Ex-99.17(h)
Annual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
TAX-EXEMPT MONEY MARKET FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
DECEMBER 31, 2008
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH AS HIGH A LEVEL OF CURRENT
INCOME EXEMPT FROM FEDERAL INCOME TAX AS IS
CONSISTENT WITH LIQUIDITY AND STABILITY OF PRINCIPAL.
<Table>
(SINGLE STRATEGY FUNDS ICON)
</Table>
LETTER TO SHAREHOLDERS --------------------------------------------------------
(PHOTO - BANNIGAN - LEWIS)
Patrick T. Bannigan (left)
Stephen R. Lewis, Jr. (right)
Dear Fellow Shareholders,
2008 was an unprecedented year in many ways. Investors watched the precipitous
decline in all the major U.S. and international equity indexes as concerns about
the economy gave way to fear and selling of securities. In response to
substantial losses in the markets and weakening economic indicators, the
government stepped in swiftly and aggressively to encourage liquidity and credit
availability in an attempt to make credit markets function. By the end of the
calendar year, these actions still needed time to gain traction in the markets.
During a severe economic environment like the one we are experiencing, it is
essential that investors try not to let short-term losses in the market distract
from a long-term investment plan. Such discipline may be easier said than done
in the presence of negative news in the media. However, the financial choices
you make today -- practicing patience or locking in losses -- will influence
your portfolio's performance.
GETTING BACK ON TRACK
Whether you look at the glass half empty or half full, every broad based market
decline creates investment opportunities. The financial markets are expected to
recover, although it is impossible to know when. In the meantime, make sure your
portfolio is positioned to benefit from the next sources of growth.
Market recoveries often occur before the reported end of a recession. If you
wait for validation of economic recovery before reinvesting in the markets, you
may well miss out on market returns associated with an economic rebound.
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THIS PAGE IS NOT PART OF THE ANNUAL REPORT
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<Table>
<Caption>
TIME ELAPSED
BETWEEN BEAR
MARKET AND
BEAR MARKET RECESSION RETURNS
RECESSION ENDED END DATES MISSED*
-----------------------------------------------------------------
August 1929 - March
1933 June 1932 9 months 39.21%
August 1957 - April
1958 December 1957 4 months 9.94%
December 1969 -
November 1970 June 1970 5 months 21.81%
November 1973 - March
1975 September 1974 6 months 34.47%
July 1981 - November
1982 July 1982 4 months 31.72%
July 1990 - March 1991 October 1990 5 months 25.33%
-----------------------------------------------------------------
</Table>
* S&P 500(R) Index total returns for the number of months
between the recession and bear market end dates.
Be sure your portfolio is on track today. Talk with your
financial professional about opportunities that have been
created in the markets and take advantage of our solutions and
strategies that can help position portfolios for the next market
recovery cycle.
OUR FAMILY OF FUNDS
We also want to share some good news with our fellow
shareholders. Last November, RiverSource Investments, a wholly-
owned subsidiary of Ameriprise Financial, Inc., acquired J. & W.
Seligman & Co. Incorporated. Seligman's long heritage of
investing and exceptional wealth of experience is a valuable
addition to RiverSource Investments. Along with RiverSource and
Threadneedle, Seligman joins our comprehensive family of mutual
funds we offer investors.
For more information
about any of our
RiverSource Funds, go
online to RiverSource.com
or call (888) 791-3380.
Customer Service
Representatives are
available to answer your
questions Monday through
Friday from 8 a.m. to
5 p.m. Central time.
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THIS PAGE IS NOT PART OF THE ANNUAL REPORT
LETTER TO SHAREHOLDERS (continued) --------------------------------------------
In addition, we are excited to welcome John Maher and Leroy Richie to the
RiverSource Funds' Boards of Directors. Mr. Maher and Mr. Richie join us from
the Seligman Funds' Boards of Directors. The acquisition of Seligman creates
several new opportunities for RiverSource Funds' shareholders, including access
to talented portfolio managers and competitive mutual fund solutions to help you
reach your investment goals. We hope you are as excited by these opportunities
as we are. Thank you for investing with us.
<Table>
/s/ STEPHEN R. LEWIS, JR. /s/ PATRICK T. BANNIGAN
Stephen R. Lewis, Jr. Patrick T. Bannigan
Chairman of the Boards President, RiverSource Funds
</Table>
YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A
MUTUAL FUND CAREFULLY BEFORE INVESTING. FOR A FREE PROSPECTUS, WHICH CONTAINS
THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUNDS, CALL (888) 791-3380. READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
Asset allocation, diversification, and dollar cost averaging do not assure a
profit or protect against loss and past performance is no guarantee of future
results.
Standard & Poor's 500 Index (S&P 500 Index) is an unmanaged list of common
stocks and is frequently used as a general measure of U.S. market performance.
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THIS PAGE IS NOT PART OF THE ANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
TABLE OF CONTENTS -------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 3
Manager Commentary................. 5
Fund Expenses Example.............. 9
Portfolio of Investments........... 11
Statement of Assets and
Liabilities...................... 18
Statement of Operations............ 19
Statements of Changes in Net
Assets........................... 20
Financial Highlights............... 21
Notes to Financial Statements...... 22
Report of Independent Registered
Public Accounting Firm........... 31
Federal Income Tax Information..... 33
Board Members and Officers......... 35
Proxy Voting....................... 40
</Table>
(DALBAR LOGO)
The RiverSource mutual fund shareholder reports have
been awarded the Communications Seal from Dalbar Inc.,
an independent financial services research firm. The
Seal recognizes communications demonstrating a level
of excellence in the industry.
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2 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
--------------------------------------------------------------------------------
> RiverSource Tax-Exempt Money Market Fund (the Fund) gained 1.38% for the 12
months ended Dec. 31, 2008.
> The annualized simple yield was 0.33% and the annualized compound yield was
also 0.33% for the seven-day period ended Dec. 31, 2008. The annualized simple
and compound yields more closely reflect the current earnings of the Fund than
the total return.
ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2008)
--------------------------------------------------------------------------------
<Table>
<Caption>
1 year 3 years 5 years 10 years
--------------------------------------------------------------------
RiverSource Tax-Exempt Money
Market Fund +1.38% +2.41% +1.89% +1.90%
--------------------------------------------------------------------
</Table>
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The Fund is neither insured nor guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the Fund. Yields will fluctuate. The seven-day current
yield more closely reflects the current earnings of the Fund than the total
return.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
STYLE MATRIX
--------------------------------------------------------------------------------
<Table>
<Caption>
DURATION
SHORT INT. LONG
X HIGH
MEDIUM QUALITY
LOW
</Table>
Shading within the style matrix indicates areas in which the Fund is designed to
generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO STATISTICS
--------------------------------------------------------------------------------
<Table>
Weighted average
maturity(1) 33 days
------------------------------------
</Table>
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
--------------------------------------------------------------------------------
<Table>
<Caption>
Total fund expenses 0.69%
---------------------------------
</Table>
(1) WEIGHTED AVERAGE MATURITY is the amount of time remaining before securities
are due and principal must be repaid.
AN INVESTMENT IN MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND
SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
Income from tax-exempt funds may be subject to state and local taxes. Federal
income tax rules will apply to any capital gains distribution.
--------------------------------------------------------------------------------
4 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
Dear Shareholders:
RiverSource Tax-Exempt Money Market Fund (the Fund) gained 1.38% for the 12
months ended Dec. 31, 2008. The annualized simple yield was 0.33% and the
annualized compound yield was also 0.33% for the seven-day period ended Dec. 31,
2008. The annualized simple and compound yields more closely reflect the current
earnings of the Fund than the total return.
SIGNIFICANT PERFORMANCE FACTORS
Dramatic action by the Federal Reserve (the Fed), increasing weakness in
economic growth, the intensifying global financial crisis and the resulting
liquidity freeze had the greatest effect on the Fund's results. These factors
came to an unprecedented confluence starting in the third quarter of 2008. As
financial institutions declared bankruptcy, were forced to merge or were taken
over by the government, solvency concerns prominently drove the crisis. In an
effort to revive confidence, the Fed and U.S. Treasury, in coordination with
global policymakers, announced a host of programs to help improve liquidity.
Further, as part of a global effort to ease monetary conditions, combat
deterioration in financial market conditions and mitigate worsening economic
growth prospects, the Fed lowered the targeted federal funds rate by over 400
basis points (4.00%) in December, bringing the rate to between 0.00% and 0.25%.
Following the downward path of the targeted federal funds rate, tax-exempt money
market yields moved dramatically lower. At the same time, the tax-exempt money
market yield curve actually steepened, meaning longer-term yields grew
increasingly higher than shorter-term yields, as credit concerns caused
investors to favor shorter-dated maturities in an effort to increase their
liquidity profile and further mitigate risk.
Within the tax-free money market area, extreme dislocation in the variable-rate
demand obligation market also had a major impact, driven primarily by the
failure of Lehman Brothers in September along with certain technical factors.
Another related factor was the tax-exempt note market grinding to a halt during
September and October, as the liquidity
SECTOR DIVERSIFICATION (at Dec. 31, 2008; % of portfolio assets)
---------------------------------------------------------------------
<Table>
Municipal Notes 100%
-----------------------------------------------
</Table>
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
crunch hit hard. The commercial paper market also experienced extreme
dislocation during the period, as issuers were not able to issue commercial
paper because investors were unwilling to finance any fixed-rate product that
was illiquid or longer than seven days in maturity.
Given these volatile conditions, money market investors remained principally
concerned with safety and preserving liquidity throughout the annual period.
Preservation of capital and liquidity management were our primary areas of focus
as well.
CHANGES TO THE FUND'S PORTFOLIO
We strategically adjusted the Fund's average weighted maturity as market
conditions shifted. The Fund began the 12-month period with an average weighted
maturity of 35 days. For most of the first half of the year, we maintained a
neutral duration bias, as the money markets were focused on credit conditions.
(Duration is a measure of the Fund's sensitivity to changes in interest rates.)
By mid-year, we had increased the average weighted maturity of the Fund to 46
days, as the Fed was proactively adding liquidity measures in an effort to
address liquidity concerns and as a result credit conditions marginally
improved. Beginning in September, however, we once again raised the Fund's
liquidity profile as a defensive measure given the meltdown in the financial
markets. In implementing this strategy, we increased the Fund's holdings of
daily floating rate securities, which are reset in line with changes in market
interest rates and offer daily liquidity. As of Dec. 31, 2008, the average
weighted maturity of the Fund had been reduced to 33 days.
TOP TEN STATES (at Dec. 31, 2008; % of portfolio assets)
--------------------------------------------------------------------------------
<Table>
<Caption>
Minnesota 16.2%
------------------------------------------------------------
Texas 6.7%
------------------------------------------------------------
Tennessee 6.6%
------------------------------------------------------------
Massachusetts 6.3%
------------------------------------------------------------
Alaska 4.7%
------------------------------------------------------------
Alabama 4.7%
------------------------------------------------------------
Arizona 4.7%
------------------------------------------------------------
New Mexico 4.7%
------------------------------------------------------------
Illinois 4.6%
------------------------------------------------------------
Washington 4.5%
------------------------------------------------------------
</Table>
--------------------------------------------------------------------------------
6 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
Although the tax-exempt money market yield curve steepened during the annual
period overall, volatile market conditions led us to primarily invest the Fund's
assets in daily and weekly variable rate demand notes, as these are the most
liquid securities available in the tax-exempt money markets. We also increased
the Fund's allocation to municipal commercial paper with one-month maturities.
OUR FUTURE STRATEGY
The Fed stated in December that it intends to maintain its current monetary
policy for some time, as weak economic conditions are likely to warrant an
exceptionally low targeted federal funds rate. Among the weak economic
conditions that the Fed must consider during the coming months are unemployment
rates possibly heading upward of 7%, consumers likely to be increasing their
savings at the expense of spending and the fact that the credit crisis has
resulted in a recession that will likely continue through much of 2009.
We intend to continue to evaluate investments carefully and make strategic
decisions to balance an enhanced liquidity profile while seeking current income.
We may look to lengthen the Fund's weighted average maturity through the
purchase of high quality fixed-rate securities as we seek to lock in the higher
yields of an upward sloping yield curve. We will, of course, continue to closely
monitor economic data, Fed policy and any shifts in the tax-exempt money market
yield curve, striving to strategically adjust the portfolio accordingly. We
intend to continue to focus on high quality investments with minimal credit risk
while seeking competitive yields. Our objective
We intend to continue to evaluate investments carefully and make strategic
decisions to balance an enhanced liquidity profile while seeking current
income.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
remains to seek as high a level of current income exempt from federal income tax
as is consistent with liquidity and stability of principal.
Dan Tronstad
Portfolio Manager
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.
--------------------------------------------------------------------------------
8 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur ongoing costs including 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.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Dec. 31, 2008.
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. 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.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 9
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JULY 1, 2008 DEC. 31, 2008 THE PERIOD(A),(B) EXPENSE RATIO
----------------------------------------------------------------------------------------------
Actual(c) $1,000 $1,005.80 $3.53 .70%
----------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.62 $3.56 .70%
----------------------------------------------------------------------------------------------
</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 184/366 (to reflect the one-half year period).
(b) From time to time, the Investment Manager and its affiliates may limit the
expenses of the Fund for the purpose of increasing the yield. This expense
limitation policy may be revised or terminated at any time without notice.
(c) Based on the actual return of +0.58% for the six months ended Dec. 31, 2008.
--------------------------------------------------------------------------------
10 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
DEC. 31, 2008
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
MUNICIPAL NOTES (100.2%)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER(B,C) YIELD MATURITY VALUE(a)
ALABAMA (4.7%)
Columbia Industrial Development Board
Refunding Revenue Bonds
Alabama Power Company Project
V.R.D.N. Series 1995E
10-01-22 1.60% $6,550,000(d) $6,550,000
-------------------------------------------------------------------------------------
ALASKA (4.8%)
City of Valdez
Refunding Revenue Bonds
Exxon Mobil Project
V.R.D.N. Series 2001
12-01-29 0.77 1,700,000(d) 1,700,000
City of Valdez
Refunding Revenue Bonds
Exxon Pipeline Company Project
V.R.D.N. Series 1993B
12-01-33 1.00 4,900,000(d) 4,900,000
---------------
Total 6,600,000
-------------------------------------------------------------------------------------
ARIZONA (4.7%)
Salt River Project Agricultural
C.P.
01-08-09 0.78 1,000,000 1,000,000
01-09-09 1.20 1,000,000 1,000,000
01-12-09 0.85 4,500,000 4,500,000
---------------
Total 6,500,000
-------------------------------------------------------------------------------------
CALIFORNIA (4.3%)
California State Department of Water Resources
Revenue Bonds
V.R.D.N. Series 2002B-3 (Bank of New York)
05-01-22 0.75 6,000,000(d) 6,000,000
-------------------------------------------------------------------------------------
COLORADO (1.4%)
Colorado Educational & Cultural Facilities Authority
Revenue Bonds
Clyford Still Museum Project
V.R.D.N. Series 2008 (Wells Fargo Bank)
12-01-38 1.13 2,000,000(d) 2,000,000
-------------------------------------------------------------------------------------
DELAWARE (0.9%)
Bryant Park Funding LLC
C.P.
01-05-09 0.41 1,200,000 1,199,933
-------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (0.7%)
District of Columbia
Revenue Bonds
American Psychological Association
V.R.D.N. Series 2003 (Bank of America)
03-01-28 1.22 1,030,000(d) 1,030,000
-------------------------------------------------------------------------------------
FLORIDA (0.1%)
Collier County Health Facilities Authority
Revenue Bonds
Cleveland Clinic Fairview Hospital
V.R.D.N. Series 2003C-1 (JP Morgan Chase & Co)
01-01-35 1.10 200,000(d) 200,000
-------------------------------------------------------------------------------------
IDAHO (1.4%)
State of Idaho
Unlimited General Obligation Notes
T.A.N. Series 2008
06-30-09 1.72 2,000,000 2,012,402
-------------------------------------------------------------------------------------
ILLINOIS (4.6%)
City of Chicago
Revenue Bonds
2nd Lien
V.R.D.N. Series 1999 (Bank One)
11-01-30 0.80 3,065,000(d) 3,065,000
HSBC Finance
C.P.
01-29-09 0.34 2,000,000 1,999,456
</Table>
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
MUNICIPAL NOTES (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER(B,C) YIELD MATURITY VALUE(a)
ILLINOIS (CONT.)
Illinois Finance Authority
Refunding Revenue Bonds
Amoco Oil Company Project
V.R.D.N. Series 1994
11-01-12 1.10% $300,000(d) $300,000
Illinois International District
Refunding Revenue Bonds
V.R.D.N. Series 2003 (LaSalle Bank)
01-01-23 3.10 1,000,000(d) 1,000,000
---------------
Total 6,364,456
-------------------------------------------------------------------------------------
INDIANA (1.8%)
Hammond
Refunding Revenue Bonds
Amoco Oil Company Project
V.R.D.N. Series 1994
02-01-22 1.15 300,000(d) 300,000
Purdue University
Revenue Bonds
Student Facilities Systems
V.R.D.N. Series 2004A
07-01-33 0.55 1,300,000(d) 1,300,000
Purdue University
Revenue Bonds
Student Fees
V.R.D.N. Series 2005V
07-01-27 0.55 925,000(d) 925,000
---------------
Total 2,525,000
-------------------------------------------------------------------------------------
KENTUCKY (2.4%)
Newport
Revenue Bonds
V.R.D.N. Series 2002 (U.S. Bank)
04-01-32 1.35 3,300,000(d) 3,300,000
-------------------------------------------------------------------------------------
LOUISIANA (3.8%)
Louisiana Offshore Terminal Authority
Refunding Revenue Bonds
Loop LLC
V.R.D.N. Series 2003B (Bank One)
09-01-14 0.80 5,300,000(d) 5,300,000
-------------------------------------------------------------------------------------
MARYLAND (2.2%)
Maryland Health & Higher Education
C.P.
01-14-09 0.75 2,000,000 2,000,000
01-14-09 1.20 1,000,000 1,000,000
---------------
Total 3,000,000
-------------------------------------------------------------------------------------
MASSACHUSETTS (6.3%)
Massachusetts Health & Educational Facilities Authority
Revenue Bonds
Harvard University
V.R.D.N. Series 1999R
11-01-49 0.70 4,300,000(d) 4,300,000
Massachusetts Health & Higher Education
C.P.
01-14-09 1.54 1,500,000 1,500,000
Massachusetts School Building Authority
C.P.
01-15-09 0.60 3,000,000 3,000,000
---------------
Total 8,800,000
-------------------------------------------------------------------------------------
MICHIGAN (4.3%)
University of Michigan
Refunding Revenue Bonds
University of Michigan Hospitals
V.R.D.N. Series 1992A
12-01-19 1.35 6,000,000(d) 6,000,000
-------------------------------------------------------------------------------------
MINNESOTA (16.2%)
Arden Hills
Refunding Revenue Bonds
Presbyterian Homes
V.R.D.N. Series 1999A (U.S. Bank)
09-01-29 1.15 4,700,000(d) 4,700,000
Arden Hills
Revenue Bonds
Presbyterian Homes
V.R.D.N. Series 1999B (U.S. Bank)
09-01-29 1.15 2,005,000(d) 2,005,000
</Table>
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
12 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL NOTES (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER(B,C) YIELD MATURITY VALUE(a)
MINNESOTA (CONT.)
Center City
Revenue Bonds
Hazelden Foundation Project
V.R.D.N. Series 2005 (Bank of New York)
11-01-35 1.35% $6,600,000(d) $6,600,000
City of Rochester
Revenue Bonds
Mayo Clinic
V.R.D.N. Series 2008A (Wells Fargo Bank)
11-15-38 0.64 2,700,000(d) 2,700,000
Southern Minnesota Municipal Power
C.P.
01-09-09 1.23 4,000,000 4,000,000
01-14-09 0.78 2,500,000 2,500,000
---------------
Total 22,505,000
-------------------------------------------------------------------------------------
MISSISSIPPI (2.8%)
County of Jackson
Refunding Revenue Bonds
Chevron USA Incorporated Project
V.R.D.N. Series 1993
06-01-23 1.10 3,400,000(d) 3,400,000
County of Jackson
Revenue Bonds
Chevron USA Incorporated Project
V.R.D.N. Series 1992
12-01-16 1.00 550,000(d) 550,000
---------------
Total 3,950,000
-------------------------------------------------------------------------------------
MISSOURI (0.6%)
Missouri State Health & Educational Facilities Authority
Revenue Bonds
Washington University
V.R.D.N. Series 1996A (Morgan Guaranty Trust)
09-01-30 1.20 800,000(d) 800,000
-------------------------------------------------------------------------------------
NEW MEXICO (4.7%)
Farmington
Refunding Revenue Bonds
Arizona Public Service Company
V.R.D.N. Series 1994B (Barclays Bank)
09-01-24 1.22 6,495,000(d) 6,495,000
-------------------------------------------------------------------------------------
NEW YORK (1.1%)
BNP Paribas Finance
C.P.
01-02-09 0.01 1,500,000 1,500,000
-------------------------------------------------------------------------------------
OREGON (2.2%)
State of Oregon
Unlimited General Obligation Notes
T.A.N. Series 2008A
06-30-09 1.70 3,000,000 3,018,900
-------------------------------------------------------------------------------------
PENNSYLVANIA (3.5%)
Bucks County Industrial Development Authority
Revenue Bonds
SHV Real Estate Incorporated
V.R.D.N. Series 1985 (ABN AMRO Bank)
07-01-15 0.80 4,000,000(d) 4,000,000
Pennsylvania State Higher Educational Facilities Authority
Refunding Revenue Bonds
Carnegie Mellon University
V.R.D.N. Series 1995C (Morgan Guaranty Trust)
11-01-29 0.85 900,000(d) 900,000
---------------
Total 4,900,000
-------------------------------------------------------------------------------------
TENNESSEE (6.6%)
Clarksville Public Building Authority
Revenue Bonds
Pooled Financing
Tennessee Municipal Bond Fund
V.R.D.N. Series 2001 (Bank of America)
07-01-31 1.10 2,670,000(d) 2,670,000
</Table>
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 13
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
<Table>
<Caption>
MUNICIPAL NOTES (CONTINUED)
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER(B,C) YIELD MATURITY VALUE(a)
TENNESSEE (CONT.)
Clarksville Public Building Authority
Revenue Bonds
Pooled Financing
Tennessee Municipal Bond Fund
V.R.D.N. Series 2003 (Bank of America)
01-01-33 1.10% $600,000(d) $600,000
Clarksville Public Building Authority
Revenue Bonds
Pooled Financing
Tennessee Municipal Bond Fund
V.R.D.N. Series 2004 (Bank of America)
07-01-34 1.10 2,420,000(d) 2,420,000
Montgomery County Public Building Authority
Revenue Bonds
Tennessee County Loan Pool
V.R.D.N. Series 2002 (Bank of America)
04-01-32 1.10 1,865,000(d) 1,865,000
Montgomery County Public Building Authority
Revenue Bonds
Tennessee County Loan Pool
V.R.D.N. Series 2006 (Bank of America)
02-01-36 1.10 1,600,000(d) 1,600,000
---------------
Total 9,155,000
-------------------------------------------------------------------------------------
TEXAS (6.7%)
Port of Port Arthur Navigation District
Refunding Revenue Bonds
Texaco Incorporated Project
V.R.D.N. Series 1994
10-01-24 1.05 1,100,000(d) 1,100,000
San Antonio Texas Electric & Gas
C.P.
01-05-09 1.50 2,160,000 2,160,000
01-12-09 1.15 3,000,000 3,000,000
State of Texas
Limited General Obligation Notes
T.R.A.N. Series 2007
08-28-09 1.62 3,000,000 3,026,676
---------------
Total 9,286,676
-------------------------------------------------------------------------------------
WASHINGTON (4.5%)
Energy Northwest
Refunding Revenue Bonds
V.R.D.N. 1st Series 1993A-3
(Morgan Guaranty Trust)
07-01-17 0.65 3,955,000(d) 3,955,000
Energy Northwest
Refunding Revenue Bonds
V.R.D.N. Series 1993 1A-1
07-01-17 0.65 2,360,000(d) 2,360,000
---------------
Total 6,315,000
-------------------------------------------------------------------------------------
WISCONSIN (1.8%)
Milwaukee Redevelopment Authority
Revenue Bonds
La Causa Incorporated Project
V.R.D.N. Series 2000 (U.S. Bank)
12-01-20 0.80 2,540,000(d) 2,540,000
-------------------------------------------------------------------------------------
WYOMING (0.9%)
Uinta County
Refunding Revenue Bonds
Chevron USA Incorporated Project
V.R.D.N. Series 1993
08-15-20 1.10 1,300,000(d) 1,300,000
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $139,147,367)(e) $139,147,367
=====================================================================================
</Table>
See accompanying Notes to Portfolio of Investments.
--------------------------------------------------------------------------------
14 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) The following abbreviations may be used in the portfolio descriptions:
<Table>
A.M.T. -- Alternative Minimum
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
</Table>
(c) The Fund is entitled to receive principal and interest from the party, if
indicated in parentheses, after a day or a week's notice or upon maturity.
The maturity date disclosed represents the final maturity. For purposes of
Rule 2a-7, maturity is the later of the next put or interest rate reset
date.
(d) Interest rate varies to reflect current market conditions; rate shown is
the effective rate on Dec. 31, 2008.
(e) Also represents the cost of securities for federal income tax purposes at
Dec. 31, 2008.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 15
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FAIR VALUE MEASUREMENTS
Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to
implement more uniform reporting relating to the fair valuation of securities
for financial statement purposes. Mutual funds are required to implement the
requirements of this standard for fiscal years beginning after Nov. 15, 2007.
While uniformity of presentation is the objective of the standard, industry
implementation has just begun and it is likely that there will be a range of
practices utilized and it will be some period of time before industry practices
become more uniform. For this reason care should be exercised in interpreting
this information and/or using it for comparison with other mutual funds.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
- Level 1 -- quoted prices in active markets for identical securities
- Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit risks,
etc.)
- Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Observable inputs are those based on market data obtained from sources
independent of the fund, and unobservable inputs reflect the fund's own
assumptions based on the best information available. The input levels are not
necessarily an indication of the risk or liquidity associated with investments
at that level.
The following table is a summary of the inputs used to value the Fund's
investments as of Dec. 31, 2008:
<Table>
<Caption>
FAIR VALUE AT DEC. 31, 2008
------------------------------------------------------------
LEVEL 1 LEVEL 2
QUOTED PRICES OTHER LEVEL 3
IN ACTIVE SIGNIFICANT SIGNIFICANT
MARKETS FOR OBSERVABLE UNOBSERVABLE
DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL
-----------------------------------------------------------------------------------
Investments in
securities $-- $139,147,367 $-- $139,147,367
</Table>
At Dec. 31, 2008, 100% of the Fund's investments were valued using amortized
cost in accordance with rules under the Investment Company Act of 1940.
Amortized cost approximates the current fair value of a security, but since the
value is not obtained from a quoted price in an active market, securities valued
at amortized cost are considered to be valued using Level 2 inputs.
--------------------------------------------------------------------------------
16 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 17
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------
DEC. 31, 2008
<Table>
<Caption>
ASSETS
Investments in securities, at value (identified cost
$139,147,367) $139,147,367
Cash 193,356
Capital shares receivable 393,491
Accrued interest receivable 218,750
Prepaid expense 17,031
-------------------------------------------------------------------------------
Total assets 139,969,995
-------------------------------------------------------------------------------
LIABILITIES
Dividends payable to shareholders 1,718
Capital shares payable 965,264
Accrued investment management services fees 1,260
Accrued distribution fees 24,308
Accrued transfer agency fees 296
Accrued administrative services fees 229
Other accrued expenses 60,922
-------------------------------------------------------------------------------
Total liabilities 1,053,997
-------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $138,915,998
-------------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 1,389,490
Additional paid-in capital 137,527,408
Excess of distributions over net investment income (226)
Accumulated net realized gain (loss) (674)
-------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $138,915,998
-------------------------------------------------------------------------------
Shares outstanding 138,948,951
-------------------------------------------------------------------------------
Net asset value per share of outstanding capital stock $ 1.00
-------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
18 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
YEAR ENDED DEC. 31, 2008
<Table>
<Caption>
INVESTMENT INCOME
Income:
Interest $2,865,475
-----------------------------------------------------------------------------
Expenses:
Investment management services fees 464,177
Distribution fees 140,660
Transfer agency fees 107,272
Administrative services fees 84,396
Compensation of board members 3,488
Custodian fees 24,520
Printing and postage 39,280
Registration fees 47,188
Professional fees 32,774
Other 22,464
-----------------------------------------------------------------------------
Total expenses 966,219
Earnings and bank fee credits on cash balances (8,255)
-----------------------------------------------------------------------------
Total net expenses 957,964
-----------------------------------------------------------------------------
Investment income (loss) -- net 1,907,511
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on security transactions 22,110
-----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $1,929,621
-----------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 19
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
<Table>
<Caption>
YEAR ENDED DEC. 31, 2008 2007
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 1,907,511 $ 3,686,604
Net realized gain (loss) on investments 22,110 --
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 1,929,621 3,686,604
-----------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1,907,737) (3,713,525)
-----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS AT CONSTANT $1 NET ASSET VALUE
Proceeds from sales of shares 199,254,046 202,663,665
Net asset value of shares issued for reinvestment of
distributions 1,891,912 3,585,516
Payments for redemptions of shares (204,662,330) (181,517,734)
-----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (3,516,372) 24,731,447
-----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,494,488) 24,704,526
Net assets at beginning of year 142,410,486 117,705,960
-----------------------------------------------------------------------------------------------
Net assets at end of year $ 138,915,998 $ 142,410,486
-----------------------------------------------------------------------------------------------
Undistributed (excess of distributions over) net investment
income $ (226) $ --
-----------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
20 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2008 2007 2006 2005 2004
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .01 .03 .03 .02 .01
--------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) (.03) (.03) (.02) (.01)
--------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $139 $142 $118 $120 $128
--------------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(b) .69% .70% .73% .74% .73%
--------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c),(d) .69% .63% .73% .74% .73%
--------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.36% 2.99% 2.70% 1.68% .48%
--------------------------------------------------------------------------------------------------------------
Total return 1.38% 3.09% 2.79%(e) 1.71% .50%
--------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is before reduction for earnings and bank fee credits on cash
balances.
(c) Expense ratio is before reduction for earnings and bank fee credits on cash
balances. The ratio of net expenses after expense waiver/reimbursement and
after reduction for earnings and bank fee credits was 0.68% and 0.61% for
the years ended Dec. 31, 2008 and 2007, respectively.
(d) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses.
(e) The Fund received a one time reimbursement by Ameriprise Financial for
additional earnings from overnight cash balances determined to be owed for
prior years. Had the Fund not received this reimbursement, the total return
would have been lower by 0.05%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 21
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Tax-Exempt Money Market Fund (the Fund) is a series of RiverSource
Tax-Exempt Money Market 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 Tax-Exempt Money Market 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 debt obligations.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
Effective Jan. 1, 2008, the Fund adopted Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. There was no impact to the
Fund's net assets or results of operations upon adoption. The fair valuation
measurements disclosure can be found following the Notes to Portfolio of
Investments.
Pursuant to Rule 2a-7 of the 1940 Act, all securities are valued daily at
amortized cost, which approximates market value, in order to maintain a constant
net asset value of $1 per share.
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
--------------------------------------------------------------------------------
22 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. 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.
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED DEC. 31, 2008 2007
----------------------------------------------------------------
Distributions paid from:
Ordinary income*.................... $1,907,737 $3,713,525
</Table>
* Tax-exempt interest distributions were 99.10% and 98.73% of cash basis
distributions paid for the years ended Dec. 31, 2008 and 2007, respectively.
At Dec. 31, 2008, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed tax-exempt income................... $ 3,382
Undistributed accumulated long-term gain.......... $ --
Accumulated realized loss......................... $ (675)
Unrealized appreciation (depreciation)............ $(1,889)
</Table>
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and payable monthly, are
reinvested in additional shares of the Fund at net asset value or payable in
cash.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including amortization of premium and discount, is
recognized daily.
2. EXPENSES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net assets
that declines from 0.33% to 0.15% annually as the Fund's assets increase.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 23
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The management fee for the year ended Dec. 31, 2008 was 0.33% of the Fund's
average daily net assets.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial,
Inc., parent company of the Investment Manager, a fee for administration and
accounting services at a percentage of the Fund's average daily net assets that
declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for
the year ended Dec. 31, 2008 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 Dec. 31,
2008, other expenses paid to this company were $373.
COMPENSATION OF BOARD MEMBERS
Compensation of board members includes, for a former Board Chair, compensation
as well as retirement benefits. Certain other aspects of a former Board Chair's
compensation, including health benefits and payment of certain other expenses,
are included under other expenses.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund 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 fee of $22 per shareholder account for this service.
The Transfer Agent charges an annual account fee of $5 per inactive account,
charged on a pro rata basis for 12 months from the date the account becomes
inactive. These fees are included in the transfer agency fees on the Statement
of Operations.
--------------------------------------------------------------------------------
24 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
DISTRIBUTION FEES
The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund
Distributors, Inc. (collectively, 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 0.10% of the Fund's
average daily net assets.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
Under an agreement which was effective until Dec. 31, 2008, the Investment
Manager and its affiliates contractually agreed to waive certain fees and
expenses such that net expenses would not exceed 0.74% of the Fund's average
daily net assets. From time to time, the Investment Manager and its affiliates
may limit the expenses of the Fund for the purpose of increasing the yield. This
expense limitation policy may be revised or terminated at any time without
notice.
EARNINGS AND BANK FEE CREDITS
During the year ended Dec. 31, 2008, the Fund's custodian and transfer agency
fees were reduced by $8,255 as a result of earnings and bank fee credits from
overnight cash balances.
TEMPORARY MONEY MARKET FUND GUARANTY PROGRAM
On Oct. 6, 2008, the Fund applied to participate in the initial term of the U.S.
Department of Treasury's Temporary Guarantee Program for Money Market Funds (the
"Program"), through Dec. 18, 2008, after obtaining the approval of the Board,
including a majority of the independent directors. On Dec. 2, 2008, the Board
approved the Fund's filing for participation in an extension of the Program
through April 30, 2009. The Fund filed the extension notice with the U.S.
Department of Treasury on Dec. 4, 2008.
The Program covers shareholders of each participating money market fund for
amounts they held in such funds as of the close of business on Sept. 19, 2008.
Any increase in the number of shares of that fund held by a shareholder after
the close of business on Sept. 19, 2008 will not be guaranteed. Any purchase of
shares of a participating money market fund after the close of business on Sept.
19, 2008 will not be guaranteed. If shares of a participating fund held by a
shareholder as of the close of business on Sept. 19, 2008 are sold before the
guarantee is called upon, then the guarantee will only cover the lesser of (i)
the number of fund shares held by the shareholder as of the close of business on
Sept. 19, 2008, or (ii) the number of fund shares held by the shareholder on the
date the guarantee is called upon. A participating fund shareholder who sells
all of his or her shares after Sept. 19, 2008 (and before the guarantee is
called upon) will no longer be covered by the guarantee, even if the shareholder
subsequently reinvests in the fund or in another fund that is participating in
the Program.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 25
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Under the terms of the Program, the guarantee is called upon with respect to a
fund if the Board of the Fund makes a determination to liquidate that Fund. For
shares covered by the guarantee, any difference between the amount a shareholder
received in connection with the liquidation and $1.00 per share (a guarantee
payment) will be covered by the U.S. Department of Treasury under the Program,
subject to the overall amount available to all funds participating in the
Program. Guarantee payments under the Program will not exceed the amount
available in the Program (at inception of the Program, approximately $50 billion
was available to support guarantee payments).
During the year ended Dec. 31, 2008, the Fund paid upfront fees to the U.S.
Department of Treasury to participate in the Program. For the initial three-
month term of the Program that expired on Dec. 18, 2008, the fee incurred by the
Fund was 0.010% of its net asset value as of the close of business Sept. 19,
2008. The fee to participate in the extended term of the Program through April
30, 2009 required an additional payment in the amount of 0.015% of its net asset
value as of Sept. 19, 2008. The fees are being amortized over the period of the
participation in the Program and are included as a component of other expenses
on the Statement of Operations. The cost to participate will be borne by the
Fund without regard to any expense limitation currently in effect. The U.S.
Treasury Department has the option to extend the Program beyond April 30, 2009
through the close of business Sept. 19, 2009. If extended, the Board will
consider whether the Fund should continue to participate in the Program and, if
so, the Fund will incur additional participation fees.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities aggregated $427,061,846
and $428,577,405, respectively, for the year ended Dec. 31, 2008. Realized gains
and losses are determined on an identified cost basis.
4. 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 RiverSource
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
--------------------------------------------------------------------------------
26 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
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 Dec. 31, 2008.
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.
5. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of $675
at Dec. 31, 2008, that if not offset by capital gains will expire in 2013. 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.
6. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
investment advisory and distribution agreements. The plaintiffs voluntarily
agreed to transfer this case to the United States District Court for the
District of Minnesota. In response to defendants' motion to dismiss the
complaint, the 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 on
August 8, 2007.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), 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., Inc. (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 2005, the New
York staff of the SEC indicated that it was considering recommending to the
Commissioners of the SEC the instituting of a formal action against Seligman and
the distributor of the Seligman Funds, Seligman Advisors, Inc., relating to
frequent trading in the Seligman Funds. Seligman
--------------------------------------------------------------------------------
28 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
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.
In September 2006, the NYAG commenced a civil action in New York State Supreme
Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. (transfer
agent for the Seligman Funds) and Brian T. Zino (collectively, the Seligman
Parties), alleging, in substance, that, in addition to the four arrangements
noted above, the Seligman Parties permitted other persons to engage in frequent
trading and, as a result, the prospectus disclosure used by the registered
investment companies managed by Seligman is and has been misleading. The NYAG
included other related claims and also claimed that the fees charged by Seligman
to the Seligman Funds were excessive. The NYAG is seeking damages of at least
$80 million and restitution, disgorgement, penalties and costs and injunctive
relief. The Seligman Parties answered the complaint in December 2006 and believe
that the claims are without merit. Any resolution of these matters may include
the relief noted above or other sanctions or changes in procedures. Any damages
would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains
injunctive relief, each of Seligman, RiverSource Investments and their
affiliates could, in the absence of the SEC in its discretion granting exemptive
relief, be enjoined from providing advisory and underwriting services to the
Seligman Funds and other registered investment companies including those funds
in the RiverSource complex of funds. Neither Seligman nor RiverSource
Investments believes that the foregoing legal action or other possible actions
will have a material adverse impact on Seligman, RiverSource Investments or
their current or former clients, including the Seligman Funds and other
investment companies managed by RiverSource Investments; however, there can be
no assurance of this or that these matters and any related publicity will not
affect demand for shares of the Seligman Funds and such other investment
companies or have other adverse consequences.
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
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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.
--------------------------------------------------------------------------------
30 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Tax-Exempt Money Market Fund (the
Fund) of the RiverSource Tax-Exempt Money Market Series, Inc. as of December 31,
2008, 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 period
presented through December 31, 2006, were audited by other auditors whose report
dated February 20, 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 December 31, 2008, 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 TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 31
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 Tax-Exempt Money Market Fund of the RiverSource Tax-
Exempt Money Market Series, Inc. at December 31, 2008, 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
February 20, 2009
--------------------------------------------------------------------------------
32 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 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. Individual shareholders should refer to their Form 1099 or other tax
information, which will be mailed in January 2009, to determine the calendar
year amounts to be included on their 2008 tax returns. Tax-exempt distributions
may be subject to state and local taxes. Shareholders should consult a tax
advisor about reporting this income for state and local tax purposes.
Fiscal year ended Dec. 31, 2008
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Exempt-Interest Dividends.................................... 99.10%
</Table>
Tax-exempt distributions are exempt from federal income taxes and should not be
included in shareholders' gross income.
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.
SOURCE OF INCOME BY STATE
Percentages of income from municipal securities earned by the Fund from various
states during the year ended Dec. 31, 2008 are listed below.
<Table>
<Caption>
Alabama.......................................................... 3.048%
Alaska........................................................... 0.666
Arizona.......................................................... 3.582
California....................................................... 0.097
Colorado......................................................... 0.803
Connecticut...................................................... 3.049
Florida.......................................................... 0.394
Georgia.......................................................... 5.341
Idaho............................................................ 1.114
Illinois......................................................... 7.850
Indiana.......................................................... 1.556
Kentucky......................................................... 6.358
Louisiana........................................................ 2.710
Maryland......................................................... 1.982
Massachusetts.................................................... 3.334
Michigan......................................................... 4.352
Minnesota........................................................ 13.891
Mississippi...................................................... 1.622
Missouri......................................................... 0.491
Nebraska......................................................... 2.403
</Table>
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 33
FEDERAL INCOME TAX INFORMATION (continued) -------------------------------------
<Table>
<Caption>
Nevada........................................................... 1.285%
New Mexico....................................................... 3.589
New York......................................................... 0.031
Oregon........................................................... 4.724
Pennsylvania..................................................... 1.479
Tennessee........................................................ 6.529
Texas............................................................ 8.203
Utah............................................................. 2.252
Virginia......................................................... 3.170
Washington....................................................... 0.959
Washington, D.C. ................................................ 0.552
Wisconsin........................................................ 2.075
Wyoming.......................................................... 0.509
</Table>
--------------------------------------------------------------------------------
34 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 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 complex of funds that each Board member oversees consists of 163
funds, which includes 104 RiverSource funds and 59 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. Under the current Board
policy, members may serve until the end of the meeting following their 75th
birthday, or the fifteenth anniversary of the first Board meeting they attended
as members of the Board, whichever occurs first. This policy does not apply to
Ms. Jones who may retire after her 75th birthday.
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 54
------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None
901 S. Marquette Ave. 1999 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 College
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 TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 35
BOARD MEMBERS AND OFFICERS (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 64
------------------------------------------------------------------------------------------------------------------------------
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; Director, Digital Ally, Inc.
901 S. Marquette Ave. 2008 Vibration Control Technologies, LLC (auto vibration (digital imaging)
Minneapolis, MN 55402 technology); Director and Chairman, Highland Park since 2005; and
Age 66 Michigan Economic Development Corp; and Chairman, Infinity, Inc. (oil
Detroit Public Schools Foundation. Formerly, Chairman and gas exploration
and Chief Executive Officer, Q Standards Worldwide, and production);
Inc. (library of technical standards); Director, Kerr- Director, OGE Energy
McGee Corporation (diversified energy and chemical Corp. (energy and
company); Trustee, New York University Law Center energy services)
Foundation; Vice Chairman, Detroit Medical Center and since 2007
Detroit Economic Growth Corp.
------------------------------------------------------------------------------------------------------------------------------
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 Pharmaceutical, Inc.
Minneapolis, MN 55402 Biotech (biotechnology);
Age 64 Healthways, Inc.
(health management
programs)
------------------------------------------------------------------------------------------------------------------------------
</Table>
--------------------------------------------------------------------------------
36 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 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. and President,
Financial Center Vice President since Chairman of the Board and Chief Investment Officer,
Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director,
Age 48 President and Chief Executive Officer, Ameriprise
Certificate Company and Chairman of the Board, Chief
Executive Officer and President, RiverSource
Distributors, Inc. since 2006; Chief Executive Officer
and President, RiverSource Fund Distributors, Inc.
since 2008; Senior Vice President -- Chief Investment
Officer, Ameriprise Financial, Inc. and Chairman of the
Board and Chief Investment Officer, RiverSource
Investments, LLC, 2001-2005
------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 37
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
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 since 2006; Director and Vice President -- Asset
Minneapolis, MN 55474 Management, Products and Marketing, RiverSource
Age 43 Distributors, Inc. since 2006; Managing Director and
Global Head of Product, Morgan Stanley Investment
Management, 2004-2006; President, Touchstone
Investments, 2002-2004
--------------------------------------------------------------------------------------------------------
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 44 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
--------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company
5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice
Center Minneapolis, MN President -- Operations and Compliance, RiverSource
55474 Investments, LLC, 2004-2006; Director of Product
Age 43 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 53
--------------------------------------------------------------------------------------------------------
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 49 since 2006; 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
--------------------------------------------------------------------------------------------------------
</Table>
--------------------------------------------------------------------------------
38 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
--------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------
Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC
100 Park Avenue Officer since 2009* since 2009; Chief Compliance Officer for each of the
New York, NY 10017 investment companies of the Seligman group of funds
Age 57 since 2004; Anti Money Laundering Prevention Officer
and Identity Theft Prevention Officer for each of the
investment companies of the Seligman group of funds
since 2008; Managing Director, J. & W. Seligman & Co.
Incorporated and Vice-President for each of the
investment companies of the Seligman group of funds,
2004-2008.
--------------------------------------------------------------------------------------------------------
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer,
172 Ameriprise Financial Officer Since 2006* RiverSource Investments, LLC since 2006;
Center Director -- Mutual Funds, Voyageur Asset Management,
Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset
Age 48 Management, 2000-2003
--------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti-
Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003-
Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer,
Age 44 American Express Centurion Bank, 2000-2003
--------------------------------------------------------------------------------------------------------
</Table>
* Effective February 2009, Ms. Lammers no longer serves as the Chief Compliance
Officer for the Funds and Ms. Hoagland now serves in that capacity.
--------------------------------------------------------------------------------
RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT 39
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 RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities 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.
--------------------------------------------------------------------------------
40 RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND -- 2008 ANNUAL REPORT
NOTES --------------------------------------------------------------------------
--------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED
PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS.
<Table>
ADVANCED ALPHA(SM) STRATEGIES
RiverSource 120/20 Contrarian Equity Fund
RiverSource Absolute Return Currency and Income Fund
Threadneedle Global Extended Alpha Fund
ADVICE-BUILT(SM) SOLUTIONS
RIVERSOURCE INCOME BUILDER SERIES
RiverSource Income Builder Basic Income Fund
RiverSource Income Builder Enhanced Income Fund
RiverSource Income Builder Moderate Income Fund
RIVERSOURCE PORTFOLIO BUILDER SERIES
RiverSource Portfolio Builder Aggressive Fund
RiverSource Portfolio Builder Conservative Fund
RiverSource Portfolio Builder Moderate Fund
RiverSource Portfolio Builder Moderate Aggressive Fund
RiverSource Portfolio Builder Moderate Conservative Fund
RiverSource Portfolio Builder Total Equity Fund
RIVERSOURCE RETIREMENT PLUS(R) SERIES
RiverSource Retirement Plus 2010 Fund
RiverSource Retirement Plus 2015 Fund
RiverSource Retirement Plus 2020 Fund
RiverSource Retirement Plus 2025 Fund
RiverSource Retirement Plus 2030 Fund
RiverSource Retirement Plus 2035 Fund
RiverSource Retirement Plus 2040 Fund
RiverSource Retirement Plus 2045 Fund
RIVERSOURCE STRATEGIC ALLOCATION FUND
RIVERSOURCE BALANCED FUND
SINGLE-STRATEGY FUNDS
GROWTH FUNDS
RiverSource Partners Aggressive Growth Fund
RiverSource Disciplined Large Cap Growth Fund
RiverSource Global Technology Fund
RiverSource Growth Fund
RiverSource Mid Cap Growth Fund
RiverSource Partners Small Cap Growth Fund
BLEND FUNDS
RiverSource Disciplined Equity Fund
RiverSource Disciplined Small and Mid Cap Equity Fund
RiverSource Large Cap Equity Fund
RiverSource Precious Metals and Mining Fund
RiverSource Recovery and Infrastructure Fund
RiverSource S&P 500 Index Fund*
RiverSource Small Cap Advantage Fund
RiverSource Partners Small Cap Equity Fund
RiverSource Small Company Index Fund
VALUE FUNDS
RiverSource Disciplined Large Cap Value Fund
RiverSource Disciplined Small Cap Value Fund
RiverSource Diversified Equity Income Fund
RiverSource Dividend Opportunity Fund
RiverSource Equity Value Fund
RiverSource Partners Fundamental Value Fund
RiverSource Large Cap Value Fund
RiverSource Mid Cap Value Fund
RiverSource Real Estate Fund
RiverSource Partners Select Value Fund
RiverSource Partners Small Cap Value Fund
GLOBAL/INTERNATIONAL FUNDS
RiverSource Disciplined International Equity Fund
Threadneedle Emerging Markets Fund
Threadneedle European Equity Fund
Threadneedle Global Equity Fund
Threadneedle Global Equity Income Fund
RiverSource Partners International Select Growth Fund
Threadneedle International Opportunity Fund
RiverSource Partners International Select Value Fund
RiverSource Partners International Small Cap Fund
</Table>
--------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
<Table>
TAXABLE INCOME FUNDS
RiverSource Cash Management Fund**
RiverSource Diversified Bond Fund
RiverSource Emerging Markets Bond Fund
RiverSource Floating Rate Fund
RiverSource Global Bond Fund
RiverSource High Yield Bond Fund
RiverSource Income Opportunities Fund
RiverSource Inflation Protected Securities Fund
RiverSource Limited Duration Bond Fund
RiverSource Short Duration U.S. Government Fund
RiverSource Strategic Income Allocation Fund
RiverSource U.S. Government Mortgage Fund
TAX-EXEMPT FUNDS
RiverSource California Tax-Exempt Fund
RiverSource Intermediate Tax-Exempt Fund
RiverSource Minnesota Tax-Exempt Fund
RiverSource New York Tax-Exempt Fund
RiverSource Tax-Exempt Bond Fund
RiverSource Tax-Exempt High Income Fund
RiverSource Tax-Exempt Money Market Fund**
</Table>
You should consider the investment objectives, risks, charges and expenses of a
mutual fund carefully before investing. For a free prospectus of any of the
funds listed above, which contains this and other important information about
the funds, contact your financial institution or visit riversource.com/funds.
Read the prospectus carefully before investing.
Investment products, including shares of mutual funds, involve risks including
possible loss of principal and fluctuation in value. Investing in certain funds
involves special risks, such as those related to investments in foreign
securities, small- and mid-capitalization stocks, fixed income securities
(especially high-yield securities), and funds which focus their investments in a
particular sector, such as real estate, technology and precious metals. See each
fund's prospectus for specific risks associated with the fund.
* "Standard & Poors(R)," "S&P," "S&P 500(R)," and "Standard & Poor's 500(R)"
are trademarks of the McGraw-Hill Companies, Inc. These trademarks have been
licensed for use by Ameriprise Financial, Inc. The fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's or any of their subsidiaries
or affiliates (the "Licensors") and the Licensors make no representation
regarding the advisability of investing in the fund.
** AN INVESTMENT IN MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
--------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
RIVERSOURCE TAX-EXEMPT MONEY MARKET 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 Distributors, Inc., and
RiverSource Fund Distributors, Inc., Members FINRA, and
managed by RiverSource Investments, LLC. RiverSource is part
of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6433 AF (2/09)
</Table>