Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE(R)
CORE BOND FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2007
(Prospectus also enclosed)
RIVERSOURCE CORE BOND FUND SEEKS
TO PROVIDE SHAREHOLDERS WITH A
HIGH TOTAL RETURN THROUGH CURRENT
INCOME AND CAPITAL APPRECIATION.
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges, fees
and other matters of interest. Please read the
prospectus carefully before you invest or send
money.
LETTER TO SHAREHOLDERS
Dear Fellow RiverSource Funds Shareholder:
At RiverSource Funds, we are focused on delivering consistent and competitive
investment results. Yet our commitment to shareholders extends beyond investment
performance to include providing Insightful Solutions for Today's Investor(R).
What this means is that we remain dedicated to offering innovative products such
as our Advice-Built Solutions(SM) that are designed to help you achieve your
financial goals.
Our Advice-Built Solutions embed investment advice such as asset allocation and
rebalancing into the investment management process. Advice-embedded solutions
are among the fastest growing investment products in the financial industry in
part because investors find them easy to understand and use in a portfolio. At
RiverSource Funds, we have been at the forefront of this movement with
innovative products such as our Income Builder, Portfolio Builder and Retirement
Plus(SM) Series of funds in addition to RiverSource(R) Strategic Allocation
Fund.
Your financial professional provides a wide range of investment and planning
services in addition to helping you select mutual funds for your portfolio. We
encourage you to talk with your financial professional about our Advice-Built
Solutions and how they may help you reach your specific goals whether you are
saving for retirement or paying for future college expenses or health care
expenses.
Thank you for investing with RiverSource Funds and for your continued support.
Sincerely,
<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.
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.
- --------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
TABLE OF CONTENTS
<Table>
Fund Snapshot....................... 3
Performance Summary................. 5
Questions & Answers
with Portfolio Management........ 8
The Fund's Long-term Performance ... 12
Fund Expenses Example............... 14
Investments in Securities........... 17
Financial Statements................ 30
Notes to Financial Statements....... 36
Report of Independent Registered
Public Accounting Firm........... 60
Federal Income Tax Information...... 61
Board Members and Officers.......... 66
Approval of Investment Management
Services Agreement............... 70
Proxy Voting........................ 72
Change in Independent Registered
Public Accounting Firm........... 72
</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.
- --------------------------------------------------------------------------------
2 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2007
FUND OBJECTIVE
RiverSource Core Bond Fund seeks to provide shareholders with a high total
return through current income and capital appreciation.
SECTOR BREAKDOWN
Percentage of portfolio assets
(PIE CHART)
<Table>
Mortgage-Backed 38.9%
U.S. Government Obligations & Agencies 18.3%
Cash & Cash Equivalents 17.0%
Corporate Bonds (1) 16.6%
Commercial Mortgage-Backed 7.3%
Asset-Backed 1.9%
</Table>
(1) Includes Financials 7.1%, Telecommunication 3.7%, Utilities 2.0%, Consumer
Discretionary 1.4%, Consumer Staples 1.4%, Energy 0.4%, Health Care 0.4%
and Industrials 0.2%.
QUALITY BREAKDOWN
Percentage of bond portfolio assets
(PIE CHART)
<Table>
AAA bonds 79.0%
AA bonds 3.1%
A bonds 5.3%
BBB bonds 12.0%
Non-investment grade bonds 0.6%
</Table>
Bond ratings apply to underlying holdings of the Fund and not the Fund itself.
Whenever possible, the Standard and Poor's rating is used to determine the
credit quality of a security. Standard and Poor's rates the creditworthiness of
corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest).
Ratings from AA to CCC may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within the major rating categories. If
Standard and Poor's doesn't rate a security, then Moody's rating is used.
RiverSource Investments, LLC, the Fund's investment manager, rates a security
using an internal rating system when Moody's doesn't provide a rating.
There are risks associated with an investment in a bond fund, including the
impact of interest rates and credit. These and other risk considerations are
discussed in the fund's prospectus. In general, bond prices rise when interest
rates fall and vice versa. This effect is usually more pronounced for
longer-term securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2007
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 generally
invests.
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 serves 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 MANAGERS
<Table>
<Caption>
YEARS IN INDUSTRY
Jamie Jackson, CFA 19
Scott Kirby 28
Tom Murphy, CFA 21
</Table>
FUND FACTS
<Table>
<Caption>
TICKER SYMBOL INCEPTION DATE
Class A ACBAX 06/19/03
Class B ABOBX 06/19/03
Class C -- 06/19/03
Class I ABDIX 03/04/04
Class R2 -- 12/11/06
Class R3 -- 12/11/06
Class R4(1) RSCFX 06/19/03
Class R5 -- 12/11/06
Class W RCBWX 12/01/06
(1) Effective Dec. 11, 2006, Class Y was renamed Class
R4.
Total net assets $309.8 million
Number of holdings 320
Weighted average life(2) 7.5 years
Effective duration(3) 4.7 years
Weighted average bond rating(4) AA+
</Table>
(2) WEIGHTED AVERAGE LIFE measures a bond's maturity, which takes into
consideration the possibility that the issuer may call the bond before its
maturity date.
(3) EFFECTIVE DURATION measures the sensitivity of a security's price to
parallel shifts in the yield curve (the graphical depiction of the levels
of interest rates from two years out to 30 years). Positive duration means
that as rates rise, the price decreases, and negative duration means that
as rates rise, the price increases.
(4) WEIGHTED AVERAGE BOND RATING represents the average credit quality of the
underlying bonds in the portfolio.
- --------------------------------------------------------------------------------
4 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the year ended July 31, 2007
(BAR CHART)
<Table>
RiverSource Core Bond Fund Class A (excluding
sales charge) +4.75
Lehman Brothers Aggregate Bond Index (unmanaged) +5.58
Lipper Intermediate Investment Grade Debt Funds
Index +5.07
</Table>
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 4.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
<Table>
<Caption>
TOTAL NET EXPENSES(A)
Class A 1.09% 0.89%
Class B 1.85% 1.65%
Class C 1.85% 1.65%
Class I 0.66% 0.50%
Class R2(b) 1.45% 1.30%
Class R3(b) 1.19% 1.05%
Class R4(c) 0.95% 0.77%
Class R5(b) 0.71% 0.55%
Class W(d) 1.08% 0.95%
</Table>
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until July 31, 2008,
unless sooner terminated at the discretion of the Fund's Board. Any amounts
waived will not be reimbursed by the Fund. Under this agreement, net fund
expenses (excluding fees and expenses of acquired funds), will not exceed
0.89% for Class A, 1.65% for Class B, 1.65% for Class C, 0.50% for Class I,
1.30% for Class R2, 1.05% for Class R3, 0.77% for Class R4, 0.55% for Class
R5 and 0.95% for Class W.
(b) Inception date for Class R2, Class R3 and Class R5 was Dec. 11, 2006.
(c) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(d) Inception date for Class W was Dec. 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 5
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
AT JULY 31, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR 3 YEARS INCEPTION
Class A (inception 6/19/03) +4.75% +3.39% +2.35%
Class B (inception 6/19/03) +3.85% +2.60% +1.58%
Class C (inception 6/19/03) +3.85% +2.59% +1.57%
Class I (inception 3/4/04) +5.01% +3.68% +3.01%
Class R2 (inception 12/11/06) N/A N/A +0.67%*
Class R3 (inception 12/11/06) N/A N/A +0.83%*
Class R4** (inception 6/19/03) +4.81% +3.52% +2.49%
Class R5 (inception 12/11/06) N/A N/A +1.14%*
Class W (inception 12/1/06) N/A N/A +0.58%*
WITH SALES CHARGE
Class A (inception 6/19/03) -0.22% +1.73% +1.15%
Class B (inception 6/19/03) -1.15% +1.34% +1.14%
Class C (inception 6/19/03) +2.85% +2.59% +1.57%
</Table>
- --------------------------------------------------------------------------------
6 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
PERFORMANCE SUMMARY
<Table>
<Caption>
AT JUNE 30, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR 3 YEARS INCEPTION
Class A (inception 6/19/03) +5.40% +3.50% +2.25%
Class B (inception 6/19/03) +4.60% +2.67% +1.48%
Class C (inception 6/19/03) +4.60% +2.67% +1.47%
Class I (inception 3/4/04) +5.88% +3.78% +2.92%
Class R2 (inception 12/11/06) N/A N/A +0.08%*
Class R3 (inception 12/11/06) N/A N/A +0.22%*
Class R4** (inception 6/19/03) +5.57% +3.59% +2.38%
Class R5 (inception 12/11/06) N/A N/A +0.49%*
Class W (inception 12/1/06) N/A N/A +0.07%*
WITH SALES CHARGE
Class A (inception 6/19/03) +0.39% +1.83% +1.02%
Class B (inception 6/19/03) -0.40% +1.40% +1.02%
Class C (inception 6/19/03) +3.60% +2.67% +1.47%
</Table>
Class A share performance reflects the maximum sales charge of 4.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares.
Class I, Class R2, Class R3, Class R4 and Class R5 are available to
institutional investors only. Class W shares are offered through qualifying
discretionary accounts.
* Not annualized.
** Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 7
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, the portfolio management team for RiverSource Core Bond Fund discusses
the Fund's results and positioning for the 12 months ended July 31, 2007.
At July 31, 2007, approximately 84% of the Fund's shares were owned in the
aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC
(RiverSource). As a result of asset allocation decisions by RiverSource, it is
possible RiverSource Core Bond Fund may experience relatively large purchases or
redemptions from affiliated funds-of-funds (see page 46, Class I capital share
transactions for related activity during the most recent fiscal period).
RiverSource seeks to minimize the impact of these transactions by structuring
them over a reasonable period of time. RiverSource Core Bond Fund may experience
increased expenses as it buys and sells securities as a result of purchases or
redemptions by affiliated funds-of-funds. For more information on the Fund's
expenses, see the discussions beginning on pages 14 and 43.
Q: How did RiverSource Core Bond Fund perform for the 12-month period?
A: RiverSource Core Bond Fund's Class A shares (excluding sales charge)
returned 4.75% for the 12 months ended July 31, 2007. The Fund underperformed
its benchmark, the unmanaged Lehman Brothers Aggregate Bond Index (Lehman
Index), which gained 5.58%. The Fund's peer group, as represented by the
Lipper Intermediate Investment Grade Debt Funds Index, returned 5.07% during
the same period.
MODESTLY DECLINING INTEREST RATES, GENERALLY SOLID RETURNS FROM U.S. BONDS
AND INCREASED VOLATILITY AMONG THE SPREAD SECTORS, OR NON-TREASURY SECTORS
OF THE FIXED INCOME MARKET, HAD THE GREATEST IMPACT ON THE FUND.
Q: What factors most significantly affected the Fund's performance?
A: Modestly declining interest rates, generally solid returns from U.S. bonds
and increased volatility among the spread sectors, or non-Treasury sectors of
the fixed income market, had the greatest impact on the Fund. For much of the
annual period, interest rates actually rose across the yield curve as the
fixed income market dropped its expectations of Federal Reserve Board (Fed)
easing later this year. However, in July 2007, the U.S. Treasury market
rallied strongly. Investors flocked to the relative safety of Treasuries as
other fixed income asset classes experienced notable volatility based on
heightened concerns over subprime mortgage turmoil, hedge fund losses and the
fear that
- --------------------------------------------------------------------------------
8 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS
the turmoil in the credit markets would affect the broader economy. Bonds in
credit-sensitive sectors were impacted most. Such increasingly risk-averse
investor sentiment pushed U.S. Treasury yields lower across the yield curve.
The Fed maintained its targeted federal funds rate at 5.25% throughout the
period despite the fact that inflation remained at or above the Fed's stated
comfort level. The Fed also anticipated greater economic growth over the
second half of 2007.
The Fund's tactical duration positioning relative to the Lehman Index
contributed positively to its performance for the annual period overall. The
Fund was well positioned with a shorter-than-Lehman Index duration when
interest rates rose from November through January, and again in April through
May. In response to these materially higher interest rates, we subsequently
lengthened the Fund's duration from shorter than the Lehman Index to neutral
to the Lehman Index in June. This proved prudent, as interest rates declined
toward the end of the period. Duration is a measure of the Fund's sensitivity
to changes in interest rates.
Effective issue selection within mortgage-backed securities also helped Fund
performance for the annual period, as adjustable-rate mortgages (ARMs) and
higher-coupon mortgage-backed securities, where the Fund had an emphasis,
outperformed the sector as a whole. Conversely, a significant allocation to
commercial mortgage-backed securities detracted from performance, as this
sector lagged the Lehman Index for the 12 months.
Shifts in the Fund's exposure to investment grade corporate bonds also hurt
its annual results, as this sector swung from outperformance to
underperformance of the Lehman Index during the fiscal year. We increased the
Fund's allocation to investment grade corporate bonds during the period,
seeking to take advantage of what we believed to be temporary weakness in the
sector. However, the move proved premature, as investment grade corporate
bonds continued to perform poorly in the last two months of the period.
Q: What changes did you make to the Fund's portfolio during the period?
A: We tactically shifted the Fund's duration over the period between shorter
than the Lehman Index and neutral to the Lehman Index in response to changes
in the direction of interest rates. At the end of the period, the Fund had a
duration relatively neutral to the Lehman Index. Also, we increased the
Fund's exposure
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 9
QUESTIONS & ANSWERS
to investment grade corporate bonds during the period. We also increased the
Fund's already sizable allocations to high quality mortgage-backed
securities, U.S. agency securities and commercial mortgage-backed securities,
as we continue to believe that the weakness in these sectors seen toward the
end of the period will be temporary. The Fund's portfolio turnover rate for
the annual period was 347%.*
DESPITE THE TURMOIL IN THE FIXED INCOME MARKET AT THE END OF JULY, THE
FUNDAMENTAL ECONOMIC PICTURE REMAINED FAIRLY STRONG.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: Despite the turmoil in the fixed income market at the end of July, the
fundamental economic picture remained fairly strong. Recent reports on the
labor market indicate continued strength and low unemployment, as well as
solid gains in real wages. In addition, broad measures of both consumer and
wholesale prices indicated that inflation rates exceed the Fed's stated 1% to
2% comfort zone. We believe interest rates may resume their migration higher
over the coming months, supported by the Fed staying on hold.
Given this view, we intend to maintain the Fund's neutral duration
positioning relative to the Lehman Index for the near term. We further intend
to maintain a disciplined focus on individual security selection, as we
believe there remain pockets of opportunities to add value through investment
grade corporate bonds, commercial mortgage-backed securities and agency
securities. We continue to favor investment in these non-Treasury sectors
over U.S. Treasuries. Within mortgage-backed securities, we intend to
maintain the Fund's emphasis on AAA-rated agency pass-through mortgages with
premium coupons as a defensive strategy with respect to higher interest rates
and widening credit spreads.
* A significant portion of the turnover was the result of "roll" transactions
in the liquid derivatives and Treasury securities. In the derivative
transactions, positions in expiring contracts are liquidated and
simultaneously replaced with positions in new contracts with equivalent
characteristics. In the Treasury transactions, existing holdings are sold
to purchase newly issued securities with slightly longer maturity dates.
Although these transactions affect the turnover rate of the portfolio, they
do not change the risk exposure or result in material transaction costs.
The remaining turnover resulted from strategic reallocations and relative
value trading. After transaction costs, we expect this activity to enhance
the returns on the overall Fund.
- --------------------------------------------------------------------------------
10 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS
Given the volatility of the fixed income market of late, we will continue to
closely monitor Fed policy shifts, economic data releases, supply/demand
factors and interest rate movements, and adjust the Fund's holdings and
duration stance if necessary.
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource Fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource Fund.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Core Bond Fund Class A shares (from 7/1/03 to
7/31/07)* as compared to the performance of two widely cited performance
indices, the Lehman Brothers Aggregate Bond Index and the Lipper Intermediate
Investment Grade Debt Funds Index. In comparing the Fund's Class A shares to
these indices, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 4.75%, while such charges are not reflected
in the performance of the indices. Returns for the Fund include the reinvestment
of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
* Fund data is from June 19, 2003. Lehman Brothers Aggregate Bond Index and
Lipper peer group data is from July 1, 2003.
COMPARATIVE RESULTS
<Table>
<Caption>
SINCE
Results at July 31, 2007 1 YEAR 3 YEARS INCEPTION(3)
RIVERSOURCE CORE BOND FUND (INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $9,978 $10,528 $10,481
Average annual total return -0.22% +1.73% +1.15%
LEHMAN BROTHERS AGGREGATE BOND INDEX(1)
Cumulative value of $10,000 $10,558 $11,226 $11,373
Average annual total return +5.58% +3.93% +3.20%
LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS INDEX(2)
Cumulative value of $10,000 $10,507 $11,177 $11,347
Average annual total return +5.07% +3.78% +3.14%
</Table>
- --------------------------------------------------------------------------------
12 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE CORE BOND FUND LINE
GRAPH)
<Table>
<Caption>
RIVERSOURCE CORE BOND FUND LIPPER INTERMEDIATE INVESTMENT
CLASS A (INCLUDES SALES CHARGE) LEHMAN BROTHERS AGGREGATE GRADE DEBT FUNDS INDEX(2)
($10,481) BOND INDEX(1) ($11,373) ($11,347)
------------------------------- ------------------------- ------------------------------
7/1/03 9,525 10,000 10,000
7/03 9,114 9,664 9,663
7/04 9,484 10,132 10,151
7/05 9,894 10,617 10,653
7/06 10,006 10,772 10,799
7/07 10,481 11,373 11,347
</Table>
(1) The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of
a representative list of government, corporate, asset-backed and
mortgage-backed securities. The index is frequently used as a general
measure of bond market performance. The index reflects reinvestment of all
distributions and changes in market prices.
(2) The Lipper Intermediate Investment Grade Debt Funds Index includes the 30
largest investment grade funds tracked by Lipper Inc. The index's returns
include net reinvested dividends.
(3) Fund data is from June 19, 2003. Lehman Brothers Aggregate Bond Index and
Lipper peer group data is from July 1, 2003.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the acquired funds expense ratio as of the most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2007.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
14 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,015.90 $4.45(c) .89%
Hypothetical
(5% return before
expenses) $1,000 $1,020.38 $4.46(c) .89%
Class B
Actual(b) $1,000 $1,011.00 $8.23(c) 1.65%
Hypothetical
(5% return before
expenses) $1,000 $1,016.61 $8.25(c) 1.65%
Class C
Actual(b) $1,000 $1,011.00 $8.18(c) 1.64%
Hypothetical
(5% return before
expenses) $1,000 $1,016.66 $8.20(c) 1.64%
Class I
Actual(b) $1,000 $1,016.60 $2.70(c) .54%
Hypothetical
(5% return before
expenses) $1,000 $1,022.12 $2.71(c) .54%
Class R2
Actual(b) $1,000 $1,012.80 $6.49(c) 1.30%
Hypothetical
(5% return before
expenses) $1,000 $1,018.35 $6.51(c) 1.30%
Class R3
Actual(b) $1,000 $1,014.00 $5.24(c) 1.05%
Hypothetical
(5% return before
expenses) $1,000 $1,019.59 $5.26(c) 1.05%
Class R4*
Actual(b) $1,000 $1,015.60 $3.65(c) .73%
Hypothetical
(5% return before
expenses) $1,000 $1,021.17 $3.66(c) .73%
Class R5
Actual(b) $1,000 $1,016.60 $2.75(c) .55%
Hypothetical
(5% return before
expenses) $1,000 $1,022.07 $2.76(c) .55%
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 15
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class W
Actual(b) $1,000 $1,014.60 $4.75(c) .95%
Hypothetical
(5% return before
expenses) $1,000 $1,020.08 $4.76(c) .95%
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2007: +1.59%
for Class A, +1.10% for Class B, +1.10% for Class C, +1.66% for Class I,
+1.28% for Class R2, +1.40% for Class R3, +1.56% for Class R4, +1.66%. for
Class R5 and +1.46% for Class W.
(c) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until July 31, 2008,
unless sooner terminated at the discretion of the Fund's Board, such that
net expenses (excluding fees and expenses of acquired funds), will not
exceed 0.89% for Class A, 1.65% for Class B, 1.65% for Class C, 0.50% for
Class I, 1.30% for Class R2, 1.05% for Class R3, 0.77% for Class R4, 0.55%
for Class R5 and 0.95% for Class W. Any amounts waived will not be
reimbursed by the Fund. This change was effective Aug. 1, 2007. If this
change had been in place for the entire six month period ended July 31,
2007, the actual expenses paid would have been $8.23 for Class C, $2.50 for
Class I and $3.85 for Class R4; the hypothetical expenses paid would have
been $8.25 for Class C, $2.51 for Class I and $3.86 for Class R4; the
actual and hypothetical expenses paid for Class A, Class B, Class R2, Class
R3, Class R5 and Class W would have been the same as those expenses
presented in the table above.
- --------------------------------------------------------------------------------
16 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
INVESTMENTS IN SECURITIES
JULY 31, 2007
(Percentages represent value of investments compared to net assets)
<Table>
<Caption>
BONDS (96.6%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
U.S. GOVERNMENT OBLIGATIONS & AGENCIES (21.4%)
Federal Farm Credit Bank
10-10-08 4.25% $660,000 $654,488
Federal Home Loan Bank
02-08-08 4.63 2,100,000 2,092,726
09-12-08 4.25 2,215,000 2,196,310
Federal Home Loan Mtge Corp
06-15-08 3.88 3,890,000 3,847,871
03-15-09 5.75 470,000 475,890
07-12-10 4.13 2,371,000 2,314,366
03-15-31 6.75 1,430,000 1,648,787
04-16-37 6.00 3,615,000 3,522,362
Federal Natl Mtge Assn
01-15-08 3.25 1,750,000 1,734,548
06-15-08 5.25 1,750,000 1,751,295
02-16-12 5.00 3,215,000 3,199,922
05-18-12 4.88 4,865,000 4,811,728
11-15-30 6.63 6,900,000 7,832,777
07-15-37 5.63 1,595,000 1,613,630
U.S. Treasury
11-30-07 4.25 5,000 4,988
06-30-09 4.88 10,705,000 10,762,711
07-31-09 4.63 1,060,000 1,061,242
06-30-12 4.88 3,905,000 3,950,150
05-15-17 4.50 1,295,000 1,267,380
02-15-26 6.00 6,065,000 6,776,691
U.S. Treasury Inflation-Indexed Bond
01-15-14 2.00 4,997,491(e) 4,849,297
---------------
Total 66,369,159
- -----------------------------------------------------------------------------------
ASSET-BACKED (2.2%)
Capital Auto Receivables Asset Trust
Series 2004-1 Cl CTFS
09-15-10 2.84 200,000 199,772
Capital Auto Receivables Asset Trust
Series 2006-SN1A Cl D
04-20-11 6.15 200,000(d) 202,053
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
ASSET-BACKED (CONT.)
College Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-1 Cl AIO
07-25-08 5.62% $1,025,000(h) $96,854
Countrywide Asset-backed Ctfs
Series 2005-10 Cl AF6
02-25-36 4.92 95,000 90,862
Countrywide Asset-backed Ctfs
Series 2006-4 Cl 1A1M
07-25-36 5.58 153,711(i) 153,189
Countrywide Asset-backed Ctfs
Series 2007-7 Cl 2A2
10-25-37 5.48 750,000(i) 745,430
Dunkin Securitization
Series 2006-1 Cl A2 (AMBAC)
06-20-31 5.78 700,000(d,j) 706,760
Franklin Auto Trust
Series 2004-1 Cl A3 (MBIA)
03-15-12 4.15 83,871(j) 83,335
Hertz Vehicle Financing LLC
Series 2004-1A Cl A3 (MBIA)
05-25-09 2.85 200,000(d,j) 197,607
Keycorp Student Loan Trust
Series 2003-A Cl 2A2 (MBIA)
10-25-25 5.67 1,209,787(i,j) 1,215,268
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-2 Cl AIO
08-25-11 5.88 650,000(h) 137,137
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2006-3 Cl AIO
01-25-12 5.88 1,100,000(h) 292,655
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 17
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
ASSET-BACKED (CONT.)
Natl Collegiate Student Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2007-2 Cl AIO
07-25-12 5.90% $550,000(h) $156,112
Popular ABS Mtge Pass-Through Trust
Series 2005-A Cl AF2
06-25-35 4.49 23,585 23,485
Renaissance Home Equity Loan Trust
Series 2005-4 Cl A3
02-25-36 5.57 275,000 274,126
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M4
06-25-37 6.31 120,000 113,220
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M5
06-25-37 6.66 80,000 75,363
Renaissance Home Equity Loan Trust
Series 2007-2 Cl M6
06-25-37 7.01 115,000 112,107
Residential Asset Securities
Series 2006-KS1 Cl A2
02-25-36 5.46 605,000(i) 602,731
Residential Asset Securities
Series 2007-KS3 Cl AI2
04-25-37 5.50 1,050,000(i) 1,049,212
SBA CMBS Trust
Series 2006-1A Cl B
11-15-36 5.45 300,000(d) 296,580
WFS Financial Owner Trust
Series 2004-1 Cl D
08-22-11 3.17 14,953 14,928
---------------
Total 6,838,786
- -----------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED (8.5%)(f)
Banc of America Commercial Mtge
Series 2005-1 Cl A4
11-10-42 5.02 225,000 221,009
Banc of America Commercial Mtge
Series 2007-1 Cl A3
01-15-49 5.45 450,000 439,449
Bear Stearns Commercial Mtge Securities
Series 2003-T10 Cl A1
03-13-40 4.00 294,433 285,268
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
COMMERCIAL MORTGAGE-BACKED (CONT.)
Bear Stearns Commercial Mtge Securities
Series 2004-PWR5 Cl A3
07-11-42 4.57% $325,000 $314,147
Bear Stearns Commercial Mtge Securities
Series 2007-T26 Cl A4
01-12-45 5.47 475,000 466,835
CDC Commercial Mtge Trust
Series 2002-FX1 Cl A2
11-15-30 5.68 750,000 755,467
Citigroup Commercial Mtge Trust
Series 2005-EMG Cl A1
09-20-51 4.15 219,138(d) 216,042
Citigroup/Deutsche Bank Commercial Mtge Trust
Series 2005-CD1 Cl ASB
07-15-44 5.23 175,000 171,454
Commercial Mtge Pass-Through Ctfs
Series 2006-CN2A Cl BFL
02-05-19 5.63 150,000(d,i) 150,533
Commercial Mtge Pass-Through Ctfs
Series 2007-FL14 Cl MKL1
06-15-22 6.12 875,000(d,i) 873,906
Credit Suisse Mtge Capital Ctfs
Series 2006-C2 Cl A3
03-15-39 5.66 375,000 370,162
CS First Boston Mtge Securities
Series 2003-CPN1 Cl A2
03-15-35 4.60 275,000 261,282
Federal Natl Mtge Assn #386558
10-01-10 4.85 475,039 471,151
Federal Natl Mtge Assn #725217
02-01-14 4.72 1,172,889 1,141,259
Federal Natl Mtge Assn #735029
09-01-13 5.28 479,218 479,454
GE Capital Commercial Mtge
Series 2005-C1 Cl A5
06-10-48 4.77 400,000 375,076
General Electric Capital Assurance
Series 2003-1 Cl A3
05-12-35 4.77 525,000(d) 517,888
Greenwich Capital Commercial Funding
Series 2004-GG1 Cl A5
06-10-36 4.88 150,000 147,145
Greenwich Capital Commercial Funding
Series 2007-GG9 Cl A4
03-10-39 5.44 700,000 673,456
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
18 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
COMMERCIAL MORTGAGE-BACKED (CONT.)
GS Mtge Securities II
Series 2004-GG2 Cl A4
08-10-38 4.96% $250,000 $245,898
GS Mtge Securities II
Series 2006-GG6 Cl A4
04-10-38 5.55 375,000 366,712
GS Mtge Securities II
Series 2007-EOP Cl J
03-06-20 6.17 500,000(d,i) 495,000
GS Mtge Securities II
Series 2007-GG10 Cl A4
08-10-45 5.99 1,250,000 1,235,486
GS Mtge Securities II
Series 2007-GG10 Cl F
08-10-45 5.99 375,000 368,393
JPMorgan Chase Commercial Mtge Securities
Series 2003-LN1 Cl A1
10-15-37 4.13 178,895 172,920
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A1
03-12-39 3.97 159,027 154,861
JPMorgan Chase Commercial Mtge Securities
Series 2003-ML1A Cl A2
03-12-39 4.77 525,000 502,110
JPMorgan Chase Commercial Mtge Securities
Series 2004-C2 Cl A2
05-15-41 5.26 325,000 320,533
JPMorgan Chase Commercial Mtge Securities
Series 2004-CBX Cl A3
01-12-37 4.18 150,000 146,068
JPMorgan Chase Commercial Mtge Securities
Series 2004-LN2 Cl A1
07-15-41 4.48 677,766 657,733
JPMorgan Chase Commercial Mtge Securities
Series 2006-LDP6 Cl A4
04-15-43 5.48 750,000 727,919
JPMorgan Chase Commercial Mtge Securities
Series 2006-LDP6 Cl ASB
04-15-43 5.49 750,000 739,767
JPMorgan Chase Commercial Mtge Securities
Series 2007-LDPX Cl A3
01-15-49 5.42 700,000 671,371
LB-UBS Commercial Mtge Trust
Series 2002-C4 Cl A4
09-15-26 4.56 200,000 195,204
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
COMMERCIAL MORTGAGE-BACKED (CONT.)
LB-UBS Commercial Mtge Trust
Series 2002-C4 Cl A5
09-15-31 4.85% $500,000 $483,143
LB-UBS Commercial Mtge Trust
Series 2004-C2 Cl A3
03-15-29 3.97 225,000 213,530
LB-UBS Commercial Mtge Trust
Series 2005-C5 Cl AAB
09-15-30 4.93 1,200,000 1,170,372
LB-UBS Commercial Mtge Trust
Series 2006-C4 Cl AAB
06-15-32 5.86 975,000 983,278
LB-UBS Commercial Mtge Trust
Series 2007-C1 Cl A4
02-15-40 5.42 375,000 359,452
Merrill Lynch Mtge Trust
Series 2005-CKI1 Cl A1
11-12-37 5.08 1,246,354 1,241,879
Morgan Stanley Capital I
Series 2003-T11 Cl A2
06-13-41 4.34 1,325,000 1,301,762
Morgan Stanley Capital I
Series 2004-HQ4 Cl A5
04-14-40 4.59 250,000 242,030
Morgan Stanley Capital I
Series 2006-T23 Cl AAB
08-12-41 5.97 250,000 251,451
Wachovia Bank Commercial Mtge Trust
Series 2003-C7 Cl A2
10-15-35 5.08 1,100,000(d) 1,061,234
Wachovia Bank Commercial Mtge Trust
Series 2005-C18 Cl A4
04-15-42 4.94 300,000 283,307
Wachovia Bank Commercial Mtge Trust
Series 2005-C20 Cl A5
07-15-42 5.09 300,000 293,772
Wachovia Bank Commercial Mtge Trust
Series 2006-C27 Cl A3
07-15-45 5.77 225,000 221,289
Wachovia Bank Commercial Mtge Trust
Series 2006-C27 Cl APB
07-15-45 5.73 400,000 396,462
Wachovia Bank Commercial Mtge Trust
Series 2006-C29 Cl A4
11-15-48 5.31 900,000 858,340
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 19
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
COMMERCIAL MORTGAGE-BACKED (CONT.)
Wachovia Bank Commercial Mtge Trust
Series 2007-C31 Cl A4
04-15-47 5.51% $1,775,000 $1,708,081
---------------
Total 26,400,340
- -----------------------------------------------------------------------------------
MORTGAGE-BACKED (45.5%)(f)
Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2005-12 Cl 2A1
03-25-36 5.69 458,521(g) 460,115
Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2006-1 Cl 2A1
03-25-36 5.94 553,191(g) 553,673
Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2007-1 Cl 3A21
03-25-37 6.19 555,000(g) 558,200
American Home Mtge Assets
Collateralized Mtge Obligation
Series 2007-2 Cl A2A
03-25-47 5.49 898,898(g) 896,060
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11 Cl 1A1
01-25-34 6.00 103,365 103,209
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11 Cl 4A1
01-25-19 4.75 180,502 172,125
Banc of America Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-9 Cl 1CB1
01-25-37 6.00 1,401,354 1,374,360
Banc of America Funding
Collateralized Mtge Obligation
Series 2006-2 Cl N1
11-25-46 7.25 66,397(d) 64,903
Banc of America Funding
Collateralized Mtge Obligation
Series 2006-A Cl 3A2
02-20-36 5.90 447,540(g) 448,914
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Bear Stearns Adjustable Rate Mtge Trust
Collateralized Mtge Obligation
Series 2005-8 Cl A4
08-25-35 5.09% $450,000(d,g) $432,111
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2007-8CB Cl A13
05-25-37 7.73 478,657(h) 81,783
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-11T1 Cl A1
07-25-18 4.75 144,443 137,740
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2003-20CB Cl 1A1
10-25-33 5.50 2,219,404 2,122,031
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-54CB Cl 2A3
11-25-35 5.50 308,494 307,902
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-54CB Cl 3A7
11-25-35 5.50 311,614 311,020
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-64CB Cl 1A1
12-25-35 5.50 644,935 644,788
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-6CB Cl 1A1
04-25-35 7.50 262,748 272,488
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2005-85CB Cl 2A2
02-25-36 5.50 235,648 234,952
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-22R Cl 1A2
05-25-36 6.00 773,865 780,002
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-2CB Cl A11
03-25-36 6.00 627,495 625,776
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
20 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-31CB Cl A16
11-25-36 6.00% $1,200,000 $1,215,684
Countrywide Alternative Loan Trust
Collateralized Mtge Obligation
Series 2006-43CB Cl 1A4
02-25-37 6.00 965,397 972,705
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2005-R2 Cl 2A1
06-25-35 7.00 323,819(d) 337,901
Countrywide Home Loans
Collateralized Mtge Obligation
Series 2006-HYB1 Cl 1A1
03-20-36 5.36 638,521(g) 638,725
Deutsche Bank Alternate Mtge Loan Trust
Collateralized Mtge Obligation
Series 2007-AR3 Cl 2A1
05-25-37 5.43 460,509(g) 460,750
Downey Savings & Loan Assn Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2005-AR5 Cl X1
08-19-45 0.12 2,360,026(h) 23,600
Federal Home Loan Mtge Corp
08-01-37 6.00 3,785,000(b) 3,754,248
08-01-37 6.50 6,000,000(b) 6,067,501
Federal Home Loan Mtge Corp #1J0283
02-01-37 5.83 810,210(g) 810,783
Federal Home Loan Mtge Corp #1J1445
01-01-37 5.90 1,224,630(g) 1,229,749
Federal Home Loan Mtge Corp #A12692
10-01-32 6.00 127,526 127,904
Federal Home Loan Mtge Corp #A13854
09-01-33 6.00 141,467 141,420
Federal Home Loan Mtge Corp #A62695
06-01-37 6.00 1,997,915 1,983,139
Federal Home Loan Mtge Corp #B10254
10-01-18 5.50 437,147 433,482
Federal Home Loan Mtge Corp #B12280
02-01-19 5.50 230,387 228,456
Federal Home Loan Mtge Corp #C02951
07-01-37 6.50 3,000,000(b) 3,034,148
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Federal Home Loan Mtge Corp #C59161
10-01-31 6.00% $133,738 $133,518
Federal Home Loan Mtge Corp #C77372
03-01-33 6.00 260,479 260,353
Federal Home Loan Mtge Corp #C90613
01-01-23 5.00 148,000 141,785
Federal Home Loan Mtge Corp #C90683
06-01-23 5.00 152,018 145,634
Federal Home Loan Mtge Corp #C90767
12-01-23 6.00 129,528 130,212
Federal Home Loan Mtge Corp #E74288
12-01-13 6.00 180,073 181,837
Federal Home Loan Mtge Corp #E98725
08-01-18 5.00 160,399 156,347
Federal Home Loan Mtge Corp #G01410
04-01-32 7.00 294,846 304,073
Federal Home Loan Mtge Corp #G02757
06-01-36 5.00 2,157,631 2,029,800
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 237 Cl IO
05-15-36 9.81 317,668(h) 86,253
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2718 Cl IA
10-15-22 20.00 92,246(h) 2,414
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2795 Cl IY
07-15-17 12.98 416,814(h) 41,893
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Interest Only
Series 2817 Cl SA
06-15-32 18.97 603,103(h) 32,028
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 2576 Cl KJ
02-15-33 5.50 169,683 170,119
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 21
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Federal Home Loan Mtge Corp
Collateralized Mtge Obligation
Series 2641 Cl KC
01-15-18 6.50% $170,981 $175,451
Federal Natl Mtge Assn
08-01-22 5.00 2,500,000(b) 2,423,438
08-01-22 5.50 3,000,000(b) 2,962,500
08-01-22 6.00 2,275,000(b) 2,288,509
08-01-37 5.00 2,000,000(b) 1,875,624
08-01-37 5.50 7,000,000(b) 6,759,376
08-01-37 6.00 7,000,000(b) 6,934,376
08-01-37 7.00 7,500,000(b) 7,703,911
09-01-37 6.00 3,300,000(b) 3,267,000
Federal Natl Mtge Assn #252440
05-01-29 7.00 214,485 222,536
Federal Natl Mtge Assn #254587
12-01-22 5.50 588,529 576,572
Federal Natl Mtge Assn #254916
09-01-23 5.50 446,382 437,257
Federal Natl Mtge Assn #255788
06-01-15 5.50 634,598 636,808
Federal Natl Mtge Assn #256135
02-01-36 5.50 3,858,265 3,703,771
Federal Natl Mtge Assn #323715
05-01-29 6.00 452,792 452,272
Federal Natl Mtge Assn #493945
04-01-29 6.50 93,115 94,792
Federal Natl Mtge Assn #518159
09-01-14 7.00 406,922 419,544
Federal Natl Mtge Assn #545216
03-01-09 5.89 103,281 103,425
Federal Natl Mtge Assn #545868
08-01-32 7.00 102,114 106,143
Federal Natl Mtge Assn #555340
04-01-33 5.50 283,517 275,473
Federal Natl Mtge Assn #555528
04-01-33 6.00 1,579,930 1,574,781
Federal Natl Mtge Assn #555734
07-01-23 5.00 95,777 91,579
Federal Natl Mtge Assn #555740
08-01-18 4.50 167,512 160,334
Federal Natl Mtge Assn #555794
09-01-28 7.50 86,521 90,639
Federal Natl Mtge Assn #582154
05-01-31 6.50 123,851 126,310
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #597374
09-01-31 7.00% $110,023 $114,910
Federal Natl Mtge Assn #611831
02-01-31 7.50 43,871 45,932
Federal Natl Mtge Assn #615135
11-01-16 6.00 281,100 283,286
Federal Natl Mtge Assn #646147
06-01-32 7.00 699,755 731,998
Federal Natl Mtge Assn #650009
09-01-31 7.50 98,374 102,996
Federal Natl Mtge Assn #654208
10-01-32 6.50 239,376 243,667
Federal Natl Mtge Assn #661815
10-01-32 6.00 148,874 148,655
Federal Natl Mtge Assn #662061
09-01-32 6.50 1,009,647 1,027,745
Federal Natl Mtge Assn #667604
10-01-32 5.50 278,518 270,382
Federal Natl Mtge Assn #677089
01-01-33 5.50 641,586 622,845
Federal Natl Mtge Assn #678028
09-01-17 6.00 146,121 147,226
Federal Natl Mtge Assn #681080
02-01-18 5.00 1,084,250 1,056,667
Federal Natl Mtge Assn #681166
04-01-32 6.50 423,861 432,278
Federal Natl Mtge Assn #683100
02-01-18 5.50 191,231 189,846
Federal Natl Mtge Assn #683116
02-01-33 6.00 269,261 268,384
Federal Natl Mtge Assn #689026
05-01-33 5.50 1,151,540 1,118,204
Federal Natl Mtge Assn #689093
07-01-28 5.50 123,838 120,328
Federal Natl Mtge Assn #704005
05-01-33 5.50 1,103,657 1,071,249
Federal Natl Mtge Assn #705655
05-01-33 5.00 490,478 462,677
Federal Natl Mtge Assn #709093
06-01-33 6.00 180,882 180,163
Federal Natl Mtge Assn #709901
06-01-18 5.00 531,414 518,243
Federal Natl Mtge Assn #711503
06-01-33 5.50 136,137 132,651
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
22 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #712057
07-01-18 4.50% $81,255 $77,777
Federal Natl Mtge Assn #720378
06-01-18 4.50 169,706 162,443
Federal Natl Mtge Assn #725232
03-01-34 5.00 1,141,124 1,076,444
Federal Natl Mtge Assn #725424
04-01-34 5.50 1,850,536 1,796,196
Federal Natl Mtge Assn #725425
04-01-34 5.50 1,791,982(b) 1,739,475
04-01-34 5.50 1,346,244 1,306,798
Federal Natl Mtge Assn #725431
08-01-15 5.50 152,894 152,124
Federal Natl Mtge Assn #725684
05-01-18 6.00 336,534 339,334
Federal Natl Mtge Assn #725719
07-01-33 4.85 252,618(g) 248,252
Federal Natl Mtge Assn #725773
09-01-34 5.50 1,774,975 1,720,506
Federal Natl Mtge Assn #726940
08-01-23 5.50 79,516 77,695
Federal Natl Mtge Assn #735212
12-01-34 5.00 1,842,194 1,736,408
Federal Natl Mtge Assn #735841
11-01-19 4.50 1,864,933 1,782,531
Federal Natl Mtge Assn #743347
10-01-33 6.00 101,901 101,828
Federal Natl Mtge Assn #743579
11-01-33 5.50 305,607 296,633
Federal Natl Mtge Assn #745392
12-01-20 4.50 1,019,643 974,590
Federal Natl Mtge Assn #745563
08-01-34 5.50 1,525,070 1,480,287
Federal Natl Mtge Assn #753074
12-01-28 5.50 199,606 193,948
Federal Natl Mtge Assn #757581
01-01-19 5.50 999,070 990,760
Federal Natl Mtge Assn #765760
02-01-19 5.00 246,260 239,995
Federal Natl Mtge Assn #779676
06-01-34 5.00 2,361,390 2,225,789
Federal Natl Mtge Assn #815264
05-01-35 5.23 710,962(g) 703,052
Federal Natl Mtge Assn #829227
08-01-35 6.00 1,436,499 1,425,995
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Federal Natl Mtge Assn #831870
11-01-36 6.50% $1,975,210 $1,995,379
Federal Natl Mtge Assn #848482
12-01-35 6.00 3,029,646(b) 3,004,557
Federal Natl Mtge Assn #878661
02-01-36 5.50 1,856,296 1,784,030
Federal Natl Mtge Assn #881629
02-01-36 5.50 1,217,201 1,169,816
Federal Natl Mtge Assn #883201
07-01-36 6.50 874,862 888,313
Federal Natl Mtge Assn #886291
07-01-36 7.00 877,572 907,607
Federal Natl Mtge Assn #886464
08-01-36 6.50 2,030,876 2,051,613
Federal Natl Mtge Assn #915770
03-01-37 6.50 3,190,188(b) 3,222,513
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-63 Cl IP
07-25-33 12.58 1,316,452(h) 322,537
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2003-71 Cl IM
12-25-31 12.80 233,683(h) 42,737
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2004-84 Cl GI
12-25-22 11.02 135,743(h) 19,735
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 2005-92 CL SC
10-25-35 17.41 2,212,292(h) 111,986
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Interest Only
Series 367 Cl 2
01-01-36 9.52 1,440,669(h) 389,438
Federal Natl Mtge Assn
Collateralized Mtge Obligation
Series 2003-133 Cl GB
12-25-26 8.00 143,822 152,373
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 23
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Govt Natl Mtge Assn #567717
06-15-32 7.50% $15,588 $16,305
Govt Natl Mtge Assn #604708
10-15-33 5.50 105,669 103,183
Harborview Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-16 Cl 3A1B
01-19-36 5.66 346,830(g) 346,828
Harborview Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-8 Cl 2A1B
08-21-36 5.57 1,116,511(g) 1,116,123
Harborview Nim
Collateralized Mtge Obligation
Series 2006-10 Cl N1
11-19-36 6.41 87,037(d) 86,956
Harborview Nim
Collateralized Mtge Obligation
Series 2006-8A Cl N1
07-21-36 6.41 10,554(d) 10,462
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Interest Only
Series 2005-AR8 Cl AX1
04-25-35 4.50 5,188,201(h) 37,290
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Series 2005-AR25 Cl 1A21
12-25-35 5.85 372,140(g) 369,189
IndyMac Index Mtge Loan Trust
Collateralized Mtge Obligation
Series 2007-AR5 Cl 1A1
05-25-37 6.37 1,052,968(g) 1,069,352
IndyMac Index Nim
Collateralized Mtge Obligation
Series 2006-AR6 Cl N1
06-25-46 6.65 59,511(d) 59,288
Lehman XS Net Interest Margin Nts
Collateralized Mtge Obligation
Series 2006-GPM6 Cl A1
10-28-46 6.25 140,047(d) 139,612
Lehman XS Trust
Collateralized Mtge Obligation
Series 2007-5H Cl 1A1
05-25-37 6.50 2,361,748 2,386,468
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Master Alternative Loans Trust
Collateralized Mtge Obligation
Series 2004-2 Cl 4A1
02-25-19 5.00% $405,539 $390,396
Master Alternative Loans Trust
Collateralized Mtge Obligation
Series 2004-4 Cl 2A1
05-25-34 6.00 144,313 144,407
Master Alternative Loans Trust
Collateralized Mtge Obligation
Series 2004-7 Cl 8A1
08-25-19 5.00 164,555 160,091
Master Alternative Loans Trust
Collateralized Mtge Obligation
Series 2004-8 Cl 7A1
09-25-19 5.00 239,651 232,718
Master Alternative Loans Trust
Collateralized Mtge Obligation
Series 2005-3 Cl 1A2
04-25-35 5.50 950,000 901,778
Merrill Lynch Alternative Note Asset
Collateralized Mtge Obligation
Series 2007-OAR2 Cl A1
04-25-37 5.50 1,059,897(i) 1,060,247
Residential Accredit Loans
Collateralized Mtge Obligation
Series 2006-QS3 Cl 1A10
03-25-36 6.00 463,335 467,386
Structured Adjustable Rate Mtge Loan Trust
Collateralized Mtge Obligation
Series 2006-5 Cl 4A1
06-25-36 5.94 709,416(g) 703,791
Structured Asset Securities
Collateralized Mtge Obligation
Series 2003-33H Cl 1A1
10-25-33 5.50 1,073,053 1,025,994
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2004-CB2 Cl 6A
07-25-19 4.50 118,551 113,339
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2005-AR14 Cl 2A1
12-25-35 5.29 401,363(g) 397,857
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
24 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
MORTGAGE-BACKED (CONT.)
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2005-AR8 Cl 2AB1
07-25-45 5.57% $119,856(g) $119,842
Washington Mutual Mtge Pass-Through Ctfs
Collateralized Mtge Obligation
Series 2006-AR10 Cl 1A1
09-25-36 5.95 392,190(g) 392,610
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-10 Cl A1
10-25-35 5.00 1,699,583 1,630,835
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2005-5 Cl 2A1
05-25-35 5.50 677,041 649,853
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2006-AR12 Cl 1A1
09-25-36 6.03 373,157(g) 373,621
Wells Fargo Mtge Backed Securities Trust
Collateralized Mtge Obligation
Series 2006-AR6 Cl 5A1
03-25-36 5.11 894,098(g) 879,502
---------------
Total 140,908,183
- -----------------------------------------------------------------------------------
BANKING (4.2%)
Bank of America
Sub Nts
03-15-17 5.30 3,435,000 3,264,029
Citigroup
Sub Nts
02-15-17 5.50 2,365,000 2,280,910
JPMorgan Chase & Co
Sub Nts
06-27-17 6.13 2,025,000 2,055,760
Manufacturers & Traders Trust
Sub Nts
12-01-21 5.63 1,720,000 1,644,545
Popular North America
Sr Nts
10-01-08 3.88 2,180,000 2,133,302
Regions Bank
Sub Nts
06-26-37 6.45 875,000 892,798
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
BANKING (CONT.)
Wachovia Bank
Sub Nts
02-01-37 5.85% $645,000 $603,870
---------------
Total 12,875,214
- -----------------------------------------------------------------------------------
BROKERAGE (2.9%)
Discover Financial Services
06-12-17 6.45 580,000(d,k) 562,472
Goldman Sachs Group
Sub Nts
01-15-17 5.63 1,290,000 1,222,356
Lehman Brothers Holdings
Sr Nts
07-19-12 6.00 1,520,000 1,519,883
Lehman Brothers Holdings
Sub Nts
07-19-17 6.50 1,185,000 1,163,826
Merrill Lynch & Co
Sub Nts
05-02-17 5.70 1,910,000 1,810,546
Morgan Stanley
04-27-17 5.55 2,755,000 2,631,963
---------------
Total 8,911,046
- -----------------------------------------------------------------------------------
ELECTRIC (1.6%)
Consumers Energy
1st Mtge Series F
05-15-10 4.00 105,000 101,120
Consumers Energy
1st Mtge Series H
02-17-09 4.80 1,165,000 1,153,720
Entergy Gulf States
1st Mtge
06-01-08 3.60 425,000 418,388
Exelon
06-15-10 4.45 1,585,000 1,539,443
Indiana Michigan Power
Sr Nts
03-15-37 6.05 330,000 313,629
Metropolitan Edison
Sr Nts
03-15-10 4.45 140,000 136,767
Northern States Power
Sr Nts
08-01-09 6.88 515,000 528,661
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 25
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
ELECTRIC (CONT.)
Oncor Electric Delivery
Secured
01-15-15 6.38% $75,000 $75,886
Portland General Electric
03-15-10 7.88 230,000(k) 244,896
Potomac Electric Power
Secured
06-01-35 5.40 240,000 211,055
Public Service Company of Colorado
Sr Nts Series A
07-15-09 6.88 160,000 164,268
Xcel Energy
Sr Nts
07-01-08 3.40 145,000 142,294
---------------
Total 5,030,127
- -----------------------------------------------------------------------------------
FOOD AND BEVERAGE (1.2%)
Cadbury Schweppes US Finance LLC
10-01-08 3.88 2,155,000(d) 2,111,575
HJ Heinz
12-01-08 6.43 470,000(d) 475,494
Molson Coors Capital Finance
09-22-10 4.85 1,055,000(c) 1,037,205
---------------
Total 3,624,274
- -----------------------------------------------------------------------------------
GAS DISTRIBUTORS (0.1%)
Atmos Energy
Sr Unsub
10-15-09 4.00 310,000 301,009
- -----------------------------------------------------------------------------------
GAS PIPELINES (0.7%)
CenterPoint Energy Resources
02-15-11 7.75 285,000 303,152
Colorado Interstate Gas
Sr Nts
11-15-15 6.80 970,000(k) 996,150
Southern Natural Gas
04-01-17 5.90 805,000(d) 777,706
---------------
Total 2,077,008
- -----------------------------------------------------------------------------------
HEALTH CARE INSURANCE (0.4%)
UnitedHealth Group
06-15-37 6.50 490,000(d) 504,587
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
HEALTH CARE INSURANCE (CONT.)
WellPoint
Sr Unsub
01-15-36 5.85% $665,000 $602,890
06-15-37 6.38 255,000 251,864
---------------
Total 1,359,341
- -----------------------------------------------------------------------------------
HOME CONSTRUCTION (0.2%)
Centex
Sr Unsecured
05-01-16 6.50 140,000 127,604
DR Horton
Sr Unsub
04-15-16 6.50 695,000 631,653
---------------
Total 759,257
- -----------------------------------------------------------------------------------
INDEPENDENT ENERGY (0.4%)
Anadarko Petroleum
Sr Unsecured
09-15-16 5.95 425,000 417,650
Canadian Natural Resources
03-15-38 6.25 870,000(c) 831,640
XTO Energy
Sr Nts
08-01-37 6.75 60,000 60,869
---------------
Total 1,310,159
- -----------------------------------------------------------------------------------
MEDIA CABLE (0.4%)
Comcast
03-15-37 6.45 930,000 884,569
Comcast MO of Delaware LLC
09-01-08 9.00 400,000 414,371
---------------
Total 1,298,940
- -----------------------------------------------------------------------------------
MEDIA NON CABLE (1.2%)
British Sky Broadcasting Group
02-23-09 6.88 850,000(c) 868,011
News America
12-15-35 6.40 1,215,000 1,141,112
RR Donnelley & Sons
Sr Unsecured
01-15-17 6.13 1,780,000 1,728,456
---------------
Total 3,737,579
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
26 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
NON CAPTIVE CONSUMER (0.1%)
SLM
01-15-13 5.38% $195,000 $172,938
10-01-13 5.00 200,000 172,958
---------------
Total 345,896
- -----------------------------------------------------------------------------------
OTHER FINANCIAL INSTITUTIONS (0.6%)
Residential Capital LLC
06-30-10 6.38 2,055,000 1,934,515
- -----------------------------------------------------------------------------------
PROPERTY & CASUALTY (0.2%)
Travelers Companies
Sr Unsecured
06-15-37 6.25 605,000 567,907
- -----------------------------------------------------------------------------------
RAILROADS (0.3%)
Burlington Northern Santa Fe
05-01-37 6.15 660,000 625,508
REITS (0.3%)
Brandywine Operating Partnership LP
05-01-17 5.70 490,000 472,380
ERP Operating LP
06-15-17 5.75 605,000 588,689
---------------
Total 1,061,069
- -----------------------------------------------------------------------------------
RETAILERS (1.0%)
CVS Caremark
Sr Unsecured
06-01-17 5.75 145,000 138,796
Home Depot
Sr Unsecured
12-16-36 5.88 1,605,000 1,393,546
Macys Retail Holdings
07-15-09 4.80 1,575,000 1,548,541
---------------
Total 3,080,883
- -----------------------------------------------------------------------------------
WIRELINES (3.1%)
AT&T
Sr Nts
05-15-36 6.80 520,000 538,325
Sprint Capital
03-15-32 8.75 55,000 60,440
Telecom Italia Capital
11-15-33 6.38 885,000(c) 816,233
</Table>
<Table>
<Caption>
BONDS (CONTINUED)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
WIRELINES (CONT.)
Telefonica Europe
09-15-10 7.75% $1,560,000(c) $1,650,180
TELUS
06-01-11 8.00 3,727,500(c) 3,991,489
Verizon New York
Series A
04-01-12 6.88 1,900,000 1,982,023
Verizon Pennsylvania
Series A
11-15-11 5.65 665,000 668,305
---------------
Total 9,706,995
- -----------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $300,949,859) $299,123,195
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MUNICIPAL BONDS (0.5%)
NAME OF
ISSUER
AND TITLE COUPON PRINCIPAL
OF ISSUE RATE AMOUNT VALUE(A)
TOBACCO
Tobacco Settlement Financing Corporation
Revenue Bonds
Series 2007A-1
06-01-46 6.71% $1,480,000 $1,412,527
- -----------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost: $1,467,425) $1,412,527
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (19.8%)
SHARES VALUE(A)
RiverSource Short-Term Cash Fund 61,324,135(l) $61,324,135
- -----------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $61,324,135) $61,324,135
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $363,741,419)(m) $361,859,857
===================================================================================
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 27
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At July 31, 2007, the cost of securities purchased, including interest
purchased, on a when-issued and/or other forward-commitment basis was
$54,995,296.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in U.S. dollar currency unless otherwise
noted. At July 31, 2007, the value of foreign securities represented 3.0%
of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Fund's
Board of Directors. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At July 31,
2007, the value of these securities amounted to $10,280,670 or 3.3% of net
assets.
(e) Inflation-indexed bonds are securities in which the principal amount is
adjusted for inflation and the semiannual interest payments equal a fixed
percentage of the inflation-adjusted principal amount.
(f) Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. These securities may be issued or
guaranteed by U.S. government agencies or instrumentalities, or by private
issuers, generally originators and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment
bankers and special purpose entities. The maturity dates shown represent
the original maturity of the underlying obligation. Actual maturity may
vary based upon prepayment activity on these obligations. Unless otherwise
noted, the coupon rates presented are fixed rates.
(g) Adjustable rate mortgage; interest rate varies to reflect current market
conditions; rate shown is the effective rate on July 31, 2007.
(h) Interest only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
interest only is extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of principal repayments
may have an adverse (positive) effect on yield to maturity. The principal
amount shown is the notional amount of the underlying mortgages. Interest
rate disclosed represents yield based upon the estimated timing and amount
of future cash flows at July 31, 2007.
(i) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on July 31,
2007.
(j) The following abbreviations are used in the portfolio security descriptions
to identify the insurer of the issue:
<Table>
AMBAC -- Ambac Assurance Corporation
MBIA -- MBIA Insurance Corporation
</Table>
(k) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 5 to the financial statements):
<Table>
<Caption>
TYPE OF SECURITY NOTIONAL AMOUNT
- -------------------------------------------------------------------------------
PURCHASE CONTRACTS
U.S. Treasury Note, Sept. 2007, 2-year $10,400,000
U.S. Treasury Note, Sept. 2007, 10-year 3,700,000
SALE CONTRACTS
U.S. Long Bond, Sept. 2007, 20-year 1,200,000
U.S. Treasury Note, Sept. 2007, 5-year 200,000
</Table>
(l) Affiliated Money Market Fund -- See Note 7 to the financial statements.
- --------------------------------------------------------------------------------
28 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
NOTES TO INVESTMENTS IN SECURITIES (CONTINUED)
(m) At July 31, 2007, the cost of securities for federal income tax purposes
was $364,166,578 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $1,044,685
Unrealized depreciation (3,351,406)
- ------------------------------------------------------------------------------
Net unrealized depreciation $(2,306,721)
- ------------------------------------------------------------------------------
</Table>
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 CORE BOND FUND -- 2007 ANNUAL REPORT 29
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2007
<Table>
ASSETS
Investments in securities, at value (Note 1)
Unaffiliated issuers (identified cost $302,417,284) $300,535,722
Affiliated money market fund (identified cost
$61,324,135) (Note 7) 61,324,135
- ----------------------------------------------------------------------------
Total investments in securities (identified cost
$363,741,419) 361,859,857
Capital shares receivable 1,732,203
Accrued interest receivable 2,289,498
Receivable for investment securities sold 17,604,605
Variation margin receivable 3,391
- ----------------------------------------------------------------------------
Total assets 383,489,554
- ----------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of cash on demand deposit 10,572
Dividends payable to shareholders 246,535
Capital shares payable 104,292
Payable for investment securities purchased 18,107,229
Payable for securities purchased on a forward-commitment
basis (Note 1) 54,995,296
Unrealized depreciation on swap transactions, at value (Note
6) 170,408
Accrued investment management services fee 4,026
Accrued distribution fee 567
Accrued transfer agency fee 31
Accrued administrative services fee 587
Other accrued expenses 60,009
- ----------------------------------------------------------------------------
Total liabilities 73,699,552
- ----------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $309,790,002
============================================================================
</Table>
- --------------------------------------------------------------------------------
30 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JULY 31, 2007
<Table>
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 327,248
Additional paid-in capital 314,870,028
Undistributed net investment income (78,744)
Accumulated net realized gain (loss) (Note 9) (3,410,267)
Unrealized appreciation (depreciation) on investments and on
translation of assets and liabilities in foreign
currencies (Notes 5 and 6) (1,918,263)
- ----------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $309,790,002
============================================================================
</Table>
<Table>
Net assets applicable to outstanding
shares: Class A $ 39,913,930
Class B $ 10,154,475
Class C $ 587,688
Class I $259,104,810
Class R2 $ 4,912
Class R3 $ 4,912
Class R4 $ 9,474
Class R5 $ 4,912
Class W $ 4,889
Net asset value per share of outstanding Class A
capital stock: shares(1) 4,212,416 $ 9.48
Class B shares 1,070,928 $ 9.48
Class C shares 61,965 $ 9.48
Class I shares 27,376,402 $ 9.46
Class R2 shares 518 $ 9.48
Class R3 shares 518 $ 9.48
Class R4 shares 1,000 $ 9.47
Class R5 shares 518 $ 9.48
Class W shares 516 $ 9.47
- ------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $9.95. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 4.75%.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 31
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2007
<Table>
INVESTMENT INCOME
Income:
Interest 11,030,002
Income distributions from affiliated money market fund (Note
7) 1,055,036
- ---------------------------------------------------------------------------
Total income 12,085,038
- ---------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 1,096,973
Distribution fee
Class A 93,444
Class B 114,825
Class C 5,557
Class R2 16
Class R3 7
Class W 8
Transfer agency fee
Class A 68,221
Class B 22,251
Class C 1,062
Class R2 2
Class R3 2
Class R4 90
Class R5 2
Class W 7
Service fee -- Class R4 44
Administrative services fees and expenses 159,975
Plan administration services fee
Class R2 7
Class R3 7
Class R4 111
Compensation of board members 4,271
Custodian fees 90,758
Printing and postage 30,055
Registration fees 79,995
Professional fees 35,350
Other 9,650
- ---------------------------------------------------------------------------
Total expenses 1,812,690
Expenses waived/reimbursed by the Investment Manager and
its affiliates (Note 2) (313,935)
- ---------------------------------------------------------------------------
1,498,755
Earnings and bank fee credits on cash balances (Note 2) (3,105)
- ---------------------------------------------------------------------------
Total net expenses 1,495,650
- ---------------------------------------------------------------------------
Investment income (loss) -- net 10,589,388
- ---------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
32 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED JULY 31, 2007
<Table>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) $ (9,600)
Foreign currency transactions 9,539
Futures contracts 205,518
Swap transactions (106,013)
- ---------------------------------------------------------------------------
Net realized gain (loss) on investments 99,444
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities
in foreign currencies 227,306
- ---------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 326,750
- ---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $10,916,138
===========================================================================
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 33
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED JULY 31, 2007 2006
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 10,589,388 $ 7,875,418
Net realized gain (loss) on investments 99,444 (3,334,965)
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities in foreign currencies 227,306 (1,626,948)
- --------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 10,916,138 2,913,505
- --------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,661,080) (1,346,770)
Class B (422,424) (363,823)
Class C (20,374) (16,869)
Class I (8,585,459) (6,020,734)
Class R2 (121) N/A
Class R3 (129) N/A
Class R4 (4,185) (3,966)
Class R5 (144) N/A
Class W (142) N/A
Net realized gain
Class A -- (10,474)
Class B -- (3,920)
Class C -- (158)
Class I -- (42,743)
Class R4 -- (30)
- --------------------------------------------------------------------------------------
Total distributions (10,694,058) (7,809,487)
- --------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
34 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
YEAR ENDED JULY 31, 2007 2006
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) $ 15,225,958 $ 18,529,854
Class B shares 5,099,082 6,000,039
Class C shares 287,282 266,911
Class I shares 120,023,256 95,959,205
Class R2 shares 5,000 N/A
Class R3 shares 5,000 N/A
Class R4 shares 91,190 --
Class R5 shares 5,000 N/A
Class W shares 5,000 N/A
Reinvestment of distributions at net asset value
Class A shares 1,481,215 1,165,583
Class B shares 389,581 333,536
Class C shares 18,738 15,565
Class I shares 8,481,913 5,968,439
Class R4 shares 3,799 3,571
Payments for redemptions
Class A shares (13,285,763) (22,260,950)
Class B shares (Note 2) (6,200,217) (7,088,319)
Class C shares (Note 2) (290,569) (290,859)
Class I shares (44,053,924) (36,878,152)
Class R4 shares (188,059) (10)
- --------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 87,103,482 61,724,413
- --------------------------------------------------------------------------------------
Total increase (decrease) in net assets 87,325,562 56,828,431
Net assets at beginning of year 222,464,440 165,636,009
- --------------------------------------------------------------------------------------
Net assets at end of year $309,790,002 $222,464,440
======================================================================================
Undistributed net investment income $ (78,744) $ 122,400
- --------------------------------------------------------------------------------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource Bond Series, Inc. and is registered under
the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. RiverSource Bond Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board. Although the Fund is not an index fund, it
invests primarily in securities like those included in the Lehman Brothers
Aggregate Bond Index (the Index), which are investment grade and denominated in
U.S. dollars. The Index includes securities issued by the U.S. government,
corporate bonds and mortgage- and asset-backed securities.
The Fund offers Class A, Class B, Class C, Class I and Class R4 shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I and Class R4 shares have no sales charge and are offered only to
qualifying institutional investors.
Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4,
terminating the shareholder servicing agreement, revising the fee structure
under the transfer agent agreement from account-based to asset-based, and
adopting a plan administration services agreement.
At July 31, 2007, Ameriprise Financial, Inc. (Ameriprise Financial), the parent
company of RiverSource Investments, LLC (the Investment Manager) and the
affiliated funds-of-funds owned 100% of Class I shares.
Effective Dec. 11, 2006, the Fund offers additional classes of shares, Class R2,
Class R3, and Class R5, to certain institutional investors. These shares are
sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise
Financial owned 100% of Class R2, Class R3 and Class R5 shares.
Effective Dec. 1, 2006, the Fund offers an additional class of shares, Class W,
through qualifying discretionary accounts. Class W shares are sold without a
front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned
100% of Class W shares.
At July 31, 2007, Ameriprise Financial, RiverSource Life Insurance Company, a
wholly-owned subsidiary of Ameriprise Financial and the affiliated
funds-of-funds owned approximately 84% of the total outstanding Fund shares.
- --------------------------------------------------------------------------------
36 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration fees) differ among classes. Income, expenses (other
than class specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative net
assets.
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
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. The procedures adopted by the Board
of Directors of the funds generally contemplate the use of fair valuation in the
event that price quotations or valuations are not readily available, price
quotations or valuations from other sources are not reflective of market value
and thus deemed unreliable, or a significant event has occurred in relation to a
security or class of securities (such as foreign equities) that is not reflected
in price quotations or valuations from other sources. A fair value price is a
good faith estimate of the value of a security at a given point in time. Many
securities markets and exchanges outside the U.S. close prior to the close of
the New York Stock Exchange and therefore the closing prices for securities in
such markets or on such exchanges may not fully reflect events that occur after
such close but before the close of the New York Stock Exchange, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial will fair value foreign
equity securities pursuant to procedures adopted by the Board of Directors of
the funds, including utilizing a third party pricing service to determine these
fair values. These procedures take into account multiple factors, including
movements in the U.S. securities markets, to determine a good faith estimate
that reasonably reflects the current market conditions as of the close of the
New York Stock Exchange. Swap transactions are valued through an authorized
pricing service, broker, or an internal model. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 37
SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS
Delivery and payment for securities that have been purchased by the Fund on a
forward-commitment basis, including when-issued securities and other forward-
commitments, can take place one month or more after the transaction date. During
this period, such securities are subject to market fluctuations, and they may
affect the Fund's net assets the same as owned securities. The Fund designates
cash or liquid securities at least equal to the amount of its
forward-commitments. At July 31, 2007, the Fund has entered into outstanding
when-issued securities of $43,991,346 and other forward-commitments of
$11,003,950.
The Fund also enters into transactions to sell purchase commitments to third
parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the Fund
to "roll over" its purchase commitments, the Fund receives negotiated amounts in
the form of reductions of the purchase price of the commitment.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Fund may buy and write options traded on any
U.S. or foreign exchange or in the over-the-counter market where completing the
obligation depends upon the credit standing of the other party. Cash collateral
may be collected by the Fund to secure certain over-the-counter options trades.
Cash collateral held by the Fund for such option trades must be returned to the
counterparty upon closure, exercise or expiration of the contract. The Fund also
may buy and sell put and call options and write covered call options on
portfolio securities as well as write cash-secured put options. The risk in
writing a call option is that the Fund gives up the opportunity for profit if
the market price of the security increases. The risk in writing a put option is
that the Fund may incur a loss if the market price of the security decreases and
the option is exercised. The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The Fund also has the additional
risk of being unable to enter into a closing transaction if a liquid secondary
market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Fund will realize a
gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid. At July 31, 2007, the Fund had no outstanding option
contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund
- --------------------------------------------------------------------------------
38 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
also may buy and write put and call options on these futures contracts. Risks of
entering into futures contracts and related options include the possibility of
an illiquid market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying securities.
Futures are valued daily based upon the last sale price at the close of market
on the principal exchange on which they are traded. Upon entering into a futures
contract, the Fund is required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund recognizes a realized
gain or loss when the contract is closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations. At July 31, 2007, the
Fund had no outstanding forward foreign currency contracts.
FORWARD SALE COMMITMENTS
The Fund may enter into forward sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of forward sale commitments are not received until the
contractual settlement date. During the time a forward sale commitment is
outstanding, equivalent deliverable securities, or an offsetting forward
purchase commitment deliverable on or before the sale commitment date, are used
to satisfy the commitment.
Unsettled forward sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 39
"Valuation of securities" above. The forward sale commitment is "marked-to-
market" daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. If the forward sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund realizes a gain or
loss. If the Fund delivers securities under the commitment, the Fund realizes a
gain or a loss from the sale of the securities based upon the market price
established at the date the commitment was entered into. Forward sale
commitments outstanding at period end are listed in the "Notes to investments in
securities." At July 31, 2007, the Fund had no outstanding forward sale
commitments.
CMBS TOTAL RETURN SWAP TRANSACTIONS
The Fund may enter into swap agreements to earn the total return on a specified
security or index of fixed income securities. CMBS total return swaps are
bilateral financial contracts designed to replicate synthetically the total
returns of collateralized mortgage-backed securities. Under the terms of the
swaps, the Fund either receives or pays the total return on a reference security
or index applied to a notional principal amount. In return, the Fund agrees to
pay or receive from the counterparty a floating rate, which is reset
periodically based on short-term interest rates, applied to the same notional
amount.
The notional amounts of swap contracts are not recorded in the financial
statements. Swaps are valued daily, and the change in value is recorded as
unrealized appreciation (depreciation) until the termination of the swap, at
which time realized gain (loss) is recorded. Payments received or made are
recorded as realized gains (losses).
Swap agreements may be subject to liquidity risk, which exists when a particular
swap is difficult to purchase or sell. It may not be possible for the Fund to
initiate a transaction or liquidate a position at an advantageous time or price,
which may result in significant losses. Total return swaps are subject to the
risk that the counterparty will default on its obligation to pay net amounts due
to the Fund.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
- --------------------------------------------------------------------------------
40 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $96,474
and accumulated net realized loss has been decreased by $96,474.
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2007 2006
- ----------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income........................... $1,661,080 $1,357,244
Long-term capital gain.................... -- --
CLASS B
Distributions paid from:
Ordinary income........................... 422,424 367,743
Long-term capital gain.................... -- --
CLASS C
Distributions paid from:
Ordinary income........................... 20,374 17,027
Long-term capital gain.................... -- --
CLASS I
Distributions paid from:
Ordinary income........................... 8,585,459 6,063,477
Long-term capital gain.................... -- --
CLASS R2(A)
Distributions paid from:
Ordinary income........................... 121 N/A
Long-term capital gain.................... -- N/A
CLASS R3(A)
Distributions paid from:
Ordinary income........................... 129 N/A
Long-term capital gain.................... -- N/A
CLASS R4(B)
Distributions paid from:
Ordinary income........................... 4,185 3,966
Long-term capital gain.................... -- --
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 41
<Table>
<Caption>
YEAR ENDED JULY 31, 2007 2006
- ----------------------------------------------------------------------------
CLASS R5(A)
Distributions paid from:
Ordinary income........................... 144 N/A
Long-term capital gain.................... -- N/A
CLASS W(C)
Distributions paid from:
Ordinary income........................... 142 N/A
Long-term capital gain.................... -- N/A
</Table>
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(b) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007.
At July 31, 2007, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income.............................. $ 378,829
Undistributed accumulated long-term gain................... $ --
Accumulated realized loss.................................. $(2,830,266)
Unrealized appreciation (depreciation)..................... $(2,709,302)
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
On Sept. 20, 2006, the Financial Accounting Standards Board (FASB) released
Statement of Financial Accounting Standards No. 157 "Fair Value Measurements"
(SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets
out a framework for measuring fair value, and requires additional disclosures
about fair-value measurements. The application of SFAS 157 is required for
fiscal years beginning after Nov. 15, 2007 and interim periods within those
fiscal years. The impact of SFAS 157 on the Fund's financial statements is being
evaluated.
In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for
Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in accordance with FASB Statement 109, "Accounting for
Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a
tax position taken or expected to be taken in a tax return. The first step is to
determine whether a tax position has met the more-likely-than-not recognition
threshold and the second step is to measure a tax position that meets the
threshold to determine the amount of benefit to recognize. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after Dec. 15, 2006. Tax positions of the Fund are being
evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48
is not anticipated to have a material impact on the Fund.
- --------------------------------------------------------------------------------
42 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared daily and payable monthly, when
available, are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with the
last income dividend of the calendar year.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including amortization of premium, market discount and
original issue discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, 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 0.48%
to 0.29% annually as the Fund's assets increase. The management fee for the year
ended July 31, 2007, was 0.48% of the Fund's average daily net assets.
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.07% to 0.04% annually as the
Fund's assets increase.
Other expenses in the amount of $3,868 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.
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.
Professional fees include fees paid by the Fund for legal services and
independent registered public accounting firm services.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 43
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 per shareholder account for this service as follows:
- - Class A $20.50
- - Class B $21.50
- - Class C $21.00
Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as
Class R4, the fee structure under the Transfer Agency Agreement was revised from
an account-based fee for Class Y to an asset-based fee for Class R4. The Fund
pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the
Fund's average daily net assets attributable to Class R4 shares. Prior to Dec.
11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $18.50
per shareholder account.
In addition, the Fund pays the Transfer Agent an annual asset-based fee at a
rate of 0.05% of the Funds average daily net assets attributable to Class R2,
Class R3 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of
the Fund's average daily net assets attributable to Class W shares.
Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per
shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource
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 0.25% of the Fund's
average daily net assets attributable to Class A, Class R3 and Class W shares, a
fee at an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of
the Fund's average daily net assets attributable to Class B and Class C shares.
Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted
for the restructured Class R4 and the introduction of Class R2 and Class R3. The
fee is calculated at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares.
Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the
Distributor a fee for service provided to shareholders by the Distributor and
other servicing agents with respect to Class Y shares. The fee was calculated at
a rate of 0.10% of the Fund's average daily net assets attributable to Class Y
shares. Effective Dec. 11, 2006, this agreement was terminated.
- --------------------------------------------------------------------------------
44 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
Sales charges received by the Distributor for distributing Fund shares were
$101,452 for Class A, $15,438 for Class B and $114 for Class C for the year
ended July 31, 2007.
In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in which
it invests (also referred to as "acquired funds"), including affiliated and non-
affiliated pooled investment vehicles (including mutual funds and exchange
traded funds). Because the acquired funds have varied expense and fee levels and
the Fund may own different proportions of acquired funds at different times, the
amount of fees and expenses incurred indirectly by the Fund will vary.
For the year ended July 31, 2007, the Investment Manager and its affiliates
waived certain fees and expenses such that net expenses (excluding fees and
expenses of acquired funds) were 0.89% for Class A, 1.65% for Class B, 1.65% for
Class C, 0.54% for Class I, 1.30% for Class R2, 1.05% for Class R3, 0.73% for
Class R4, 0.55% for Class R5 and 0.95% for Class W. Of these waived fees and
expenses, the transfer agency fees waived for Class A, Class B, Class C, Class
R2, Class R3, Class R4, Class R5, and Class W were $30,843, $9,621, $458, $1,
$1, $77, $2 and $1, respectively, and the management fees waived at the Fund
level were $272,931. Under an agreement, which was effective until July 31,
2007, the Investment Manager and its affiliates contractually agreed to waive
certain fees and expenses such that net expenses (excluding fees and expenses of
acquired funds) would not exceed 0.89% for Class A, 1.65% for Class B, 1.66% for
Class C, 0.54% for Class I, 1.30% for Class R2, 1.05% for Class R3, 0.73% for
Class R4, 0.55% for Class R5 and 0.95% for Class W of the Fund's average daily
net assets. Effective August 1, 2007, the Investment Manager and its affiliates
have contractually agreed to wave certain fees and expenses (excluding fees and
expenses of acquired funds) such that net expenses will not exceed 0.89% for
Class A, 1.65% for Class B, 1.65% for Class C, 0.50% for Class I, 1.30% for
Class R2, 1.05% for Class R3, 0.77% for Class R4, 0.55% for Class R5 and 0.95%
for Class W of the Fund's average daily net assets, until July 31, 2008, unless
sooner terminated at the discretion of the Board.
During the year ended July 31, 2007, the Fund's custodian and transfer agency
fees were reduced by $3,105 as a result of earnings and bank fee credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $863,227,222 and $791,864,523, respectively, for the
year ended July 31, 2007. Realized gains and losses are determined on an
identified cost basis.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 45
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------------------
Class A 1,595,525 154,847 (1,389,995) 360,377
Class B 532,271 40,687 (650,636) (77,678)
Class C 30,029 1,958 (30,399) 1,588
Class I 12,642,580 888,099 (4,616,870) 8,913,809
Class R2(a) 518 -- -- 518
Class R3(a) 518 -- -- 518
Class R4(b) 9,495 396 (19,605) (9,714)
Class R5(a) 518 -- -- 518
Class W(c) 516 -- -- 516
- ---------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED JULY 31, 2006
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------------------
Class A 1,936,566 122,246 (2,314,283) (255,471)
Class B 625,431 34,948 (741,998) (81,619)
Class C 27,931 1,630 (30,424) (863)
Class I 10,067,076 627,362 (3,874,552) 6,819,886
Class R4(b) -- 374 (1) 373
- ---------------------------------------------------------------------------------------------
</Table>
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(b) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007.
5. INTEREST RATE FUTURES CONTRACTS
At July 31, 2007, investments in securities included securities valued at
$118,597 that were pledged as collateral to cover initial margin deposits on 89
open purchase contracts and 14 open sale contracts. The notional market value of
the open purchase contracts at July 31, 2007 was $14,631,360 with a net
unrealized gain of $154,843. The notional market value of the open sale
contracts at July 31, 2007 was $4,695,750 with a net unrealized loss of $21,136.
See "Summary of significant accounting policies" and "Notes to investments in
securities."
- --------------------------------------------------------------------------------
46 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
6. SWAP CONTRACTS
At July 31, 2007, the Fund had the following open CMBS total return swap
contracts:
<Table>
<Caption>
UNREALIZED
TERMINATION NOTIONAL APPRECIATION
DATE AMOUNT (DEPRECIATION)
- ----------------------------------------------------------------------------------
Receive total return on Lehman
Brothers Aaa 8.5+ Commercial
Mortgage-Backed Securities Index
and pay a floating rate based on
1-month LIBOR less 0.25%.
Counterparty: Wachovia Oct. 1, 2007 $2,725,000 $ (16,781)
Receive total return on Lehman
Brothers Baa 8.5+ Commercial
Mortgage-Backed Securities Index
and pay a floating rate based on
1-month LIBOR less 1.20%.
Counterparty: Citigroup Nov. 1, 2007 650,000 (35,512)
Receive total return on Lehman
Brothers Baa 8.5+ Commercial
Mortgage-Backed Securities Index
and pay a floating rate based on
1-month LIBOR less 1.10%.
Counterparty: Citigroup Dec. 1, 2007 650,000 (35,568)
Receive total return on Lehman
Brothers Baa 8.5+ Commercial
Mortgage-Backed Securities Index
and pay a floating rate based on
1-month LIBOR less 1.05%.
Counterparty: Wachovia Dec. 1, 2007 600,000 (32,787)
Receive spread on Lehman Brothers
Baa 8.5+ Commercial
Mortgage-Backed Securities Index
plus 1.00% times notional amount
plus spread return amount, if such
amount is positive, and pay the
absolute value of the spread
return amount, if such amount is
negative.
Counterparty: Citigroup Jan. 1, 2008 200,000 (14,268)
Receive total return on Lehman
Brothers Baa 8.5+ Commercial
Mortgage-Backed Securities Index
and pay a floating rate based on
1-month LIBOR plus 1.10%.
Counterparty: Wachovia Jan. 1, 2008 650,000 (35,492)
- ----------------------------------------------------------------------------------
Total $(170,408)
- ----------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 47
7. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. Cost of purchases
and proceeds from sales aggregated $196,644,362 and $135,320,227, respectively,
for the year ended July 31, 2007.
8. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The agreement went into effect Sept. 19, 2006. The Fund must maintain asset
coverage for borrowings of at least 300%. The agreement, which enables the Fund
to participate with other RiverSource funds, permits borrowings up to $500
million, collectively. Interest is charged to each Fund based on its borrowings
at a rate equal to either the higher of the Federal Funds Effective Rate plus
0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within
60 days after such loan is executed. 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. Prior to this agreement, the Fund paid a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.07% per
annum. The Fund had no borrowings under the facility outstanding during the year
ended July 31, 2007.
9. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, the Fund had a capital loss carry-over of
$2,158,756 at July 31, 2007, that if not offset by capital gains will expire as
follows:
<Table>
<Caption>
2014 2015
$526,700 $1,632,056
</Table>
The Fund also had a post-October loss of $671,510 at July 31, 2007.
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.
10. 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
- --------------------------------------------------------------------------------
48 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota. 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 may file a notice of appeal with the Eighth Circuit Court of Appeals
within 30 days from the date of judgment.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), the parent company of RiverSource Investments, LLC
(RiverSource Investments), entered into settlement agreements with the
Securities and Exchange Commission (SEC) and Minnesota Department of Commerce
(MDOC) related to market timing activities. In connection with these matters,
the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain
provisions of the federal and Minnesota securities laws by failing to adequately
disclose market timing activities by allowing certain identified market timers
to continue to market time contrary to disclosures in mutual fund and variable
annuity product prospectuses. The Orders also alleged that AEFC failed to
implement procedures to detect and prevent market timing in 401(k) plans for
employees of AEFC and related companies and failed to adequately disclose that
there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its employees.
As a result of the Orders, 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. Pursuant to the terms of the Orders, AEFC agreed to pay
disgorgement of $10 million and civil money penalties of $7 million. AEFC also
agreed to make presentations at least annually to its board of directors and the
relevant mutual funds' board that include an overview of policies and procedures
to prevent market timing, material changes to these policies and procedures and
whether disclosures related to market timing are consistent with the SEC order
and federal securities laws. 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. In
addition, AEFC agreed to complete and submit to the MDOC a compliance review of
its
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 49
procedures regarding market timing within one year of the MDOC Order, including
a summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
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.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
50 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
11. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B)
Net asset value, beginning of period $9.46 $9.72 $9.62 $9.49 $9.94
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .42(c) .36 .31 .26 .02
Net gains (losses) (both realized and
unrealized) .02 (.26) .11 .13 (.45)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .44 .10 .42 .39 (.43)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.42) (.36) (.32) (.26) (.02)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48 $9.46 $9.72 $9.62 $9.49
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $40 $36 $40 $65 $51
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) .89% .90% .94% .97% .96%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.39% 3.84% 3.09% 2.61% 1.80%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347% 301% 313% 310% 46%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 4.75% 1.13% 4.32% 4.06% (4.31%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 19, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class A would have been 1.09%, 1.12%, 1.04%, 1.06% and 2.56% for the
periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 51
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B)
Net asset value, beginning of period $9.47 $9.72 $9.62 $9.50 $9.94
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .35(c) .29 .23 .18 .01
Net gains (losses) (both realized and
unrealized) .01 (.25) .11 .12 (.44)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .36 .04 .34 .30 (.43)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.35) (.29) (.24) (.18) (.01)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48 $9.47 $9.72 $9.62 $9.50
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $10 $11 $12 $8 $2
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.65% 1.66% 1.69% 1.74% 1.73%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 3.62% 3.09% 2.39% 1.87% 1.37%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347% 301% 313% 310% 46%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 3.85% .42% 3.56% 3.18% (4.28%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 19, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 1.85%, 1.89%, 1.83%, 1.83% and 3.32% for the
periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
52 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B)
Net asset value, beginning of period $9.47 $9.72 $9.62 $9.50 $9.94
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .35(c) .29 .23 .18 .01
Net gains (losses) (both realized and
unrealized) .01 (.26) .11 .12 (.44)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .36 .03 .34 .30 (.43)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.35) (.28) (.24) (.18) (.01)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48 $9.47 $9.72 $9.62 $9.50
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1 $1 $1 $-- $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.65% 1.67% 1.69% 1.72% 1.64%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 3.63% 3.07% 2.40% 1.88% 1.51%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347% 301% 313% 310% 46%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 3.85% .42% 3.55% 3.17% (4.28%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 19, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 1.85%, 1.89%, 1.84%, 1.81% and 3.32% for the
periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 53
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004(B)
Net asset value, beginning of period $9.45 $9.71 $9.61 $9.79
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .45(c) .39 .33 .12
Net gains (losses) (both realized and
unrealized) .02 (.26) .11 (.18)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .47 .13 .44 (.06)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.46) (.39) (.34) (.12)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.46 $9.45 $9.71 $9.61
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $259 $174 $113 $63
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) .54% .58% .70% .70%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.75% 4.22% 3.42% 3.03%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347% 301% 313% 310%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 5.01% 1.47% 4.58% (.72%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (inception date) to July 31, 2004.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class I would have been 0.66%, 0.69%, 0.72% and 0.73% for the periods ended
July 31, 2007, 2006, 2005 and 2004, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
54 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $9.65
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .24(c)
Net gains (losses) (both realized and
unrealized) (.18)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .06
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.23)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.30%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.04%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347%
- -----------------------------------------------------------------------------------------------------------
Total return(h) .67%(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class R2 would have been 1.45% for the period ended July 31, 2007.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 55
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $9.65
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .26(c)
Net gains (losses) (both realized and
unrealized) (.19)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .07
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.24)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.05%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.29%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347%
- -----------------------------------------------------------------------------------------------------------
Total return(h) .83%(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class R3 would have been 1.18% for the period ended July 31, 2007.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
56 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS R4*
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B)
Net asset value, beginning of period $9.46 $9.72 $9.62 $9.49 $9.94
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .43(c) .38 .32 .27 .02
Net gains (losses) (both realized and
unrealized) .02 (.26) .11 .13 (.45)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .45 .12 .43 .40 (.43)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.44) (.38) (.33) (.27) (.02)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.47 $9.46 $9.72 $9.62 $9.49
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) .73% .74% .78% .80% .82%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.43% 4.01% 3.36% 2.78% 2.01%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347% 301% 313% 310% 46%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 4.81% 1.28% 4.49% 4.23% (4.30%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 19, 2003 (when shares became publicly available)
to July 31, 2003.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class R4 would have been 0.93%, 0.94%, 0.92%, 0.89% and 2.40% for the
periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 57
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $9.65
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .29(c)
Net gains (losses) (both realized and
unrealized) (.19)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .10
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.27)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) .55%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.78%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 1.14%(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class R5 would have been 0.71% for the period ended July 31, 2007.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
58 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $9.69
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .28(c)
Net gains (losses) (both realized and
unrealized) (.23)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .05
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.27)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.47
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) .95%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 4.41%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 347%
- -----------------------------------------------------------------------------------------------------------
Total return(h) .58%(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class W would have been 1.08% for the period ended July 31, 2007.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF RIVERSOURCE CORE BOND FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of RiverSource Core Bond Fund (the
Fund), one of the portfolios constituting the RiverSource Bond Series, Inc. as
of July 31, 2007, and the related statements of operations, changes in net
assets and financial highlights for the year 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 audit. The financial statements
and financial highlights of the Fund for the periods presented through July 31,
2006, were audited by other auditors whose report dated September 20, 2006,
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audit 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 audit 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 July 31, 2007, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 2007 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
RiverSource Core Bond Fund of the RiverSource Bond Series, Inc. at July 31,
2007, the results of its operations, changes in its net assets, and the
financial highlights for the year then ended, in conformity with U.S. generally
accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
September 20, 2007
- --------------------------------------------------------------------------------
60 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended July 31, 2007
CLASS A
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Aug. 28, 2006............................................... $0.03500
Sept. 25, 2006.............................................. 0.03600
Oct. 26, 2006............................................... 0.03750
Nov. 27, 2006............................................... 0.03750
Dec. 18, 2006............................................... 0.03751
Jan. 23, 2007............................................... 0.03751
Feb. 23, 2007............................................... 0.03300
March 26, 2007.............................................. 0.03300
April 25, 2007.............................................. 0.03300
May 25, 2007................................................ 0.03300
June 25, 2007............................................... 0.03400
July 25, 2007............................................... 0.03600
Total distributions......................................... $0.42302
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 61
CLASS B
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Aug. 28, 2006............................................... $0.02850
Sept. 25, 2006.............................................. 0.03046
Oct. 26, 2006............................................... 0.03136
Nov. 27, 2006............................................... 0.03113
Dec. 18, 2006............................................... 0.03330
Jan. 23, 2007............................................... 0.03036
Feb. 23, 2007............................................... 0.02686
March 26, 2007.............................................. 0.02680
April 25, 2007.............................................. 0.02703
May 25, 2007................................................ 0.02702
June 25, 2007............................................... 0.02790
July 25, 2007............................................... 0.02999
Total distributions......................................... $0.35071
</Table>
CLASS C
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Aug. 28, 2006............................................... $0.02844
Sept. 25, 2006.............................................. 0.03040
Oct. 26, 2006............................................... 0.03126
Nov. 27, 2006............................................... 0.03105
Dec. 18, 2006............................................... 0.03326
Jan. 23, 2007............................................... 0.03025
Feb. 23, 2007............................................... 0.02663
March 26, 2007.............................................. 0.02679
April 25, 2007.............................................. 0.02743
May 25, 2007................................................ 0.02680
June 25, 2007............................................... 0.02818
July 25, 2007............................................... 0.03016
Total distributions......................................... $0.35065
</Table>
- --------------------------------------------------------------------------------
62 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS I
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Aug. 28, 2006............................................... $0.03796
Sept. 25, 2006.............................................. 0.03852
Oct. 26, 2006............................................... 0.04030
Nov. 27, 2006............................................... 0.04040
Dec. 18, 2006............................................... 0.03938
Jan. 23, 2007............................................... 0.04078
Feb. 23, 2007............................................... 0.03580
March 26, 2007.............................................. 0.03582
April 25, 2007.............................................. 0.03572
May 25, 2007................................................ 0.03572
June 25, 2007............................................... 0.03677
July 25, 2007............................................... 0.03866
Total distributions......................................... $0.45583
</Table>
CLASS R2
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 18, 2006............................................... $0.01048
Jan. 23, 2007............................................... 0.03401
Feb. 23, 2007............................................... 0.02974
March 26, 2007.............................................. 0.02966
April 25, 2007.............................................. 0.02982
May 25, 2007................................................ 0.02982
June 25, 2007............................................... 0.03088
July 25, 2007............................................... 0.03287
Total distributions......................................... $0.22728
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 63
CLASS R3
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 18, 2006............................................... $0.01086
Jan. 23, 2007............................................... 0.03632
Feb. 23, 2007............................................... 0.03177
March 26, 2007.............................................. 0.03171
April 25, 2007.............................................. 0.03180
May 25, 2007................................................ 0.03179
June 25, 2007............................................... 0.03289
July 25, 2007............................................... 0.03482
Total distributions......................................... $0.24196
</Table>
CLASS R4*
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Aug. 28, 2006............................................... $0.03637
Sept. 25, 2006.............................................. 0.03717
Oct. 26, 2006............................................... 0.03880
Nov. 27, 2006............................................... 0.03885
Dec. 18, 2006............................................... 0.03888
Jan. 23, 2007............................................... 0.03922
Feb. 23, 2007............................................... 0.03430
March 26, 2007.............................................. 0.03425
April 25, 2007.............................................. 0.03425
May 25, 2007................................................ 0.03425
June 25, 2007............................................... 0.03509
July 25, 2007............................................... 0.03720
Total distributions......................................... $0.43863
</Table>
- --------------------------------------------------------------------------------
64 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
CLASS R5
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 18, 2006............................................... $0.01129
Jan. 23, 2007............................................... 0.04088
Feb. 23, 2007............................................... 0.03582
March 26, 2007.............................................. 0.03582
April 25, 2007.............................................. 0.03574
May 25, 2007................................................ 0.03574
June 25, 2007............................................... 0.03689
July 25, 2007............................................... 0.03870
Total distributions......................................... $0.27088
</Table>
CLASS W
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 0.00%
Dividends Received Deduction for corporations......... 0.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 18, 2006............................................... $0.03114
Jan. 23, 2007............................................... 0.03711
Feb. 23, 2007............................................... 0.03264
March 26, 2007.............................................. 0.03260
April 25, 2007.............................................. 0.03267
May 25, 2007................................................ 0.03254
June 25, 2007............................................... 0.03347
July 25, 2007............................................... 0.03566
Total distributions......................................... $0.26783
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 65
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. Each member oversees 102
RiverSource 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 Chief Justice, Minnesota Supreme
901 S. Marquette Ave. since 2006 Court, 1998-2005
Minneapolis, MN 55402
Age 53
- -----------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, RiverSource Funds,
901 S. Marquette Ave. since 1999 1999-2006; former Governor of
Minneapolis, MN 55402 Minnesota
Age 73
- -----------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member President, Springboard -- Partners
901 S. Marquette Ave. since 2007 in Cross Cultural Leadership
Minneapolis, MN 55402 (consulting company)
Age 52
- -----------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College; former
Minneapolis, MN 55402 Dean, McCallum Graduate School of
Age 56 Business, Bentley College
- -----------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 72
- -----------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive
901 S. Marquette Ave. since 2005 Asset Management Insurance
Minneapolis, MN 55402
Age 71
- -----------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries,
901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures
Minneapolis, MN 55402 Chair of the irrigation systems)
Age 68 Board since 2007
- -----------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
66 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic
901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc.
Minneapolis, MN 55402 estate and asset management (transportation,
Age 55 company) distribution and
logistics
consultants)
- -----------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc.
901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology);
Minneapolis, MN 55402 former President, Forester Biotech American Healthways,
Age 63 Inc. (health
management programs)
- -----------------------------------------------------------------------------------------------------
</Table>
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 President -- U.S. Asset Management
53600 Ameriprise since 2001, and Chief Investment Officer,
Financial Center Vice President Ameriprise Financial, Inc. and
Minneapolis, MN 55474 since 2002 President, Chairman of the Board
Age 47 and Chief Investment Officer,
RiverSource Investments, LLC since
2005; President, Ameriprise
Certificate Company since 2006;
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 CORE BOND FUND -- 2007 ANNUAL REPORT 67
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 Senior Vice President -- Asset Management,
172 Ameriprise 2006 RiverSource Investments, LLC since 2006;
Financial Center Managing Director and Global Head of Product,
Minneapolis, MN 55474 Morgan Stanley Investment Management,
Age 41 2004-2006; President, Touchstone Investments,
2002-2004; Director of Strategic Planning,
Evergreen Investments, 1995-2002
- ------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed
172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and
Financial Center RiverSource Investments, LLC since 2006; Vice
Minneapolis, MN 55474 President -- Investments, Ameriprise
Age 43 Certificate Company since 2003; Senior Vice
President -- Fixed Income, Ameriprise
Financial, Inc., 2002-2006 and RiverSource
Investments, LLC, 2004-2006; Managing
Director, Zurich Global Assets, 2001-2002
- ------------------------------------------------------------------------------------------
Amy K. Johnson Vice President Vice President -- Asset Management and Trust
5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC
Financial Center since 2006; Vice President -- Operations and
Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC,
Age 41 2004-2006; Director of Product
Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
- ------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting,
105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Vice
Financial Center President -- Finance, American Express
Minneapolis, MN 55474 Company, 2000-2002
Age 52
- ------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset
5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since
Financial Center and Secretary 2005; Vice President, General Counsel and
Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company
Age 47 since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc.,
2004-2005; Senior Vice President and Chief
Compliance Officer, U.S. Bancorp Asset
Management, 2002-2004; Second Vice President
and Assistant General Counsel, Hartford Life,
2001-2002
- ------------------------------------------------------------------------------------------
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance
172 Ameriprise Officer since Officer, RiverSource Investments, LLC since
Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset
Minneapolis, MN 55474 Management, 2003-2006; Director of Finance,
Age 46 Voyageur Asset Management, 2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
68 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering
2934 Ameriprise Prevention Officer, Ameriprise Financial, Inc. since
Financial Center Officer since 2004; Manager Anti-Money Laundering,
Minneapolis, MN 55474 2004 Ameriprise Financial, Inc., 2003-2004;
Age 43 Compliance Director and Bank Secrecy Act
Officer, American Express Centurion Bank,
2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 69
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC ("RiverSource"), a wholly-owned subsidiary of
Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment
manager to the Fund. Under an investment management services agreement (the "IMS
Agreement") RiverSource provides investment advice and other services to the
Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of
Directors (the "Board") and the Board's Investment Review and Contracts
Committees monitor these services throughout the year.
On an annual basis, the Board, including the independent Board members (the
"Independent Directors"), considers renewal of the IMS Agreement. RiverSource
prepares detailed reports for the Board and its Contracts Committee in March and
April, including reports based on data provided by independent organizations to
assist the Board in making this determination. In addition, throughout the year,
the Board (or its committees) reviews information prepared by RiverSource
addressing the services RiverSource provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts and Investment Review Committees in determining whether to continue
the IMS Agreement. At the April 11-12, 2007 in-person Board meeting, independent
legal counsel to the Independent Directors reviewed with the Independent
Directors various factors relevant to the Board's consideration of advisory
agreements and the Board's legal responsibilities related to such consideration.
Following an analysis and discussion of the factors identified below, the Board,
including all of the Independent Directors, approved renewal of the IMS
Agreement.
Nature, Extent and Quality of Services Provided by RiverSource: The Board
analyzed various reports and presentations it had received detailing the
services performed by RiverSource, as well as its expertise, resources and
capabilities. The Board specifically considered many developments during the
past year concerning the services provided by RiverSource, including, in
particular, the growing strength and capabilities of many RiverSource offices
and the increased investment and resources dedicated to the Fund's operations,
particularly in the areas of trading systems, legal and compliance. Further, in
connection with the Board's evaluation of the overall package of services
provided by RiverSource, the Board considered the quality of the administrative,
custody and transfer agency services provided by RiverSource affiliates to the
Fund. The Board also reviewed the financial condition of RiverSource and the
entity's ability to carry out its responsibilities under the IMS Agreement. The
Board also discussed the acceptability of the terms of the IMS Agreement
(including the relatively broad scope of services required to be performed by
RiverSource). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality.
- --------------------------------------------------------------------------------
70 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board determined that RiverSource was in a
position to continue to provide a high quality and level of services to the
Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods (including since inception), recent Fund
inflows (and outflows) and a comparison of the Fund's net assets from December
2006 to December 2005. The Board observed that the Fund's investment performance
was appropriate in light of the particular management style and market
conditions involved.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource and its Affiliates from their Relationships with the Fund: The
Board reviewed comparative fees and the costs of services to be provided under
the IMS Agreement. The Board members considered detailed comparative information
set forth in an annual report on fees and expenses, including, among other
things, data (prepared by an independent organization) showing a comparison of
the Fund's expenses with median expenses paid by funds in its peer group, as
well as data showing the Fund's contribution to RiverSource's profitability. The
Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund, with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was below the peer group's median expense ratio shown in the
reports. Based on its review, the Board concluded that the Fund's management fee
was fair and reasonable in light of the extent and quality of services that the
Fund receives.
The Board also considered the expected profitability of RiverSource and its
affiliates in connection with RiverSource providing investment management
services to the Fund. In this regard, the Board referred to a detailed
profitability report, discussing the profitability to RiverSource and Ameriprise
Financial from managing and operating the Fund, including data showing
comparative profitability. The Board also considered the services acquired by
the investment manager through the use of commission dollars paid by the Funds
on portfolio transactions. The Board noted that the fees paid by the Fund should
permit the
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 71
investment manager to offer competitive compensation to its personnel, make
necessary investments in its business and earn an appropriate profit. The Board
concluded that profitability levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource as the Fund grows and took note of
the extent to which Fund shareholders might also benefit from such growth. The
Board considered that the IMS Agreement provides for lower fees as assets
increase at pre-established breakpoints and concluded that the IMS Agreement
satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 12, 2007, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement.
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.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent
registered public accounting firm for the 2007 fiscal year. A majority of the
Fund's Board of Directors, including a majority of the Independent Directors,
approved the appointment of Ernst & Young LLP. The predecessor independent
registered public accounting firm's reports on the Fund's financial statements
for the year ended July 31, 2006 and the year ended July 31, 2005 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During such fiscal periods
and through April 12, 2007 there were no disagreements between the Fund and the
predecessor independent registered public accounting firm on any matter of
- --------------------------------------------------------------------------------
72 RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which such disagreements, if not resolved to the
satisfaction of the predecessor independent registered public accounting firm,
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports on the financial statements for
such fiscal periods.
- --------------------------------------------------------------------------------
RIVERSOURCE CORE BOND FUND -- 2007 ANNUAL REPORT 73
THIS PAGE LEFT BLANK INTENTIONALLY
THIS PAGE LEFT BLANK INTENTIONALLY
THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED
PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS.
<Table>
GROWTH FUNDS
RiverSource Growth Fund
RiverSource Fundamental Growth Fund
RiverSource Disciplined Large Cap
Growth Fund
RiverSource Mid Cap Growth Fund
RiverSource Aggressive Growth Fund
RiverSource Small Cap Growth Fund
Sector: RiverSource Global
Technology Fund
BLEND FUNDS
RiverSource Disciplined Equity Fund
RiverSource Large Cap Equity Fund
RiverSource S&P 500 Index Fund*
RiverSource Disciplined Small and
Mid Cap Equity Fund
RiverSource Small Cap Advantage
Fund
RiverSource Small Company Index
Fund
RiverSource Small Cap Equity Fund
Sector: RiverSource Precious Metals
and Mining Fund
VALUE FUNDS
RiverSource Dividend Opportunity
Fund
RiverSource Value Fund
RiverSource Fundamental Value Fund
RiverSource Equity Value Fund
RiverSource Large Cap Value Fund
RiverSource Diversified Equity
Income Fund
RiverSource Select Value Fund
RiverSource Mid Cap Value Fund
RiverSource Disciplined Small Cap
Value Fund
RiverSource Small Cap Value Fund
Sector: RiverSource Real Estate
Fund
ASSET ALLOCATION FUNDS
RiverSource Portfolio Builder
Conservative Fund
RiverSource Income Builder Basic
Income Fund
RiverSource Income Builder Moderate
Income Fund
RiverSource Income Builder Enhanced
Income Fund
RiverSource Portfolio Builder
Moderate Conservative Fund
RiverSource Portfolio Builder
Moderate Fund
RiverSource Retirement Plus(SM)
2010 Fund
RiverSource Balanced Fund
RiverSource Portfolio Builder
Moderate Aggressive Fund
RiverSource Retirement Plus(SM)
2015 Fund
RiverSource Strategic Allocation
Fund
RiverSource Retirement Plus(SM)
2020 Fund
RiverSource Portfolio Builder
Aggressive Fund
RiverSource Retirement Plus(SM)
2025 Fund
RiverSource Retirement Plus(SM)
2030 Fund
RiverSource Retirement Plus(SM)
2035 Fund
RiverSource Retirement Plus(SM)
2040 Fund
RiverSource Retirement Plus(SM)
2045 Fund
RiverSource Portfolio Builder Total
Equity Fund
</Table>
- --------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
<Table>
TAXABLE INCOME FUNDS
RiverSource Cash Management Fund**
RiverSource Short Duration U.S.
Government Fund
RiverSource U.S. Government
Mortgage Fund
RiverSource Inflation Protected
Securities Fund
RiverSource Floating Rate Fund
RiverSource Limited Duration Bond
Fund
RiverSource Core Bond Fund
RiverSource Diversified Bond Fund
RiverSource Strategic Income
Allocation Fund
RiverSource Income Opportunities
Fund
RiverSource High Yield Bond Fund
RiverSource Global Bond Fund
RiverSource Emerging Markets Bond
Fund
TAX-EXEMPT FUNDS
RiverSource Tax-Exempt Money Market
Fund**
RiverSource Intermediate Tax-Exempt
Fund
RiverSource Tax-Exempt Bond Fund
RiverSource State Tax-Exempt Funds
RiverSource Tax-Exempt High Income
Fund
GLOBAL/INTERNATIONAL FUNDS
RiverSource Global Equity Fund
RiverSource International Select
Value Fund
RiverSource International Equity
Fund
RiverSource Disciplined
International Equity Fund
RiverSource International
Opportunity Fund
RiverSource International Small Cap
Fund
RiverSource International
Aggressive Growth Fund
RiverSource European Equity Fund
RiverSource Emerging Markets 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 & Poor's(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 A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH A MONEY MARKET FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT
AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN A MONEY
MARKET FUND.
- --------------------------------------------------------------------------------
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
RIVERSOURCE(R) CORE BOND 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 Ameriprise Financial Services, Inc., Members FINRA, and
managed by
(RIVERSOURCE INVESTMENTS RiverSource Investments, LLC. These companies are part of
LOGO) Ameriprise Financial, Inc. S-6267 G (9/07)
</Table>