UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-5522
RIVERSOURCE SECTOR SERIES, INC.
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 6/30
Date of reporting period: 12/31
Semiannual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE(R)
DIVIDEND OPPORTUNITY FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
DECEMBER 31, 2007
RIVERSOURCE DIVIDEND OPPORTUNITY
FUND SEEKS TO PROVIDE SHAREHOLDERS
WITH A HIGH LEVEL OF CURRENT
INCOME. SECONDARY OBJECTIVE IS
GROWTH OF INCOME AND CAPITAL.
TABLE OF CONTENTS
<Table>
Fund Snapshot....................... 2
Performance Summary................. 4
Questions & Answers
with Portfolio Management........ 6
Fund Expenses Example............... 9
Portfolio of Investments............ 11
Financial Statements................ 16
Notes to Financial Statements....... 21
Proxy Voting........................ 38
Change in Independent Registered
Public Accounting Firm........... 39
</Table>
(DALBAR LOGO)
The RiverSource mutual fund
shareholder reports have been
awarded the Communications Seal
from Dalbar Inc., an independent
financial services research firm.
The Seal recognizes communications
demonstrating a level of
excellence in the industry.
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RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 1
FUND SNAPSHOT AT DEC. 31, 2007 (UNAUDITED)
FUND OBJECTIVE
RiverSource Dividend Opportunity Fund seeks to provide shareholders with a high
level of current income. Secondary objective is growth of income and capital.
SECTOR BREAKDOWN*
Percentage of portfolio assets
(PIE CHART)
<Table>
Other(1) 24.9%
Materials 8.8%
Utilities 8.8%
Consumer Staples 12.3%
Financials 18.3%
Energy 14.1%
Telecommunication Services 12.8%
</Table>
* Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
(1) Includes Health Care 7.5%, Industrials 7.2%, Consumer Discretionary 4.5%,
Information Technology 2.1% and Cash & Cash Equivalents(2) 3.6%
(2) Of the 3.6%, 3.2% is due to security lending activity and 0.4% is the
Fund's cash equivalent position.
TOP TEN HOLDINGS
Percentage of portfolio assets
<Table>
AT&T 4.7%
Chevron 3.7%
Loews-Carolina Group 3.1%
BP ADR 2.8%
Lehman Brothers Holdings
10.06% 2008 2.7%
Bank of America 2.6%
Pfizer 2.4%
Altria Group 2.3%
Verizon Communications 2.2%
Merck & Co 2.2%
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
FUND SNAPSHOT AT DEC. 31, 2007 (UNAUDITED)
STYLE MATRIX
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
</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
Warren Spitz 23
Steve Schroll 26
Laton Spahr, CFA 9
Paul Stocking 20
</Table>
FUND FACTS
<Table>
<Caption>
TICKER
SYMBOL INCEPTION DATE
Class A INUTX 08/01/88
Class B IUTBX 03/20/95
Class C ACUIX 06/26/00
Class I RSOIX 03/04/04
Class R4 -- 03/20/95
Class W -- 12/01/06
Total net assets $2.022 billion
Number of holdings 123
</Table>
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RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 3
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended Dec. 31, 2007
(BAR CHART)
<Table>
RiverSource Dividend Opportunity Fund Class A
(excludes sales charge) -3.56%
Russell 1000(R) Value Index(1) (unmanaged) -6.03%
Lipper Equity Income Funds Index(2) -4.18%
</Table>
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 5.75% 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.
(1) The Russell 1000(R) Value Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. The index reflects
reinvestment of all distributions and changes in market prices.
(2) The Lipper Equity Income Funds Index includes the 30 largest equity income
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends. The Fund's performance is currently measured against this index
for purposes of determining the performance incentive adjustment.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
<Table>
<Caption>
TOTAL NET EXPENSES
Class A 1.15% 1.15%
Class B 1.91% 1.91%
Class C 1.91% 1.91%
Class I 0.76% 0.76%
Class R4 1.05% 1.04%(a)
Class W 1.19% 1.19%
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until June 30, 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), before giving
effect to any performance incentive adjustment (that increased the
management fee by 0.08%), will not exceed 0.96% for Class R4.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
AT DEC. 31, 2007
SINCE
WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
Class A (inception 8/1/88) -3.56% +5.47% +11.77% +13.11% +5.75% +9.94%
Class B (inception 3/20/95) -3.96% +4.70% +10.95% +12.27% +4.95% +8.65%
Class C (inception 6/26/00) -3.93% +4.66% +10.93% +12.27% N/A +2.70%
Class I (inception 3/4/04) -3.38% +5.85% +12.18% N/A N/A +12.70%
Class R4 (inception 3/20/95) -3.22% +5.88% +12.02% +13.36% +5.95% +9.66%
Class W (inception 12/1/06) -3.59% +5.49% N/A N/A N/A +7.58%
</Table>
<Table>
<Caption>
With sales charge
Class A (inception 8/1/88) -9.13% -0.64% +9.57% +11.78% +5.21% +9.65%
Class B (inception 3/20/95) -8.72% -0.30% +9.85% +12.02% +4.95% +8.65%
Class C (inception 6/26/00) -4.89% +3.66% +10.93% +12.27% N/A +2.70%
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second 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 R4 and Class W shares. Class I and Class R4 are
available to institutional investors only. Class W shares are offered through
qualifying discretionary accounts.
* Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 5
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, portfolio managers Warren Spitz, Steve Schroll, Laton Spahr and Paul
Stocking discuss RiverSource Dividend Opportunity Fund's results and positioning
for the six months ended Dec. 31, 2007.
Q: How did RiverSource Dividend Opportunity Fund perform for the first half of
the fiscal year?
A: RiverSource Dividend Opportunity Fund's Class A shares declined 3.56%
(excluding sales charge) for the six months ended Dec. 31, 2007. The Fund
outperformed the Russell 1000(R) Value Index (Russell Index), which decreased
6.03%. Also, the Fund outperformed its peer group, as represented by the
Lipper Equity Income Funds Index (Lipper Index), which fell 4.18% during the
same period.
Q: What factors most significantly affected performance?
A: The first half of the fiscal year was characterized by accelerated weakness
in the housing and subprime mortgage markets. This weakness pervaded the
financials sector, the largest weighting in the Russell Index, and impacted
the consumer discretionary sector as well. The resulting equity market
decline was only partially mitigated during the six months by comparatively
stronger performance in the consumer staples and energy sectors.
Dividend-paying stocks overall lagged those that did not pay dividends during
the period. However, this was solely due to the financials sector
performance, as the other sectors that traditionally pay high dividends,
including utilities, energy and consumer staples, performed well but
represent smaller constituents of the Russell Index. With these factors in
mind, it's worth mentioning that the Fund's dividend yield remained high
relative to its peer group, as represented by the Lipper Index.
The Fund's exposure to the strongly performing utilities and materials
sectors contributed positively to the Fund's performance during the period.
Within utilities, a position in Enbridge helped in particular. Within
materials, Rio Tinto and Compass Minerals Intl were standout individual
performers. Elsewhere, tobacco company Loews-Carolina Group, offshore
drilling firm Transocean and pharmaceutical company Merck & Co were strong
individual performers. Within health care, Merck's performance more than
offset disappointing results from Biovail and Bristol-Myers Squibb.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
Detracting from performance was stock selection within the integrated oils
industry. Most notably, not having a position in the strongly performing
Exxon Mobil hurt the Fund's results. So, too, did having a sizable allocation
to the poorly performing BP.
Q: What changes did you make to the Fund's portfolio?
A: We further reduced the Fund's already moderate position in the financials
sector, trimming especially the Fund's exposure to regional banks. We
redeployed the proceeds from those sales primarily into the information
technology and consumer staples sectors, adding to positions in Coca-Cola,
Loews-Carolina Group, Intel and Microsoft. Other than these, we made no
significant changes to the Fund's portfolio during the period, maintaining a
low 6% turnover rate.
WE BELIEVE THOSE SELECT COMPANIES WITH THE ABILITY AND WILLINGNESS TO
INCREASE THEIR DIVIDEND PAYOUT RATIO AS THEIR EARNINGS GROW WILL BE
PARTICULARLY ATTRACTIVE INVESTMENTS GOING FORWARD.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: Over the past several months, the global macroeconomic environment has
grown increasingly uncertain. In response to this cloudiness, we have
increased our emphasis on individual stock selection. This focus has recently
led us to new ideas in sectors such as health care and information
technology, which we believe will complement the Fund's sustained greater
exposure to cyclical industries, including producer durables and energy. At
the same time, we intend to maintain modest exposure to financial services in
favor of more attractive sectors, given ongoing concerns regarding the
capital and credit markets in the United States.
As always, we take larger positions in sectors, industries or individual
stocks when we believe we have identified factors that other investors have
either missed, ignored or strongly disagree with, and that have the potential
to move the share values higher. We intend to focus on larger-cap stocks and
to continue to add stocks offering greater dividend yield. Of course, we
continue to carefully monitor economic data and shifts in market conditions
as we seek
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 7
QUESTIONS & ANSWERS
stock-specific and industry-level opportunities to add value for our
shareholders.
We remain optimistic about dividend-paying stocks. We believe those select
companies with the ability and willingness to increase their dividend payout
ratio as their earnings grow will be particularly attractive investments
going forward. In addition, stock dividends have historically outpaced the
inflation rate. Given these factors and the many other historical benefits of
dividend-paying stocks, we expect that investors will be willing to pay more
for companies that demonstrate dividend growth as part of a total return
strategy going forward. We continue to seek a diversified mix of
dividend-paying stocks, with a focus on large-cap, value-oriented companies.
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource Fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource Fund.
- --------------------------------------------------------------------------------
8 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
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 Dec. 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.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 9
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JULY 1, 2007 DEC. 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class A
Actual(b) $1,000 $ 964.40 $5.61 1.13%
Hypothetical
(5% return before
expenses) $1,000 $1,019.56 $5.77 1.13%
Class B
Actual(b) $1,000 $ 960.40 $9.36 1.89%
Hypothetical
(5% return before
expenses) $1,000 $1,015.72 $9.63 1.89%
Class C
Actual(b) $1,000 $ 960.70 $9.37 1.89%
Hypothetical
(5% return before
expenses) $1,000 $1,015.72 $9.63 1.89%
Class I
Actual(b) $1,000 $ 966.20 $3.73 .75%
Hypothetical
(5% return before
expenses) $1,000 $1,021.48 $3.83 .75%
Class R4
Actual(b) $1,000 $ 967.80 $5.17 1.04%
Hypothetical
(5% return before
expenses) $1,000 $1,020.02 $5.31 1.04%
Class W
Actual(b) $1,000 $ 964.10 $5.96 1.20%
Hypothetical
(5% return before
expenses) $1,000 $1,019.21 $6.12 1.20%
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 185/366 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Dec. 31, 2007: -3.56%
for Class A, -3.96% for Class B, -3.93% for Class C, -3.38% for Class I,
-3.22% for Class R4 and -3.59% for Class W.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS
DEC. 31, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (96.2%)
ISSUER SHARES VALUE(A)
AEROSPACE & DEFENSE (0.9%)
Honeywell Intl 291,299 $17,935,279
- --------------------------------------------------------------------------------------
AUTOMOBILES (0.6%)
Ford Motor 1,289,725(b) 8,679,849
General Motors 106,322 2,646,355
---------------
Total 11,326,204
- --------------------------------------------------------------------------------------
BEVERAGES (2.3%)
Coca-Cola 412,515 25,316,045
Diageo ADR 249,719(c) 21,433,382
---------------
Total 46,749,427
- --------------------------------------------------------------------------------------
CHEMICALS (4.3%)
Air Products & Chemicals 120,028 11,838,362
Dow Chemical 533,445 21,028,402
Eastman Chemical 173,590 10,604,613
EI du Pont de
Nemours & Co 864,340 38,108,750
Olin 245,638 4,748,183
---------------
Total 86,328,310
- --------------------------------------------------------------------------------------
COMMERCIAL BANKS (6.9%)
Comerica 83,004 3,613,164
HSBC Holdings 685,220(c) 11,517,242
KeyCorp 138,808 3,255,048
Lloyds TSB Group 759,380(c) 7,135,390
Natl Australia Bank 764,003(c) 25,121,528
PNC Financial Services Group 69,459 4,559,983
Regions Financial 553,217 13,083,582
Royal Bank of Scotland Group 900,569(c) 7,934,352
US Bancorp 1,102,268 34,985,986
Wachovia 502,741 19,119,240
Wells Fargo & Co 284,817 8,598,625
---------------
Total 138,924,140
- --------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (2.2%)
Deluxe 358,601 11,794,387
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
COMMERCIAL SERVICES & SUPPLIES (CONT.)
Pitney Bowes 352,499 $13,409,062
RR Donnelley & Sons 394,839 14,901,223
Waste Management 157,983 5,161,305
---------------
Total 45,265,977
- --------------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.8%)
Packaging Corp of America 594,973 16,778,239
- --------------------------------------------------------------------------------------
DISTRIBUTORS (0.4%)
Genuine Parts 168,088 7,782,474
- --------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (6.4%)
Bank of America 1,315,263 54,267,752
Citigroup 1,403,698 41,324,869
JPMorgan Chase & Co 650,436 28,391,531
KKR Financial Holdings LLC 326,144 4,582,323
---------------
Total 128,566,475
- --------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (12.7%)
AT&T 2,375,260 98,715,806
BT Group 3,991,269(c) 21,514,437
Citizens Communications 1,166,140 14,844,962
Deutsche Telekom ADR 764,056(c) 16,557,094
Embarq 466,061 23,084,001
Telefonos de Mexico ADR Series L 482,884(c) 17,789,447
Telstra 2,687,800(c) 10,995,509
Verizon Communications 1,046,210 45,708,915
Windstream 526,195 6,851,059
---------------
Total 256,061,230
- --------------------------------------------------------------------------------------
ELECTRIC UTILITIES (3.6%)
American Electric Power 218,228 10,160,696
Duke Energy 721,640 14,555,479
</Table>
See accompanying notes to portfolio of investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 11
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ELECTRIC UTILITIES (CONT.)
FPL Group 274,869 $18,630,621
Pinnacle West Capital 219,698 9,317,392
Progress Energy 175,724 8,510,313
Southern 210,661 8,163,114
UIL Holdings 104,020 3,843,539
---------------
Total 73,181,154
- --------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.6%)
Hubbell Cl B 248,114 12,802,682
- --------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (2.7%)
Halliburton 404,223 15,324,094
Schlumberger 123,739 12,172,205
Transocean 183,515(b) 26,270,173
---------------
Total 53,766,472
- --------------------------------------------------------------------------------------
FOOD PRODUCTS (2.7%)
B&G Foods Cl A 554,919 5,665,723
ConAgra Foods 431,226 10,258,867
Kraft Foods Cl A 456,691 14,901,827
Reddy Ice Holdings 697,940 17,664,861
Sara Lee 388,379 6,237,367
---------------
Total 54,728,645
- --------------------------------------------------------------------------------------
GAS UTILITIES (0.8%)
Nicor 388,478(e) 16,452,043
- --------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (0.2%)
Health Management Associates Cl A 571,610 3,418,228
- --------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (1.4%)
Newell Rubbermaid 234,984 6,081,386
Tupperware Brands 669,064 22,099,184
---------------
Total 28,180,570
- --------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.2%)
General Electric 1,053,266 39,044,571
Tomkins 1,417,186(c) 4,974,064
---------------
Total 44,018,635
- --------------------------------------------------------------------------------------
INSURANCE (2.1%)
Lincoln Natl 107,549 6,261,503
Marsh & McLennan Companies 126,739 3,354,781
Montpelier Re Holdings 558,748(c) 9,504,303
Unitrin 87,109 4,180,361
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
INSURANCE (CONT.)
XL Capital Cl A 399,125(c) $20,079,979
---------------
Total 43,380,927
- --------------------------------------------------------------------------------------
MACHINERY (0.7%)
Harsco 222,114 14,230,844
- --------------------------------------------------------------------------------------
MARINE (0.1%)
Aries Maritime Transport 430,889(c) 2,800,779
- --------------------------------------------------------------------------------------
MEDIA (2.3%)
Cinemark Holdings 184,788 3,141,396
GateHouse Media 341,029(e) 2,994,235
Idearc 119,592 2,100,036
Natl CineMedia 631,934 15,931,056
Regal Entertainment Group Cl A 1,065,340(e) 19,250,693
RH Donnelley 83,832(b) 3,058,191
---------------
Total 46,475,607
- --------------------------------------------------------------------------------------
METALS & MINING (2.7%)
Compass Minerals Intl 500,027 20,501,107
Rio Tinto ADR 45,186(c) 18,973,601
Southern Copper 140,797(e) 14,801,989
---------------
Total 54,276,697
- --------------------------------------------------------------------------------------
MULTI-UTILITIES (4.7%)
Ameren 97,171 5,267,640
CH Energy Group 79,934 3,560,260
Consolidated Edison 266,580(e) 13,022,433
Dominion Resources 225,121 10,681,991
DTE Energy 183,825 8,080,947
Energy East 342,116 9,308,976
Natl Grid 1,426,209(c) 23,602,105
NiSource 290,362 5,484,938
NSTAR 126,095 4,567,161
Public Service Enterprise Group 112,973 11,098,468
---------------
Total 94,674,919
- --------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (11.9%)
Arlington Tankers 128,754(c) 2,849,326
BP ADR 804,979(c) 58,900,313
Chevron 831,916 77,642,720
Enbridge 741,990(c) 29,998,656
Enbridge Energy Management LLC 1(b) 27
Eni 507,522(c) 18,490,390
</Table>
See accompanying notes to portfolio of investments.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
OIL, GAS & CONSUMABLE FUELS (CONT.)
Kinder Morgan Management LLC 1(b) $52
Royal Dutch Shell ADR 336,994(c) 28,374,895
Ship Finance Intl 179,283(c) 4,967,932
Spectra Energy 360,818 9,316,321
TransCanada 259,597(c) 10,625,305
---------------
Total 241,165,937
- --------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (1.3%)
Intl Paper 193,480 6,264,882
MeadWestvaco 406,295 12,717,034
Stora Enso Series R 506,134(c) 7,542,320
---------------
Total 26,524,236
- --------------------------------------------------------------------------------------
PHARMACEUTICALS (7.3%)
Biovail 620,265(c) 8,348,767
Bristol-Myers Squibb 795,274 21,090,666
Johnson & Johnson 243,070 16,212,769
Merck & Co 779,938 45,322,197
Pfizer 2,211,910 50,276,715
Schering-Plough 56,137 1,495,490
Wyeth 127,149 5,618,714
---------------
Total 148,365,318
- --------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.1%)
Intel 440,139 11,734,106
Microchip Technology 498,587 15,665,603
Taiwan Semiconductor Mfg ADR 1,544,275(c) 15,380,979
---------------
Total 42,780,688
- --------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Capitol Federal Financial 132,922(e) 4,120,582
Fannie Mae 113,926 4,554,761
---------------
Total 8,675,343
- --------------------------------------------------------------------------------------
TOBACCO (7.7%)
Altria Group 632,141 47,777,217
Loews-Carolina Group 752,406(g) 64,180,232
Reynolds American 667,101(e) 44,001,982
---------------
Total 155,959,431
- --------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
TRADING COMPANIES & DISTRIBUTORS (0.7%)
Babcock & Brown Air ADR 764,865(b,c,e) $13,928,192
- --------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.5%)
Vodafone Group ADR 266,468(c) 9,944,586
- --------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $1,662,501,807 $1,945,449,688
- --------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
BONDS (2.8%)
COUPON PRINCIPAL
ISSUER RATE AMOUNT VALUE(A)
OTHER FINANCIAL INSTITUTIONS
Lehman Brothers Holdings
10.06% Cv
02-08-08 10.06% $60,000,000(d,h,j) $56,172,000
- --------------------------------------------------------------------------------------
TOTAL BONDS
(Cost: $60,000,000) $56,172,000
- --------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PREFERRED STOCKS & OTHER (0.5%)
ISSUER SHARES VALUE(A)
Schering-Plough
6.00% Cv 20,400 $4,961,076
XL Capital
7.00% Cv 255,800(c) 4,865,316
- ------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS & OTHER
(Cost: $11,514,662) $9,826,392
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (3.7%)(f)
SHARES VALUE(A)
RiverSource Short-Term Cash Fund 75,235,746(i) $75,235,746
- ------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $75,235,746) $75,235,746
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,809,252,215)(k) $2,086,683,826
====================================================================================
</Table>
See accompanying notes to portfolio of investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 13
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2007, the
value of foreign securities represented 21.5% 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 Dec. 31,
2007, the value of these securities amounted to $58,576,824 or 2.9% of net
assets.
(e) At Dec. 31, 2007, security was partially or fully on loan. See Note 5 to
the financial statements.
(f) Cash collateral received from security lending activity is invested in an
affiliated money market fund and represents 3.3% of net assets. See Note 5
to the financial statements. The Fund's cash equivalent position is 0.4% of
net assets.
(g) Shareholders of tracking stocks have a financial interest only in a unit or
division of the company. Unlike the common stock of the company itself, a
tracking stock usually has limited or no voting rights. In the event of a
company's liquidation, tracking stock shareholders typically do not have a
legal claim on the company's assets.
(h) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). These securities may be valued at fair
value according to procedures approved, in good faith, by the Fund's Board
of Directors. Information concerning such security holdings at Dec. 31,
2007, is as follows:
<Table>
<Caption>
ACQUISITION
SECURITY DATES COST
- ---------------------------------------------------------------------------------
Lehman Brothers Holdings*
10.06% Cv 07-31-07 $60,000,000
</Table>
* Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended.
(i) Affiliated Money Market Fund - See Note 6 to the financial statements.
(j) This privately issued security is an aggregate mandatory exchangeable note
whose investment results are designed to correspond generally to the
performance of a specific basket of common stocks. Upon maturity, the
security will be exchanged for either cash or at the option of the issues,
the issuer may deliver shares of the referenced securities.
(k) At Dec. 31, 2007, the cost of securities for federal income tax purposes
was approximately $1,809,252,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $388,936,000
Unrealized depreciation (111,504,000)
- ------------------------------------------------------------------------------
Net unrealized appreciation $277,432,000
- ------------------------------------------------------------------------------
</Table>
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DEC. 31, 2007 (UNAUDITED)
<Table>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $1,734,016,469) $2,011,448,080
Affiliated money market fund (identified cost
$75,235,746) 75,235,746
- ------------------------------------------------------------------------------
Total investments in securities (identified cost
$1,809,252,215) 2,086,683,826
Capital shares receivable 1,568,417
Dividends and accrued interest receivable 5,702,833
- ------------------------------------------------------------------------------
Total assets 2,093,955,076
- ------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 1,205,229
Payable for investment securities purchased 2,342,945
Payable upon return of securities loaned 66,883,500
Accrued investment management services fee 96,826
Accrued distribution fee 764,864
Accrued transfer agency fee 14,311
Accrued administrative services fee 8,993
Accrued plan administration services fee 496
Other accrued expenses 148,499
- ------------------------------------------------------------------------------
Total liabilities 71,465,663
- ------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $2,022,489,413
==============================================================================
</Table>
- --------------------------------------------------------------------------------
16 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DEC. 31, 2007 (UNAUDITED)
<Table>
REPRESENTED BY
Capital stock -- $.01 par value $ 2,203,882
Additional paid-in capital 2,107,809,767
Undistributed net investment income 5,864,087
Accumulated net realized gain (loss) (370,805,492)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies 277,417,169
- ------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $2,022,489,413
==============================================================================
</Table>
<Table>
Net assets applicable to outstanding
shares: Class A $1,498,641,356
Class B $ 227,403,983
Class C $ 27,460,819
Class I $ 267,823,140
Class R4 $ 1,154,890
Class W $ 5,225
Net asset value per share of outstanding
capital stock: Class A shares(1) 163,198,548 $ 9.18
Class B shares 24,942,266 $ 9.12
Class C shares 3,017,175 $ 9.10
Class I shares 29,104,207 $ 9.20
Class R4 shares 125,461 $ 9.21
Class W shares 568 $ 9.20
- --------------------------------------------------------------------------------------------
* Including securities on loan, at value $ 64,389,110
- --------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $9.74. The offering
price is calculated by dividing the net asset value by 1.0 minus the
maximum sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 17
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DEC. 31, 2007 (UNAUDITED)
<Table>
INVESTMENT INCOME
Income:
Dividends $ 36,103,423
Interest 3,168,853
Income distributions from affiliated money market fund 760,751
Fee income from securities lending 222,033
Less foreign taxes withheld (662,671)
- -----------------------------------------------------------------------------
Total income 39,592,389
- -----------------------------------------------------------------------------
Expenses
Investment management services fee 6,789,393
Distribution fee
Class A 1,905,600
Class B 1,232,962
Class C 136,440
Class W 7
Transfer agency fee
Class A 1,037,780
Class B 179,620
Class C 19,186
Class R4 311
Class W 6
Administrative services fee 553,302
Plan administration services fee -- Class R4 1,556
Compensation of board members 19,656
Custodian fees 85,378
Printing and postage 114,300
Registration fees 49,261
Professional fees 32,838
Other 33,865
- -----------------------------------------------------------------------------
Total expenses 12,191,461
Expenses waived/reimbursed by the Investment Manager and
its affiliates (1,580)
- -----------------------------------------------------------------------------
12,189,881
Earnings and bank fee credits on cash balances (38,633)
- -----------------------------------------------------------------------------
Total net expenses 12,151,248
- -----------------------------------------------------------------------------
Investment income (loss) -- net 27,441,141
- -----------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
18 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED DEC. 31, 2007 (UNAUDITED)
<Table>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $ 28,908,166
Foreign currency transactions 292,136
- -----------------------------------------------------------------------------
Net realized gain (loss) on investments 29,200,302
Net change in unrealized appreciation (depreciation) on
investments
and on translation of assets and liabilities in foreign
currencies (131,244,443)
- -----------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (102,044,141)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (74,603,000)
=============================================================================
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 19
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS ENDED
DEC. 31, 2007 YEAR ENDED
(UNAUDITED) JUNE 30, 2007
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 27,441,141 $ 49,502,404
Net realized gain (loss) on investments 29,200,302 58,260,614
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (131,244,443) 264,722,828
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (74,603,000) 372,485,846
- ----------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (20,425,824) (33,311,055)
Class B (2,288,303) (5,449,259)
Class C (275,209) (414,008)
Class I (4,033,022) (5,522,045)
Class R4 (18,325) (35,161)
Class W (70) (107)
- ----------------------------------------------------------------------------------------
Total distributions (27,040,753) (44,731,635)
- ----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares 248,250,862 481,210,177
Class B shares 19,813,392 68,992,607
Class C shares 4,770,352 10,520,148
Class I shares 45,240,885 168,025,146
Class R4 shares 183,595 444,187
Class W shares -- 5,000
Reinvestment of distributions at net asset value
Class A shares 19,427,901 31,486,764
Class B shares 2,206,614 5,250,958
Class C shares 251,698 382,217
Class I shares 4,032,803 5,521,621
Class R4 shares 18,325 35,161
Payments for redemptions
Class A shares (145,319,806) (204,331,194)
Class B shares (87,402,422) (99,829,524)
Class C shares (2,021,811) (3,444,796)
Class I shares (10,213,839) (9,363,966)
Class R4 shares (311,235) (294,026)
- ----------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 98,927,314 454,610,480
- ----------------------------------------------------------------------------------------
Total increase (decrease) in net assets (2,716,439) 782,364,691
Net assets at beginning of period 2,025,205,852 1,242,841,161
- ----------------------------------------------------------------------------------------
Net assets at end of period $2,022,489,413 $2,025,205,852
========================================================================================
Undistributed net investment income $ 5,864,087 $ 5,463,699
- ----------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
(Unaudited as to Dec. 31, 2007)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Dividend Opportunity Fund (the Fund) is a series of RiverSource
Sector Series, Inc. and is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment company.
RiverSource Sector Series, Inc. has 10 billion authorized shares of capital
stock that can be allocated among the separate series as designated by the Board
of Directors of the funds (the Board). The Fund invests primarily in
dividend-paying common and preferred stocks.
The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W 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 are sold without a front-end sales charge or CDSC
and are offered to qualifying institutional investors.
- - Class W shares are sold without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At Dec. 31, 2007, RiverSource Investments, LLC (the Investment Manager) and the
affiliated funds-of-funds owned 100% of Class I shares and the Investment
Manager owned 100% of Class W shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
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-
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 21
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
generally contemplate the use of fair valuation in the event that price
quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the 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, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New
York Stock Exchange.
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.
ILLIQUID SECURITIES
At Dec. 31, 2007, investments in securities included issues that are illiquid
which the Fund currently limits to 15% of net assets, at market value, at the
time of purchase. Prior to July 12, 2007, the Fund limited the percent held in
securities and other instruments that were illiquid to 10% of the Fund's net
assets. The aggregate value of such securities at Dec. 31, 2007 was $58,576,824
representing 2.89% of net assets. These securities may be valued at fair value
according to procedures approved, in good faith, by the Board. According to
Board guidelines, certain unregistered securities are determined to be liquid
and are not included within the 15% limitation specified above. Assets are
liquid if they can be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which the asset is valued by the
Fund.
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.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
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 an
option is 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. During
the six months ended Dec. 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 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. At Dec. 31, 2007, the Fund
had no outstanding futures contracts.
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
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 23
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 Dec. 31, 2007, the
Fund had no outstanding forward foreign currency contracts.
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.
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.
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 hierarchy for measuring fair value, and requires additional disclosures
about the
- --------------------------------------------------------------------------------
24 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
inputs used to develop the measurements of fair value and the effect of certain
measurements reported in the Statement of operations for a fiscal period. The
application of SFAS 157 will be effective for the Fund's fiscal year beginning
July 1, 2008. The adoption of SFAS 157 is not anticipated to have a material
impact on the Fund's financial statements.
In June 2006, the FASB issued 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 has been adopted by the Fund
and there is no material impact on the Fund.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
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 0.61%
to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
performance of one Class A share of the Fund and the change to the Lipper Equity
Income Funds Index. In certain circumstances, the Board may approve a change in
the index. The maximum adjustment is 0.12% per year. If the performance
difference is less than 0.50%, the adjustment will be zero. The adjustment
increased the fee by $833,382 for the six months ended Dec. 31, 2007. The
management fee for the six months ended Dec. 31, 2007, was 0.66% of the Fund's
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 25
average daily net assets, including an adjustment under the terms of the
performance incentive arrangement.
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 0.06% to 0.03% annually as the
Fund's assets increase. The fee for the six months ended Dec. 31, 2007, was
0.05% of the Fund's average daily net assets.
For the six months ended Dec. 31, 2007, other expenses paid in the amount of
$3,988 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.
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 $19.50
- - Class B $20.50
- - Class C $20.00
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 and an
annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets
attributable to Class W shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the Statement of operations.
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
- --------------------------------------------------------------------------------
26 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor)
for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise
Financial Services, Inc. also served as a principal underwriter and distributor
to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1,
the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily
net assets attributable to Class A and Class W shares and a fee at an annual
rate of up to 1.00% of the Fund's average daily net assets attributable to Class
B and Class C shares.
Sales charges received by the Distributor for distributing Fund shares were
$978,623 for Class A, $67,921 for Class B and $2,430 for Class C for the six
months ended Dec. 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 six months ended Dec. 31, 2007, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that net expenses
(excluding fees and expenses of acquired funds) were 0.79% for Class R4. Of
these waived/reimbursed fees and expenses, the transfer agency fee at the class
level was $24 for Class R4 and the plan administration services fee at the class
level was $1,556 for Class R4. In addition, the Investment Manager and its
affiliates have contractually agreed to waive certain fees and expenses until
June 30, 2008, such that net expenses (excluding fees and expenses of acquired
funds), before giving effect to any performance incentive adjustment, will not
exceed 0.96% of the Fund's average daily net assets for Class R4, unless sooner
terminated at the discretion of the Board.
During the six months ended Dec. 31, 2007, the Fund's custodian and transfer
agency fees were reduced by $38,633 as a result of earnings and bank fee credits
from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust
Company, a subsidiary of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $257,055,675 and $125,554,619, respectively, for the
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 27
six months ended Dec. 31, 2007. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED DEC. 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 26,001,757 2,079,273 (15,378,983) 12,702,047
Class B 2,107,813 238,344 (9,036,500) (6,690,343)
Class C 507,638 27,178 (215,223) 319,593
Class I 4,750,393 431,273 (1,090,556) 4,091,110
Class R4 19,367 1,964 (33,119) (11,788)
Class W -- -- -- --
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED JUNE 30, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 54,219,265 3,497,308 (23,007,012) 34,709,561
Class B 7,770,738 589,257 (12,013,076) (3,653,081)
Class C 1,171,837 42,724 (391,943) 822,618
Class I 19,633,199 608,792 (1,075,764) 19,166,227
Class R4 51,172 3,908 (33,039) 22,041
Class W* 568 -- -- 568
- ----------------------------------------------------------------------------------------------
</Table>
* For the period from Dec. 1, 2006 (inception date) to June 30, 2007.
5. LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend securities
representing up to one-third of the value of its total assets (which includes
collateral for securities on loan) to broker-dealers, banks, or other
institutional borrowers of securities. The Fund receives collateral in the form
of cash and U.S. government securities, equal to at least 100% of the value of
securities loaned, which is marked to the market value of the loaned securities
daily until the securities are returned, e.g., if the value of the securities on
loan increases, additional cash collateral is provided by the borrower. The
investment manager serves as securities lending agent for the Fund under the
Investment Management Services Agreement pursuant to which the Fund has agreed
to reimburse the Investment Manager for expenses incurred by it in connection
with the lending program, and pursuant to guidelines adopted by and under the
oversight of the Board. At Dec. 31, 2007, securities valued at $64,389,110 were
on loan to brokers. For collateral, the Fund received $66,883,500 in cash. Cash
collateral received is invested in an affiliated
- --------------------------------------------------------------------------------
28 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
money market fund and short-term securities, including U.S. government
securities or other high grade debt obligations, which are included in the
"Portfolio of Investments." Income from securities lending amounted to $222,033
for the six months ended Dec. 31, 2007. Expenses paid to the Investment Manager
were $7,255 for the six months ended Dec. 31, 2007, which are included in other
expenses on the Statement of operations. The risks to the Fund of securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due.
6. 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. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $397,313,321 and $415,925,361, respectively, for the six
months ended Dec. 31, 2007.
7. BANK BORROWINGS
The Fund has entered into a revolving credit facility 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 credit facility became effective on Oct. 18, 2007, replacing a
prior credit facility. The credit facility agreement, which is a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permits collective borrowings up to $500 million. Interest is
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.06% per annum. Under the prior credit facility, a Fund paid interest on its
outstanding 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. The Fund
had no borrowings during the six months ended Dec. 31, 2007.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$398,074,003 at June 30, 2007, that if not offset by capital gains will expire
in 2011. 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.
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 29
9. CONCENTRATION OF RISK
SECTOR RISK
If a fund emphasizes one or more economic sectors, it may be more susceptible to
the financial, market or economic events affecting the particular issuers and
industries in which it invests than funds that do not emphasize particular
sectors. The more a fund diversifies, the more it spreads risk and potentially
reduces the risks of loss and volatility.
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 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 filed a notice of appeal with the Eighth Circuit Court of Appeals on
August 8, 2007.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), 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.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
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 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,
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 31
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.
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 JUNE 30, 2007(H) 2007 2006 2005 2004
Net asset value, beginning of
period $9.65 $7.83 $7.30 $6.39 $6.23
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .13(b) .26 .25 .22 .21
Net gains (losses) (both
realized and unrealized) (.47) 1.81 .50 .91 .15
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.34) 2.07 .75 1.13 .36
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.13) (.25) (.22) (.22) (.20)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.18 $9.65 $7.83 $7.30 $6.39
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1,499 $1,453 $907 $808 $700
- ---------------------------------------------------------------------------------------------------------------
Total expenses(c),(d) 1.13%(e) 1.15% 1.16% 1.12% 1.02%
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.72%(e) 3.15% 3.27% 3.20% 3.30%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17% 19% 24% 118%
- ---------------------------------------------------------------------------------------------------------------
Total return(f) (3.56%)(g) 26.66% 10.34% 17.79% 5.87%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amount has been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
32 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(H) 2007 2006 2005 2004
Net asset value, beginning of
period $9.59 $7.78 $7.25 $6.35 $6.19
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .09(b) .19 .19 .17 .16
Net gains (losses) (both
realized and unrealized) (.47) 1.80 .50 .89 .15
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.38) 1.99 .69 1.06 .31
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.09) (.18) (.16) (.16) (.15)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.12 $9.59 $7.78 $7.25 $6.35
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $227 $303 $275 $297 $301
- ---------------------------------------------------------------------------------------------------------------
Total expenses(c),(d) 1.89%(e) 1.91% 1.93% 1.88% 1.79%
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.91%(e) 2.38% 2.50% 2.41% 2.53%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17% 19% 24% 118%
- ---------------------------------------------------------------------------------------------------------------
Total return(f) (3.96%)(g) 25.76% 9.55% 16.84% 5.08%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amount has been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 33
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(H) 2007 2006 2005 2004
Net asset value, beginning of
period $9.57 $7.77 $7.25 $6.35 $6.19
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .09(b) .19 .18 .17 .16
Net gains (losses) (both
realized and unrealized) (.47) 1.79 .50 .89 .15
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.38) 1.98 .68 1.06 .31
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.09) (.18) (.16) (.16) (.15)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.10 $9.57 $7.77 $7.25 $6.35
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $27 $26 $15 $12 $10
- ---------------------------------------------------------------------------------------------------------------
Total expenses(c),(d) 1.89%(e) 1.91% 1.92% 1.89% 1.79%
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.97%(e) 2.40% 2.50% 2.43% 2.54%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17% 19% 24% 118%
- ---------------------------------------------------------------------------------------------------------------
Total return(f) (3.93%)(g) 25.74% 9.47% 16.86% 5.11%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amount has been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
34 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(I) 2007 2006 2005 2004(B)
Net asset value, beginning of
period $9.67 $7.85 $7.32 $6.41 $6.64
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .15(c) .30 .27 .25 .13
Net gains (losses) (both
realized and unrealized) (.48) 1.80 .51 .91 (.24)
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.33) 2.10 .78 1.16 (.11)
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.14) (.28) (.25) (.25) (.12)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.20 $9.67 $7.85 $7.32 $6.41
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $268 $242 $46 $-- $--
- ---------------------------------------------------------------------------------------------------------------
Total expenses(d),(e) .75%(f) .76% .78% .70% .60%(f)
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.12%(f) 3.58% 3.52% 3.61% 3.81%(f)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17% 19% 24% 118%
- ---------------------------------------------------------------------------------------------------------------
Total return(g) (3.38%)(h) 27.07% 10.78% 18.24% (1.84%)(h)
- ---------------------------------------------------------------------------------------------------------------
</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 June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
(i) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 35
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(I) 2007 2006 2005 2004
Net asset value, beginning of
period $9.67 $7.85 $7.32 $6.41 $6.23
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .15(b) .27 .26 .23 .22
Net gains (losses) (both
realized and unrealized) (.46) 1.81 .50 .91 .17
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.31) 2.08 .76 1.14 .39
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.15) (.26) (.23) (.23) (.21)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.21 $9.67 $7.85 $7.32 $6.41
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1 $1 $1 $-- $--
- ---------------------------------------------------------------------------------------------------------------
Gross expenses prior to
expense
waiver/reimbursement(c),(d) 1.05%(e) 1.03% .99% .94% .84%
- ---------------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(c),(d) .79%(e),(f) 1.02%(f) .99% .94% .84%
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3.05%(e) 3.29% 3.37% 3.37% 3.32%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17% 19% 24% 118%
- ---------------------------------------------------------------------------------------------------------------
Total return(g) (3.22%)(h) 26.75% 10.56% 17.93% 6.35%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Per share amount has been calculated using the average shares outstanding
method.
(c) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(e) Adjusted to an annual basis.
(f) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
(i) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
36 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(I) 2007(B)
Net asset value, beginning of
period $9.67 $8.80
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .13(c) .25
Net gains (losses) (both
realized and unrealized) (.48) .81
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (.35) 1.06
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.12) (.19)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $9.20 $9.67
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $--
- ---------------------------------------------------------------------------------------------------------------
Total expenses(d),(e) 1.20%(f) 1.19%(f)
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.63%(f) 2.97%(f)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 17%
- ---------------------------------------------------------------------------------------------------------------
Total return(g) (3.59%)(h) 12.15%(h)
- ---------------------------------------------------------------------------------------------------------------
</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 June 30, 2007.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
(i) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 37
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.
- --------------------------------------------------------------------------------
38 RIVERSOURCE DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT
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 2008 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 June 30, 2007 and the year ended June 30, 2006 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
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 DIVIDEND OPPORTUNITY FUND -- 2007 SEMIANNUAL REPORT 39
RIVERSOURCE(R) DIVIDEND OPPORTUNITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by
the Fund's current prospectus. RiverSource(R)
mutual funds are distributed by RiverSource
Distributors, Inc., Member FINRA, and managed by
RiverSource Investments, LLC. These companies are
part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6342 X (2/08)
</Table>
Semiannual Report
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE(R)
REAL ESTATE FUND
SEMIANNUAL REPORT FOR
THE PERIOD ENDED
DECEMBER 31, 2007
RIVERSOURCE REAL ESTATE FUND SEEKS
TO PROVIDE SHAREHOLDERS WITH TOTAL
RETURN FROM BOTH CURRENT INCOME
AND CAPITAL APPRECIATION.
TABLE OF CONTENTS
<Table>
Fund Snapshot....................... 2
Performance Summary................. 4
Questions & Answers
with Portfolio Management........ 6
Fund Expenses Example............... 10
Portfolio of Investments............ 12
Financial Statements................ 14
Notes to Financial Statements....... 19
Proxy Voting........................ 36
Change in Independent Registered
Public Accounting Firm........... 37
</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.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 1
FUND SNAPSHOT AT DEC. 31, 2007 (UNAUDITED)
FUND OBJECTIVE
RiverSource Real Estate Fund seeks to provide shareholders with total return
from both current income and capital appreciation.
SECTOR BREAKDOWN
Percentage of portfolio assets
(PIE CHART)
<Table>
Office Property 18.2%
Regional Malls 16.2%
Apartments 14.8%
Industrial 11.0%
Shopping Centers 9.5%
Health Care 7.5%
Other(1) 22.8%
</Table>
(1) Includes Hotels 7.2%, Diversified Properties 7.1%, Storage 4.2%,
Manufactured Homes 0.8%, Homebuilders 0.6%, Other Property 0.5% and Cash &
Cash Equivalents 2.4%.
TOP TEN HOLDINGS
Percentage of portfolio assets
<Table>
Simon Property Group* 9.5%
ProLogis* 7.0%
Vornado Realty Trust* 5.4%
Boston Properties* 5.4%
Public Storage* 4.2%
Equity Residential* 4.0%
Host Hotels & Resorts* 3.5%
Kimco Realty* 3.4%
Alexandria Real Estate Equities* 3.1%
HCP* 3.1%
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
* Real Estate Investment Trust.
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
The RiverSource Real Estate Fund is a narrowly-focused sector fund and it may
exhibit higher volatility than funds with broader investment objectives.
Principal risks associated with the Fund include market risk and real estate
industry risk. See the Fund's prospectus for information on these and other
risks associated with the Fund.
Investments in small- and mid-capitalization companies often involve greater
risks and potential volatility than investments in larger, more established
companies.
- --------------------------------------------------------------------------------
2 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
FUND SNAPSHOT AT DEC. 31, 2007 (UNAUDITED)
STYLE MATRIX
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
</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 MANAGER
<Table>
<Caption>
YEARS IN INDUSTRY
Julene Melquist 14
</Table>
FUND FACTS
<Table>
<Caption>
TICKER SYMBOL INCEPTION DATE
Class A ARLAX 03/04/04
Class B AESBX 03/04/04
Class C RRECX 03/04/04
Class I AESIX 03/04/04
Class R4 -- 03/04/04
Class W RREWX 12/01/06
Total net assets $181.2 million
Number of holdings 43
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 3
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six month period ended Dec. 31, 2007
(BAR CHART)
<Table>
RiverSource Real Estate Fund Class A (excluding
sales charge) -10.69%
Dow Jones Wilshire Real Estate Securities Index
(Float-Weighted(1) -12.43%
Lipper Real Estate Funds Index(2) -9.99%
</Table>
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 5.75% 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.
(1) The Dow Jones Wilshire Real Estate Securities Index (Float-Weighted), an
unmanaged capitalization-weighted index, measures the performance of
publicly traded real estate securities, including REITs and real estate
operating companies. The index reflects reinvestment of all distributions
and changes in market prices.
(2) The Lipper Real Estate Funds Index includes the 30 largest real estate
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends. The Fund's performance is currently measured against this index
for purposes of determining the performance incentive adjustment.
Effective June 30, 2007, the Dow Jones Wilshire Real Estate Securities Index
(Full-Cap) was discontinued and replaced with the Dow Jones Wilshire Real Estate
Securities Index (Float-Weighted), which is now the Fund's primary benchmark.
Since information for the Dow Jones Wilshire Real Estate Securities Index
(Full-Cap) is no longer available, its performance for the six-months ended Dec.
31, 2007, is not shown.
- --------------------------------------------------------------------------------
4 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
<Table>
<Caption>
TOTAL(A)
Class A 1.51%
Class B 2.27%
Class C 2.26%
Class I 1.04%
Class R4 1.35%
Class W 1.48%
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until June 30, 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), before giving
effect to any performance incentive adjustment (that increased the
management fee by 0.06%), will not exceed 1.49% for Class A, 2.25% for
Class B, 2.25% for Class C, 1.08% for Class I, 1.31% for Class R4 and 1.53%
for Class W.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
AT DEC. 31, 2007
SINCE
WITHOUT SALES CHARGE 6 MONTHS* 1 YEAR 3 YEARS INCEPTION
Class A (inception 3/4/04) -10.69% -16.61% +9.33% +13.37%
Class B (inception 3/4/04) -11.04% -17.21% +8.49% +12.49%
Class C (inception 3/4/04) -11.02% -17.18% +8.52% +12.50%
Class I (inception 3/4/04) -10.45% -16.11% +9.85% +13.83%
Class R4 (inception 3/4/04) -10.38% -16.21% +9.61% +13.64%
Class W (inception 12/1/06) -10.69% -16.57% N/A -16.51%
WITH SALES CHARGE
Class A (inception 3/4/04) -15.85% -21.41% +7.18% +11.63%
Class B (inception 3/4/04) -14.83% -20.73% +7.40% +11.92%
Class C (inception 3/4/04) -11.77% -17.88% +8.52% +12.50%
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second 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 R4 and Class W shares. Class I and Class R4 are
available to institutional investors only. Class W shares are offered through
qualifying discretionary accounts.
* Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 5
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, RiverSource Real Estate Fund portfolio manager Julene Melquist discusses
the Fund's performance and positioning for the six months ended Dec. 31, 2007.
At Dec. 31, 2007, approximately 34% of the Fund's total outstanding shares were
owned in aggregate by affiliated funds-of-funds managed by RiverSource
Investments, LLC (RiverSource). As a result of asset allocation decisions by
RiverSource, it is possible RiverSource Real Estate Fund may experience
relatively large purchases or redemptions from affiliated funds-of-funds (see
page 26, Class I capital share transactions for related activity during the most
recent fiscal period). RiverSource seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time. RiverSource
Real Estate Fund may experience increased expenses as it buys and sells
securities to manage transactions for affiliated funds-of-funds. For more
information on the Fund's expenses, see the discussions beginning on pages 10
and 23.
Q: How did RiverSource Real Estate Fund perform for the first half of the fiscal
year?
A: RiverSource Real Estate Fund's Class A shares declined 10.69% (excluding
sales charge) for the six months ended Dec. 31, 2007. The Fund outperformed
its benchmark, the Dow Jones Wilshire Real Estate Securities Index (Float-
Weighted) (Wilshire Index), which fell 12.43% during the same time period.
Effective June 30, 2007, the Dow Jones Wilshire Real Estate Securities Index
(Full-Cap) was discontinued and replaced with the Dow Jones Wilshire Real
Estate Securities Index (Float-Weighted), which is now the Fund's primary
benchmark. Since information for the Dow Jones Wilshire Real Estate
Securities Index (Full-Cap) is no longer available, its performance for the
six-months ended Dec. 31, 2007, is not shown. The Lipper Real Estate Funds
Index, representing the Fund's peer group, decreased 9.99% during the same
time frame.
ON THE POSITIVE SIDE, IT IS IMPORTANT TO NOTE THAT EVEN WITH THE DECLINE
IN REAL ESTATE SHARE PRICES, UNDERLYING REAL ESTATE FUNDAMENTALS REMAINED
HEALTHY.
Q: What factors most significantly affected performance?
A: During the first half of 2007, real estate company and real estate investment
trust (REIT) valuations had become stretched, as rising share prices produced
smaller dividend yields and higher valuation multiples relative to other
- --------------------------------------------------------------------------------
6 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
investment sectors. These premium REIT valuations, combined with the credit
crisis that arose during the summer as fallout from the subprime mortgage
turmoil roiled the broader financial markets, led to a significant decline in
real estate share prices during the semiannual period as a whole. There was
generally a great deal of profit-taking during the second half of 2007, as
investor risk aversion increased with worries about the potential for slower
economic growth and about increased borrowing costs for real estate. The
crisis in the credit markets had also dried up financing for highly leveraged
real estate transactions, which had been a primary driver of higher real
estate prices during the prior year.
On the positive side, it is important to note that even with the decline in
real estate share prices, underlying real estate fundamentals remained
healthy. Revenues and dividend yields for most REITs continued to grow albeit
at a slowed pace. Overbuilding, which was a characteristic of some previous
real estate downturns, was not a factor in the market. Occupancies overall
remained solid.
Against this challenging backdrop, the Fund outperformed the Wilshire Index
due primarily to effective individual stock selection. The Fund's results
benefited most during the six-month period from stock selection within the
apartment, hotel and community shopping center REIT subsectors. Hilton
Hotels, Senior Housing Properties Trust, Alexandria Real Estate Equities and
Boardwalk Real Estate Investment Trust were among the strongest positive
individual stock contributors to Fund performance. Hilton Hotels saw its
shares advance after the announcement during the first week of July that it
would be acquired by the Blackstone Group in an all-cash transaction valued
at approximately $26 billion. Senior Housing Properties Trust is a health
care REIT, which benefited both from being added to the Wilshire Index during
the period and from relative strength in the underlying health care
subsector. The health care subsector is widely considered a comparatively
defensive REIT subsector and thus less economically sensitive. Alexandria
Real Estate Equities performed well given its niche position as an office
property REIT that specializes in providing laboratory space for
biotechnology and other science-driven companies. Boardwalk Real Estate
Investment Trust is a Canadian apartment REIT that exhibited strong
performance based on its key location in
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 7
QUESTIONS & ANSWERS
Calgary, a busy area supported in large part by an active oil exploration and
production industry.
Detracting from the Fund's performance most was having only a modest exposure
to the health care subsector, which was a new addition to the Wilshire Index
during the period and which also outpaced the Wilshire Index for the six
months. Stock selection within the health care subsector also hurt the Fund's
results. Stock selection in the industrial subsector further detracted from
the Fund's performance as did having a sizable allocation in the office
property subsector, which underperformed the Wilshire Index. From an
individual stock perspective, holdings in hotel operating company Starwood
Hotels & Resorts Worldwide, commercial and residential real estate
development company Forest City Enterprises, commercial real estate broker
HFF and health care REIT Medical Properties Trust hurt the Fund's performance
during the semiannual period.
Detracting from the Fund's results relative to its Lipper peer group was the
Fund's inherent emphasis on U.S. real estate companies. During the semiannual
period, international real estate investments outperformed domestic real
estate companies.
Q: What changes did you make to the Fund and how is it currently positioned?
A: Given weakness in the real estate market, tightening credit conditions and
increasing investor fears regarding the potential direction of the economy,
we continued to seek to upgrade the quality of the portfolio overall,
reducing positions where we felt discomfort based on stock-specific or
event-specific concerns and increasing holdings in higher quality companies
with strong balance sheets, including low leverage, superior management teams
and a sustainable competitive advantage. We also, of course, made adjustments
based on relative valuation analysis and shifts in market conditions.
At the end of the period, the Fund had exposure to the industrial subsector
and more modest allocations to the shopping center, health care and
diversified properties subsectors. As of December 31, the Fund was virtually
equally weighted to the Wilshire Index in the hotel, regional mall, storage,
office property, apartment and manufactured home subsectors.
- --------------------------------------------------------------------------------
8 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WE INTEND TO LOOK FOR SELECT REAL ESTATE COMPANIES AND REITS WHERE A
SUSTAINABLE COMPETITIVE ADVANTAGE POSITIONS SUCH COMPANIES TO TAKE
ADVANTAGE OF CURRENT MARKET CONDITIONS.
Q: What is the Fund's tactical view and strategy for the months ahead?
A: At the end of the period, the real estate market was at a virtual standstill
in transactions. The balance sheets of several major brokerage firms remained
weighed down by outstanding debt. The financial sector was still being
impacted by the fallout of subprime mortgage and credit market troubles, and
there was virtually no clarity on the extent of the U.S. economic slowdown
going forward. While REIT valuations had declined significantly from their
peak levels -- and indeed were, in many cases, more attractive at the end of
the semiannual period than they had been for some time -- they remained, at
the end of 2007, above their historical norms. All told, then, the decline in
real estate over the second half of 2007 appears to be setting the stage for
a buying opportunity, but probably not until mid-2008, as we believe real
estate companies may continue to struggle through the first half of the new
year.
Given this view, we intend over the months ahead to seek to take advantage of
stock-specific buying opportunities created by recent market weakness. We
intend to look for select real estate companies and REITs where a sustainable
competitive advantage positions such companies to take advantage of current
market conditions. Our goal, as always, will be to use in-depth, bottom-up
analysis of real estate fundamentals and market performance across the U.S.
to find undervalued companies with solid, dividend-paying ability and
attractive long-term growth potential. Our focus will be on securities of
real estate companies with quality assets, strong balance sheets, and, more
importantly than ever in our opinion, experienced management teams.
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource Fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource Fund.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 9
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 Dec. 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.
- --------------------------------------------------------------------------------
10 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
JULY 1, 2007 DEC. 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class A
Actual(b) $1,000 $ 893.10 $ 6.70 1.40%
Hypothetical
(5% return before
expenses) $1,000 $1,018.20 $ 7.14 1.40%
Class B
Actual(b) $1,000 $ 889.60 $10.32 2.16%
Hypothetical
(5% return before
expenses) $1,000 $1,014.36 $11.00 2.16%
Class C
Actual(b) $1,000 $ 889.80 $10.32 2.16%
Hypothetical
(5% return before
expenses) $1,000 $1,014.36 $11.00 2.16%
Class I
Actual(b) $1,000 $ 895.50 $ 4.31 .90%
Hypothetical
(5% return before
expenses) $1,000 $1,020.72 $ 4.60 .90%
Class R4
Actual(b) $1,000 $ 896.20 $ 5.80 1.21%
Hypothetical
(5% return before
expenses) $1,000 $1,019.16 $ 6.17 1.21%
Class W
Actual(b) $1,000 $ 893.10 $ 6.46 1.35%
Hypothetical
(5% return before
expenses) $1,000 $1,018.45 $ 6.89 1.35%
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 185/366 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Dec. 31, 2007: -10.69%
for Class A, -11.04% for Class B, -11.02% for Class C, -10.45% for Class I,
-10.38% for Class R4 and -10.69% for Class W.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 11
PORTFOLIO OF INVESTMENTS
DEC. 31, 2007 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (97.0%)
ISSUER SHARES VALUE(A)
CAPITAL MARKETS (0.5%)
HFF Cl A 125,053(b) $967,910
- -----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (94.5%)
Acadia Realty Trust 71,715 1,836,621
Alexandria Real Estate Equities 55,151 5,607,202
AMB Property 89,551 5,154,556
AvalonBay Communities 53,768 5,061,720
Boardwalk Real Estate Investment Trust 61,700(c) 2,766,440
Boston Properties 105,436 9,680,079
Brookfield Properties 270,991 5,216,577
Camden Property Trust 52,991 2,551,517
Corporate Office Properties Trust 52,995 1,669,343
DiamondRock Hospitality 162,336 2,431,793
Douglas Emmett 136,030 3,075,638
EastGroup Properties 49,923 2,089,278
Equity Lifestyle Properties 29,831 1,362,382
Equity Residential 197,943 7,218,981
Essex Property Trust 32,628 3,180,904
Federal Realty Investment Trust 65,801 5,405,552
General Growth Properties 109,238 4,498,421
HCP 160,089 5,567,895
Hersha Hospitality Trust 106,461 1,011,380
Highwoods Properties 127,634 3,749,887
Home Properties 64,340 2,885,649
Host Hotels & Resorts 367,431 6,261,024
Kilroy Realty 39,884 2,192,025
Kimco Realty 166,770 6,070,428
LaSalle Hotel Properties 65,183 2,079,338
Liberty Property Trust 15,618 449,955
Macerich 70,224 4,990,117
Medical Properties Trust 148,460 1,512,807
Mid-America Apartment Communities 68,568 2,931,282
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
REAL ESTATE INVESTMENT TRUSTS (REITS) (CONT.)
ProLogis 198,698 $12,593,479
Public Storage 102,630 7,534,068
Regency Centers 60,290 3,888,102
Senior Housing Properties Trust 193,653 4,392,050
Simon Property Group 196,467 17,065,123
SL Green Realty 17,128 1,600,783
Sunstone Hotel Investors 60,760 1,111,300
Taubman Centers 51,780 2,547,058
Ventas 45,330 2,051,183
Vornado Realty Trust 111,293 9,788,219
---------------
Total 171,080,156
- -----------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (2.0%)
Forest City Enterprises Cl A 56,323 2,502,994
St. Joe 32,676 1,160,325
---------------
Total 3,663,319
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $184,811,278) $175,711,385
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (2.4%)
SHARES VALUE(A)
RiverSource Short-Term
Cash Fund 4,287,571(d) $4,287,571
- ------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $4,287,571) $4,287,571
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $189,098,849)(e) $179,998,956
====================================================================================
</Table>
See accompanying notes to portfolio of investments.
- --------------------------------------------------------------------------------
12 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2007, the
value of foreign securities represented 1.5% of net assets.
(d) Affiliated Money Market Fund -- See Note 5 to the financial statements.
(e) At Dec. 31, 2007, the cost of securities for federal income tax purposes
was approximately $189,099,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<Table>
Unrealized appreciation $ 11,599,000
Unrealized depreciation (20,699,000)
- ------------------------------------------------------------------------------
Net unrealized depreciation $ (9,100,000)
- ------------------------------------------------------------------------------
</Table>
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
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 REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 13
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DEC. 31, 2007 (UNAUDITED)
<Table>
ASSETS
Investments in securities, at value
Unaffiliated issuers* (identified cost $184,811,278) $175,711,385
Affiliated money market fund (identified cost $4,287,571) 4,287,571
- ----------------------------------------------------------------------------
Total investments in securities (identified cost
$189,098,849) 179,998,956
Cash 32,248
Capital shares receivable 102,638
Dividends and accrued interest receivable 1,517,937
- ----------------------------------------------------------------------------
Total assets 181,651,779
- ----------------------------------------------------------------------------
LIABILITIES
Capital shares payable 357,553
Accrued investment management services fee 12,439
Accrued distribution fee 57,218
Accrued transfer agency fee 2,461
Accrued administrative services fee 889
Accrued plan administration services fee 68
Other accrued expenses 45,244
- ----------------------------------------------------------------------------
Total liabilities 475,872
- ----------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $181,175,907
============================================================================
</Table>
- --------------------------------------------------------------------------------
14 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DEC. 31, 2007 (UNAUDITED)
<Table>
REPRESENTED BY
Capital stock -- $.01 par value $ 150,447
Additional paid-in capital 186,511,183
Undistributed net investment income 2,079,254
Accumulated net realized gain (loss) 1,535,006
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (9,099,983)
- ----------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $181,175,907
============================================================================
</Table>
<Table>
Net assets applicable to outstanding shares: Class A $100,234,833
Class B $ 17,205,916
Class C $ 1,594,008
Class I $ 61,994,410
Class R4 $ 143,442
Class W $ 3,298
Net asset value per share of outstanding Class A
capital stock: shares(1) 8,322,139 $ 12.04
Class B shares 1,443,071 $ 11.92
Class C shares 133,740 $ 11.92
Class I shares 5,133,543 $ 12.08
Class R4 shares 11,942 $ 12.01
Class W shares 275 $ 11.99
- -------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $12.77. The offering
price is calculated by dividing the net asset value by 1.0 minus the
maximum sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 15
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DEC. 31, 2007 (UNAUDITED)
<Table>
INVESTMENT INCOME
Income:
Dividends $ 4,354,911
Interest 815
Income distributions from affiliated money market fund 72,102
Less foreign taxes withheld (23,497)
- ----------------------------------------------------------------------------
Total income 4,404,331
- ----------------------------------------------------------------------------
Expenses:
Investment management services fee 920,886
Distribution fee
Class A 161,310
Class B 112,387
Class C 10,248
Class W 5
Transfer agency fee
Class A 170,773
Class B 31,521
Class C 2,788
Class R4 45
Class W 4
Administrative services fee 73,814
Plan administration services fee -- Class R4 224
Compensation of board members 2,274
Custodian fees 10,175
Printing and postage 41,100
Registration fees 42,610
Professional fees 18,891
Other 2,599
- ----------------------------------------------------------------------------
Total expenses 1,601,654
Expenses waived/reimbursed by the Investment Manager and
its affiliates (17,591)
- ----------------------------------------------------------------------------
1,584,063
Earnings and bank fee credits on cash balances (2,597)
- ----------------------------------------------------------------------------
Total net expenses 1,581,466
- ----------------------------------------------------------------------------
Investment income (loss) -- net 2,822,865
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions 9,930,372
Foreign currency transactions 351
- ----------------------------------------------------------------------------
Net realized gain (loss) on investments 9,930,723
Net change in unrealized appreciation (depreciation) on
investments (36,686,146)
- ----------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (26,755,423)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(23,932,558)
============================================================================
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
16 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
DEC. 31, 2007 JUNE 30, 2007
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 2,822,865 $ 3,706,693
Net realized gain (loss) on investments 9,930,723 19,389,903
Net change in unrealized appreciation (depreciation)
on investments (36,686,146) (7,865,363)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (23,932,558) 15,231,233
- -----------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (471,598) (1,648,144)
Class B (29,790) (112,364)
Class C (3,233) (9,035)
Class I (587,041) (1,269,062)
Class R4 (1,151) (3,035)
Class W (18) (42)
Net realized gain
Class A (14,679,913) (7,168,364)
Class B (2,506,709) (1,506,082)
Class C (232,761) (107,494)
Class I (8,717,442) (3,430,271)
Class R4 (20,584) (11,480)
Class W (549) (237)
- -----------------------------------------------------------------------------------------
Total distributions (27,250,789) (15,265,610)
- -----------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 17
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
DEC. 31, 2007 JUNE 30, 2007
(UNAUDITED)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 12,193,816 $ 71,003,345
Class B shares 1,149,215 11,643,215
Class C shares 165,048 1,325,734
Class I shares 17,387,186 42,168,432
Class R4 shares 6,000 48,466
Class W shares -- 5,000
Reinvestment of distributions at net asset value
Class A shares 14,723,722 8,628,771
Class B shares 2,460,220 1,576,925
Class C shares 228,883 108,406
Class I shares 9,302,396 4,698,204
Class R4 shares 19,640 13,435
Payments for redemptions
Class A shares (44,530,387) (40,780,657)
Class B shares (11,040,653) (10,850,325)
Class C shares (675,799) (679,693)
Class I shares (42,083,793) (7,933,451)
Class R4 shares (32,813) (118,777)
- -----------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (40,727,319) 80,857,030
- -----------------------------------------------------------------------------------------
Total increase (decrease) in net assets (91,910,666) 80,822,653
Net assets at beginning of period 273,086,573 192,263,920
- -----------------------------------------------------------------------------------------
Net assets at end of period $181,175,907 $273,086,573
=========================================================================================
Undistributed net investment income $ 2,079,254 $ 349,220
- -----------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
18 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
(Unaudited as to Dec. 31, 2007)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Real Estate Fund (the Fund) is a series of RiverSource Sector
Series, Inc. and is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company. RiverSource
Sector Series, Inc. has 10 billion authorized shares of capital stock that can
be allocated among the separate series as designated by the Board of Directors
of the funds (the Board). The Fund invests primarily in equity securities of
companies operating in the real estate industry, including equities of real
estate investment trusts (REITs), and other real estate related investments.
The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares.
- - Class A shares are 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 are sold without a front-end sales charge or CDSC
and are offered to qualifying institutional investors.
- - Class W shares are sold without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At Dec. 31, 2007, RiverSource Investments, LLC (the Investment Manager) and the
affiliated funds-of-funds owned 100% of Class I shares, and the Investment
Manager owned 100% of Class W shares.
At Dec. 31, 2007, the Investment Manager and the affiliated funds-of-funds owned
approximately 34% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
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.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 19
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
generally contemplate the use of fair valuation in the event that price
quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the 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, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New
York Stock Exchange.
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.
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 company upon closure, exercise or expiration 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
- --------------------------------------------------------------------------------
20 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
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 an
option is 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. During
the six months ended Dec. 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 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. At Dec. 31, 2007, the Fund
had no outstanding futures contracts.
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
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 21
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 Dec. 31, 2007, the Fund had no outstanding
forward foreign currency contracts.
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.
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.
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 hierarchy for measuring fair value, and requires additional disclosures
about the inputs used to develop the measurements of fair value and the effect
of certain measurements reported in the Statement of operations for a fiscal
period. The application of SFAS 157 will be effective for the Fund's fiscal year
beginning July 1, 2008. The adoption of SFAS 157 is not anticipated to have a
material impact on the Fund's financial statements.
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
- --------------------------------------------------------------------------------
22 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
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 has been
adopted by the Fund and there is no material impact on the Fund.
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, declared and paid each calendar quarter,
when available, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
The Fund receives substantial distributions from holdings in real estate
investment trusts (REITs). Distributions from REITs may be characterized as
ordinary income, net capital gain, or a return of capital to the REIT
shareholder. The proper characterization of REIT distributions is generally not
known until after the end of each calendar year. As such, the Fund must use
estimates in reporting the character of its income and distributions for
financial statement purposes. The actual character of distributions to fund
shareholders will be reflected on the Form 1099 received by shareholders after
the end of the calendar year. Due to the nature of REIT investments, a portion
of the distributions received by a fund shareholder may represent a return of
capital.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
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 0.84%
to 0.72% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
performance of one Class A share of the Fund and the change to the Lipper Real
Estate Funds Index. In certain circumstances, the Board may approve a change in
the index. The maximum adjustment is 0.12% per year. If the performance
difference is less than 0.50%, the adjustment will be zero. The adjustment
decreased the fee by $112,507 for the six months ended Dec. 31, 2007. The
management fee for the six months ended Dec. 31, 2007, was 0.75% of the Fund's
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 23
average daily net assets, including an adjustment under the terms of the
performance incentive arrangement.
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 0.06% to 0.03% annually as the
Fund's assets increase. The fee for the six months ended Dec. 31, 2007, was
0.06% of the Fund's average daily net assets.
For the six months ended Dec. 31, 2007, other expenses paid in the amount of
$709 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.
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 $19.50
- - Class B $20.50
- - Class C $20.00
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 and an
annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets
attributable to Class W shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the Statement of operations.
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
- --------------------------------------------------------------------------------
24 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor)
for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise
Financial Services, Inc. also served as a principal underwriter and distributor
to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1,
the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily
net assets attributable to Class A and Class W shares and a fee at an annual
rate of up to 1.00% of the Fund's average daily net assets attributable to Class
B and Class C shares.
Sales charges received by the Distributor for distributing Fund shares were
$98,564 for Class A, $15,218 for Class B and $882 for Class C for the six months
ended Dec. 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 six months ended Dec. 31, 2007, the Investment Manager and its
affiliates waived/reimbursed certain fees and expenses such that net expenses
(excluding fees and expenses of acquired funds) were 1.40% for Class A, 2.16%
for Class B, 2.16% for Class C and 0.96% for Class R4. Of these
waived/reimbursed fees and expenses, the transfer agency fees at the class level
were $14,367, $2,772 and $228 for Class A, Class B and Class C, respectively,
and the plan administration services fee at the class level was $224 for Class
R4. In addition, the Investment Manager and its affiliates have contractually
agreed to waive certain fees and expenses such that net expenses (excluding fees
and expenses of acquired funds), before giving effect to any performance
incentive adjustment, will not exceed 1.49% for Class A, 2.25% for Class B,
2.25% for Class C, 1.08% for Class I, 1.31% for Class R4 and 1.53% for Class W
of the Fund's average daily net assets until June 30, 2008, unless sooner
terminated at the discretion of the Board.
During the six months ended Dec. 31, 2007, the Fund's transfer agency fees were
reduced by $2,597 as a result of bank fee credits from overnight cash balances.
The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of
Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 25
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $51,115,063 and $118,557,294, respectively, for the six
months ended Dec. 31, 2007. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<Table>
<Caption>
SIX MONTHS ENDED DEC. 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 778,387 1,244,979 (2,958,148) (934,782)
Class B 75,323 211,213 (710,481) (423,945)
Class C 10,925 19,640 (45,481) (14,916)
Class I 1,083,264 779,056 (2,695,538) (833,218)
Class R4 412 1,662 (2,146) (72)
Class W -- -- -- --
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED JUNE 30, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 4,147,287 511,609 (2,380,595) 2,278,301
Class B 682,014 94,005 (660,721) 115,298
Class C 77,195 6,462 (40,753) 42,904
Class I 2,430,646 278,457 (463,573) 2,245,530
Class R4 2,788 798 (7,005) (3,419)
Class W* 275 -- -- 275
- ----------------------------------------------------------------------------------------------
</Table>
* For the period from Dec. 1, 2006 (inception date) to June 30, 2007.
5. 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. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $50,187,065 and $46,797,198, respectively, for the six
months ended Dec. 31, 2007.
6. BANK BORROWINGS
The Fund has entered into a revolving credit facility 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
- --------------------------------------------------------------------------------
26 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
emergency purposes. The credit facility became effective on Oct. 18, 2007,
replacing a prior credit facility. The credit facility agreement, which is a
collective agreement between the Fund and certain other RiverSource funds,
severally and not jointly, permits collective borrowings up to $500 million.
Interest is charged to each Fund based on its borrowings at a rate equal to the
federal funds rate plus 0.30%. Each borrowing under the credit facility matures
no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the amount of the credit facility
at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid
interest on its outstanding 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. The Fund had no borrowings during the six months ended Dec. 31,
2007.
7. CONCENTRATION OF RISK
REAL ESTATE INDUSTRY RISK
Because of the Fund's policy of concentrating its investments in securities of
companies operating in the real estate industry, the Fund is more susceptible to
risks associated with the ownership of real estate and with the real estate
industry in general. These risks can include fluctuations in the value of the
underlying properties, defaults by borrowers or tenants, market saturation,
decreases in market rates for rents, and other economic, political, or
regulatory occurrences affecting the real estate industry, including REITs.
8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota. In response to defendants' motion to dismiss the
complaint, the Court dismissed one of plaintiffs' four claims and granted
plaintiffs limited discovery. Defendants moved for summary judgment in April
2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The
plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on
August 8, 2007.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 27
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 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
- --------------------------------------------------------------------------------
28 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
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.
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 29
9. 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 JUNE 30, 2007(J) 2007 2006 2005 2004(B)
Net asset value, beginning of period $15.83 $15.30 $13.44 $10.46 $10.35
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .17(c) .21 .30 .32 .06
Net gains (losses) (both realized
and unrealized) (1.91) 1.37 2.76 2.94 .05
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.74) 1.58 3.06 3.26 .11
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.19) (.14) (.18) --
Distributions from realized gains (1.99) (.86) (1.06) (.10) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.05) (1.05) (1.20) (.28) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.04 $15.83 $15.30 $13.44 $10.46
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $100 $147 $107 $62 $17
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.42%(f) 1.51% 1.55% 1.57% 3.86%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) 1.40%(f),(g) 1.51% 1.53%(g) 1.49%(g) 1.49%(f),(g)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.21%(f) 1.41% 2.37% 3.56% 3.76%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38% 47% 63% 49%
- ----------------------------------------------------------------------------------------------------------
Total return(h) (10.69%)(i) 9.97% 24.02% 31.32% 1.06%(i)
- ----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (when shares became publicly available)
to June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
30 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(J) 2007 2006 2005 2004(B)
Net asset value, beginning of period $15.72 $15.20 $13.37 $10.43 $10.35
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(c) .05 .18 .22 .05
Net gains (losses) (both realized
and unrealized) (1.90) 1.39 2.75 2.93 .03
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.79) 1.44 2.93 3.15 .08
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.06) (.04) (.11) --
Distributions from realized gains (1.99) (.86) (1.06) (.10) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.01) (.92) (1.10) (.21) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 $15.72 $15.20 $13.37 $10.43
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $17 $29 $27 $18 $4
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.18%(f) 2.27% 2.32% 2.34% 4.63%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) 2.16%(f),(g) 2.27% 2.30%(g) 2.27%(g) 2.26%(f),(g)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.42%(f) .64% 1.59% 2.77% 3.12%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38% 47% 63% 49%
- ----------------------------------------------------------------------------------------------------------
Total return(h) (11.04%)(i) 9.13% 23.06% 30.31% .77%(i)
- ----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (when shares became publicly available)
to June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 31
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(J) 2007 2006 2005 2004(B)
Net asset value, beginning of period $15.72 $15.20 $13.37 $10.43 $10.35
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(c) .05 .18 .21 .05
Net gains (losses) (both realized
and unrealized) (1.90) 1.40 2.75 2.93 .03
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.79) 1.45 2.93 3.14 .08
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.07) (.04) (.10) --
Distributions from realized gains (1.99) (.86) (1.06) (.10) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.01) (.93) (1.10) (.20) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 $15.72 $15.20 $13.37 $10.43
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $2 $2 $2 $1 $--
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.18%(f) 2.26% 2.32% 2.33% 4.64%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) 2.16%(f),(g) 2.26% 2.29%(g) 2.27%(g) 2.27%(f),(g)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 1.46%(f) .66% 1.61% 2.79% 3.20%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38% 47% 63% 49%
- ----------------------------------------------------------------------------------------------------------
Total return(h) (11.02%)(i) 9.18% 23.07% 30.29% .77%(i)
- ----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (when shares became publicly available)
to June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
32 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(J) 2007 2006 2005 2004(B)
Net asset value, beginning of period $15.87 $15.33 $13.46 $10.46 $10.35
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .21(c) .32 .36 .35 .06
Net gains (losses) (both realized
and unrealized) (1.92) 1.35 2.76 2.95 .05
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.71) 1.67 3.12 3.30 .11
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.27) (.19) (.20) --
Distributions from realized gains (1.99) (.86) (1.06) (.10) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.08) (1.13) (1.25) (.30) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.08 $15.87 $15.33 $13.46 $10.46
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $62 $95 $57 $53 $10
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) .90%(f) 1.04% 1.09% 1.10% 3.54%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) .90%(f) 1.04% 1.09% 1.10% 1.17%(f),(g)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.65%(f) 1.87% 2.85% 4.04% 5.50%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38% 47% 63% 49%
- ----------------------------------------------------------------------------------------------------------
Total return(h) (10.45%)(i) 10.52% 24.55% 31.78% 1.06%(i)
- ----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (when shares became publicly available)
to June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 33
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(J) 2007 2006 2005 2004(B)
Net asset value, beginning of period $15.79 $15.26 $13.41 $10.47 $10.35
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .21(c) .24 .32 .38 .06
Net gains (losses) (both realized
and unrealized) (1.90) 1.37 2.75 2.89 .06
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.69) 1.61 3.07 3.27 .12
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.22) (.16) (.23) --
Distributions from realized gains (1.99) (.86) (1.06) (.10) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.09) (1.08) (1.22) (.33) --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.01 $15.79 $15.26 $13.41 $10.47
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $-- $-- $-- $--
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.21%(f) 1.34% 1.36% 1.39% 3.50%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) .96%(f),(g) 1.34% 1.35%(g) 1.34%(g) 1.13%(f),(g)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.69%(f) 1.58% 2.53% 3.79% 3.62%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38% 47% 63% 49%
- ----------------------------------------------------------------------------------------------------------
Total return(h) (10.38%)(i) 10.17% 24.22% 31.48% 1.16%(i)
- ----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 4, 2004 (when shares became publicly available)
to June 30, 2004.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive certain fees
and expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
(j) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
34 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JUNE 30, 2007(I) 2007(B)
Net asset value, beginning of period $15.78 $18.17
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .17(c) .24
Net gains (losses) (both realized
and unrealized) (1.91) (1.62)
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (1.74) (1.38)
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.15)
Distributions from realized gains (1.99) (.86)
- ----------------------------------------------------------------------------------------------------------
Total distributions (2.05) (1.01)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.99 $15.78
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $--
- ----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.35%(f) 1.48%(f)
- ----------------------------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(d),(e) 1.35%(f) 1.48%(f)
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 2.27%(f) 1.19%(f)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 38%
- ----------------------------------------------------------------------------------------------------------
Total return(g) (10.69%)(h) (7.90%)(h)
- ----------------------------------------------------------------------------------------------------------
</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 June 30, 2007.
(c) Per share amount has been calculated using the average shares outstanding
method.
(d) Expense ratio is before reduction of earnings and bank fee credits on cash
balances. Includes the impact of a performance incentive adjustment fee, if
any.
(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) Adjusted to an annual basis.
(g) Total return does not reflect payment of a sales charge.
(h) Not annualized.
(i) Six months ended Dec. 31, 2007 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 35
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.
- --------------------------------------------------------------------------------
36 RIVERSOURCE REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT
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 2008 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 June 30, 2007 and the year ended June 30, 2006 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
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 REAL ESTATE FUND -- 2007 SEMIANNUAL REPORT 37
RIVERSOURCE(R) REAL ESTATE FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by
the Fund's current prospectus. RiverSource(R)
mutual funds are distributed by RiverSource
Distributors, Inc., Member FINRA, and managed by
RiverSource Investments, LLC. These companies are
part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6292 E (2/08)
</Table>
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual
reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's Principal Financial Officer and Principal Executive Officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached
as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) RiverSource Sector Series, Inc.
By /s/ Patrick T. Bannigan
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Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
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Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 2008
By /s/ Jeffrey P. Fox
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Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date March 5, 2008