12/07 15,236 15,740 15,515
3/08 15,506 16,074 15,472
6/08 14,618 15,204 15,118
9/08 15,252 15,890 15,210
12/08 9,235 9,470 9,436
3/09 6,497 6,264 6,644
6/09 8,299 8,249 8,553
</Table>
(1) The Dow Jones Wilshire Real Estate Securities Index (Float-Weighted), an
unmanaged float-weighted index, measures the performance of publicly traded
real estate securities, including REITS and real estate operating companies.
The index reflects reinvestment of all distributions and changes in market
prices.
(2) The Lipper Real Estate Funds Index includes the 30 largest real estate funds
tracked by Lipper Inc. The index's returns include net reinvested dividends.
The Fund's performance is currently measured against this index for purposes
of determining the performance incentive adjustment.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(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. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the 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 ongoing expenses of any funds in which the Fund
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 ongoing expenses charged by
acquired funds using the expense ratio of each of the acquired funds as of the
acquired fund's most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended June 30, 2009.
ACTUAL EXPENSES
The first line of the 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 the table provides information about hypothetical account
values and hypothetical expenses based on the 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 this 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 the 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 the 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.
- --------------------------------------------------------------------------------
14 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 898.60 $ 6.73(c) 1.43%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.70 $ 7.15(c) 1.43%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 896.60 $10.35(c) 2.20%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.88 $10.99(c) 2.20%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 896.80 $10.30(c) 2.19%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,013.93 $10.94(c) 2.19%
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 902.50 $ 4.53(c) .96%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.03 $ 4.81(c) .96%
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 900.50 $ 5.98(c) 1.27%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.50 $ 6.36(c) 1.27%
- ------------------------------------------------------------------------------------------
Class W
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 901.00 $ 6.74(c) 1.43%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.70 $ 7.15(c) 1.43%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended June 30, 2009: -10.14%
for Class A, -10.34% for Class B, -10.32% for Class C, -9.75% for Class I,
-9.95% for Class R4 and -9.90% for Class W.
(c) RiverSource Investments, LLC (the Investment Manager) and its affiliates
have contractually agreed to waive certain fees and to absorb certain
expenses until Aug. 31, 2010, unless sooner terminated at the discretion of
the Fund's Board, such that net expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment, will not exceed 1.38% for Class A, 2.17% for Class B, 2.14% for
Class C, 0.93% for Class I, 1.23% for Class R4 and 1.38% for Class W. Any
amounts waived will not be reimbursed by the Fund. This change was effective
July 1, 2009. Had this change been in place for the entire six month period
ended June 30, 2009, the actual expenses paid would have been $6.36 for
Class A, $10.06 for Class B, $9.92 for Class C, $4.25 for Class I, $5.65 for
Class R4 and $6.36 for Class W; the hypothetical expenses paid would have
been $6.76 for Class A, $10.69 for Class B, $10.54 for Class C, $4.51 for
Class I, $6.01 for Class R4 and $6.76 for Class W.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JUNE 30, 2009
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (97.9%)
ISSUER SHARES VALUE(a)
HOTELS, RESTAURANTS & LEISURE (0.7%)
Starwood Hotels & Resorts Worldwide 43,624(c) $968,453
- -------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (96.4%)
Acadia Realty Trust 109,203(c) 1,425,099
Alexandria Real Estate Equities 62,511(c) 2,237,269
AMB Property 185,190 3,483,424
American Campus Communities 35,433(c) 785,904
AvalonBay Communities 94,011(c) 5,258,975
Boston Properties 126,910(c) 6,053,606
Brookfield Properties 323,131(c) 2,575,354
Camden Property Trust 150,307(c) 4,148,473
Corporate Office Properties Trust 116,051(c) 3,403,776
DiamondRock Hospitality 100,000(c) 626,000
Digital Realty Trust 106,957(c) 3,834,408
Douglas Emmett 77,017(c) 692,383
Duke Realty 62,347(c) 546,783
EastGroup Properties 57,965 1,914,004
Equity Lifestyle Properties 65,470 2,434,175
Equity Residential 260,283 5,786,091
Essex Property Trust 38,165(c) 2,375,008
Federal Realty Investment Trust 88,707(c) 4,570,185
Government Properties Income Trust 50,000(b,c) 1,026,500
HCP 244,181(c) 5,174,195
Health Care REIT 73,547(c) 2,507,953
Healthcare Realty Trust 42,847(c) 721,115
Highwoods Properties 139,562 3,122,002
Home Properties 56,555 1,928,526
Host Hotels & Resorts 655,389(c) 5,498,714
Kimco Realty 203,583 2,046,009
LaSalle Hotel Properties 256,887(c) 3,169,986
Liberty Property Trust 164,191 3,782,961
Macerich 33,391(c) 588,016
Mack-Cali Realty 59,100 1,347,480
Mid-America Apartment Communities 26,847 985,553
ProLogis 315,585 2,543,615
Public Storage 127,235 8,331,347
Regency Centers 110,464(c) 3,856,298
Senior Housing Properties Trust 205,821 3,358,999
Simon Property Group 270,811(c) 13,927,809
Taubman Centers 69,886(c) 1,877,138
Ventas 174,651(c) 5,215,079
Vornado Realty Trust 133,062(c) 5,991,790
Washington Real Estate Investment Trust 33,418(c) 747,561
---------------
Total 129,899,563
- -------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.8%)
CB Richard Ellis Group Cl A 67,432(b) 631,164
Forest City Enterprises Cl A 77,409(c) 510,899
---------------
Total 1,142,063
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $185,049,878) $132,010,079
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (0.6%)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.30% 822,335(d) $822,335
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $822,335) $822,335
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (25.2%)
SHARES VALUE(a)
CASH COLLATERAL REINVESTMENT FUND
JPMorgan Prime Money Market Fund 34,004,621 $34,004,621
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN
(Cost: $34,004,621) $34,004,621
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $219,876,834)(e) $166,837,035
=====================================================================================
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using policies described in Note 2 to the
financial statements.
(b) Non-income producing.
(c) At June 30, 2009, security was partially or fully on loan. Note 7 to the
financial statements.
(d) Affiliated Money Market Fund -- See Note 8 to the financial statements. The
rate shown is the seven-day current annualized yield at June 30, 2009.
(e) At June 30, 2009, the cost of securities for federal income tax purposes
was $228,306,295 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $1,251,914
Unrealized depreciation (62,721,174)
-----------------------------------------------------------
Net unrealized depreciation $(61,469,260)
-----------------------------------------------------------
</Table>
The industries identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 17
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) requires
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.
SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair
value 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. When a valuation uses multiple inputs from
varying levels of the hierarchy, the hierarchy level is determined based on the
lowest level input or inputs that are significant to the fair value measurement
in its entirety. 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.
Non-U.S. equity securities actively traded in foreign markets may be reflected
in Level 2 despite the availability of closing prices, because the Fund
evaluates and determines whether those closing prices reflect the fair value at
the close of the NYSE or require adjustment, as described in Note 2 to the
financial statements -- Valuation of securities.
- --------------------------------------------------------------------------------
18 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (CONTINUED)
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 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 June 30, 2009:
<Table>
<Caption>
FAIR VALUE AT JUNE 30, 2009
---------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
- -----------------------------------------------------------------------------------
Equity Securities
Common Stocks $132,010,079(a) $-- $-- $132,010,079
- -----------------------------------------------------------------------------------
Total Equity Securities 132,010,079 -- -- 132,010,079
- -----------------------------------------------------------------------------------
Other
Affiliated Money
Market Fund 822,335(b) -- -- 822,335
Investments of Cash
Collateral Received
for Securities on
Loan 34,004,621 -- -- 34,004,621
- -----------------------------------------------------------------------------------
Total Other 34,826,956 -- -- 34,826,956
- -----------------------------------------------------------------------------------
Total $166,837,035 $-- $-- $166,837,035
- -----------------------------------------------------------------------------------
</Table>
(a) All industry classifications are identified in the Portfolio of
Investments.
(b) Money market fund that is a sweep investment for cash balances in the Fund
at June 30, 2009.
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.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 19
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
JUNE 30, 2009
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $185,049,878) $132,010,079
Affiliated money market fund (identified cost $822,335) 822,335
Investments of cash collateral received for securities on loan
(identified cost $34,004,621) 34,004,621
- -------------------------------------------------------------------------------
Total investments in securities (identified cost $219,876,834) 166,837,035
Cash 38,453
Capital shares receivable 26,698
Dividends and accrued interest receivable 648,629
Receivable for investment securities sold 1,413,161
- -------------------------------------------------------------------------------
Total assets 168,963,976
- -------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 43,808
Payable upon return of securities loaned 34,004,621
Accrued investment management services fees 3,079
Accrued distribution fees 20,083
Accrued transfer agency fees 754
Accrued administrative services fees 220
Accrued plan administration services fees 25
Other accrued expenses 71,570
- -------------------------------------------------------------------------------
Total liabilities 34,144,160
- -------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $134,819,816
- -------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 215,742
Additional paid-in capital 244,117,920
Excess of distributions over net investment income (2,547)
Accumulated net realized gain (loss) (56,471,500)
Unrealized appreciation (depreciation) on investments (53,039,799)
- -------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $134,819,816
- -------------------------------------------------------------------------------
*Including securities on loan, at value $ 33,652,081
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $39,604,801 6,343,058 $6.24(1)
Class B $ 5,963,230 962,244 $6.20
Class C $ 786,769 127,106 $6.19
Class I $88,405,029 14,132,093 $6.26
Class R4 $ 58,277 9,376 $6.22
Class W $ 1,710 275 $6.22
- ----------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $6.62. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
20 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED JUNE 30, 2009
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 7,745,521
Interest 13
Income distributions from affiliated money market fund 39,190
Fee income from securities lending 57,237
Less foreign taxes withheld (30,964)
- -------------------------------------------------------------------------------
Total income 7,810,997
- -------------------------------------------------------------------------------
Expenses:
Investment management services fees 1,227,857
Distribution fees
Class A 137,477
Class B 83,293
Class C 9,596
Class W 5
Transfer agency fees
Class A 264,559
Class B 42,618
Class C 4,854
Class R4 36
Class W 4
Administrative services fees 91,566
Plan administration services fees -- Class R4 181
Compensation of board members 4,526
Custodian fees 15,595
Printing and postage 39,670
Registration fees 56,815
Professional fees 33,787
Other 8,623
- -------------------------------------------------------------------------------
Total expenses 2,021,062
Expenses waived/reimbursed by the Investment Manager and its
affiliates (177,401)
Earnings and bank fee credits on cash balances (129)
- -------------------------------------------------------------------------------
Total net expenses 1,843,532
- -------------------------------------------------------------------------------
Investment income (loss) -- net 5,967,465
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (58,384,768)
Foreign currency transactions 1,994
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments (58,382,774)
Net change in unrealized appreciation (depreciation) on
investments (33,559,870)
- -------------------------------------------------------------------------------
Net gain (loss) on investments (91,942,644)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(85,975,179)
- -------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 21
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED JUNE 30, 2009 2008
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 5,967,465 $ 5,584,208
Net realized gain (loss) on investments (58,382,774) 7,805,861
Net change in unrealized appreciation (depreciation) on
investments (33,559,870) (47,066,092)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (85,975,179) (33,676,023)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,291,096) (1,484,774)
Class B (131,849) (106,391)
Class C (17,004) (11,115)
Class I (2,832,757) (1,829,893)
Class R4 (1,981) (2,902)
Class W (52) (56)
Net realized gain
Class A (417,313) (14,679,913)
Class B (64,837) (2,506,709)
Class C (7,599) (232,761)
Class I (627,942) (8,717,442)
Class R4 (552) (20,584)
Class W (16) (549)
Tax return of capital
Class A (144,585) --
Class B (22,464) --
Class C (2,633) --
Class I (217,560) --
Class R4 (192) --
Class W (6) --
- ---------------------------------------------------------------------------------------------
Total distributions (5,780,438) (29,593,089)
- ---------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
22 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED JUNE 30, 2009 2008
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 10,275,881 $ 22,580,376
Class B shares 1,273,258 2,597,783
Class C shares 298,395 579,010
Class I shares 74,254,744 74,017,463
Class R4 shares 1,500 8,000
Reinvestment of distributions at net asset value
Class A shares 1,797,530 15,706,217
Class B shares 213,725 2,534,302
Class C shares 24,995 236,189
Class I shares 3,678,098 10,545,077
Class R4 shares 2,570 21,205
Conversions from Class B to Class A
Class A shares 1,357,272 --
Class B shares (1,357,272) --
Payments for redemptions
Class A shares (21,010,178) (64,940,426)
Class B shares (2,515,554) (14,671,042)
Class C shares (331,279) (1,181,708)
Class I shares (56,470,378) (42,696,102)
Class R4 shares (7,264) (64,415)
- ---------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 11,486,043 5,271,929
- ---------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (80,269,574) (57,997,183)
Net assets at beginning of year 215,089,390 273,086,573
- ---------------------------------------------------------------------------------------------
Net assets at end of year $134,819,816 $215,089,390
- ---------------------------------------------------------------------------------------------
Excess of distributions over net investment income $ (2,547) $ (2,762)
- ---------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 23
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $11.42 $15.83 $15.30 $13.44 $10.46
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .28(b) .33(b) .21 .30 .32
Net gains (losses) (both realized and
unrealized) (5.19) (2.55) 1.37 2.76 2.94
- ------------------------------------------------------------------------------------------------------
Total from investment operations (4.91) (2.22) 1.58 3.06 3.26
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.20) (.20) (.19) (.14) (.18)
Distributions from realized gains (.05) (1.99) (.86) (1.06) (.10)
Tax return of capital (.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.27) (2.19) (1.05) (1.20) (.28)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.24 $11.42 $15.83 $15.30 $13.44
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $40 $86 $147 $107 $62
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.70% 1.45% 1.51% 1.55% 1.57%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.43% 1.40% 1.51% 1.53% 1.49%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.51% 2.41% 1.41% 2.37% 3.56%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38% 47% 63%
- ------------------------------------------------------------------------------------------------------
Total return(g) (43.23%) (14.32%) 9.97% 24.02% 31.32%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
24 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $11.34 $15.72 $15.20 $13.37 $10.43
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .21(b) .22(b) .05 .18 .22
Net gains (losses) (both realized and
unrealized) (5.14) (2.52) 1.39 2.75 2.93
- ------------------------------------------------------------------------------------------------------
Total from investment operations (4.93) (2.30) 1.44 2.93 3.15
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.09) (.06) (.04) (.11)
Distributions from realized gains (.05) (1.99) (.86) (1.06) (.10)
Tax return of capital (.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.21) (2.08) (.92) (1.10) (.21)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.20 $11.34 $15.72 $15.20 $13.37
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $6 $14 $29 $27 $18
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 2.48% 2.21% 2.27% 2.32% 2.34%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 2.19% 2.16% 2.27% 2.30% 2.27%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.75% 1.62% .64% 1.59% 2.77%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38% 47% 63%
- ------------------------------------------------------------------------------------------------------
Total return(g) (43.65%) (14.92%) 9.13% 23.06% 30.31%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 25
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $11.33 $15.72 $15.20 $13.37 $10.43
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .22(b) .23(b) .05 .18 .21
Net gains (losses) (both realized and
unrealized) (5.15) (2.54) 1.40 2.75 2.93
- ------------------------------------------------------------------------------------------------------
Total from investment operations (4.93) (2.31) 1.45 2.93 3.14
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.09) (.07) (.04) (.10)
Distributions from realized gains (.05) (1.99) (.86) (1.06) (.10)
Tax return of capital (.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.21) (2.08) (.93) (1.10) (.20)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.19 $11.33 $15.72 $15.20 $13.37
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $1 $2 $2 $1
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 2.47% 2.21% 2.26% 2.32% 2.33%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 2.19% 2.16% 2.26% 2.29% 2.27%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.89% 1.66% .66% 1.61% 2.79%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38% 47% 63%
- ------------------------------------------------------------------------------------------------------
Total return(g) (43.65%) (14.96%) 9.18% 23.07% 30.29%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
26 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $11.45 $15.87 $15.33 $13.46 $10.46
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .32(b) .40(b) .32 .36 .35
Net gains (losses) (both realized and
unrealized) (5.21) (2.56) 1.35 2.76 2.95
- ------------------------------------------------------------------------------------------------------
Total from investment operations (4.89) (2.16) 1.67 3.12 3.30
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23) (.27) (.27) (.19) (.20)
Distributions from realized gains (.05) (1.99) (.86) (1.06) (.10)
Tax return of capital (.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.30) (2.26) (1.13) (1.25) (.30)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.26 $11.45 $15.87 $15.33 $13.46
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $88 $113 $95 $57 $53
- ------------------------------------------------------------------------------------------------------
Total expenses(d),(f) .97% .91% 1.04% 1.09% 1.10%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 4.27% 2.89% 1.87% 2.85% 4.04%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38% 47% 63%
- ------------------------------------------------------------------------------------------------------
Total return (42.92%) (13.90%) 10.52% 24.55% 31.78%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 27
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007 2006 2005
Net asset value, beginning of period $11.38 $15.79 $15.26 $13.41 $10.47
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .30(b) .40(b) .24 .32 .38
Net gains (losses) (both realized and
unrealized) (5.17) (2.53) 1.37 2.75 2.89
- ------------------------------------------------------------------------------------------------------
Total from investment operations (4.87) (2.13) 1.61 3.07 3.27
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.22) (.29) (.22) (.16) (.23)
Distributions from realized gains (.05) (1.99) (.86) (1.06) (.10)
Tax return of capital (.02) -- -- -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.29) (2.28) (1.08) (1.22) (.33)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.22 $11.38 $15.79 $15.26 $13.41
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(c),(d) 1.27% 1.21% 1.34% 1.36% 1.39%
- ------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.09% .96% 1.34% 1.35% 1.34%
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.90% 2.86% 1.58% 2.53% 3.79%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38% 47% 63%
- ------------------------------------------------------------------------------------------------------
Total return (43.02%) (13.74%) 10.17% 24.22% 31.48%
- ------------------------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Highlights.
- --------------------------------------------------------------------------------
28 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a)
<Table>
<Caption>
FISCAL PERIOD ENDED JUNE 30,
2009 2008 2007(h)
Net asset value, beginning of period $11.37 $15.78 $18.17
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .27(b) .34(b) .24
Net gains (losses) (both realized and
unrealized) (5.15) (2.55) (1.62)
- ---------------------------------------------------------------------------------
Total from investment operations (4.88) (2.21) (1.38)
- ---------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.20) (.21) (.15)
Distributions from realized gains (.05) (1.99) (.86)
Tax return of capital (.02) -- --
- ---------------------------------------------------------------------------------
Total distributions (.27) (2.20) (1.01)
- ---------------------------------------------------------------------------------
Net asset value, end of period $6.22 $11.37 $15.78
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- ---------------------------------------------------------------------------------
Gross expenses prior to expense waiver/
reimbursement(c),(d) 1.45% 1.35% 1.48%(i)
- ---------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e),(f) 1.43% 1.35% 1.48%(i)
- ---------------------------------------------------------------------------------
Net investment income (loss) 3.58% 2.48% 1.19%(i)
- ---------------------------------------------------------------------------------
Portfolio turnover rate 51% 52% 38%
- ---------------------------------------------------------------------------------
Total return (43.14%) (14.30%) (7.90%)(j)
- ---------------------------------------------------------------------------------
</Table>
NOTES TO FINANCIAL HIGHLIGHTS
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amounts have been calculated using the average shares outstanding
method.
(c) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(d) 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
above reported expense ratios.
(e) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(f) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits were less than 0.01% of average net
assets for the years ended June 30, 2009 and 2008.
(g) Total return does not reflect payment of a sales charge.
(h) For the period from Dec. 1, 2006 (inception date) to June 30, 2007.
(i) Adjusted to an annual basis.
(j) Not annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
RiverSource Real Estate Fund (the Fund) is a series of RiverSource Sector
Series, Inc. and is registered under the Investment Company Act of 1940, as
amended (the 1940 Act) as a non-diversified, open-end management investment
company. RiverSource Sector Series, Inc. has 10 billion authorized shares of
capital stock that can be allocated among the separate series as designated by
the Board of Directors (the Board). The Fund invests primarily in equity
securities of companies operating in the real estate industry, including
equities of real estate investment trusts (REITs), and other real estate related
investments.
The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W 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 approximately eight years after
their initial purchase date.
- - Class C shares may be subject to a CDSC.
- - Class I and Class R4 shares are offered without a front-end sales charge or
CDSC to qualifying institutional investors.
- - Class W shares are offered without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At June 30, 2009, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of
Class I shares, and the Investment Manager owned 100% of Class W shares. At June
30, 2009, the Investment Manager and the RiverSource affiliated funds-of-funds
owned approximately 65% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
- --------------------------------------------------------------------------------
30 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
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. 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. Foreign securities are valued based on quotations from
the principal market in which such securities are normally traded. The
procedures adopted by 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 (such as foreign 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.
Many securities markets and exchanges outside the U.S. close prior to the close
of the NYSE and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close but
before the close of the NYSE, including significant movements in the U.S. market
after foreign exchanges have closed. Accordingly, in those situations,
Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the
Investment Manager, as administrator to the Fund, will fair value foreign
securities pursuant to procedures adopted by the Board, including utilizing a
third party pricing service to determine these fair values. These procedures
take into account multiple factors, including movements in the U.S. securities
markets, to determine a good faith estimate that reasonably reflects the current
market conditions as of the close of the NYSE.
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 60 days or less at acquisition date are valued at amortized cost.
Amortized cost is
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
an approximation of market value. Investments in money market funds are valued
at net asset value.
FOREIGN CURRENCY TRANSLATIONS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The 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) to
shareholders. No provision for income or excise taxes is thus required.
Management of the Fund has concluded that there are no significant uncertain tax
positions that would require recognition in the financial statements. Generally,
the tax authorities can examine all the tax returns filed for the last three
years.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the 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. Dividend income is recognized on the ex-dividend date and interest income,
- --------------------------------------------------------------------------------
32 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
The Fund receives distributions from holdings in REITs which report information
on the character components of their distributions annually. REIT distributions
are allocated to dividend income, capital gain and return of capital based on
management's estimates if actual information has not yet been reported. Return
of capital is recorded as a reduction of the cost basis of securities held.
Management's estimates are subsequently adjusted when the actual character of
the distributions are disclosed by the REITs which could result in a
proportionate increase in returns of capital to shareholders.
3. INVESTMENTS IN DERIVATIVES
The 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. The Fund may also use derivative
instruments to mitigate certain investment risks, such as foreign currency
exchange rate risk, interest rate risk, and credit risk.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts in connection with
settling purchases or sales of securities, to hedge the currency exposure
associated with some or all of the Fund's securities or as part of its
investment strategy. A foreign currency contract is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of a foreign currency contract fluctuates with changes in foreign currency
exchange rates. Foreign currency contracts are marked to market daily based upon
foreign currency exchange rates from an independent pricing service and the
change in value is recorded as unrealized appreciation or depreciation. The Fund
will record a realized gain or loss when the foreign currency contract is
closed.
The risks of foreign currency contracts include movement in the values of the
foreign currencies relative to the U.S. dollar (or other foreign currencies) and
the possibility that the counterparty will not complete its contractual
obligation, which may be in excess of the amount reflected in the Statement of
Assets and Liabilities.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 the 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 the 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.
FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2009
At June 30, 2009, the Fund had no outstanding derivatives.
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2009
<Table>
<Caption>
AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
- ---------------------------------------------------------------------
FORWARD CURRENCY
RISK EXPOSURE CATEGORY CONTRACTS
- ---------------------------------------------------------------------
Foreign exchange contracts $(57,495)
- ---------------------------------------------------------------------
Total $(57,495)
- ---------------------------------------------------------------------
</Table>
<Table>
<Caption>
CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES
RECOGNIZED IN INCOME
- ---------------------------------------------------------------------
FORWARD CURRENCY
RISK EXPOSURE CATEGORY CONTRACTS
- ---------------------------------------------------------------------
Foreign exchange contracts $--
- ---------------------------------------------------------------------
Total $--
- ---------------------------------------------------------------------
</Table>
4. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is equal to a percentage of the Fund's average daily net assets that declines
from 0.84% to 0.72% annually as the Fund's net assets increase. The fee may be
adjusted upward or downward by a performance incentive adjustment determined
monthly by measuring the percentage difference over a rolling 12-month period
between the annualized performance of one Class A share of the Fund and the
annualized performance of the Lipper Real Estate Funds Index. In certain
circumstances, the Board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than 0.50%,
the adjustment will be zero. The adjustment decreased the management fee by
$54,067 for the year ended June 30, 2009. The management fee for the year
- --------------------------------------------------------------------------------
34 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
ended June 30, 2009 was 0.80% of the Fund's average daily net assets, including
the adjustment under the terms of the performance incentive arrangement.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services equal to a percentage of the
Fund's average daily net assets that declines from 0.06% to 0.03% annually as
the Fund's net assets increase. The fee for the year ended June 30, 2009 was
0.06% of the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund 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 Fund and the Board. For the year ended June 30,
2009, other expenses paid to this company were $1,275.
COMPENSATION OF BOARD MEMBERS
Under a Deferred Compensation Plan (the Plan), the board members who are not
"interested persons" of the 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 the Fund or other funds in the RiverSource Family
of Funds. The Fund's liability for these amounts is adjusted for market 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 shareholder accounts and records. The Fund pays the Transfer
Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50
for Class B and $20.00 for Class C for this service. The Transfer Agent also
charges an annual fee of $3 per account serviced directly by the Fund or its
designated agent for Class A, Class B and Class C shares. The Fund also pays the
Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's
average daily net assets attributable to Class R4 shares and an annual asset-
based fee at a rate of 0.20% of the Fund's average daily net assets attributable
to Class W shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees in the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
DISTRIBUTION FEES
The 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, the Fund pays a fee at an
annual rate of up to 0.25% of the Fund's average daily net assets attributable
to Class A and Class W shares and a fee at an annual rate of up to 1.00% of the
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) was approximately $445,000 and $13,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of April 30, 2009, and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges, including front-end and CDSCs, received by the Distributor for
distributing Fund shares were $91,576 for Class A, $6,506 for Class B and $219
for Class C for the year ended June 30, 2009.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended June 30, 2009, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*), including the adjustment under the terms
of a performance incentive arrangement, were as follows:
<Table>
Class A............................................. 1.43%
Class B............................................. 2.19
Class C............................................. 2.19
Class R4............................................ 1.09
Class W............................................. 1.43
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class A.......................................... $150,941
Class B.......................................... 23,562
Class C.......................................... 2,771
</Table>
- --------------------------------------------------------------------------------
36 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R4........................................... $127
</Table>
Under an agreement which was effective until June 30, 2009, the Investment
Manager and its affiliates contractually agreed to waive certain fees and
expenses such that net expenses (excluding fees and expenses of acquired
funds*), before giving effect to any performance incentive adjustment, would not
exceed the following percentage of the class' average daily net assets:
<Table>
Class A............................................. 1.46%
Class B............................................. 2.23
Class C............................................. 2.22
Class I............................................. 1.01
Class R4............................................ 1.31
Class W............................................. 1.46
</Table>
Effective July 1, 2009, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and expenses until Aug. 31, 2010,
unless sooner terminated at the discretion of the Board, such that net expenses
(excluding fees and expenses of acquired funds*), before giving effect to any
performance incentive adjustment, will not exceed the following percentage of
the class' average daily net assets:
<Table>
Class A............................................. 1.38%
Class B............................................. 2.17
Class C............................................. 2.14
Class I............................................. 0.93
Class R4............................................ 1.23
Class W............................................. 1.38
</Table>
* 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 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 the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
BANK FEE CREDITS
During the year ended June 30, 2009, the Fund's transfer agency fees were
reduced by $129 as a result of bank fee credits from overnight cash balances.
CUSTODIAN FEES
Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank,
N.A. For the period from July 1, 2008 to Dec. 15, 2008, the Fund paid custodian
fees amounting to $14,211 to Ameriprise Trust Company, a subsidiary of
Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $94,764,225 and $78,763,426, respectively, for the year
ended June 30, 2009. Realized gains and losses are determined on an identified
cost basis.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
JUNE 30, 2009 JUNE 30, 2008
- -------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------
Sold 1,275,845 1,620,097
Converted from Class B shares* 122,780 --
Reinvested distributions 253,832 1,327,612
Redeemed (2,838,694) (4,675,335)
- -------------------------------------------------------------------
Net increase (decrease) (1,186,237) (1,727,626)
- -------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------
Sold 150,250 193,231
Reinvested distributions 30,989 217,558
Converted to Class A shares* (123,787) --
Redeemed (351,959) (1,021,054)
- -------------------------------------------------------------------
Net increase (decrease) (294,507) (610,265)
- -------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------
Sold 40,007 44,818
Reinvested distributions 3,686 20,266
Redeemed (41,866) (88,461)
- -------------------------------------------------------------------
Net increase (decrease) 1,827 (23,377)
- -------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------
Sold 10,647,708 5,791,409
Reinvested distributions 546,181 883,959
Redeemed (6,957,366) (2,746,559)
- -------------------------------------------------------------------
Net increase (decrease) 4,236,523 3,928,809
- -------------------------------------------------------------------
CLASS R4
- -------------------------------------------------------------------
Sold 131 569
Reinvested distributions 366 1,795
Redeemed (724) (4,775)
- -------------------------------------------------------------------
Net increase (decrease) (227) (2,411)
- -------------------------------------------------------------------
</Table>
* Automatic conversion of Class B shares to Class A shares.
- --------------------------------------------------------------------------------
38 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
7. LENDING OF PORTFOLIO SECURITIES
Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending
Agreement (the Agreement) with JPMorgan Chase Bank, National Association
(JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend
securities to authorized borrowers in order to generate additional income on
behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured
by cash or U.S. government securities equal to at least 100% of the market value
of the loaned securities. Any additional collateral required to maintain those
levels due to market fluctuations of the loaned securities is delivered the
following business day. Cash collateral received is invested by the lending
agent on behalf of the Fund into authorized investments pursuant to the
Agreement. The investments made with the cash collateral are listed in the
Portfolio of Investments. The values of such investments and any uninvested cash
collateral balance are disclosed in the Statement of Assets and Liabilities
along with the related obligation to return the collateral upon the return of
the securities loaned. At June 30, 2009, securities valued at $33,652,081 were
on loan, secured by cash collateral of $34,004,621 invested in short-term
securities or in cash equivalents.
Risks of delay in recovery of securities or even loss of rights in the
securities may occur should the borrower of the securities fail financially.
Risks may also arise to the extent that the value of the securities loaned
increases above the value of the collateral received. JPMorgan will indemnify
the Fund from losses resulting from a borrower's failure to return a loaned
security when due. Such indemnification does not extend to losses associated
with declines in the value of cash collateral investments. Loans are subject to
termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments.
Pursuant to the Agreement, the Fund receives income for lending its securities
either in the form of fees or by earning interest on invested cash collateral,
net of negotiated rebates paid to borrowers and fees paid to the lending agent
for services provided and any other securities lending expenses. Income of
$57,237 earned from securities lending from Dec. 1, 2008 through June 30, 2009
is included in the Statement of Operations. The Fund also continues to earn
interest and dividends on the securities loaned.
Prior to Dec. 1, 2008, the Investment Manager served as securities lending agent
for the Fund under the Securities Lending Agency Agreement. For the period from
July 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan.
8. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the funds in the
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 39
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
RiverSource Family of Funds and other institutional clients of RiverSource
Investment. The cost of the Fund's purchases and proceeds from sales of shares
of RiverSource Short-Term Cash Fund aggregated $82,349,908 and $97,561,168,
respectively, for the year ended June 30, 2009. The income distributions
received with respect to the Fund's investment in RiverSource Short-Term Cash
Fund can be found in the Statement of Operations and the Fund's invested balance
in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the
Portfolio of Investments.
9. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund
may borrow for the temporary funding of shareholder redemptions or for other
temporary or emergency purposes. The credit facility became effective on Oct.
16, 2008, replacing a prior credit facility. The credit facility agreement,
which is a collective agreement between the Fund and certain other funds in the
RiverSource Family of Funds, severally and not jointly, permits collective
borrowings up to $475 million. The borrowers shall have the right, upon written
notice to the Administrative Agent to request an increase of up to $175 million
in the aggregate amount of the credit facility from new or existing lenders,
provided that the aggregate amount of the credit facility shall at no time
exceed $650 million. Participation in such increase by any existing lender shall
be at such lender's sole discretion. Interest is charged to each Fund based on
its borrowings at a rate equal to the federal funds rate plus 0.75%. Each
borrowing under the credit facility matures no later than 60 days after the date
of borrowing. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.06% per annum, in addition to
an upfront fee equal to its pro rata share of 0.02% of the amount of the credit
facility. The Fund had no borrowings during the year ended June 30, 2009.
Under the prior credit facility which was effective until Oct. 15, 2008, the
Fund had entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow
for the temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The credit facility agreement, which was a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permitted collective borrowings up to $500 million. Interest was
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matured no later
than 60 days after the date of borrowing. The 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.
- --------------------------------------------------------------------------------
40 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
10. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of foreign currency
transactions, re-characterization of REIT distributions, post-October losses and
losses deferred due to wash sales. 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 Fund.
In the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, excess of distributions over net investment income has been
increased by $1,692,511 and accumulated net realized loss has been decreased by
$1,692,511.
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED JUNE 30,
2009 2008
------------------------------------ ------------------------
ORDINARY LONG-TERM TAX RETURN ORDINARY LONG-TERM
INCOME CAPITAL GAIN OF CAPITAL INCOME CAPITAL GAIN
- ----------------------------------------------------------------------------------
Class A $1,291,096 $417,313 $144,585 $3,187,447 $12,977,240
Class B 131,849 64,837 22,464 397,462 2,215,638
Class C 17,004 7,599 2,633 38,142 205,734
Class I 2,832,757 627,942 217,560 2,842,136 7,705,199
Class R4 1,981 552 192 5,293 18,193
Class W 52 16 6 120 485
</Table>
At June 30, 2009, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income $ --
Undistributed accumulated long-term gain $ --
Accumulated realized loss $(48,042,039)
Unrealized appreciation (depreciation) $(61,471,807)
</Table>
For federal income tax purposes, the Fund had a capital loss carry-over of
$1,114,883 at June 30, 2009, that if not offset by capital gains will expire in
2017.
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, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss)
as occurring on the first day of the following tax year. At June 30, 2009, the
Fund
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 41
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
had a post-October loss of $46,927,156 that is treated for income tax purposes
as occurring on July 1, 2009.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires. There is no assurance that the Fund will be able to utilize all of its
capital loss carry-over before it expires.
11. RISKS RELATING TO CERTAIN INVESTMENTS
DIVERSIFICATION RISK
The Fund is non-diversified. A non-diversified fund may invest more of its
assets in fewer companies than if it were a diversified fund. The Fund may be
more exposed to the risks of loss and volatility than a fund that invests more
broadly.
REAL ESTATE INDUSTRY RISK
Because of the Fund's policy of concentrating its investments in securities of
companies operating in the real estate industry, the Fund is more susceptible to
risks associated with the ownership of real estate and with the real estate
industry in general. These risks can include fluctuations in the value of the
underlying properties, defaults by borrowers or tenants, market saturation,
decreases in market rates for rents, and other economic, political, or
regulatory occurrences affecting the real estate industry, including REITs.
REITs depend upon specialized management skills, may have limited financial
resources, may have less trading volume, and may be subject to more abrupt or
erratic price movements than the overall securities markets. REITs are also
subject to the risk of failing to qualify for tax-free pass-through of income.
Some REITs (especially mortgage REITs) are affected by risks similar to those
associated with investments in debt securities including changes in interest
rates and the quality of credit extended.
12. SUBSEQUENT EVENTS
Management has evaluated Fund related events and transactions that occurred
during the period from the date of the Statement of Assets and Liabilities
through Aug. 20, 2009, the date of issuance of the Fund's financial statements.
There were no events or transactions that occurred during the period that
materially impacted the amounts or disclosures in the Fund's financial
statements.
13. 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
- --------------------------------------------------------------------------------
42 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
United States District Court for the District of Arizona. The plaintiffs allege
that 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
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 43
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
period 2001-2003, noted one arrangement that permitted frequent trading in
certain open-end registered investment companies managed by Seligman (the
Seligman Funds); this arrangement was in the process of being closed down by
Seligman before September 2003. Seligman identified three other arrangements
that permitted frequent trading, all of which had been terminated by September
2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these
four arrangements to its clients and to shareholders of the Seligman Funds.
Seligman also provided information concerning mutual fund trading practices to
the SEC and the Office of the Attorney General of the State of New York (NYAG).
In September 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
- --------------------------------------------------------------------------------
44 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
to perform under their contracts with the Funds. Ameriprise Financial is
required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities
and Exchange Commission on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained
by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE REAL ESTATE FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Real Estate Fund (the Fund) (one of
the portfolios constituting the RiverSource Sector Series, Inc.) as of June 30,
2009, and the related statement of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for each of the
two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of the Fund for the periods
presented through June 30, 2007, were audited by other auditors whose report
dated August 21, 2007, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of June 30, 2009, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
- --------------------------------------------------------------------------------
46 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of RiverSource Real Estate Fund of the RiverSource Sector Series, Inc.
at June 30, 2009, the results of its operations for the year then ended, and
changes in its net assets and the financial highlights for each of the two years
in the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
August 20, 2009
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 47
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended June 30, 2009
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals.................... 8.56%
Dividends Received Deduction for corporations................ 1.32%
U.S. Government Obligations.................................. 0.00%
<Caption>
CAPITAL GAIN DISTRIBUTION - the Fund designates $1,118,259 to be taxed as
long-term capital gain.
</Table>
The Fund also designates as distributions of long-term gains, to the extent
necessary to fully distribute such capital gains, earnings and profits
distributed to shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
48 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
The RiverSource Family of Funds that each Board member oversees consists of 138
funds, which includes 105 RiverSource funds and 33 Seligman funds. Board members
serve until the next regular shareholders' meeting or until he or she reaches
the mandatory retirement age established by the Board.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2006 Attorney
Minneapolis, MN 55402
Age 55
- ------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None
901 S. Marquette Ave. 1999 Governor of Minnesota
Minneapolis, MN 55402
Age 74
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2007 Leadership (consulting company)
Minneapolis, MN 55402
Age 54
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley University
Age 58
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 1985
Minneapolis, MN 55402
Age 74
- ------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2005 Insurance
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 2007, College Inc. (manufactures
Minneapolis, MN 55402 Board member since irrigation systems)
Age 70 2002
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 49
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member since Retired President and Chief Executive Officer and None
901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 (financial services), 1986-1997
Age 66
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2004 real estate and asset management company)
Minneapolis, MN 55402
Age 56
- ------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 67 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceuticals,
Minneapolis, MN 55402 Biotech Inc.
Age 65 (biotechnology);
Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
50 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005;
Financial Center Vice President since President, Chairman of the Board and Chief Investment
Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001;
Age 49 Director, President and Chief Executive Officer,
Ameriprise Certificate Company since 2006; Chairman of
the Board and Chief Executive Officer, RiverSource
Distributors, Inc. since 2006 and of RiverSource Fund
Distributors, Inc. since 2008; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc., 2001-2005
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling the RiverSource Family of
Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting
riversource.com/funds.
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center and Director and Vice President -- Asset Management,
Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc.
Age 43 since 2006 and of RiverSource Fund Distributors, Inc.
since 2008; Managing Director and Global Head of
Product, Morgan Stanley Investment Management, 2004-
2006; President, Touchstone Investments, 2002-2004
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 51
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 45 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments,
5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and
Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC,
55474 2006-2009; Vice President -- Operations and Compliance,
Age 43 RiverSource Investments, LLC, 2004-2006; Director of
Product Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006
Minneapolis, MN 55474
Age 54
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer
Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC
Age 50 since 2006; Chief Counsel, RiverSource Fund
Distributors, Inc. since 2008; Vice President, General
Counsel and Secretary, Ameriprise Certificate Company
since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc., 2004-2005;
Senior Vice President and Chief Compliance Officer,
USBancorp Asset Management, 2002-2004
- --------------------------------------------------------------------------------------------------------
Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC,
100 Park Avenue Officer since 2009 Kenwood Capital Management LLC, Ameriprise Certificate
New York, NY 10010 Company, RiverSource Service Corporation and Seligman
Age 58 Data Corp. since 2009; Chief Compliance Officer for
each of the Seligman funds since 2004 and all funds in
the RiverSource Family of Funds since 2009; Anti-Money
Laundering Prevention Officer and Identity Theft
Prevention Officer for each of the Seligman funds since
2008; Managing Director, J. & W. Seligman & Co.
Incorporated and Vice-President for each of the
Seligman funds, 2004-2008
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer,
Center since 2004 Ameriprise Financial, Inc. since 2004; Compliance
Minneapolis, MN 55474 Director, Ameriprise Financial, Inc., 2004-2008
Age 45
- --------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
52 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors/Trustees (the "Board"),
including the independent Board members (the "Independent Directors"), considers
renewal of the IMS Agreement. RiverSource Investments prepared detailed reports
for the Board and its Contracts Committee in March and April 2009, including
reports based on data provided by independent organizations to assist the Board
in making this determination. In addition, throughout the year, the Board (or
its committees) reviews information prepared by RiverSource Investments
addressing the services RiverSource Investments provides and Fund performance.
The Board accords particular weight to the work, deliberations and conclusions
of the Contracts, Investment Review and Compliance Committees in determining
whether to continue the IMS Agreement. At the April 7-8, 2009 in-person Board
meeting, independent legal counsel to the Independent Directors reviewed with
the Independent Directors various factors relevant to the Board's consideration
of advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved renewal
of the IMS Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services performed by RiverSource Investments, as well as its expertise,
resources and capabilities. The Board specifically considered many developments
during the past year concerning the services provided by RiverSource
Investments, including, in particular, the continued investment in, and
resources dedicated to, the Fund's operations, most notably, the large
investment made in the acquisition of J. & W. Seligman & Co. Incorporated,
including its portfolio management operations, personnel and infrastructure
(including the addition of two new offices in New York City and Palo Alto).
Further, in connection with the Board's evaluation of the overall package of
services provided by RiverSource Investments, the Board considered the quality
of the administrative and transfer agency services provided by RiverSource
Investments' affiliates to the Fund. The Board also reviewed the financial
condition of RiverSource Investments (and its affiliates) and each entity's
ability to carry out its responsibilities under the IMS
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 53
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
Agreement. Further, the Board considered RiverSource Investments' ability to
retain key personnel and its expectations in this regard. The Board also
discussed the acceptability of the terms of the IMS Agreement (including the
relatively broad scope of services required to be performed by RiverSource
Investments). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality, particularly in light of recent
market conditions.
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates were in a position to continue to provide a high quality and
level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods, recent Fund inflows (and outflows) and
a comparison of the Fund's net assets from December 2007 to December 2008. The
Board observed that the Fund's investment performance was appropriate in light
of the particular management style and the exceptionally challenging market
conditions involved.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability. They also reviewed information in the
report comparing the fees charged to the Fund by RiverSource Investments to fees
charged to other client accounts (with similar investment strategies to those of
the Fund).
- --------------------------------------------------------------------------------
54 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
- --------------------------------------------------------------------------------
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund (excluding the effect of a performance incentive
adjustment, if applicable), with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) approximated the peer group's median expense ratio. The Board also
considered the Fund's performance incentive adjustment and noted its continued
appropriateness.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability over the past two years. The
Board also considered the services acquired by the investment manager through
the use of commission dollars paid by the Funds on portfolio transactions. The
Board noted that the fees paid by the Fund should permit the investment manager
to offer competitive compensation to its personnel, make necessary investments
in its business and earn an appropriate profit. The Board concluded that
profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 8, 2009, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement for an additional annual period.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 55
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your
financial intermediary; visiting riversource.com/funds; or searching the website
of the Securities and Exchange Commission (SEC) at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities is filed with the SEC by August 31 for the most recent 12-month
period ending June 30 of that year, and is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
56 RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT
RESULTS OF MEETING OF SHAREHOLDERS --------------------------------------------
RiverSource Real Estate Fund
SPECIAL MEETING OF SHAREHOLDERS HELD ON JUNE 2, 2009
(UNAUDITED)
A brief description of the proposal voted upon at the meeting and the votes cast
for, against or withheld, as well as the number of abstentions and broker non-
votes as to the proposal is set forth below. A vote is based on total dollar
interest in the Fund.
To approve a change in the classification of the Fund from a "diversified" fund
to a "non-diversified" fund.
<Table>
<Caption>
DOLLARS VOTED DOLLARS VOTED BROKERS
"FOR" "AGAINST" ABSTENTIONS NON-VOTES
- -------------------------------------------------------------
99,849,911.665 6,960,459.394 5,041,513.400 0.000
- -------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2009 ANNUAL REPORT 57
RIVERSOURCE REAL ESTATE FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Fund Distributors, Inc., Member
FINRA, and managed by RiverSource Investments, LLC.
RiverSource is part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C)2009 RiverSource Investments, LLC. S-6281 H (8/09)
</Table>
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P.
Jones, each qualify as audit committee financial experts.
Item 4. Principal Accountant Fees and Services
Fund - Related Fees
(a) Audit Fees. The fees for the year ended June 30, to Ernst & Young LLP for
professional services rendered for the audit of the annual financial
statements for RiverSource Sector Series, Inc. were as follows:
2009 - $48,526 2008 - $45,300
(b) Audit - Related Fees. The fees for the year ended June 30, to Ernst & Young
LLP for additional professional services rendered in connection with the
registrant's security count pursuant to Rule 17f-2 and the semiannual
financial statement review for RiverSource Sector Series, Inc. were as
follows:
2009 - $1,750 2008 - $1,590
(c) Tax Fees. The fees for the year ended June 30, to Ernst & Young LLP for tax
compliance related services for RiverSource Sector Series, Inc. were as
follows:
2009 - $6,678 2008 - $6,300
(d) All Other Fees. The fees for the year ended June 30, to Ernst & Young LLP
for additional professional services rendered for RiverSource Sector
Series, Inc. were as follows:
2009 - $0 2008 - $0
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by Ernst & Young
LLP for the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant must be
pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above during
2009 and 2008 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees for the year ended June 30, to Ernst & Young LLP
by the registrant for non-audit fees and by the registrant's investment
adviser, and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant were as
follows:
2009 - $644,434 2008 - $619,690
(h) 100% of the services performed in item (g) above during 2009 and 2008 were
pre-approved by the Ameriprise Financial Audit Committee and/or the
RiverSource Mutual Funds Audit Committee.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not
applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's Principal Financial Officer and Principal Executive
Officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal executive
officer and principal financial officer, as required to be disclosed under
Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(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 Sector Series, Inc.
By /s/ Patrick T. Bannigan
---------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date September 2, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
---------------------------------
Patrick T. Bannigan
President and Principal Executive
Officer
Date September 2, 2009
By /s/ Jeffrey P. Fox
---------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial
Officer
Date September 2, 2009