PRE 14A 1 proxy-pres14a.txt RIVERSOURCE FUNDS PROXY SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Materials Under Section 240.14a-12 AXP California Tax-Exempt Trust AXP Discovery Series, Inc. AXP Equity Series, Inc. AXP Fixed Income Series, Inc. AXP Global Series, Inc. AXP Government Income Series, Inc. AXP Growth Series, Inc. AXP High Yield Income Series, Inc. AXP High Yield Tax-Exempt Series, Inc. AXP International Series, Inc. AXP Investment Series, Inc. AXP Managed Series, Inc. AXP Market Advantage Series, Inc. AXP Money Market Series, Inc. AXP Partners International Series, Inc. AXP Partners Series, Inc. AXP Sector Series, Inc. AXP Selected Series, Inc. AXP Special Tax-Exempt Series Trust AXP Strategy Series, Inc. AXP Tax-Exempt Series, Inc. AXP Tax-Free Money Series, Inc. AXP Variable Portfolio - Income Series, Inc. AXP Variable Portfolio - Investment Series, Inc. AXP Variable Portfolio - Managed Series, Inc. AXP Variable Portfolio - Money Market Series, Inc. AXP Variable Portfolio - Partners Series, Inc. AXP Variable Portfolio - Select Series, Inc. -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) -------------------------------------------------------------------------------- (Name(s) of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 (1) Title of each class of securities to which transaction applies: ---------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined); ---------------------------------------------------------------------- (4) Proposed maximum aggregated value of transaction: ---------------------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ---------------------------------------------------------------------- (3) Filing Party: ---------------------------------------------------------------------- (4) Date Filed: ---------------------------------------------------------------------- RIVERSOURCE FUNDS (FORMERLY KNOWN AS AMERICAN EXPRESS FUNDS) Principal Executive Office 901 Marquette Avenue South, Suite 2810 Minneapolis, MN 55402-3268 NOTICE OF REGULAR MEETING OF SHAREHOLDERS TO BE HELD FEB. 15, 2006 RETAIL FUNDS: AXP CALIFORNIA TAX-EXEMPT TRUST - RiverSource California Tax-Exempt Fund AXP DISCOVERY SERIES, INC. - RiverSource Core Bond Fund - RiverSource Income Opportunities Fund - RiverSource Inflation Protected Securities Fund - RiverSource Limited Duration Bond Fund AXP EQUITY SERIES, INC. - RiverSource Mid Cap Growth Fund AXP FIXED INCOME SERIES, INC. - RiverSource Diversified Bond Fund AXP GLOBAL SERIES, INC. - RiverSource Emerging Markets Fund - RiverSource Global Bond Fund - RiverSource Global Equity Fund - RiverSource Global Technology Fund AXP GOVERNMENT INCOME SERIES, INC. - RiverSource Short Duration U.S. Government Fund - RiverSource U.S. Government Mortgage Fund AXP GROWTH SERIES, INC. - RiverSource Disciplined Equity Fund - RiverSource Growth Fund - RiverSource Large Cap Equity Fund - RiverSource Large Cap Value Fund AXP HIGH YIELD INCOME SERIES, INC. - RiverSource High Yield Bond Fund AXP HIGH YIELD TAX-EXEMPT SERIES, INC. - RiverSource Tax-Exempt High Income Fund AXP INTERNATIONAL SERIES, INC. - RiverSource European Equity Fund - RiverSource International Opportunity Fund AXP INVESTMENT SERIES, INC. - RiverSource Balanced Fund - RiverSource Diversified Equity Income Fund - RiverSource Mid Cap Value Fund AXP MANAGED SERIES, INC. - RiverSource Strategic Allocation Fund AXP MARKET ADVANTAGE SERIES, INC. - RiverSource Portfolio Builder Aggressive Fund - RiverSource Portfolio Builder Conservative Fund - RiverSource Portfolio Builder Moderate Fund - RiverSource Portfolio Builder Moderate Aggressive Fund - RiverSource Portfolio Builder Moderate Conservative Fund - RiverSource Portfolio Builder Total Equity Fund - RiverSource S&P 500 Index Fund - RiverSource Small Company Index Fund AXP MONEY MARKET SERIES, INC. - RiverSource Cash Management Fund AXP PARTNERS INTERNATIONAL SERIES, INC. - RiverSource International Aggressive Growth Fund - RiverSource International Equity Fund - RiverSource International Select Value Fund - RiverSource International Small Cap Fund RIVERSOURCE FUNDS -- PROXY STATEMENT 1 NOTICE OF REGULAR MEETING OF SHAREHOLDERS (CONTINUED) RETAIL FUNDS: (CONTINUED) AXP PARTNERS SERIES, INC. - RiverSource Aggressive Growth Fund - RiverSource Fundamental Growth Fund - RiverSource Fundamental Value Fund - RiverSource Select Value Fund - RiverSource Small Cap Equity Fund - RiverSource Small Cap Value Fund - RiverSource Value Fund AXP SECTOR SERIES, INC. - RiverSource Dividend Opportunity Fund - RiverSource Real Estate Fund AXP SELECTED SERIES, INC. - RiverSource Precious Metals Fund AXP SPECIAL TAX-EXEMPT SERIES TRUST - RiverSource Massachusetts Tax-Exempt Fund - RiverSource Michigan Tax-Exempt Fund - RiverSource Minnesota Tax-Exempt Fund - RiverSource New York Tax-Exempt Fund - RiverSource Ohio Tax-Exempt Fund AXP STRATEGY SERIES, INC. - RiverSource Equity Value Fund - RiverSource Small Cap Growth Fund - RiverSource Small Cap Advantage Fund AXP TAX-EXEMPT SERIES, INC. - RiverSource Intermediate Tax-Exempt Fund - RiverSource Tax-Exempt Bond Fund AXP TAX-FREE MONEY SERIES, INC. - RiverSource Tax-Exempt Money Market Fund VARIABLE PORTFOLIO FUNDS: AXP VARIABLE PORTFOLIO INCOME SERIES, INC. - RiverSource Variable Portfolio Core Bond Fund - RiverSource Variable Portfolio Diversified Bond Fund - RiverSource Variable Portfolio Global Bond Fund - RiverSource Variable Portfolio Global Inflation Protected Securities Fund - RiverSource Variable Portfolio High Yield Bond Fund - RiverSource Variable Portfolio Income Opportunities Fund - RiverSource Variable Portfolio Short Duration U.S. Government Fund AXP VARIABLE PORTFOLIO INVESTMENT SERIES, INC. - RiverSource Variable Portfolio Emerging Markets Fund - RiverSource Variable Portfolio Growth Fund - RiverSource Variable Portfolio International Opportunity Fund - RiverSource Variable Portfolio Large Cap Equity Fund - RiverSource Variable Portfolio Large Cap Value Fund - RiverSource Variable Portfolio Mid Cap Growth Fund - RiverSource Variable Portfolio Mid Cap Value Fund - RiverSource Variable Portfolio S&P 500 Index Fund - RiverSource Variable Portfolio Small Cap Advantage Fund AXP VARIABLE PORTFOLIO MANAGED SERIES, INC. - RiverSource Variable Portfolio Balanced Fund - RiverSource Variable Portfolio Diversified Equity Income Fund AXP VARIABLE PORTFOLIO MONEY MARKET SERIES, INC. - RiverSource Variable Portfolio Cash Management Fund AXP VARIABLE PORTFOLIO PARTNERS SERIES, INC. - RiverSource Variable Portfolio Select Value Fund - RiverSource Variable Portfolio Small Cap Value Fund AXP VARIABLE PORTFOLIO SELECT SERIES, INC. - RiverSource Variable Portfolio Core Equity Fund RIVERSOURCE FUNDS -- PROXY STATEMENT 2 At the end of this proxy statement is a table that shows former AXP fund names and the corresponding new RiverSource fund names Your fund will hold a shareholders' meeting at 10:00 a.m. on Feb. 15, 2006, at the IDS Center, 80 South Eighth St., Minneapolis, MN in the Galaxy Room on the 50th floor. This will be a joint meeting of the funds listed above. If you plan to attend the meeting in person and need special arrangements, please contact Leslie L. Ogg. The purpose of the meeting is to consider the issues described in the following pages. You are entitled to vote at the meeting if you were a shareholder on Dec. 16, 2005. Please read the proxy statement and vote immediately by mail, telephone or internet, even if you plan to attend the meeting. Just follow the instructions on the enclosed proxy card. You must vote separately for each fund you own. The Board of Directors/Trustees recommends that you vote FOR each proposal. By Order of the Board of Directors/Trustees Leslie L. Ogg, Secretary Dec. 16, 2005 RIVERSOURCE FUNDS -- PROXY STATEMENT 3 PROXY STATEMENT This is a combined proxy statement for the funds listed on the previous pages. There are five sections to this proxy statement: SECTION PAGE A -- Overview __ B -- Fund Proposals __ C -- Proxy Voting and Shareholder Meeting Information __ D -- Fund Information __ E -- Board Member Information __ Under each Proposal the terms "fund" or "funds" are used, as context requires, to refer to the funds subject to the Proposal. Please be sure to read the proxy statement before you vote. Enclosed is a proxy voting card for each of the funds you own covering all of the issues described in this proxy statement. It is important that you vote for each fund. If you have questions, please call your advisor or (877) 256-6085. This proxy statement was first mailed to shareholders the week of Dec. 16, 2005. PLEASE VOTE IMMEDIATELY. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. RIVERSOURCE FUNDS -- PROXY STATEMENT 4 SECTION A - OVERVIEW The Boards of Directors/Trustees (the "Board") of the RiverSource Funds are asking you to vote on the following proposals. The proposals are described in detail in Section B.
PROPOSAL FUNDS AFFECTED ------------------------------------------------------------------------------------------------------------------------------ 1. Elect Board members All Funds 2. Amend the Articles of Incorporation to permit the Board to All Funds except California Tax-Exempt, Massachusetts establish the minimum account value and to change the name Tax-Exempt, Michigan Tax-Exempt, Minnesota Tax-Exempt, New of the corporation York Tax-Exempt and Ohio Tax-Exempt 3. Approve an Investment Management Services Agreement with All Funds RiverSource Investments, LLC ("RiverSource Investments") 4. Approve Subadvisory Agreement between RiverSource Small Cap Advantage, VP Small Cap Advantage Investments and Kenwood Capital Management LLC 5. Approve a Subadvisory Agreement between RiverSource Emerging Markets, European Equity, Global Equity, Investments and Threadneedle International Limited International Opportunity, VP Emerging Markets, VP International Opportunity 6. Approve a Subadvisory Agreement between RiverSource Fundamental Value Investments and Davis Advisors
RIVERSOURCE FUNDS -- PROXY STATEMENT 5
PROPOSAL FUNDS AFFECTED -------------------------------------------------------------------------------------------------------------------------------- 7. Approve changes in fundamental policies A. All Funds except California Tax-Exempt, Global Bond, A. Diversification Global Technology, Inflation Protected Securities, Massachusetts Tax-Exempt, Michigan Tax-Exempt, Minnesota Tax-Exempt, New York Tax-Exempt, Ohio Tax-Exempt, Portfolio Builder Aggressive, Portfolio Builder Conservative, Portfolio Builder Moderate Fund, Portfolio Builder Moderate Aggressive, Portfolio Builder Moderate Conservative, Portfolio Builder Total Equity, Precious Metals, VP Global Bond B. Ten Percent Limitation in Single Issuer B. Balanced, Cash Management, Diversified Bond, Diversified Equity Income, Dividend Opportunity, Emerging Markets, Equity Value, European Equity, Global Bond, Global Equity, Growth, High Yield Bond, Intermediate Tax-Exempt, International Opportunity, Mid Cap Growth, Real Estate, S&P 500 Index, Select Value, Short Duration U.S. Gov't, Small Cap Growth, Small Cap Advantage, Small Cap Value, Small Company Index, Strategic Allocation, Tax-Exempt Bond, Tax-Exempt High Income, Tax-Exempt Money Market, U.S. Gov't Mortgage, VP Balanced, VP Cash Management, VP Diversified Bond, VP Diversified Equity Income, VP Emerging Markets, VP Global Bond, VP Growth, VP High Yield Bond, VP International Opportunity, VP Large Cap Equity, VP Mid Cap Growth, VP S&P 500 Index, VP Short Duration U.S. Gov't, VP Small Cap Value C. Lending C. All Funds D. Borrowing D. All Funds E. Precious Metals E. Precious Metals 8. Transact other business All Funds
RIVERSOURCE FUNDS -- PROXY STATEMENT 6 SECTION B - FUND PROPOSALS PROPOSAL 1: ELECTION OF BOARD MEMBERS (Applies to: ALL FUNDS) NOMINEES FOR THE BOARD. Nominees are listed in the following table. Each person is a nominee for each of the 90 RiverSource Funds. Each nominee was elected a member of the Board at the last regular shareholders' meeting except for Ms. Flynn, Ms. Paglia, Mr. Laikind, Ms. Blatz and Ms. Pryor. These nominees were recommended for the position of Board member by the independent Board members. Ms. Flynn and Ms. Paglia began serving the fund in 2004. Mr. Laikind and Ms. Blatz began serving the fund in 2005. Each Board member will serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attend as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who must retire after her 75th birthday. All nominees have agreed to serve. If an unforeseen event prevents a nominee from serving, your votes will be cast for the election of a substitute selected by the Board. Information on each nominee follows. Election requires a vote by a majority of the fund's shares voted at the meeting. TABLE B-1. INDEPENDENT NOMINEES
NAME, POSITION HELD WITH ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS -------------------------------------------------------------------------------------------------------------------------------- Kathleen Blatz 901 S. Marquette Ave. Minneapolis, MN 55402 Age 51
RIVERSOURCE FUNDS -- PROXY STATEMENT 7 INDEPENDENT NOMINEES (CONTINUED)
NAME, POSITION HELD WITH ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS -------------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, Board Services Contracts, 901 S. Marquette Ave. since 1999 Corporation (provides Executive, Minneapolis, MN 55402 administrative services to Investment Review, Age 71 boards). Former Governor of Board Effectiveness Minnesota. Patricia M. Flynn Board member Trustee Professor of Investment Review, 901 S. Marquette Ave. since 2004 Economics and Management, Joint Audit Minneapolis, MN 55402 Bentley College; former Age 54 Dean, McCallum Graduate School of Business, Bentley College Anne P. Jones Board member Attorney and consultant Joint Audit, Board 901 S. Marquette Ave. since 1985 Effectiveness, Minneapolis, MN 55402 Executive, Age 70 Investment Review Jeffrey Laikind Board member Former Managing Director, American Progressive 901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance Minneapolis, MN 55402 Age 70 Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Contracts, 901 S. Marquette Ave. since 2002 professor economics, Inc. (manufactures Investment Review, Minneapolis, MN 55402 Carleton College irrigation systems) Executive, Board Age 66 Effectiveness
RIVERSOURCE FUNDS -- PROXY STATEMENT 8 INDEPENDENT NOMINEES (CONTINUED)
NAME, POSITION HELD WITH ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS -------------------------------------------------------------------------------------------------------------------------------- Catherine James Board member Director, Enterprise Asset Strategic Contracts, Paglia since 2004 Management, Inc. (private Distribution, Inc. Investment Review 901 S. Marquette Ave. real estate and asset (transportation, Minneapolis, MN 55402 management company) distribution and Age 53 logistics consultants) Vikki L. Pryor 901 S. Marquette Ave. Minneapolis, MN 55402 Age __ Alan K. Simpson Board member Former three-term United Investment Review, 1201 Sunshine Ave. since 1997 States Senator for Wyoming Board Effectiveness Cody, Wyoming 82414 Age 74 Alison Taunton-Rigby Board member Chief Executive Officer, Hybridon, Inc. Investment Review, 901 S. Marquette Ave. since 2002 RiboNovix, Inc. since 2003 (biotechnology) Contracts Minneapolis, MN 55402 (biotechnology); President, Age 61 Forester Biotech
RIVERSOURCE FUNDS -- PROXY STATEMENT 9 TABLE B-2. NOMINEES AFFILIATED WITH RIVERSOURCE INVESTMENTS
NAME, POSITION HELD WITH ADDRESS, FUND AND LENGTH OF PRINCIPAL OCCUPATION AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS COMMITTEE MEMBERSHIPS -------------------------------------------------------------------------------------------------------------------------------- William F. Truscott* Board member Senior vice president - 53600 Ameriprise Financial since 2001, Vice chief investment officer of Center President since RiverSource Investments Minneapolis, MN 55474 2002 since 2001. Former chief Age 44 investment officer and managing director, Zurich Scudder Investments.
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. RIVERSOURCE FUNDS -- PROXY STATEMENT 10 BOARD COMMITTEES. The Board has several committees that facilitate the work of the Board. The Executive Committee has authority to act for the full Board between meetings. The Contracts Committee receives and analyzes reports covering the level and quality of services provided under contracts with the fund and advises the Board regarding actions taken on these contracts during the annual review process. The Investment Review Committee considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board. The Board Effectiveness Committee's charter, Exhibit A, requires it to make recommendations regarding nominees based on criteria approved by the Board. All members of the Committee are independent. Nominee recommendations are based on a matrix of skill sets, experience, and geographical location and each nominee must have a background that demonstrates the ability to furthering the interest of all shareholders. The Committee will consider recommendations from shareholders who write to the Boards and provide detailed information about a candidate. All candidates are processed in the same fashion; first by evaluating a candidate's detailed information against the criteria; then interviewing those candidates who best fill vacancies identified by the matrix. You may write the Board by addressing a letter to Arne H. Carlson, the independent Chairman of the Board or any other independent member of the Board, at Board Services Corporation, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. However, do not address letters to this address if you are requesting some action regarding your investments. In order to avoid any delay in processing a request regarding an investment, please address these requests to 70100 Ameriprise Financial Center, Minneapolis, MN 55474. The Joint Audit Committee, made up entirely of independent Board members, operates under a written charter, Exhibit B. The Joint Audit Committee meets with the independent auditors, internal auditors and corporate officers to review and discuss audited financial statements, reports, issues, and compliance matters. This Committee reports significant issues to the Board and makes recommendations to the independent Board members regarding the selection of the independent public accountant. More information regarding this Committee and the fund's independent auditor is found in Section D. RIVERSOURCE FUNDS -- PROXY STATEMENT 11 During the year ended Sept. 30, 2005, the Board met 8 times, Executive 2 times, Contracts 7 times, Investment Review 5 times, Board Effectiveness 6 times and Joint Audit 4 times. All board members had 100% attendance except for Mr. Simpson who had 82% attendance due to serious illness in January 2005. SHAREHOLDER COMMUNICATIONS WITH THE BOARD. Shareholders may communicate directly with the Board by sending correspondence to Arne H. Carlson, Chair of the Board, RiverSource Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. Correspondence to specific individual Board members also may be directed to the same address. Account-specific correspondence should be directed to RiverSource Funds, 70100 Ameriprise Financial Center, Minneapolis, MN 55474. BOARD MEMBER COMPENSATION. The following table shows the total compensation received by each Board member from all of the RiverSource Funds. The funds do not pay retirement benefits to Board members. Under a Deferred Compensation Plan, independent Board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of one or more designated RiverSource funds. Information on compensation paid to Board members by individual funds is shown in Section E. TABLE B-3. BOARD MEMBER COMPENSATION FROM ALL RIVERSOURCE FUNDS* (FOR THE YEAR ENDED SEPT. 30, 2005)
AGGREGATE COMPENSATION FROM ALL NOMINEE RIVERSOURCE FUNDS Flynn $143,675(1) Jones 185,892 Lewis 204,670(2) Paglia 157,708 Simpson 138,842 Taunton-Rigby 166,842
* Board members affiliated with RiverSource Investments or Board Services Corporation, a company providing administrative services to the funds, are not paid by the funds. Mr. Carlson's total compensation was $373,750. Board member compensation is a combination of a base fee and meeting fees. Because the spin-off of Ameriprise Financial from American Express Company necessitated 5 additional meetings, Ameriprise Financial reimbursed the funds $23,500 for each member to cover those additional meetings. Mr. Laikind, Ms. Blatz and Ms. Pryor were not Board members prior to Sept. 30, 2005 and therefore are not included in the table. (1) Includes the portion of compensation deferred in the amount of $60,371 from the Funds. (2) Includes the portion of compensation deferred in the amount of $59,839 from the Funds. The dollar range of equity securities beneficially owned by each Board member is shown in Section E. RIVERSOURCE FUNDS -- PROXY STATEMENT 12 FUND OFFICERS. In addition to Mr. Truscott, the fund's other executive officers are: LESLIE L. OGG, age 67. Vice president, general counsel and secretary since 1978. President of Board Services Corporation. JEFFREY P. FOX, age 50. Treasurer since 2002. Vice President - Investment Accounting of Ameriprise Financial. PAULA R. MEYER, age 51. President since 2002. Senior Vice President - Mutual Funds, RiverSource Investments. Officers serve at the pleasure of the Board. Officers are paid by Ameriprise Financial, Inc., RiverSource Investments or Board Services Corporation. During the last fiscal year, no officer earned more than $60,000 from any fund. PROPOSAL 2: APPROVE OR REJECT AN AMENDMENT TO THE ARTICLES OF INCORPORATION (Applies to: ALL FUNDS EXCEPT CALIFORNIA TAX-EXEMPT, MASSACHUSETTS TAX-EXEMPT, MICHIGAN TAX-EXEMPT, MINNESOTA TAX-EXEMPT, NEW YORK TAX-EXEMPT AND OHIO TAX-EXEMPT) Every fund is organized under state law. Each RiverSource fund, except those listed under the heading above, is a Minnesota corporation and operates under an organizational document called the articles of incorporation. The articles of incorporation set forth various provisions relating to the authority of the fund to conduct business and the governance of the fund. The Board has approved, and recommends that shareholders approve, a proposal to amend the fund's articles of incorporation (the "Articles"). The fund's investments and investment policies will not change by virtue of the adoption of the amendment to the Articles. A. MINIMUM ACCOUNT VALUE Generally, shareholders must invest at least $2,000 to open a fund account. Section 7 of the Articles currently provides that the fund may redeem shares if an account falls below a value of $1,000. Small accounts can be costly to maintain and this provision allows the Board to close accounts that no longer meet the fund's minimum standards. However, the current provision does not allow the Board to redeem accounts if the value is higher than $1,000. In the future, there may be circumstances in which a minimum account value higher than $1,000 is in the best interest of the fund and its shareholders. As a consequence, the Board recommends that the Articles be amended to eliminate the reference to a specific dollar amount. As proposed, the amended Articles will permit the Board to establish a minimum account value that will be RIVERSOURCE FUNDS -- PROXY STATEMENT 13 disclosed in the fund prospectus. The Board will be able to change the minimum account value without further action by shareholders. If the change is approved, the Articles will be amended as follows ([UNDERLINE]additions are underlined[/UNDERLINE], [STRIKETHROUGH]deletions are lined through[/STRIKETHROUGH]): Article III, Section 7 will be amended to read: Section 7. The Fund may redeem the shares of a shareholder if the amount invested is less than [STRIKETHROUGH]$1,000[/STRIKETHROUGH] [UNDERLINE]an amount determined by the Board of Directors and set forth in the current Fund prospectus.[/UNDERLINE] B. NAME CHANGE. Historically the name of the fund has reflected the name of the investment manager. Since 1999, the name of the fund has included the letters AXP, which is an abbreviated form of the name American Express. In August 2005, American Express Financial Corporation ("AEFC"), the fund's investment manager changed its name to Ameriprise Financial, Inc. ("Ameriprise Financial") in anticipation of its spin off from American Express Company, its parent company. On October 1, 2005, Ameriprise Financial transferred responsibility for the fund's investment advisory services to its wholly owned subsidiary, RiverSource Investments. The Board made a corresponding change to the name of the fund by substituting the name RiverSource for AXP. For certain funds, the Board also made other clarifying changes in the name of the fund. The name of the corporate entity can be changed only with approval of the shareholders of all the underlying funds that make up the corporation. The Board recommends that the name of the corporate entity also be changed to include the name RiverSource instead of AXP. In addition, the Boards recommend that other portions of the names of some of the corporations be changed to more clearly identify the types of funds included in that corporation. The changes are shown in the table below. This is the first shareholder meeting since the spin off of the investment manager and the first opportunity for shareholders to consider a name change for the corporation. Shareholders of each corporation will vote to change the name of the legal entity. You can determine which corporation your fund is part of by referring to page 1 of this proxy statement. Similar name changes will be made for the Massachusetts business trusts by action of the Board as permitted by the Declaration of Trust. RIVERSOURCE FUNDS -- PROXY STATEMENT 14 TABLE B-4. PROPOSED NAME OF CORPORATION
CURRENT NAME OF CORPORATION PROPOSED NAME OF CORPORATION AXP Discovery Series, Inc. RiverSource Bond Series, Inc. AXP Equity Series, Inc. RiverSource Equity Series, Inc. AXP Fixed Income Series, Inc. RiverSource Diversified Income Series, Inc. AXP Global Series, Inc. RiverSource Global Series, Inc AXP Growth Series, Inc. RiverSource Large Cap Series, Inc. AXP Government Income Series, Inc. RiverSource Government Income Series, Inc. AXP High Yield Income Series, Inc. RiverSource High Yield Income Series, Inc. AXP High Yield Tax-Exempt Series, Inc. RiverSource Tax-Exempt Income Series, Inc. AXP International Series, Inc. RiverSource International Series, Inc. AXP Investment Series, Inc. RiverSource Investment Series, Inc. AXP Managed Series, Inc. RiverSource Strategic Allocation Series, Inc. AXP Market Advantage Series, Inc. RiverSource Market Advantage Series, Inc. AXP Money Market Series, Inc. RiverSource Money Market Series, Inc. AXP Partners International Series, Inc. RiverSource International Managers Series, Inc. AXP Partners Series, Inc. RiverSource Managers Series, Inc. AXP Sector Series, Inc. RiverSource Sector Series, Inc. AXP Selected Series, Inc. RiverSource Selected Series, Inc. AXP Strategy Series, Inc. RiverSource Strategy Series, Inc. AXP Tax-Exempt Series, Inc. RiverSource Tax-Exempt Series, Inc. AXP Tax-Free Money Series, Inc. RiverSource Tax-Exempt Money Market Series, Inc. AXP VP Income Series, Inc. RiverSource VP Income Series, Inc. AXP VP Investment Series, Inc. RiverSource VP Investment Series, Inc. AXP VP Managed Series, Inc. RiverSource VP Managed Series, Inc. AXP VP Money Market Series, Inc. RiverSource VP Money Market Series, Inc. AXP VP Partners Series, Inc. RiverSource VP Managers Series, Inc. AXP VP Select Series, Inc. RiverSource VP Select Series, Inc.
BOARD RECOMMENDATION AND VOTE REQUIRED. The Board recommends that you vote to approve the amendments to the Articles. The changes require the approval by a majority of the shares voted at the meeting. The changes will be effective when the amendments are filed with the Secretary of State's office. This filing is expected to occur shortly after the shareholder meeting. RIVERSOURCE FUNDS -- PROXY STATEMENT 15 PROPOSAL 3: APPROVE OR REJECT AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC (Applies to: ALL FUNDS) The fund pays fees to RiverSource Investments under an investment management services agreement (the "IMS Agreement") for investment management services. These services include providing the personnel, equipment and office facilities necessary for the management of the fund's assets. Subject to the oversight of the Board and consistent with the fund's investment policies, the investment manager decides which securities to buy, hold or sell. The investment manager also executes buy and sell orders and provides research and statistical data to support investment management activities. For some of the funds, RiverSource Investments hires, pays and oversees a sub-adviser to perform the day-to-day management functions. Some of the retail funds are part of master/feeder structures. In these structures, these funds invest all of their assets in master funds (the "portfolio") with the same investment policies as the respective funds. For purposes of this discussion, the portfolio is referred to as a "fund". On Sept. 30, 2005, Ameriprise Financial became a publicly traded company and on Oct. 1, 2005 transferred its investment management functions and IMS Agreements to RiverSource Investments, a wholly owned subsidiary. While these transfers did not cause a termination of the IMS Agreement, the Board determined that it would be prudent to give shareholders an opportunity to review and vote on the proposed new IMS Agreements reflecting these new arrangements and the changes discussed below. SUMMARY OF KEY CHANGES A. PERFORMANCE INCENTIVE ADJUSTMENT ("PIA"). The management fee for the equity and balanced funds includes a PIA as part of the fee calculation. The PIA calculation is based on the performance of the fund compared to the performance index of a group of comparable mutual funds compiled by Lipper, Inc. The proposed change clarifies the circumstances under which the Board may change an index for purposes of calculating the PIA. B. VARIABLE PORTFOLIO FUNDS. For each of the variable portfolio funds, the current IMS Agreement includes the provision of transfer agent services. For all variable portfolio funds except VP Core Equity, these services will be provided under a new transfer agency agreement if the proposed IMS Agreements are approved. In addition, the proposed IMS Agreement clarifies the description of allocation of expenses. For VP Core Equity, the proposed IMS Agreement includes a new provision authorizing the investment manager to subcontract for administrative or transfer agent services. RIVERSOURCE FUNDS -- PROXY STATEMENT 16 C. FEE SCHEDULE. For certain funds only, the investment manager has proposed changes in the fee schedules. Please see Table B-5 to examine the fees for each Fund. For other funds, the fee schedules are unchanged. D. STANDARD OF CARE. For all funds, the investment manager will be held to a higher standard of care than under the current IMS Agreement (i.e., it will be liable for "negligence" rather than "gross negligence"). E. CONFIDENTIALITY. The proposed IMS Agreement contains an explicit acknowledgement from the funds that the investment manager may be prevented from divulging or acting upon certain confidential information learned in connection with its activities, including the provision of investment advice to clients other than the funds. In addition, the proposed IMS Agreement contains additional confidentiality provisions prohibiting the funds from disclosing to third parties any information or advice furnished by the investment manager to the funds, except under limited circumstances. F. AMENDMENTS. The proposed IMS Agreement clarifies that, as permitted under applicable law, the parties may make non-material amendments or modifications without obtaining shareholder approval. TERMS OF THE CURRENT IMS AGREEMENT. The fee the fund pays to RiverSource Investments for its services under the current IMS Agreement is based on the net assets of the fund and decreases as the size of the fund increases. The complete fee schedule for the fund and other funds managed by RiverSource Investments is found in Section D. The fund also pays its taxes, brokerage commission and nonadvisory expenses, which include custodian fees; audit and certain legal fees; fidelity bond premiums; registration fees for shares; consultant fees; Board compensation; corporate filing fees; organizational expenses; expenses incurred in connection with lending portfolio securities; and other expenses properly payable by the fund, approved by the Board. Section D includes information on the date of the current IMS Agreement, the date it was last approved by shareholders and the reason why it was submitted to shareholders at that time. RIVERSOURCE FUNDS -- PROXY STATEMENT 17 A. PIA CALCULATION. The management fee for the equity and balanced funds includes a PIA as part of the fee. The adjustment is based on the performance of the fund compared to the performance of a group of similar funds, as measured by a Lipper Index. The proposed modification explains the circumstances where the Board may change the index. The provision in the current IMS Agreement will be modified to read as follows ([UNDERLINE]additions are underlined[/UNDERLINE], [STRIKETHROUGH]deletions are lined through[/STRIKETHROUGH]): If an Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable [UNDERLINE]or, in the discretion of the Board, is no longer appropriate[/UNDERLINE] to use for purposes of a performance incentive adjustment, [UNDERLINE]for example, if Lipper reclassifies the fund from one peer group to another, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index, or (2) adoption of a methodology to transition to a substitute index it has approved.[/UNDERLINE] [STRIKETHROUGH]no adjustment will be made until such time as the Board approves a substitute index.[/STRIKETHROUGH] The PIA is determined by measuring the difference in a fund's performance compared to an index of similar funds over a rolling 12-month period. Should the Board approve the use of a substitute index, it may transition to the substitute index by introducing it gradually over time, to avoid unintended swings in the PIA. B. VARIABLE PORTFOLIO FUNDS. - FOR ALL VP FUNDS EXCEPT VP CORE EQUITY The current IMS Agreement for the variable portfolio funds includes both investment management services and transfer agent services. RiverSource Investments recommended to the Board that the transfer agent services be eliminated from the IMS agreement and moved to a separate agreement. This structure is consistent with how services are provided to the retail funds and will facilitate consistency in the management fee structure between similar retail and variable portfolio funds. The fee under the proposed IMS agreement will be reduced, in amounts that vary by fund, to reflect the elimination of the transfer agent services. If shareholders approve the proposal, the fund will then enter into a separate transfer agent agreement with RiverSource Service Corporation. The fee under that agreement will be uniform for all funds at an annual rate of 0.06% of average daily net assets. In addition to eliminating transfer agent services, the proposed IMS Agreement clarifies the description of the allocation of expenses between the fund and the investment manager. The change will not affect the allocation of expenses, but rather will eliminate an ambiguity in the current IMS Agreement. RIVERSOURCE FUNDS -- PROXY STATEMENT 18 Part One of the current IMS Agreement states that the investment manager will "pay or reimburse such expenses of the Fund as may be provided for in Part Three". The proposed IMS Agreement does not include that reference since there are no expenses delineated in Part Three for the investment manager to pay. Part Three identifies the expenses the fund will pay. The statement in Part One creates potential ambiguity about who does pay the delineated expenses. - FOR VP CORE EQUITY Unlike the other variable portfolio funds, VP Core Equity is available as an investment option only under certain variable annuity contracts that are no longer offered for sale. The current IMS Agreement for VP Core Equity includes the provision of administrative and transfer agent services, in addition to investment management services. The proposed IMS Agreement for VP Core Equity will continue to cover those services. However, the proposed IMS Agreement includes a new provision authorizing RiverSource Investments, at its own expense, to delegate the provision of certain services to an affiliate or, subject to the Board's prior approval, to enter into agreements with unaffiliated companies to assist the investment manager in performing any of the administrative or transfer agent services. C. FEE SCHEDULE. RiverSource Investments recommended to the Board that the management fees under the current IMS Agreement be changed consistent with its broader effort to establish competitive pricing for the funds, while at the same time providing fair compensation in light of increased costs resulting from changing regulatory demands and intensified competition for professional talent. RiverSource Investments proposed management fees which would result in lower management fees for nineteen retail funds and eighteen variable portfolio funds, higher management fees for four retail funds and two variable portfolio funds, and no change to management fees for thirty-six retail funds and two variable portfolio funds. RiverSource Investments believes that these changes will allow it to maintain a high level of service to each fund and to hire and retain high quality investment management and research personnel for each fund. In addition to impacting current management fees, RiverSource Investments recommended changes to certain funds' breakpoint schedules. Table B-5 shows how these recommended changes affect your fund. Changes to the variable portfolio funds include reduction in the management fee for transfer agency services, which will be offset in part or in whole by a 0.06% transfer agency fee in a separate transfer agency agreement should shareholders approve the IMS Agreement. RIVERSOURCE FUNDS -- PROXY STATEMENT 19 Management fees are a significant component of the expenses you incur as a shareholder. You should review your fund's prospectus for your fund's total expenses to understand the costs you can expect to incur as a shareholder. See "How the Proposed Fee Schedules Will Affect Total Fund Expenses" for how these recommendations, if approved, may affect the costs you will incur as a shareholder. D. STANDARD OF CARE. The proposed IMS Agreement revises the standard of care to provide that, except for bad faith, intentional misconduct or negligence in regard to the performance of its duties pursuant to the agreement, neither the investment manager, nor any of its respective directors, officers, partners, principals, employees, or agents shall be liable for any acts or omissions or for any loss suffered by the fund or its shareholders or creditors. This means that the investment manager is held to a higher standard of care. The current IMS Agreement provides that, except for bad faith, intentional misconduct or gross negligence in regard to the performance of its duties pursuant to the agreement, neither the investment manager, nor any of its respective directors, officers, partners, principals, employees, or agents shall be liable for any acts or omissions or for any loss suffered by the fund or its shareholders or creditors. E. CONFIDENTIALITY. The current IMS Agreement contains an acknowledgement by the funds that the investment manager renders investment advice and other services to other investment companies and persons which may or may not have investment policies and investments similar to those of the funds. The proposed IMS Agreement adds an explicit acknowledgement from the funds that the investment manager may not be free to divulge to the funds or act, for the benefit of the funds, upon confidential information learned in connection with its activities, including the provision of investment advice to clients other than the funds. The current IMS Agreement is silent on the funds' obligation to refrain from divulging confidential information. The proposed IMS Agreement includes a new provision that prohibits the funds from disclosing to third parties any information or advice furnished to the funds by the investment manager, except under limited circumstances. F. AMENDMENTS. The current IMS Agreement does not address whether shareholder approval must be obtained before non-material amendments or modifications may be made. The proposed IMS Agreement includes a new provision clarifying that the parties may make non-material amendments or modifications without obtaining shareholder approval, as permitted under applicable law. RIVERSOURCE FUNDS -- PROXY STATEMENT 20 WHY RIVERSOURCE INVESTMENTS IS SEEKING TO RESTRUCTURE FUND MANAGEMENT FEES. RiverSource Investments generally believes that each fund should have a total expense ratio at or below the median of a group of comparable funds sold through investment advisers (peer group). Working with the Board, it developed an approach for carrying out this pricing philosophy whereby it would use the fee structures that are set forth below, together with expense caps or waivers to keep each fund at or below the median of the peer group, prior to giving effect to any performance incentive adjustment. RiverSource Investments and the Board have agreed to review fees annually and that if, at the time of the review, the total expense ratio was more than .03% above the peer group median the expense cap would be adjusted accordingly. RiverSource Investments represented to the Board that the implementation of this pricing philosophy will enable it to continue to provide high quality services and to continue its efforts to improve investment performance. Details of recommended changes are fully set forth under Table B-5. Note that "Fee decreases" and "Fee increases" are only with respect to the management fee schedule. See discussion under "How the Proposed Fee Schedules Will Affect Total Fund Expenses" for more information on other changes to fund fees and expenses, and see Table B-6 for how these changes would position each fund in comparison to its peer group. The factors considered by the Board in determining the reasonableness and fairness of the fee schedules recommended by the investment manager are described under "Basis for Recommendation of the Board." RIVERSOURCE FUNDS -- PROXY STATEMENT 21 TABLE B-5. CURRENT AND PROPOSED MANAGEMENT FEE CHANGES
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- RETAIL FUND: Aggressive Growth NO CHANGE First $.5 - .89%; next $.5 - First $.5 - .89%; next $.5 - .865%; next .865%; next $1 - .84%; next $1 - $1 - .84%; next $1 - .815%; next $3 - .815%; next $3 - .79%; over $6 - .79%; over $6 - .765% .765% Balanced NO CHANGE First $1 - .53%; next $1 - First $1 - .53%; next $1 - .505%; next .505%; next $1 - .48%; next $3 - $1 - .48%; next $3 - .455%; next $1.5 - .455%; over $6 - .43% 0.43%; next $2.5 - .41%; next $5 - .39%; next $9 - 0.37%; over $24 - 0.35% California FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; Tax-Exempt .445%; next $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; $.25 - .405%; over $1 - .38% next $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27; over $50 - .25% Cash Management FEE DECREASE First $1 - .36%; next $.5 - First $1.0 - .33%; next $.5 - .313%; .343%; next $.5 - .325%; next $.5 next $.5 - .295%; next $.5 - .278%; next - .308%; next $1 - .29%; next $3 $2.5 - .26%; next $1 - .24%; next $1.5 - - .27%; over $6.5 - .25% .22; next $1.5 - .215%; next $1 - .19%; next $5 - .18%; next $5 - .17%; next $4 - .16%; over $24 - .15% Core Bond FEE DECREASE First $1 - .54%; next $1 - First $1 - .48%; next $1 - .455%; next .515%; next $1 - .49%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .465%; next $3 - .44%; over $9 - .38%; next $1.5 - .365%; next $1 - .36%; .415% next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31; over $50 - .29%
RIVERSOURCE FUNDS -- PROXY STATEMENT 22 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Disciplined Equity NO CHANGE First $1 - .60%; next $1 - First $1 - .60%; next $1 - .575%; next .575%; next $1 - .55%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .525%; next $6 - .50%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .49%; over $24 - .48% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% Diversified Bond FEE DECREASE First $1 - .52%; next - .495%; First $1 - .48%; next $1 - .455%; next next $1 - .47%; next $3 - .445%; $1 - .43%; next $3 - .405%; next $1.5 - next $3 - .42%; over $9 - .395% .38%; next $1.5 - .365%; next $1 - .36%; next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31%; over $50 - .29% Diversified Equity FEE INCREASE First $.5 - .53%; next $.5 - First $1 - .60%; next $1 - .575%; next Income .505%; next $1 - .48%; next $1 - $1 - .55%; next $3 - .525%; next $1.5 - .455%; next $3 - .43%; over $6 - .50%; next $2.5 - .485%; next $5 - .47%; .40% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% Dividend NO CHANGE First $.5 - .61%; next $.5 - First $.5 - .61%; next $.5 - .585%; next Opportunity .585%; next $1 - .56%; next $1 - $1 - .56%; next $1 - .535%; next $3 - .535%; next $3 - .51%; over $6 - .51%; next $4 - .48%; next $5 - .47%; .48% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% Emerging Markets NO CHANGE First $.25 - 1.10%; next $.25 - First $.25 - 1.10%; next $.25 - 1.08%; 1.08%; next $.25 - 1.06%; next next $.25 - 1.06%; next $.25 - 1.04%; $.25 - 1.04%; next $1 - 1.02%; next $1 - 1.02%; next $5.5 - 1.0%; next over $2 - 1.0% $2.5 - .985%; next $5 - .97%; next $5 - .96%; next $4 - .935%; next $26 - .92%; over $50 - .90%
RIVERSOURCE FUNDS -- PROXY STATEMENT 23 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Equity Value NO CHANGE First $.5 - .53%; next $.5 - First $.5 - .53%; next $.5 - .505%; next .505%; next $1 - .48%; next $1 - $1 - .48%; next $1 - .455%; next $3 - .455%; next $3 - .43%; over $6 - .43%; over $6 - .40% .40% European Equity NO CHANGE First $.25 - .80%; next $.25 - First $.25 - .80%; next $.25 - .775%; .775%; next $.25 - .75%; next next $.25 - .75%; next $.25 - .725%; next $.25 - .725%; next $1 - .70%; $1 - .70%; next $5.5 - .675%; next $2.5 over $2 - .675% - .66%; next $5 - .645%; next $5 - .635%; next $4 - .61%; next $26 - .60%; over $50 - .57% Fundamental Growth NO CHANGE First $1 - .78%; next $1 - First $1 - .78%; next $1 - .755%; next .755%; next $1 - .73%; next $3 - $1 - .73%; next $3 - .705%; over $6 - .705%; over $6 - .68% .68% Fundamental Value NO CHANGE First $.5 - .73%; next $.5 - First $.5 - .73%; next $.5 - .705%; next .705%; next $1 - .68%; next $1 - $1 - .68%; next $1 - .655%; next $3 - .655%; next $3 - .63%; over $6 - .63%; over $6 - .60% .60% Global Bond FEE DECREASE First $.25 - .77%; next $.25 - First $.25 - .72%; next $.25 - .695%; .745%; next $.25 - .72%; next next $.25 - .67%; next $.25 - .645%; $.25 - .695%; over $1 - .67% next $6.5 - .62%; next $2.5 - .605%; next $5 - .59%; next $5 - .58%; next $4 - .56%; next $26 - .54%; over $50 - .52% Global Equity NO CHANGE First $.25 - .80%; next $.25 - First $.25 - .80%; next $.25 - .775%; .775%; next $.25 - .75%; next next $.25 - .75%; next $.25 - .725%; $.25 - .725%; next $1 - .70%; next $1 - .70%; next $5.5 - .675%; next over $2 - .675% $2.5 - .66%; next $5 - .645%; next $5 - .635%; next $4 - .61%; next $26 - .60%; over $50 - .57%
RIVERSOURCE FUNDS -- PROXY STATEMENT 24 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Global Technology NO CHANGE First $.25 - .72%; next $.25 - First $.25 - .72%; next $.25 - .695%; .695%; next $.25 - .67%; next next $.25 - .67%; next $.25 - .645%; next $.25 - .645%; next $1 - .62%; $1 - .62%; over $2 - .595% over $2 - .595% Growth NO CHANGE First $1 - .60%; next $1 - First $1 - .60%; next $1 - .575%; next .575%; next $1 - .55%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .525%; next $6 - .50%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .49%; over $24 - .48% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% High Yield Bond NO CHANGE First $1 - .59%; next $1 - First $1 - .59%; next $1 - .565%; next .565%; next $1 - .54%; next $3 - $1 - .54%; next $3 - .515%; next $1.5 - .515%; next $3 - .49%; over $9 - .49%; next $1.5 - .475%; next $1 - .45%; .465% next $5 - .435%; next $5 - .425%; next $4 - .40%; next $26 - .385%; over $50 - .36% Income NO CHANGE First $1 - .61%; next $1 - First $1 - .61%; next $1 - .585%; next Opportunities .585%; next $1 - .56%; next $3 - $1 - .56%; next $3 - .535%; next $1.5 - .535%; next $3 - .51%; over $9 - .51%; next $1.5 - .495%; next $1 - .47%; .485% next $5 - .455%; next $5 - .445%; next $4 - .42%; next $26 - .405%; over $50 - .38% Inflation NO CHANGE First $1 - .44%; next $1 - First $1 - .44%; next $1 - .415%; next Protected .415%; next $1 - .39%; next $3 - $1 - .39%; next $3 - .365%; next $1.5 - Securities .365%; next $3 - .34%; over $9 - .34%; next $1.5 - .325%; next $1 - .32%; .315% next $5 - .31%; next $5 - .30%; next $4 - .29%; next $26 - .27%; over $50 - .25%
RIVERSOURCE FUNDS -- PROXY STATEMENT 25 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Intermediate FEE DECREASE First $1 - .45%; next $1 - First $1 - .39%; next $1 - .365%; next Tax-Exempt .425%; next $1 - .4%; next $3 - $1 - .34%; next $3 - .315%; next $1.5 - .375%; over $6 - .35% .29%; next $2.5 - .28%; next $5 - .27% ; next $35 - .26%; over $50 - .25% International NO CHANGE First $.25 - 1.00%; next $.25 - First $.25 - 1.00%; next $.25 - .975%; Aggressive Growth .975%; next $.25 - .95%; next next $.25 - .95%; next $.25 - .925%; $.25 - .925%; next $1 - .90%; next $1 - .90%; over $2 - .875% over $2 - .875% International NO CHANGE First $.25 - .97%; next $.25 - First $.25 - .97%; next $.25 - .945%; Equity .945%; next $.25 - .92%; next next $.25 - .92%; next $.25 - .895%; next $.25 - .895%; next $1 - .87%; $1 - .87%; over $2 - .845% over $2 - .845% International NO CHANGE First $.25 - .80%; next $.25 - First $.25 - .80%; next $.25 - .775%; Opportunity .775%; next $.25 - .75%; next next $.25 - .75%; next $.25 - .725%; next $.25 - .725%; next $1 - .70%; $1 - .70%; next $5.5 - .675%; next $2.5 - over $2 - .675% .66%; next $5 - .645%; next $5 - .635%; next $4 - .61%; next $26 - .60%; over $50 - .57% International NO CHANGE First $.25 - .90%; next $.25 - First $.25 - .90%; next $.25 - .875%; Select Value .875%; next $.25 - .85%; next next $.25 - .85%; next $.25 - .825%; $.25 - .825%; next $1 - .80%; next $1 - .80%; over $2 - .775% over $2 - .775% International NO CHANGE First $.25 - 1.12%; next $.25 - First $.25 - 1.12%; next $.25 - 1.095%; Small Cap 1.095%; next $.25 - 1.07%; next next $.25 - 1.07%; next $.25 - 1.045%; $.25 - 1.045%; next $1 - 1.02%; next $1 - 1.02%; over $2 - .995% over $2 - .995% Large Cap Equity NO CHANGE First $1 - .60%; next $1 - First $1 - .60%; next $1 - .575%; next .575%; next $1 - .55%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .525%; next $6 - .50%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .49%; over $24 - .48% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375%
RIVERSOURCE FUNDS -- PROXY STATEMENT 26 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Large Cap Value NO CHANGE First $1 - .60%; next $1 - First $1 - .60%; next $1 - .575%; next .575%; next $1 - .55%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .525%; next $6 - .50%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .49%; over $24 - .48% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% Limited Duration FEE DECREASE First $1 - .54%; next $1 - First $1 - .48%; next $1 - .455%; next Bond .515%; next $1 - .49%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .465%; next $3 - .44%; over $9 - .38%; next $1.5 - .365%; next $1 - .36%; .415% next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31%; over $50 - .29% Massachusetts FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; Tax-Exempt .445%; next $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; $.25 - .405%; over $1 - .38% next $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27%; over $50 - .25% Michigan Tax-Exempt FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; .445%; next $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; $.25 - .405%; over $1 - .38% next $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27; over $50 - .25 Mid Cap Growth FEE INCREASE First $1 - .60%; next $1 - .575%; First $1 - .70%; next $1 - .675%; next $1 next $1 - .55%; next $3 - .525%; - .65%; next $3 - .625%; next $1.5 - next $6 - .50%; next $12 - .49%; .60%; next $2.5 - .575%; next $5 - .55%; over $24 - .48% next $9 - .525%; next $26 - .50%; over $50 - .475%
RIVERSOURCE FUNDS -- PROXY STATEMENT 27 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Mid Cap Value NO CHANGE First $1 - .70%; next $1 - First $1 - .70%; next $1 - .675%; next .675%; next $1 - .65%; next $3 - $1 - .65%; next $3 - .625%; next $1.5 - .625%; next $6 - .60%; next $12 .60%; next $2.5 - .575%; next $5 - .55%; - .59%; over $24 - .58% next $9 - .525%; next $26 - .50%; over $50 - .475% Minnesota FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; Tax-Exempt .445%; next t $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; $.25 - .405%; over $1 - .38% next $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27%; over $50 - .25% New York Tax-Exempt FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; .445%; next $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; next $.25 - .405%; over $1 - .38% $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27%; over $50 - .25% Ohio Tax-Exempt FEE DECREASE First $.25 - .47%; next $.25 - First $.25 - .41%; next $.25 - .385%; .445%; next $.25 - .42%; next next $.25 - .36%; next $.25 - .345%; $.25 - .405%; over $1 - .38% next $6.5 - .32%; next $2.5 - .31%; next $5 - .30%; next $9 - .29%; next $26 - .27%; over $50 - .25% Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Aggressive
RIVERSOURCE FUNDS -- PROXY STATEMENT 28 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Conservative Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Moderate Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Moderate Aggressive Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Moderate Conservative Portfolio Builder NO CHANGE All assets - .08% All assets - .08% Total Equity Precious Metals NO CHANGE First $.25 - .80%; next $.25 - First $.25 - .80%; next $.25 - .775%; .775%; next $.25 - .75%; next next $.25 - .75%; next $.25 - .725%; $.25 - .725%; next $1 - .70%; next $1 - .70%; over $2 - .675% over $2 - .675% Real Estate NO CHANGE First $1 - .84%; next $1 - First $1 - .84%; next $1 - .815%; next .815%; next $1 - .79%; next $3 - $1 - .79%; next $3 - .765%; next $6 - .765%; next $6 - .74%; next $12 .74%; next $12 - .73%; over $24 - .72% - .73%; over $24 - .72% S&P 500 Index FEE DECREASE First $1 - .24; next $1 - .23%; First $1 - .22%; next $1 - .21%; next $1 next $3 - .22%; over $5 - .21% - .20%; next $4.5 - .19%; next $2.5 - .18%; next $5 - .17%; next $9 - .16%; next $26 - .14%; over $50 - .12% Select Value NO CHANGE First $.5 - .78%; next $.5 - First $.5 - .78%; next $.5 - .755%; next .755%; next $1 - .73%; next $1 - $1 - .73%; next $1 - .705%; next $3 - .705%; next $3 - .68%; over $6 - .68%; over $6 - .65% .65% Short Duration FEE DECREASE First $1 - .52%; next $1 - First $1 - .48%; next $1 - .455%; next U.S. Gov't .495%; next $1 - .47%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .445%; next $3 - .42%; over $9 - .38%; next $1.5 - .365%; next $1 - .34%; .395% next $5 - .325%; next $5 - .315%; next $4 - .29%; next $26 - .275%; over $50 - .25%
RIVERSOURCE FUNDS -- PROXY STATEMENT 29 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage FEE INCREASE First $.25 - .74%; next $.25 - First $.25 - .79%; next $.25 - .765%; .715%; next $.25 - .69%; next next $.25 - .74%; next $.25 - .715%; $.25 - .665%; next $1 - .64%; next $1 - .69%; over $2 - .665% over $2 - .615% Small Cap Equity NO CHANGE First $.25 - .97%; next $.25 - First $.25 - .97%; next $.25 - .945%; .945%; next $.25 - .92%; next next $.25 - .92%; next $.25 - .895%; $.25 - .895%; over $1 - .87% over $1 - .87% Small Cap Growth NO CHANGE First $.25 - .92%; next $.25 - First $.25 - .92%; next $.25 - .895%; .895%; next $.25 - .87%; next next $.25 - .87%; next $.25 - .845%; $.25 - .845%; next $1 - .82%; next $1 - .82%; over $2 - .795% over $2 - .795% Small Cap Value NO CHANGE First $.25 - .97%; next $.25 - First $.25 - .97%; next $.25 - .945%; .945%; next $.25 - .92%; next next $.25 - .92%; next $.25 - .895%; $.25 - .895%; over $1 - .87% over $1 - .87% Small Company Index FEE DECREASE First $.25 - .38%; next $.25 - First $.25 - .36%; next $.25 - .35%; .37%; next $.25 - .36%; next $.25 next $.25 - .34%; next $.25 - .33%; next - .35%; over $1 - .34% $6.5 - .32%; next $7.5 - .30%; next $9 - .28%; next $26 - .26%; over $50 - .24% Strategic FEE INCREASE First $.5 - .53%; next $.5 - First $1 - .57%; next $1 - .545%; next Allocation .505%; next $1 - .48%; next $1 - $1 - .52%; next $3 - .495%; next $1.5 - .455%; next $3 - .43%; over $6 - 0.47%; next $2.5 - .45%; next $5 - .43%; 0.40% next $9 - 0.41%; over $24 - 0.39% Tax-Exempt Bond FEE DECREASE First $1 - .45%; next $1 - First $1 - .41%; next $1 - .385%; next .425%; next $1 - .4%; next $3 - $1 - .36%; next $3 - .335%; next $1.5 - .375%; over $6 - .35% .31%; next $2.5 - .30%; next $5 - .29%; next $9 - .28%; next $26 - .26%; over $50 - .25%
RIVERSOURCE FUNDS -- PROXY STATEMENT 30 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- Tax-Exempt High FEE DECREASE First $1 - .49%; next $1 - First $1 - .47%; next $1 - .445%; next Income .465%; next $1 - .44%; next $3 - $1 - .42%; next $3 - .395%; next $1.5 - .415%; next $3 - .39%; over $9 - .37%; next $2.5 - .36%; next $5 - .35%; .36% next $9 - .34%; next $26 - .32%; over $50 - .30% Tax-Exempt Money FEE DECREASE First $1.0 - .36%; next $.5 - First $1.0 - .33%; next $.5 - .313%; Market .343%; next $.5 - .325%; next next $.5 - .295%; next $.5 - .278%; $.5 - .308%; next $1 - .29%; next next $2.5 - .26%; next $1 - .24%; next $3 - .27%; over $6.5 - .25% $1.5 - .22; next $1.5 - .215%; next $1 - .19%; next $5 - .18%; next $5 - .17%; next $4 - .16%; over $24 - .15% U.S. Gov't Mortgage FEE DECREASE First $1 - .52%; next $1 - First $1 - .48%; next $1 - .455%; next .495%; next $1 - .47%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .445%; next $3 - .42%; over $9 - .38%; next $1.5 - .365%; next $1 - .395% .36%; next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31; over $50 - .29% Value NO CHANGE First $.5 - .73%; next $.5 - First $.5 - .73%; next $.5 - .705%; next .705%; next $1 - .68%; next $1 - $1 - .68%; next $1 - .655%; next $3 - .655%; next $3 - .63%; over $6 - .63%; over $6 - .60% .60%
RIVERSOURCE FUNDS -- PROXY STATEMENT 31 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- VARIABLE PORTFOLIO FUND: VP Balanced REMOVE FEES FOR First $.5 - .63%; next $.5 - First $1 - .53%; next $1 - .505%; next TRANSFER AGENT (TA) .615%; next $1 - .60%; next $1 - $1 - .48%; next $3 - .455%; next $1.5 - SERVICES; FEE DECREASE .585%; next $3 - .57%; over $6 - 0.43%; next $2.5 - .41%; next $5 - .39%; .55% next $9 - 0.37%; over $24 - 0.35% VP Cash Management REMOVE FEES FOR TA First $1 - .51%; next $.5 - First $1 - .33%; next $.5 - .313%; next SERVICES; FEE DECREASE .493%; next $.5 - .475%; next $.5 $.5 - .295%; next $.5 - .278%; next - .458%; next $1 - .44%; next $3 $2.5 - .26%; next $1 - .24%; next $1.5 - - .44%; over $7.5 - .44% .22%; next $1.5 - .215%; next $1 - .19%; next $5 - .18%; next $5 - .17%; next $4 - .16%; over $24 - .15% VP Core Bond REMOVE FEES FOR TA First $1 - .63%; next $1 - First $1 - .48%; next $1 - .455%; next SERVICES; FEE DECREASE .615%; next $1 - .60%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .585%; next $3 - .57%; over $9 - .38%; next $1.5 - .365%; next $1 - .555% .36%; next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31%; over $50 - .29% VP Core Equity NO CHANGE All assets - .40% All assets - .40% VP Diversified Bond REMOVE FEES FOR TA First $1 - .61%; next $1 - First $1 - .48%; next $1 - .455%; next SERVICES; FEE DECREASE .595%; next $1 - .58%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .565%; next $3 - .55%; over $9 - .38%; next $1.5 - .365%; next $1 - .535% .36%; next $5 - .35%; next $5 - .34%; next $4 - .33%; next $26 - .31%; over $50 - .29%
RIVERSOURCE FUNDS -- PROXY STATEMENT 32 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- VP Diversified REMOVE FEES FOR TA First $.5 - .56%; next $.5 - First $1 - .60%; next $1 - .575%; next Equity Income SERVICES; FEE INCREASE .545%; next $1 - .53%; next $1 - $1 - .55%; next $3 - .525%; next $1.5 - .515%; next $3 - .50%; over $6 - .50%; next $2.5 - .485%; next $5 - .47% .47%; next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% VP Emerging Markets REMOVE FEES FOR TA First $.25 - 1.17%; next $.25 - First $.25 - 1.10%; next $.25 - 1.08%; SERVICES; FEE DECREASE 1.155%; next $.25 - 1.14%; next next $.25 - 1.06%; next $.25 - 1.04%; $.25 - 1.125%; next $1 - 1.110%; next $1 - 1.02%; next $5.5 - 1.0%; next over $2 - 1.095% $2.5 - .985%; next $5 - .97%; next $5 - .96%; next $4 - .935%; next $26 - .92%; over $50 - .90% VP Global Bond REMOVE FEES FOR TA First $.25 - .84%; next $.25 - First $.25 - .72%; next $.25 - .695%; SERVICES; FEE DECREASE .825%; next $.25 - .81%; next next $.25 - .67%; next $.25 - .645%; $.25 - .795%; over $1 - .78%; next $6.5 - .62%; next $2.5 - .605%; next $5 - .59%; next $5 - .58%; next $4 - .56%; next $26 - .54%; over $50 - .52% VP Growth REMOVE FEES FOR TA First $1 - .63%; next $1 - First $1 - .60%; next $1 - .575%; next SERVICES; FEE DECREASE .615%; next $1 - .600%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .585%; next $6 - .57%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .57%; over $24 - .57% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% VP High Yield Bond REMOVE FEES FOR TA First $1 - .62%; next $1 - First $1 - .59%; next $1 - .565%; next SERVICES; FEE DECREASE .605%; next $1 - .59%; next $3 - $1 - .54%; next $3 - .515%; next $1.5 - .575%; next $3 - .56%; over $9 - .49%; next $1.5 - .475%; next $1 - .45%; .545% next $5 - .435%; next $5 - .425%; next $4 - .40%; next $26 - .385%; over $50 - .36%
RIVERSOURCE FUNDS -- PROXY STATEMENT 33 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- VP Income REMOVE FEES FOR TA First $1 - .64%; next $1 - First $1 - .61%; next $1 - .585%; next Opportunities SERVICES; FEE DECREASE .625%; next $1 - .61%; next $3 - $1 - .56%; next $3 - .535%; next $1.5 - .595%; next $3 - .58%; over $9 - .51%; next $1.5 - .495%; next $1 - .47%; .565% next $5 - .455%; next $5 - .445%; next $4 - .42%; next $26 - .405%; over $50 - .38% VP Global REMOVE FEES FOR TA First $1 - .49%; next $1 - First $1 - .44%; next $1 - .415%; next Inflation SERVICES; FEE DECREASE .475%; next $1 - .46%; next $3 - $1 - .39%; next $3 - .365%; next $1.5 - Protected .445%; next $3 - .43%; over $9 - .34%; next $1.5 - .325%; next $1 - .32%; Securities .415% next $5 - .31%; next $5 - .30%; next $4 - .29%; next $26 - .27%; over $50 - .25% VP International REMOVE FEES FOR TA First $.25 - .87%; next $.25 - First $.25 - .80%; next $.25 - .775%; Opportunity SERVICES; FEE DECREASE .855%; next $.25 - .84%; next next $.25 - .75%; next $.25 - .725%; $.25 - .825%; next $1 - .81%; next $1 - .70%; next $5.5 - .675%; next over $2 - .795% $2.5 - .66%; next $5 - .645%; next $5 - .635%; next $4 - .61%; next $26 - .60%; over $50 - .57% VP Large Cap Equity REMOVE FEES FOR TA First $1 - .63%; next $1 - First $1 - .60%; next $1 - .575%; next SERVICES; FEE DECREASE .615%; next $1 - .600%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .585%; next $6 - .57%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .57%; over $24 - .57% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375% VP Large Cap Value REMOVE FEES FOR TA First $1 - .63%; next $1 - First $1 - .60%; next $1 - .575%; next SERVICES; FEE DECREASE .615%; next $1 - .600%; next $3 - $1 - .55%; next $3 - .525%; next $1.5 - .585%; next $6 - .57%; next $12 .50%; next $2.5 - .485%; next $5 - .47%; - .57%; over $24 - .57% next $5 - .45%; next $4 - .425%; next $26 - .40%; over $50 - .375%
RIVERSOURCE FUNDS -- PROXY STATEMENT 34 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- VP Mid Cap Growth REMOVE FEES FOR TA First $.25 - .65%; next $.25 - First $1 - .70%; next $1 - .675%; next SERVICES; FEE INCREASE .635%; next $.25 - .62%; next $1 - .65%; next $3 - .625%; next $1.5 - $.25 - .605%; next $1 - .59%; .60%; next $2.5 - .575%; next $5 - .55%; next $1 - .575%; over $3 - .56% next $9 - .525%; next $26 - .50%; over $50 - .475% VP Mid Cap Value REMOVE FEES FOR TA First $1 - .73%; next $1 - First $1 - .70%; next $1 - .675%; next SERVICES; FEE DECREASE .705%; next $1 - .68%; next $3 - $1 - .65%; next $3 - .625%; next $1.5 - .655%; next $6 - .63%; next $12 .60%; next $2.5 - .575%; next $5 - .55%; - .62%; over $24 - .61% next $9 - .525%; next $26 - .50%; over $50 - .475% VP S&P 500 Index REMOVE FEES FOR TA First $1 - .29%; next $1 - .28%; First $1 - .22%; next $1 - .21%; next $1 SERVICES; FEE DECREASE next $3 - .27%; over $5 - .26% - .20%; next $4.5 - .19%; next $2.5 - .18%; next $5 - .17%; next $9 - .16%; next $26 - .14%; over $50 - .12% VP Select Value REMOVE FEES FOR TA First $.5 - .81%; next $.5 - First $.5 - .78%; next $.5 - .755%; next SERVICES; FEE DECREASE .795%; next $1 - .78%; next $1 - $1 - .73%; next $1 - .705%; next $3 - .765%; next $3 - .75%; over $6 - .68%; over $6 - .65% .72%
RIVERSOURCE FUNDS -- PROXY STATEMENT 35 TABLE B-5. (CONTINUED)
FEE CHANGE TO (ANNUAL RATE; IN BILLIONS) CURRENT EFFECTIVE ------------------------------------------------------------------------------- FUND MANAGEMENT FEE CURRENT PROPOSED ---------------------------------------------------------------------------------------------------------------------------- VP Short Duration REMOVE FEES FOR TA First $1 - .61%; next $1 - First $1 - .48%; next $1 - .455%; next U.S. Gov't SERVICES; FEE DECREASE .595%; next $1 - .58%; next $3 - $1 - .43%; next $3 - .405%; next $1.5 - .565%; next $3 - .55%; over $9 - .38%; next $1.5 - .365%; next $1 - .535% .34%; next $5 - .325%; next $5 - .315%; next $4 - .29%; next $26 - .275%; over $50 - .25% VP Small Cap REMOVE FEES FOR TA First $.25 - .79%; next $.25 - First $.25 - .79%; next $.25 - .765%; Advantage SERVICES; NO CHANGE .77%; next $.25 - .75%; next next $.25 - .74%; next $.25 - .715%; $.25 - .73%; next $1 - .71%; over next $1 - .69%; over $2 - .665% $2 - .65% VP Small Cap Value REMOVE FEES FOR TA First $.25 - 1.02%; next $.25 - First $.25 - .97%; next $.25 - .945%; SERVICES; FEE DECREASE 1.00%; next $.25 - .98%; next next $.25 - .92%; next $.25 - .895%; $.25 - .96%; next $1 - .94%; over over $1 - .87% $2 - .92%
FUND EXPENSES. Total fees and expenses the fund actually paid as well as the fees and expenses the fund would have paid if the proposed IMS Agreement had been in effect for the last fiscal year are shown in Table D-6. HOW THE PROPOSED FEE SCHEDULE WILL AFFECT TOTAL FUND EXPENSES. It has become increasingly expensive to operate mutual funds due to changing regulatory demands and intensified competition for professional talent. RiverSource Investments is seeking to establish a pricing philosophy with a goal of maintaining competitive pricing for all the RiverSource funds for which RiverSource Investments and its affiliates provide investment management, fund administration, transfer agency, distribution and other services. Certain changes already have been made in contracts with affiliates of RiverSource Investments, as discussed below. In September 2005, the Board approved changes to the administrative service fee schedules bringing into line different pricing methodologies that had developed among the funds. This resulted in decreased administrative services fees for a few funds and a modest increase for most funds. The Board determined these changes were necessary to support increased costs. However, the effect of these increased administrative services fees for certain funds was limited, in part or in whole by expense caps or waivers. For the variable portfolio funds, RiverSource Investments has proposed moving transfer agent services from the IMS Agreement to a new transfer agent agreement. RIVERSOURCE FUNDS -- PROXY STATEMENT 36 The impact of moving transfer agent fees from the IMS Agreement fee schedules varies by fund and decreases the rate between 0.03% to 0.15% of average daily net assets. If the recommended variable portfolio fund IMS Agreement is approved, the Board has approved a new transfer agent agreement with a uniform .06% transfer agent fee to be established for each variable portfolio fund, which RiverSource Service Corporation has determined is consistent with the cost of providing those services. The net impact of these fee and expense changes, if shareholders approve the recommendations, as well as fees and expenses the fund would have paid if the proposed IMS Agreement and all other changes had been in effect for the last fiscal year are shown in Table D-7. With the proposed changes to the management fees, and the other changes that have been approved by the Board, RiverSource Investments and its affiliates represent that they will be able to: - Continue efforts to improve investment performance - Continue to manage the day-to-day business affairs of the funds - Continue to make required investments to cover the increased costs of operating the funds - Retain and attract highly qualified investment professionals - Retain and attract additional operations and compliance personnel, and continue to develop technology solutions to operate in the current regulatory environment - Maintain and improve the competitiveness of the funds generally by implementing a pricing philosophy that establishes median net expenses for the funds at or below each fund's peer group median net expenses as reviewed by the Board on an annual basis. - Continue to offer a high level of service to fund shareholders and take steps to enhance those services. - Seek to earn an appropriate return on investments. COMPARISON WITH OTHER MUTUAL FUNDS. If shareholders approve the recommended management fee changes, each RiverSource fund, with the exception of four sub-advised funds, will be at or below the median expense ratio of its Lipper peer group. Subadvised funds are footnoted in the table below. For the subadvised funds that would be priced above median, the higher fees for these funds are attributable to the fact that they primarily invest in small cap securities and have multiple subadvisers. The Board determined that this was an appropriate exception to the broader pricing philosophy insofar as relative economies of scale are unlikely to be reached by any particular subadviser with respect to its allocated portion of the fund resulting in higher management fees paid to the subadvisers. For purposes of this comparison, median is total expenses not more than 0.03% above the median expenses of the relevant Lipper peer group. RIVERSOURCE FUNDS -- PROXY STATEMENT 37 TABLE B-6. PEER GROUP COMPARISON AS OF ______________
FUND EXPENSE RATIO, MEDIAN LIPPER CLASS A SHARES, PEER TOTAL FUND EXPENSE IF SHAREHOLDERS EXPENSE RATIO RATIO APPROVE (AVAILABLE LESS LIPPER RETAIL FUNDS: RECOMMENDATIONS INFORMATION 4/2004) PEER GROUP ---------------------------------------------------------------------------------------------------------------- Aggressive Growth** 1.53% 1.44% 0.09% Balanced 1.04 1.07 -0.03 California Tax-Exempt 0.79 0.86 -0.07 Cash Management 0.73 0.70 0.03 Core Bond 0.89 0.88 0.01 Disciplined Equity 1.25 1.28 -0.03 Diversified Bond 0.89 0.88 0.01 Diversified Equity Income 1.08 1.10 -0.02 Dividend Opportunity 1.16 1.15 0.01 Emerging Markets* 1.90 2.07 -0.17 Equity Value 1.09 1.18 -.0.09 European Equity* 1.63 1.79 -0.16 Fundamental Growth* 1.40 1.40 0 Fundamental Value** 1.31 1.31 0 Global Bond 1.25 1.29 -0.04 Global Equity* 1.55 1.52 0.03 Global Technology 1.63 1.80 -0.17 Growth 1.13 1.19 -0.06 High Yield Bond 1.06 1.03 0.03 Income Opportunities 1.10 1.20 -0.10 Inflation Protected Securities 0.84 0.91 -0.07 Intermediate Tax-Exempt 0.79 0.89 -0.10 International Aggressive Growth** 1.73 1.90 .0.17 International Equity** 1.75 1.65 0.10 International Opportunity* 1.55 1.58 -0.03 International Select Value** 1.49 1.49 0 International Small Cap** 1.92 1.83 0.09 Large Cap Equity 1.21 1.31 -0.10 Large Cap Value 1.26 1.30 -0.04 Limited Duration Bond 0.89 0.88 0.01 Massachusetts Tax-Exempt 0.79 0.89 -0.10
RIVERSOURCE FUNDS -- PROXY STATEMENT 38 TABLE B-6. (CONTINUED)
FUND EXPENSE RATIO, MEDIAN LIPPER CLASS A SHARES, PEER TOTAL FUND EXPENSE IF SHAREHOLDERS EXPENSE RATIO RATIO APPROVE (AVAILABLE LESS LIPPER RETAIL FUNDS: RECOMMENDATIONS INFORMATION 4/2004) PEER GROUP ---------------------------------------------------------------------------------------------------------------- Michigan Tax-Exempt 0.79 0.88 -0.09 Mid Cap Growth 1.23 1.47 -0.24 Mid Cap Value 1.33 1.32 0.01 Minnesota Tax-Exempt 0.79 0.90 -0.11 New York Tax-Exempt 0.79 0.88 -0.09 Ohio Tax-Exempt 0.79 0.88 -0.09 Portfolio Builder Conservative tbd tbd tbd Portfolio Builder Moderate Conservative tbd tbd Tbd Portfolio Builder Moderate tbd tbd Tbd Portfolio Builder Moderate Aggressive tbd tbd Tbd Portfolio Builder Aggressive tbd tbd Tbd Portfolio Builder Total Equity tbd tbd Tbd Precious Metals 1.51 1.51 0 Real Estate 1.49 1.54 -0.05 S&P 500 Index 0.59 0.62 -0.03 Select Value** 1.35 1.34 0.01 Short Duration U.S. Gov't 0.89 0.88 0.01 Small Cap Advantage* 1.37 1.39 -0.02 Small Cap Equity** 1.54 1.34 0 Small Cap Growth** 1.69 1.54 0.17 Small Cap Value** 1.59 1.52 0.14 Small Company Index 0.89 0.91 -0.02 Strategic Allocation 1.11 1.15 -0.04 Tax-Exempt Bond 0.79 0.86 -0.07 Tax-Exempt High Income 0.79 0.78 0.01 Tax-Exempt Money Market 0.73 0.73 0 U.S. Government Mortgage 0.89 0.88 0.01 Value** 1.31 1.31 0
RIVERSOURCE FUNDS -- PROXY STATEMENT 39 TABLE B-6. (CONTINUED)
FUND EXPENSE RATIO, MEDIAN LIPPER CLASS A SHARES, PEER TOTAL FUND EXPENSE IF SHAREHOLDERS EXPENSE RATIO RATIO APPROVE (AVAILABLE LESS LIPPER VARIABLE PORTFOLIO FUNDS: RECOMMENDATIONS INFORMATION 4/2004) PEER GROUP ---------------------------------------------------------------------------------------------------------------- VP Balanced 0.80 0.90 -0.10 VP Cash Management 0.62 0.71 -0.09 VP Core Bond 0.95 0.92 0.03 VP Core Equity 0.40 0.83 -0.43 VP Diversified Bond 0.76 0.81 -0.05 VP Diversified Equity Income 0.90 0.97 -0.07 VP Emerging Markets* 1.75 1.67 0.08 VP Global Bond 1.01 1.08 -0.07 VP Growth 0.83 0.99 -0.16 VP High Yield Bond 0.88 0.93 -0.05 VP Income Opportunities 0.99 0.95 0.04 VP Global Inflation Protected Securities 0.75 0.74 0.01 VP International Opportunity* 1.07 1.12 -0.05 VP Large Cap Equity 0.86 0.83 0.03 VP Large Cap Value 1.05 1.04 0.01 VP Mid Cap Growth 1.00 1.09 -0.09 VP Mid Cap Value 1.08 1.08 0 VP S&P 500 Index 0.50 0.50 0 VP Select Value** 1.15 1.00 0.15 VP Short Duration U.S. Gov't 0.79 0.82 -0.03 VP Small Cap Advantage* 1.18 1.19 -0.01 VP Small Cap Value** 1.30 1.15 0.15
* Subadvised by an affiliate of RiverSource Investments. ** Subadvised by one or more unaffiliated subadvisers. RIVERSOURCE FUNDS -- PROXY STATEMENT 40 BASIS FOR RECOMMENDATION OF THE BOARD Following announcement of the spin-off of Ameriprise Financial from American Express Company, the Board and Ameriprise Financial agreed to review and revise, where appropriate, the terms of all contracts, including the IMS Agreement, pursuant to which Ameriprise Financial or its affiliates provides services to the funds. Each year, the Board determines whether to continue the IMS Agreement for each fund and, in doing so, evaluates the quality and level of service received under the IMS Agreement and the costs associated with those services. Accordingly, in March and April of each year, Ameriprise (formerly American Express Financial Corporation) prepares detailed reports for the Board, which include data prepared by independent organizations, to assist the Board in making this determination. The Board accords considerable weight to the deliberations and conclusions of its committees in determining whether to continue the IMS Agreement. After thorough review of the reports and data provided at a meeting held in person on April 14, 2005, the Board, including a majority of its independent members, determined that the quality and level of advisory services provided pursuant to the IMS Agreement for each fund were satisfactory and that fees were fair and reasonable. However, in light of the announced plans of the spin-off, the Board approved continuation of the IMS Agreement for only an interim period ending on the earlier of (i) the effective date of the spin-off; or (ii) the approval of a new investment management services agreement with Ameriprise Financial by the shareholders of each fund, but in no event for a period longer than one year. While it was expected that the spin-off would not result in an "assignment" of an IMS Agreement under the Investment Company Act of 1940 and, therefore, would not cause the termination of the IMS Agreement according to its terms, Schulte Roth & Zabel LLP, was retained as independent counsel to the Board, advised the Board that the legal question of whether the spin-off would result in an assignment turns on a highly fact-sensitive analysis. Therefore, the Board determined, as a matter of prudence, to proceed as if each IMS Agreement would terminate as a result of the spin-off. Accordingly, the Board determined to renew each IMS Agreement for the interim period only and to consider a new IMS Agreement for each fund prior to the spin-off. For the six months following the April 2005 meeting, the Board and its committees have been evaluating whether to approve a proposed IMS Agreement for each fund with post-spin Ameriprise Financial. Schulte Roth & Zabel LLP has assisted the Board in fulfilling its statutory and other responsibilities associated with the spin-off and the resulting consideration of new contracts, including the proposed IMS Agreements. As a key step in this process, independent counsel sent, on behalf of the independent members of the Board, a detailed and expansive request for information to American Express Company RIVERSOURCE FUNDS -- PROXY STATEMENT 41 and Ameriprise Financial, seeking specified information thought to be relevant to the Board's consideration of the proposed contracts with post-spin Ameriprise Financial. The Board and its committees were provided with a wealth of written and oral information intended to assist them in considering the proposed contracts, including the proposed IMS Agreements. Furthermore, in connection with the Board's considerations as to whether post-spin Ameriprise Financial, as an independent entity, would be capable of continuing to provide a high quality of services to the funds, the Board's independent members retained their own financial adviser, Credit Suisse First Boston LLC ("CSFB"). At the Board's requests, CSFB provided various written materials and oral presentations analyzing the capital adequacy of Ameriprise Financial. The costs of independent counsel and CSFB and of additional meetings of the Board were borne by Ameriprise Financial as part of the commitment of American Express Company to ensure a complete and thorough review of the proposed spin-off and its effect on the services provided by Ameriprise Financial and its subsidiaries. During the course of the six-month period following the April 2005 meeting, the Board and its committees met at five in-person meetings to consider the information provided by American Express Company, Ameriprise Financial, independent counsel and CSFB. At an in-person meeting held on Sept. 8, 2005, based on all of the information provided as well as the deliberations occurring at that meeting and the previous meetings held since the announcement of the spin-off, the Board, including all of its independent members, approved the new contracts, including each proposed IMS Agreement. On October 1, 2005, pursuant to an agreement between the Fund and Ameriprise Financial, the IMS Agreement was transferred to RiverSource Investments LLC, a wholly-owned subsidiary of Ameriprise Financial. FOR THESE REASONS, THE BOARD, INCLUDING ALL OF ITS INDEPENDENT MEMBERS, RECOMMENDS THAT YOU APPROVE THE PROPOSED IMS AGREEMENT FOR YOUR FUND(S). THE BOARD'S SPECIFIC CONSIDERATIONS RELATING TO THE PROPOSED IMS AGREEMENTS In carrying out its legal responsibilities associated with the consideration of the proposed IMS Agreements, the Board evaluated the following four factors: (i) the nature, extent and quality of services to be provided by; RiverSource Investments; (ii) the investment performance of the fund; (iii) the costs of the services to be provided and the profits to be realized by Ameriprise Financial; and (iv) the extent to which economies of scale would be realized as the fund grows and whether the fee level reflects these economies of scale for the benefit of fund investors. RIVERSOURCE FUNDS -- PROXY STATEMENT 42 NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY POST-SPIN AMERIPRISE FINANCIAL (AND ITS SUBSIDIARIES) The Board recognized that only a few months had passed since its April 2005 determination to renew the IMS Agreement for each fund and that in April 2005, it had concluded that the nature, extent and quality of services provided by Ameriprise Financial were satisfactory and consistent with those that would be expected for a fund family of the size of the funds. However, the Board also recognized that this assessment must be supplemented with an evaluation of whether the spin-off or other factors would result in any changes to the advisory services currently provided to the funds. In this regard, the Board focused its evaluation on the following factors potentially impacting the nature, extent and quality of advisory services to be provided by: RiverSource Investments (i) Ameriprise Financial's projected capital structure and capital adequacy as a stand-alone entity; (ii) its legal and regulatory risks; (iii) its ability to retain and attract personnel; and (iv) its ability to successfully rebrand its products and services. Based on extensive presentations and reports by Ameriprise Financial, CSFB and independent counsel, the Board concluded that the proposed capital structure (which includes certain indemnification commitments made by American Express) should enable RiverSource Investments to continue to provide a high quality and level of advisory services to the funds. In making this determination, the Board took into account representations by management of Ameriprise Financial that projected capital levels would allow Ameriprise Financial to continue to meet its legal and compliance responsibilities, build its distribution network, pursue technological upgrades, make capital commitments necessary to retain and attract key personnel devoted to legal and compliance responsibilities, portfolio management and distribution, and pursue smaller asset management acquisitions to help grow its business. The Board accorded significant weight to CSFB's confirmation as to the reasonableness of the foregoing representations. The Board also considered the fact that there were no expected departures of key personnel involved in the portfolio management, operations and marketing of the funds as a result of the announcement of the spin-off. The Board concluded that, based on all of the materials and information provided (and with the assistance of independent counsel), post-spin Ameriprise Financial would be in a position to continue to provide a high quality and level of investment management services to the funds. RIVERSOURCE FUNDS -- PROXY STATEMENT 43 INVESTMENT PERFORMANCE The Board next focused on investment performance. The Board reviewed reports documenting the fund's performance over one-, three- and/or five-year periods, as well as the entire period during which its current portfolio manager has managed the fund, and compared to relevant Lipper and market indices. The Board took into account its determination in April 2005 that investment performance either met expectations or, if not, that appropriate action (such as changes to portfolio management) had been (or was being) pursued in order to help the fund achieve its longer-term performance objective. The Board also considered that it has received monthly performance reports for the funds. The Board and its committees concluded in Sept. 2005 that there have been no significant deviations from April's overall performance data. COST OF SERVICES PROVIDED The Board evaluated comparative fees and the costs of services to be provided under the current and proposed IMS Agreements, including fees charged by RiverSource Investments to its institutional clients and paid to sub-advisers. The Board studied RiverSource Investments' effort (i.e., its "pricing philosophy") to set substantially all funds' total expense ratios at or below the median expense ratio of a group of comparable mutual funds compiled by Lipper, Inc. The Board observed that the proposed advisory fee changes are designed to work in tandem with proposed changes to the administrative services fees. It also noted that RiverSource Investments agreed to voluntarily imposed expense caps or waivers to achieve this pricing objective whenever the expense ratio exceeded the median expense ratio by more than three basis points unless the higher ratio was due to the impact of the performance fee adjustment or was due to the added costs associated with having subadvisers manage a fund. The Board considered that, with respect to all funds, other than [Mid Cap Growth, Small Cap Advantage, Strategic Allocation, Variable Portfolio Diversified Equity Income and Variable Portfolio Mid Cap Growth], advisory fees under the proposed IMS Agreements would stay the same or decrease (as indicated in Table B-5, below) and that, with respect to [Diversified Equity Income, Mid Cap Growth, Small Cap Advantage, VP Diversified Equity Income and VP Mid Cap Growth], would increase under each applicable proposed IMS Agreement. The Board accorded significant weight to the fact that the proposed changes in fee schedules were intended primarily to achieve a rational pricing model applied consistently across the various product lines in the fund family, while assuring that overall fees for each fund are in line with the "pricing philosophy." With respect to the equity and balanced funds, the Board also took into account the effect of the proposed performance incentive adjustment on the advisory fee. In this regard, RIVERSOURCE FUNDS -- PROXY STATEMENT 44 the Board took into account its past determinations regarding the appropriateness of (i) the use of the relevant index for each fund for the comparison of performance; (ii) the methodology for determining when the Board may change an index used to calculate the performance incentive adjustment; (iii) the periods used for averaging the funds' assets and computing investment performance; and (iv) the length of the period over which performance is computed. Furthermore, the Board considered that with respect to the relevant sub-advised funds, there was limited opportunity for these funds to achieve large scale growth and thus provide RiverSource Investments with potential economies of scale. The Board next considered the expected profitability to RiverSource Investments and its affiliates derived from its relationship with the fund, recalling the April 2005 determination that the profitability level was appropriate. The Board noted that projected profitability of RiverSource Investments would allow it to operate effectively and, at the same time, reinvest in its businesses. The Board also considered that the proposed changes in advisory fees and the mergers of certain funds would result in revenue gains, while taking into account that these increases would not materially alter profit margins due to expected increases in costs associated with the spin-off, particularly rebranding and separation. CSFB also reported that Ameriprise Financial's projected level of return on equity was generally reasonable in light of the returns on equity of its industry competitors. In evaluating profitability, the Board also considered the benefits Ameriprise Financial obtains through the use of commission dollars paid on portfolio transactions for the funds and from other business relationships that result from managing the funds. The Board also considered the fees charged by Ameriprise Financial to its institutional clients and paid to sub-advisers, noting the differences in services provided in each case. In light of these considerations, the Board concluded that projected profitability levels were appropriate. ECONOMIES OF SCALE The Board also considered the "breakpoints" in fees that would be triggered as fund net asset levels grew and the extent to which shareholders would benefit from such growth. The Board observed that the revised fee schedules under the proposed IMS Agreement would continue to provide breakpoints similar to those in place pursuant to the current IMS Agreement. Accordingly, the Board concluded that the proposed IMS Agreement provides adequate opportunity for shareholders to realize benefits as fund assets grew. RIVERSOURCE FUNDS -- PROXY STATEMENT 45 OTHER CONSIDERATIONS In addition, the Board accorded weight to the fact that, under the proposed IMS Agreement, RiverSource Investments is held to a higher standard of care than under the current IMS Agreements. The Board also noted Ameriprise Financial's commitment to a culture that adheres to ethical business practice, assigns accountability to senior management and seeks to identify conflicts and propose appropriate action to minimize the risks posed by the conflicts. Furthermore, the Board recognized that it was not limited to considering management's proposed contracts. In this regard, the Board evaluated the circumstances under which it would consider the retention of an investment adviser different from RiverSource Investments (or its subsidiaries). The Board concluded, based on its consultation with independent counsel, that pursuing the retention of a different adviser was not necessary, primarily because, in its best judgment, RiverSource Investments continues to be basically the same organization (from a functional and managerial standpoint), as it was prior to the spin-off. The Board reasoned that shareholders purchased shares of the funds with an expectation that the current investment advisory organization would be servicing the funds. As a result of all of the foregoing, the Board determined that the fees to be paid under each proposed IMS Agreement were fair and reasonable in light of services proposed to be provided. BOARD RECOMMENDATION AND VOTE REQUIRED. For the foregoing reasons, the Board recommends that shareholders of each fund approve the applicable proposed IMS Agreement. The proposed IMS Agreement must be approved by the lesser of (a) a majority of a fund's outstanding shares or (b) 67% of the shares voted at the meeting, so long as more than 50% of the shares actually vote. If shareholders approve the proposed IMS Agreement, it will take effect shortly after the shareholder meeting. If the proposed IMS Agreement is not approved by a Fund, the Board will consider appropriate steps to take for that Fund. RIVERSOURCE FUNDS -- PROXY STATEMENT 46 PROPOSAL 4: APPROVE OR REJECT CHANGES IN THE SUBADVISORY AGREEMENT WITH KENWOOD CAPITAL MANAGEMENT LLC (Applies to: SMALL CAP ADVANTAGE, VP SMALL CAP ADVANTAGE) Kenwood Capital Management LLC ("Kenwood") is a registered investment adviser with particular expertise in investments in small capitalization companies. Kenwood is an affiliate of Ameriprise Financial that acts as subadviser for the fund under a subadvisory agreement between Kenwood and RiverSource Investments (the "Kenwood Agreement"). RiverSource Investments recommended to the Board that the fee schedule for the Kenwood Agreement be changed to help ensure that Kenwood receives fees for its services that will allow it to attract and retain high quality investment management and research personnel and to continue efforts to improve performance for the benefit of shareholders in the future. The proposed change in the Kenwood Agreement includes an increase in the fee as well as the addition of a performance incentive adjustment. The fee is paid to Kenwood by RiverSource Investments, not by the fund. This change will not affect the cost to shareholders. A separate proposal to increase fees paid by the fund to RiverSource Investments is discussed in Proposal 3. TERMS OF THE CURRENT KENWOOD AGREEMENT. The current fee paid by RiverSource Investments to Kenwood for managing fund assets is 0.35% of average daily net assets. The complete fee schedule for the fund and other funds managed by RiverSource Investments is found in Section D. The initial approval of the Kenwood Agreement by shareholders was on June 16, 1999. PROPOSED KENWOOD AGREEMENT COMPARED TO THE CURRENT KENWOOD AGREEMENT. The terms of the proposed Kenwood Agreement are the same as the current Kenwood Agreement except for (1) the change in the fee schedule and (2) the addition of a performance incentive adjustment. The proposed fee schedule is as follows: PROPOSED SUBADVISORY FEE (annual rate, in millions) First $100 0.600 Next 100 0.550 Next 100 0.525 Next 100 0.500 Next 100 0.475 Over 500 0.450
RIVERSOURCE FUNDS -- PROXY STATEMENT 47 In addition, the proposed Kenwood Agreement includes a performance incentive adjustment. Under the performance incentive adjustment, the base fee will increase or decrease based on the performance of Kenwood's portion of the fund compared to the performance of the Russell 2000 Index. The fee paid to Kenwood by RiverSource Investments will increase or decrease 3 basis points (0.03%) for each 1% difference between the return of Class A shares of the fund and the return of the Index. The fee will be calculated monthly over a rolling 12-month period. PRINCIPALS AND MANAGEMENT BOARD OF KENWOOD. Jacob E. Hurwitz and Kent A. Kelley are the principals of Kenwood, located at 333 South 7th Street, Suite 2330, Minneapolis, MN. The following individuals are directors of Kenwood: Jacob E. Hurwitz, Kent A. Kelley, Ward D. Armstrong, William F. Truscott, Peter A. Gallus and Michelle M. Keeley. Mr. Armstrong, Mr. Truscott, Mr. Gallus and Ms. Keeley are officers of RiverSource Investments, 200 Ameriprise Financial Center, Minneapolis, MN. RiverSource Investments, a wholly owned subsidiary of Ameriprise Financial, owns 48.6% of Kenwood. Mr. Hurwitz and Mr. Kelley each own a minority interest in Kenwood totaling 48.4%. Associate portfolio managers employed by Kenwood hold the remainder of the firm's stock. BOARD CONSIDERATIONS AND CONCLUSIONS. At its meeting held on Sept. 8, 2005, the Board, including a majority of its independent members, approved the proposed Kenwood Agreement for each applicable fund and recommended its approval by shareholders. In making this determination, the Board evaluated the nature, extent and quality of services provided by Kenwood. This evaluation included an analysis of the resources of Kenwood as well as those of its affiliate, Ameriprise Financial (including those considerations discussed in Proposal 3 under "Basis for Recommendation of the Board - Nature, Extent and Quality of Services to be Provided by Post-Spin Ameriprise Financial (and its subsidiaries)"). The Board also examined the investment performance of each applicable fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Investment Performance.") The Board observed that Kenwood has delivered solid and consistent performance for the past three years. Based on the foregoing, the Board determined that the nature, extent and quality of advisory services provided by Kenwood were satisfactory. The Board also analyzed the cost of services to the funds as well as to Kenwood. In this regard, the Board observed that the fees paid to Kenwood under the proposed Kenwood Agreement would increase. But, the Board accorded weight to the fact that the fees under the current Kenwood Agreement are well below market rate for similar services. The Board also considered the total expense ratio of each fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Cost of Services Provided" RIVERSOURCE FUNDS -- PROXY STATEMENT 48 for detail regarding these considerations). Additionally, the Board took into account that the fee schedule in the proposed Kenwood Agreement includes "breakpoints" that would be triggered as fund asset levels grow. Based on the foregoing, the Board determined that the fees to be paid under the proposed Kenwood Agreement for each fund would be fair and reasonable in light of the quality of services provided. RECOMMENDATION AND VOTE REQUIRED. The Board recommends that shareholders approve the proposed change in the Kenwood Agreement. The change must be approved by the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of the shares voted at the meeting, so long as more than 50% of the shares actually vote. If the change is approved, the proposed Kenwood Agreement will go into effect as soon as practicable after the shareholder meeting. If the proposed Kenwood Agreement is not approved, the Board will consider what steps to take. PROPOSAL 5: APPROVE OR REJECT A SUBADVISORY AGREEMENT WITH THREADNEEDLE INTERNATIONAL LIMITED (Applies to: EMERGING MARKETS, EUROPEAN EQUITY, GLOBAL EQUITY, INTERNATIONAL OPPORTUNITY, VP EMERGING MARKETS, VP INTERNATIONAL OPPORTUNITY) Threadneedle International Limited ("Threadneedle"), a direct wholly-owned subsidiary of Ameriprise Financial, acts as subadviser for the fund under a subadvisory agreement between Threadneedle and RiverSource Investments (the "Threadneedle Agreement"). In connection with the change in investment manager described in Proposal 3, independent counsel advised the Board that it would be prudent to seek shareholder approval of the Threadneedle Agreement as well. The change does not affect the terms and conditions of the Threadneedle Agreement. The subadvisory fee, which would not change, would continue to be paid to Threadneedle by RiverSource Investments, not by the fund. TERMS OF THE CURRENT THREADNEEDLE AGREEMENT. The fee paid by RiverSource Investments to Threadneedle for managing fund assets is shown in the table below. The complete fee schedule for the funds subadvised by Threadneedle is found in Section D. RIVERSOURCE FUNDS -- PROXY STATEMENT 49
ASSETS UNDER MANAGEMENT* AGGREGATE FEE $1-150 NEXT $500 NEXT $500 PAID IN LAST FUND MILLION MILLION MILLION THEREAFTER FISCAL YEAR** ------------------------------------------------------------------------------------------- Emerging Markets 0.45% 0.40% 0.35% 0.30% European Equity 0.35% 0.30% 0.25% 0.20% Global Equity 0.35% 0.30% 0.25% 0.20% International Opportunity 0.35% 0.30% 0.25% 0.20% VP Emerging Markets 0.45% 0.40% 0.35% 0.30% VP International Opportunity 0.35% 0.30% 0.25% 0.20%
* The rates shown apply to the corresponding portion of the respective portfolio. For example, if the average daily net assets for Emerging Markets for a given month are $650 million, then the applicable rate is 0.45% on $150 million and 0.40% on the remaining $500 million. ** The fee is subject to a performance incentive adjustment based on the performance of one Class A share of the fund compared to the performance of a Lipper index of comparable funds. The amount of the adjustment to Threadneedle's fee, whether positive or negative, is equal to one-half of the performance incentive adjustment made to the investment management fee payable to the investment manager under the terms of the IMS Agreement. PROPOSED THREADNEEDLE AGREEMENT COMPARED TO THE CURRENT THREADNEEDLE AGREEMENT. The terms of the proposed Threadneedle Agreement are the same as the current Threadneedle Agreement. CHIEF EXECUTIVE OFFICER AND BOARD OF DIRECTORS OF THREADNEEDLE. Simon H. Davies is Director and Chief Executive Officer of Threadneedle. In addition to Mr. Davies, the following individuals are also directors of Threadneedle: Thomas W. Challenor, Strategy and Risk Officer; Timothy N. Gillbanks, Chief Finance Officer; Crispin J. Henderson, Chief Operating Officer; William D. Lowndes, Director-Legal Compliance and Audit, Chief Compliance Officer and Company Secretary; and David F. Sachon, Managing Director of Distribution. All directors are also employees of Threadneedle Management Services Limited and may be reached at the offices of Threadneedle International Limited, 60 St. Mary Axe, London, UK EC3A 8JQ. Threadneedle is a wholly-owned subsidiary of Threadneedle Asset Management Holdings Limited, 60 St. Mary Axe, London, UK EC3A 8JQ, which in turn is a direct wholly-owned subsidiary of Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Minneapolis, MN 55474. RIVERSOURCE FUNDS -- PROXY STATEMENT 50 BOARD CONSIDERATIONS AND CONCLUSIONS. At its meeting held on Sept. 8, 2005, the Board, including a majority of its independent members, approved the proposed Threadneedle Agreement for each applicable fund and recommended its approval by shareholders. In making this determination, the Board evaluated the nature, extent and quality of services provided by Threadneedle. This evaluation included an analysis of the resources of Threadneedle as well as those of its parent, Ameriprise Financial (including those considerations discussed in Proposal 3 under "Basis for Recommendation of the Board - Nature, Extent and Quality of Services to be Provided by Post-Spin Ameriprise Financial (and its subsidiaries)"). The Board noted the ability of Threadneedle to manage assets in foreign markets. The Board also examined the investment performance of each applicable fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Investment Performance.") Based on the foregoing, the Board determined that the nature, extent and quality of advisory services provided by Threadneedle were satisfactory. The Board also analyzed the cost of services to the funds as well as to Threadneedle. In this regard, the Board observed that the fees paid to Threadneedle under the proposed Threadneedle Agreement would be the same as they are now. The Board also considered the total expense ratio of each fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Cost of Services Provided" for detail regarding these considerations). Additionally, the Board took into account that the fee schedule in the proposed Threadneedle Agreement includes "breakpoints" that would be triggered as fund asset levels grow. Based on the foregoing, the Board determined that the fees to be paid under the proposed Threadneedle Agreement for each fund would be fair and reasonable in light of the quality of services provided. RECOMMENDATION AND VOTE REQUIRED. The Board recommends that shareholders approve the Threadneedle Agreement. The change must be approved by the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of the shares voted at the meeting, so long as more than 50% of the shares actually vote. If the proposed Threadneedle Agreement is not approved, the Board will consider what steps to take. RIVERSOURCE FUNDS -- PROXY STATEMENT 51 PROPOSAL 6: APPROVE OR REJECT A SUBADVISORY AGREEMENT WITH DAVIS ADVISORS (Applies to: FUNDAMENTAL VALUE) Davis Advisors ("Davis") acts as subadviser for the fund under a subadvisory agreement with RiverSource Investments (the "Davis Agreement"). Davis invests money for many clients and, from time to time, has held more than 5% of the voting securities of American Express Company. Immediately after the spin off and from time to time thereafter, Davis may hold more than 5% of the voting securities of Ameriprise Financial. Davis therefore may be considered an affiliate of the fund. In connection with the change in investment manager described in Proposal 3, shareholders are being asked to approve the Davis Agreement as well. The subadvisory fee is paid to Davis by RiverSource Investments, not by the fund. A change in the fee paid to Davis will not affect the fee paid by the fund to RiverSource Investments. The proposed change in the Davis Agreement will not affect the expenses of the fund or the cost to shareholders. TERMS OF THE CURRENT DAVIS AGREEMENT. The fee paid by RiverSource Investments to Davis for managing fund assets is 0.45% on average daily net assets up to $100 million, 0.40% on assets from $100 million to $500 million, and 0.35 on assets over $500 million. The complete fee schedule for the fund is found in Section D. The Davis Agreement was approved by AEFC as sole shareholder on June 7, 2001. Davis also manages Davis Financial Fund for which it is paid at an annual rate based on average net assets as follows: 0.75% on the first $250 million of average net assets; 0.65% on the next $250 million of average net assets; and 0.55% on average net assets in excess of $500 million. PROPOSED DAVIS AGREEMENT COMPARED TO THE CURRENT DAVIS AGREEMENT. The terms of the proposed Davis Agreement are the same as the current Davis Agreement except for the change in the fee schedule. The proposed fee schedule is as follows: PROPOSED SUBADVISORY FEE (ANNUAL RATE, IN MILLIONS) First $100 million 0.45% $100 million - $500 million 0.40% $500 million - $1 billion 0.30% Over $1 billion 0.25%
RIVERSOURCE FUNDS -- PROXY STATEMENT 52 PRESIDENT AND BOARD OF DIRECTORS OF DAVIS. Andrew A. Davis is President and Director of Davis. In addition to Mr. Davis, the following individuals are also directors of Davis: Wesley E. Bass, Jr., Marc P. Blum, Jeremy H. Biggs, Christopher C. Davis, Thomas Gayner, Jerry D. Geist, D. James Guzy, G. Bernard Hamilton, Robert P. Morgenthau, Theodore B. Smith, Jr., Christian R. Sonne and Marsha Williams. All directors may be reached at the offices of the Davis Funds, 2949 E. Elvira Road, Suite 101, Tucson, AZ 85706. BOARD CONSIDERATIONS AND CONCLUSIONS. At its meeting held on Sept. 8, 2005, the Board, including a majority of its independent members, approved the proposed Davis Agreement for the fund and recommended its approval by shareholders. In making this determination, the Board evaluated the nature, extent and quality of services provided by Davis. This evaluation included an analysis of the resources of Davis. The Board also examined the investment performance of the fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Investment Performance.") Based on the foregoing, the Board determined that the nature, extent and quality of advisory services provided by Davis were satisfactory. The Board also analyzed the cost of services to the fund as well as to Davis. In this regard, the Board observed that the fees earned by Davis for providing investment management services under the proposed Davis Agreement would be the same as they are now. The Board also considered the total expense ratio of the fund (see discussion in Proposal 3 under "Basis for Recommendation of the Board - Cost of Services Provided" for detail regarding these considerations). Additionally, the Board took into account that the fee schedule in the proposed Davis Agreement includes "breakpoints" that would be triggered as fund asset levels grow. Based on the foregoing, the Board determined that the fees to be paid under the proposed Davis Agreement for the fund would be fair and reasonable in light of the quality of services provided. RECOMMENDATION AND VOTE REQUIRED. The Board recommends that shareholders approve the proposed Davis Agreement. The change must be approved by the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of the shares voted at the meeting, so long as more than 50% of the shares actually vote. If the proposed Davis Agreement is not approved, the Board will consider what steps to take. RIVERSOURCE FUNDS -- PROXY STATEMENT 53 PROPOSAL 7: APPROVE OR REJECT CHANGES IN FUNDAMENTAL INVESTMENT POLICIES (Applies to: ALL FUNDS) The fund has some investment policies that are fundamental. This means the policies can be changed only with the approval of shareholders. RiverSource Investments recommended to the Board that certain of those policies be modified in order to standardize the policies for all funds and to eliminate unnecessary limitations. RiverSource Investments believes that increased standardization will help to promote operational efficiencies and facilitate monitoring of compliance with fundamental investment policies. Adoption of a new or revised policy is not intended to change current investment techniques employed for the fund. The Board recommends the following changes to the fund's fundamental investment policies: A. DIVERSIFICATION (Applies to: ALL FUNDS EXCEPT CALIFORNIA TAX-EXEMPT, GLOBAL BOND, GLOBAL TECHNOLOGY, INFLATION PROTECTED SECURITIES, MASSACHUSETTS TAX-EXEMPT, MICHIGAN TAX-EXEMPT, MINNESOTA TAX-EXEMPT, NEW YORK TAX-EXEMPT, OHIO TAX-EXEMPT, PORTFOLIO BUILDER AGGRESSIVE, PORTFOLIO BUILDER CONSERVATIVE, PORTFOLIO BUILDER MODERATE FUND, PORTFOLIO BUILDER MODERATE AGGRESSIVE, PORTFOLIO BUILDER MODERATE CONSERVATIVE, PORTFOLIO BUILDER TOTAL EQUITY, PRECIOUS METALS, VP GLOBAL BOND) The Board recommends that the fund's fundamental policy with respect to diversification be revised to give the fund the maximum flexibility permitted by the 1940 Act. For most of the funds, this will be a revision to an existing policy. For European Equity, Real Estate, S&P 500 Index, Small Cap Value, VP S&P 500 Index and VP Small Cap Value this will be a new policy. Each of those funds originally was established as a non-diversified fund. Recently, however, the funds have been managed as diversified funds. Consequently, the Board recommends that each of the funds adopt policies consistent with operation as a diversified fund. The Board recommends that shareholders vote to replace the fund's current fundamental investment policy with, or adopt, the following policy (additional or revised language is [UNDERLINE]underlined[/UNDERLINE]): The fund will not invest more than 5% of its total assets in securities of any company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued or guaranteed by the U.S. government, its agencies or instrumentalities [UNDERLINE]or other investment companies,[/UNDERLINE] and except that up to 25% of the fund's total assets may be invested without regard to this 5% limitation. The percentage limits in the proposed policy are required under the 1940 Act. The amended policy makes one change from the current policy: subject to applicable 1940 Act requirements, it would permit the fund to invest without RIVERSOURCE FUNDS -- PROXY STATEMENT 54 limit in the securities of other investment companies. Pursuant to an exemptive order granted by the Securities and Exchange Commission (the "SEC"), the fund may invest up to 25% of its total assets in a non-publicly offered money market fund managed by RiverSource Investments (the "cash pool fund"). The cash pool fund is not expected to pay investment advisory, management, or transfer agent fees, although it may do so subject to the conditions of the SEC order and Board approval. The cash pool fund will incur minimal costs for services, such as custodian and auditor fees. The investment manager anticipates that making use of the cash pool fund will benefit the fund by enhancing the efficiency of cash management and by providing increased short-term investment opportunities. If the proposal is approved, the cash pool fund is expected to serve as a principal option for managing the cash positions of the fund. Future amendments to the fund's fundamental diversification policy would continue to require shareholder approval. B. TEN PERCENT LIMITATION IN SINGLE ISSUER (Applies to: BALANCED, CASH MANAGEMENT, DIVERSIFIED BOND, DIVERSIFIED EQUITY INCOME, DIVIDEND OPPORTUNITY, EMERGING MARKETS, EQUITY VALUE, EUROPEAN EQUITY, GLOBAL BOND, GLOBAL EQUITY, GROWTH, HIGH YIELD BOND, INTERMEDIATE TAX-EXEMPT, INTERNATIONAL OPPORTUNITY, MID CAP GROWTH, REAL ESTATE, S&P 500 INDEX, SELECT VALUE, SHORT DURATION U.S. GOV'T, SMALL CAP ADVANTAGE, SMALL CAP GROWTH, SMALL CAP VALUE, SMALL COMPANY INDEX, STRATEGIC ALLOCATION, TAX-EXEMPT BOND, TAX-EXEMPT HIGH INCOME, TAX-EXEMPT MONEY MARKET, VP BALANCED, VP CASH MANAGEMENT, VP DIVERSIFIED BOND, VP DIVERSIFIED EQUITY INCOME, VP EMERGING MARKETS, VP GLOBAL BOND, VP GROWTH, VP HIGH YIELD BOND, VP INTERNATIONAL OPPORTUNITY, VP LARGE CAP EQUITY, VP MID CAP GROWTH, VP S&P 500 INDEX, VP SHORT DURATION U.S. GOV'T, VP SMALL CAP VALUE) The Board recommends that the fund's fundamental policy with respect to investment in a single issuer be revised to permit the fund the maximum flexibility permitted by the 1940 Act. For most of the funds, this will be a revision to an existing policy as illustrated below. For European Equity, Real Estate, Small Cap Value, S&P 500 Index, VP S&P 500 Index and VP Small Cap Value, this will be a new policy. Each of those funds originally was established as a non-diversified fund. Recently, however, the funds have been managed as diversified funds. Consequently, the Board recommends that each of the funds adopt policies consistent with operation as a diversified fund. The Board recommends that shareholders vote to replace the fund's current fundamental investment policy with, or adopt, the following policy (additional language is [UNDERLINE]underlined[/UNDERLINE]): The Fund will not purchase more than 10% of the outstanding voting securities of an issuer, [UNDERLINE]except that up to 25% of the Fund's assets may be invested without regard to this 10% limitation.[/UNDERLINE] RIVERSOURCE FUNDS -- PROXY STATEMENT 55 The 10% percent limit in the proposed policy is required under the 1940 Act. Under the 1940 Act, a fund is permitted to invest up to 25% of its assets without regard to the 10% limitation. The Board recommends that shareholders amend the policy so that it reflects the terms of the 1940 Act. The proposal is not expected to materially affect the operation of the fund. However, the adoption of the proposed investment policy will standardize investment policies. C. LENDING (Applies to: ALL FUNDS) The Board recommends that the fund's fundamental policies with respect to lending be replaced with the following policy: The Fund will not lend securities or participate in an interfund lending program if the total of all such loans would exceed 33 1/3% of the Fund's total assets except this fundamental investment policy shall not prohibit the Fund from purchasing money market, loan participation or other debt securities, or from entering into repurchases agreements. Currently each of the funds has two policies with respect to lending. One policy limits lending of portfolio securities to 30% of net assets and the other policy limits cash loans to 5% of total assets. In addition, certain funds have a policy prohibiting loans to the investment manager, or to board members and officers of the investment manager or the fund. This third policy simply states a prohibition of the 1940 Act and the fund is not required to declare this policy as a fundamental policy. It is proposed that all three of these policies be superseded by the policy stated above. The proposal is not expected to materially affect the operation of the fund. However, the proposed policy would clarify that the fund can participate in an interfund borrowing and lending program with other RiverSource Funds, subject to the requirements of an SEC exemptive order. A fund may only borrow money for temporary purposes and may not borrow for leverage or investment purposes. Appropriate safeguards will be implemented to assure that the fund will not be disadvantaged by making loans to affiliated funds. The proposed policy also would confirm the fund's ability to invest in direct debt instruments such as loans and loan participations, which are interests in amounts owed to another party by a company, government or other borrower. These types of securities may have additional risks beyond conventional debt securities because they may provide less legal protection for the fund, or there may be a requirement that the fund supply additional cash to a borrower on demand. Finally, the adoption of the proposed investment policy will advance the goal of standardizing investment policies. RIVERSOURCE FUNDS -- PROXY STATEMENT 56 D. BORROWING (Applies to: ALL FUNDS) The Board recommends that the fund's fundamental policy with respect to borrowing be replaced with the following policy: The fund may not borrow money, except for temporary purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings) immediately after the borrowings. Funds typically borrow money to meet redemptions in order to avoid forced, unplanned sales of portfolio securities. This technique allows RiverSource Investments greater flexibility in managing the fund's cash flow. The current policy limits borrowing to emergency or extraordinary purposes. In order to avoid debate over what constitutes emergency or extraordinary purposes, it is proposed to revise the policy to reflect that the purposes, whatever the circumstances, must be temporary. The fund may not use borrowing for leverage or for investment purposes. In addition, the policy for certain funds includes a prohibition on borrowing property. The Board recommends the term be deleted in order to standardize investment policies. E. PRECIOUS METALS (Applies to: PRECIOUS METALS) The fund has a policy that states: The fund will invest at least 25% of its total assets in the precious metals industry, based on current market value at the time of purchase, unless market conditions temporarily require a defensive investment strategy. The Board recommends that shareholders approve the elimination of this policy. Under the SEC's name rule, so long as the fund has the words "Precious Metals" in its name, it must invest at least 80% of its assets in the precious metals industry. If the Board were to decide to change the name of the fund to something other than Precious Metals, shareholders would receive at least 60 days notice of the change. However, if the Board were to decide to change the name of the fund, the fundamental policy regarding investment in precious metals could not be changed without a shareholder vote. While the Board has no current intention of changing the name of the fund or the policy of investing in precious metals, eliminating the fundamental policy regarding precious metals will provide the Board with the flexibility to make changes in the future without shareholder approval. BOARD RECOMMENDATION AND VOTE REQUIRED. The Board recommends that shareholders approve the proposed changes. Changes in fundamental policies must be approved by the lesser of (a) a majority of the fund's outstanding shares or (b) 67% of the shares voted at the meeting, so long as more than 50% of the shares actually vote. If the any of the proposed changes is not approved, the fund will continue to operate under its current policy. RIVERSOURCE FUNDS -- PROXY STATEMENT 57 SECTION C - PROXY VOTING AND SHAREHOLDER MEETING INFORMATION This section includes information about proxy voting and the shareholder meetings. VOTING. You are entitled to vote based on your total dollar interest in a fund. Each dollar is entitled to one vote. For those of you who cannot come to the meeting, the Board is asking permission to vote for you. The shares will be voted as you instruct either by mail, telephone, or internet. Signed proxy cards returned without instructions will be voted in favor of all proposals. Each corporation or trust issues one or more series of shares. Each series is a separate fund. On the election of Board members and the amendment of the Articles of Incorporation, you vote together with the owners of shares of all the other funds that are part of the same corporation or trust. On the Investment Management Services Agreement, Subadvisory Agreement, and changes in fundamental policies, you vote together with the owners of the other shares in your fund. In voting for Board members, you may vote all of your shares cumulatively. This means that you have the right to give each nominee an equal number of votes or divide the votes among the nominees as you wish. You have as many votes as the number of dollars you own on the record date, multiplied by the number of Board members to be elected. If you decide to withhold authority for any individual nominee or nominees, you may do so by marking the box labeled "For All Except," and by striking the name of any excepted nominee, as is further explained on the card itself. If you do withhold authority, the proxies will not vote shares equivalent to the proportionate number applicable to the names for which authority is withheld. All votes count toward a quorum, regardless of how they are voted (For, Against or Abstain). Broker non-votes will be counted toward a quorum but not toward the approval of any proposals. (Broker non-votes are shares for which the underlying owner has not voted and the broker holding the shares does not have authority to vote.) If your shares are held in an IRA account with Ameriprise Trust Company as custodian, you have the right to instruct the IRA Custodian how to vote those shares. The IRA Custodian will vote any shares for which it has not received voting instructions in proportionately the same manner - either For, Against or Abstain - as other fund shareholders have voted. If your investments include any of the variable portfolio funds, you have the right to instruct IDS Life Insurance Company ("IDS Life") or IDS Life Insurance Company of New York ("IDS Life of New York") how to vote the variable portfolio fund shares held under your annuity contract or life insurance RIVERSOURCE FUNDS -- PROXY STATEMENT 58 policy. You do this by voting yourself. IDS Life and IDS Life of New York will vote any fund shares for which they do not receive voting instructions in proportionately the same manner - either For, Against or Abstain - as shares for which they do receive instructions. MASTER/FEEDER FUNDS. Some funds are part of a master/feeder structure. The feeder funds seek their investment objectives by investing their assets in master funds with the same policies. Master funds invest in and manage the securities. Proposals 3, 5 and 7 affect certain master funds. Feeder funds, as the sole shareholders of the master fund, will vote for or against each of those proposals in proportion to the vote received from feeder fund shareholders. The Board of each feeder fund has determined that it is in the best interests of shareholders to withdraw the fund's assets from the master/feeder structure. The necessary steps to finalize the withdrawal are expected to be completed in late 2005 or early 2006. After that date, each feeder fund will invest directly in and manage its own portfolio of securities rather than investing in a master portfolio. RiverSource Investments is the investment adviser to the master portfolio and will continue to serve as the feeder fund's investment adviser under the terms and conditions in the IMS Agreement described in Proposal 3. If the withdrawal from the master fund is completed prior to the date of the shareholder meeting, shareholders of the former feeder fund will vote directly on all issues. REVOKING YOUR PROXY. If your plans change after you vote your proxy and you would like to vote in person at the meeting, simply inform the Secretary at the meeting that you will be voting your shares in person. Also, if you change your mind after you vote, you may change your vote or revoke it by mail, telephone or internet. JOINT PROXY STATEMENT/SIMULTANEOUS MEETINGS. This joint proxy statement reduces the preparation, printing and mailing costs of sending separate proxy statements for each fund. The meetings will be held simultaneously with each proposal being voted on separately by shareholders of a corporation or by shareholders of a fund or by a class of shares of the fund where appropriate. If any shareholder objects to the holding of simultaneous meetings, the shareholder may move for an adjournment of his or her fund's meeting to a time immediately after the simultaneous meetings so that a meeting of that fund may be held separately. If a shareholder makes this motion, the persons named as proxies will take into consideration the reasons for the objection in deciding whether to vote in favor of the adjournment. RIVERSOURCE FUNDS -- PROXY STATEMENT 59 SOLICITATION OF PROXIES. The Board is asking for your vote and for you to vote as promptly as possible. Ameriprise Financial will pay the expenses for the proxy material, postage and any supplementary solicitations, which may be made by mail, telephone, electronic means or personal contact by financial advisors. SHAREHOLDER PROPOSALS. No proposals were received from shareholders. The funds are not required to hold regular meetings of shareholders each year. However, meetings of shareholders are held from time to time. Any proposal that a shareholder intends to present at a future shareholder meeting must be submitted to the funds in writing in reasonable time prior to the solicitation of proxies for the meeting OTHER BUSINESS. The Board does not know at this time of any other business to come before the meetings. If something does come up, the proxies will use their best judgment to vote for you on the matter. ADJOURNMENT. In the event that not enough votes in favor of any of the proposals are received by the time scheduled for the meeting, the persons named as proxies may move for one or more adjournments of the meeting for a period of not more than 120 days in the aggregate to allow further solicitation of shareholders on the proposals. Any adjournment requires the affirmative vote of a majority of the shares present at the meeting. The persons named as proxies will vote in favor of adjournment those shares they are entitled to vote that have voted in favor of the proposals. They will vote against any adjournment those shares that have voted against any of the proposals. A shareholder vote may be taken on one or more of the items in this proxy statement prior to adjournment if sufficient votes have been received. ANNUAL REPORT. The latest annual report was previously mailed to you. If you would like another copy of the annual report and any subsequent semi-annual report, without charge, please write RiverSource Funds, 70100 Ameriprise Financial Center, Minneapolis, MN 55474 or call (800) 862-7919. RIVERSOURCE FUNDS -- PROXY STATEMENT 60 SECTION D - FUND INFORMATION This section contains the following information about your fund, its investment adviser and the independent auditors: TABLE CONTENT (all information is shown for the last fiscal period unless noted otherwise) D-1 The fund's current fee schedule under its management agreement D-2 The fund's size, number of outstanding shares and 5% owners. D-3 Payments the fund made to the investment manager and its affiliates D-4 Brokerage commissions the fund paid to a broker-dealer affiliate D-5 Information about shareholder approval of current management agreements D-6 Actual and pro forma Investment Management Services Agreement fees D-7A Actual and pro forma expenses for Class A D-7B Actual and pro forma expenses for Class B D-7C Actual and pro forma expenses for Class C D-7D Actual and pro forma expenses for Class D D-7E Actual and pro forma expenses for Class E D-7I Actual and pro forma expenses for Class I D-7Y Actual and pro forma expenses for Class Y D-8A Audit fees D-8B Audit-related, tax and other fees THE FUND'S INVESTMENT ADVISER AND DISTRIBUTOR. RiverSource Investments is the investment adviser for each of the funds. Ameriprise Financial Services, Inc., a wholly owned subsidiary of Ameriprise Financial, is the distributor for each of the retail funds. IDS Life, a wholly owned subsidiary of Ameriprise Financial, is the distributor for each of the variable portfolio funds. The address for RiverSource Investments, Ameriprise Financial Services, Inc. and IDS Life is 200 Ameriprise Financial Center, Minneapolis, MN 55474. PRESIDENT AND BOARD OF DIRECTORS OF RIVERSOURCE INVESTMENTS. William F. Truscott is President of RiverSource Investments, 200 Ameriprise Financial Center, Minneapolis, MN 55474. The following individuals are directors of RiverSource Investments. Each director is an officer of RiverSource Investments. Directors: William F. Truscott, Ward D. Armstrong and Michelle M. Keeley. PRESIDENT AND BOARD OF DIRECTORS OF IDS LIFE. Timothy V. Bechtold is President of IDS Life. The following individuals are directors of IDS Life. Each director is an officer of Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, MN 55474. Directors: Gumer C. Alvero, Timothy V. Bechtold, Arthur H. Berman, B. Roger Natarajan and Mark E. Schwarzmann. RIVERSOURCE FUNDS -- PROXY STATEMENT 61 TABLE D-1. FUND MANAGEMENT FEE SCHEDULE
CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS(1) RETAIL FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ----------------------------------------------------------------------------------------------------------------------------- Aggressive Growth(2),(4) First $.5 - .89%; next $.5 - .865%; 1.44% until 5/31/06 next $1 - .84%; next $1 - .815%; next $3 - .79%; over $6 - .765% Balanced(2),(3) First $1 - .53%; next $1 - .505%; next $1 - .48%; next $3 - .455%; over $6 - .43% California Tax-Exempt, Massachusetts First $.25 - .47%; next $.25 - .445%; 0.79% until 6/30/06 Tax-Exempt, Michigan Tax-Exempt, next $.25 - .42%; next $.25 - .405%; Minnesota Tax-Exempt, New York over $1 - .38% Tax-Exempt, Ohio Tax-Exempt Cash Management Tax-Exempt Money Market First $1.0 - .36%; next $.5 - .343%; Cash: 0.73% until 7/31/06 next $.5 - .325%; next $.5 - .308%; next $1 - .29%; next $3 - .27%; over $6.5 - .25% Core Bond Limited Duration First $1 - .54%; next $1 - .515%; next 0.89% until 7/31/06 $1 - .49%; next $3 - .465%; next $3 - .44%; over $9 - .415% Disciplined Equity(2) First $1 - .60%; next $1 - .575%; next Disciplined Equity: 1.25% until 7/31/06 Growth(2),(3) $1 - .55%; next $3 - .525%; next $6 - Large Cap Value: 1.29% until 7/31/06 Large Cap Equity(2) .50%; next $12 - .49%; over $24 - .48% Large Cap Value(2) Mid Cap Growth(2) New Dimensions(2),(3) Discovery(2),(15) First $.25 - .64%; next $.25 - .615%; 1.49% until 7/31/06 next $.25 - .59%; next $.25 - .565%; next $1 - .54%; over $2 - .515% Diversified Bond Selective(3) Short First $1 - .52%; next $1 - .495%; next 0.89% Diversified Bond until 8/31/06 Duration U.S. Gov't(3) U.S. Gov't $1 - .47%; next $3 - .445%; next $3 - Selective, Short Duration U.S. Gov't Mortgage .42%; over $9 - .395% and U.S. Gov't Mortgage until 5/31/06 Diversified Equity Income(2),(3) First $.5 - .53%; next $.5 - .505%; Equity Value(2) next $1 - .48%; next $1 - .455%; next Stock(2),(3) $3 - .43%; over $6 - .40% Strategic Allocation(2),(3)
RIVERSOURCE FUNDS -- PROXY STATEMENT 62 TABLE D-1. (CONTINUED)
CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS RETAIL FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ----------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity(2) First $.5 - .61%; next $.5 - .585%; next $1 - .56%; next $1 - .535%; next $3 - .51%; over $6 - .48% Emerging Markets(2),(3),(5) First $.25 - 1.10%; next $.25 - 1.08%; 1.99% until 10/31/06 next $.25 - 1.06%; next $.25 - 1.04%; next $1 - 1.02%; over $2 - 1.0% European Equity(2),(5) First $.25 - .80%; next $.25 - .775%; International Opportunity: 1.55% until Global Equity(2),(3),(5) next $.25 - .75%; next $.25 - .725%; 10/31/06 International Opportunity(2),(5) next $1 - .70%; over $2 - .675% Precious Metals(2) Fundamental Growth(2),(6) First $.5 - .78%; next $.5 - .78%; next 1.40% until 5/31/06 $1 - .755%; next $1 - .73%; next $3 - .705%; over $6 - .68% Fundamental Value(2),(7) First $.5 - .73%; next $.5 - .705%; Value(2),(8) next $1 - .68%; next $1 - .655%; next $3 - .63%; over $6 - .60% Global Balanced(2),(5) First $.25 - .79%; next $.25 - .765%; next $.25 - .74%; next $.25 - .715%; next $1 - .69%; over $2 - .665% Global Bond(3) First $.25 - .77%; next $.25 - .745%; 1.25% until 10/31/06 next $.25 - .72%; next $.25 - .695%; over $1 - .67% Global Technology(2),(3) First $.25 - .72%; next $.25 - .695%; 1.82% until 10/31/06 next $.25 - .67%; next $.25 - .645%; next $1 - .62%; over $2 - .595% High Yield Bond(3) First $1 - .59%; next $1 - .565%; next $1 - .54%; next $3 - .515%; next $3 - .49%; over $9 - .465% Income Opportunities First $1 - .61%; next $1 - .585%; next 1.19% until 7/31/06 $1 - .56%; next $3 - .535%; next $3 - .51%; over $9 - .485% Inflation Protected Securities First $1 - .44%; next $1 - .415%; next 0.84% until 7/31/06 $1 - .39%; next $3 - .365%; next $3 - .34%; over $9 - .315% Insured Tax-Exempt First $1 - .45%; next $1 - .425%; next 0.79% Intermediate and Tax-Exempt Intermediate Tax-Exempt $1 - .4%; next $3 - .375%; over $6 - .35% until 11/30/06 Tax-Exempt Bond International Aggressive Growth(2),(9) First $.25 - 1%; next $.25 - .975%; Cap is expiring next $.25 - .95%; next $.25 - .925%; next $1 - .90%; over $2 - .875%
RIVERSOURCE FUNDS -- PROXY STATEMENT 63 TABLE D-1. (CONTINUED)
CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS RETAIL FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ----------------------------------------------------------------------------------------------------------------------------- International Equity(2),(10) First $.25 - .97%; next $.25 - .945%; 1.75% until 10/31/06 next $.25 - .92%; next $.25 - .895%; next $1 - .87%; over $2 - .845% International Select Value(2),(11) First $.25 - .90%; next $.25 - .875%; next $.25 - .85%; next $.25 - .825%; next $1 - .80%; over $2 - .775% International Small Cap(2),(12) First $.25 - 1.12%; next $.25 - 1.095%; 1.95% until 10/31/06 next $.25 - 1.070%; next $.25 - 1.045%; next $1 - 1.020%; over $2 - .995% Mid Cap Value(2) First $1 - .70%; next $1 - .675%; next $1 - .65%; next $3 - .625%; next $6 - .60%; next $12 - .59%; over $24 - .58% Portfolio Builder Conservative 0.08% 0.59% until 1/31/07 Portfolio Builder Moderate Conservative 0.08% 0.59% until 1/31/07 Portfolio Builder Moderate 0.08% 0.59% until 1/31/07 Portfolio Builder Moderate Aggressive 0.08% 0.59% until 1/31/07 Portfolio Builder Aggressive 0.08% 0.59% until 1/31/07 Portfolio Builder Total Equity 0.08% 0.59% until 1/31/07 Real Estate(2) First $1 - .84%; next $1 - .815%; next 1.49% until 6/30/06 $1 - .79%; next $3 - .765%; next $6 - .74%; next $12 - .73%; over $24 - .72% S&P 500 Index First $1 - .24; next $1 - .23%; next $3 0.59% until 1/31/07 - .22%; over $5 - .21% Select Value(2),(13) First $.5 - .78%; next $.5 - .755%; next $1 - .73%; next $1 - .705%; next $3 - .68%; over $6 - .65% Small Cap Advantage(2),(14) First $.25 - .74%; next $.25 - .715%; next $.25 - .69%; next $.25 - .665%; next $1 - .64%; over $2 - .615%
RIVERSOURCE FUNDS -- PROXY STATEMENT 64 TABLE D-1. (CONTINUED)
CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS RETAIL FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ----------------------------------------------------------------------------------------------------------------------------- Small Cap Equity(2),(15) First $.25 - .97%; next $.25 - .945%; Small Cap Equity: 1.55% until 5/31/06; Small Cap Value(2),(16) next $.25 - .92%; next $.25 - .895%; Small Cap Value: 1.59% until 5/31/06 over $1 - .87% Small Cap Growth(2),(17) First $.25 - .92%; next $.25 - .895%; 1.70% until 3/31/07 next $.25 - .87%; next $.25 - .845%; next $1 - .82%; over $2 - .795% Small Company Index First $.25 - .38%; next $.25 - .37%; 0.89% until 1/31/07 next $.25 - .36%; next $.25 - .35%; over $1 - .34% Strategy Aggressive(2),(4) First $1 - .60%; next $1 - .575%; next $1 - .55%; next $3 - .525%; over $6 - .50% Tax-Exempt High Income(3) First $1 - .49%; next $1 - .465%; next 0.79% until 11/30/06 $1 - .44%; next $3 - .415%; next $3 - .39%; over $9 - .36%
(1) For all funds except S&P 500 Index, the information is shown for Class A shares. Fees and expenses in excess of the percentage shown will be waived or reimbursed, prior to giving effect to any PIA. For S&P 500 Index, the fee cap is shown for Class D shares. Fee caps for other classes of shares will vary slightly based on the expenses of those classes. (2) The fund has a PIA based on its performance compared to a Lipper index of comparable funds over a rolling 12-month period. (3) The fund is part of the master/feeder structure. Management fees are paid by the portfolio on behalf of the fund. (4) The fund has subadvisory agreements with American Century Investment Management, Inc. and Turner Investment Partners, Inc. (5) The fund has a subadvisory agreement with Threadneedle International Limited. (6) The fund has subadvisory agreements with Wellington Management Company, LLP and Goldman Sachs Asset Management L.P. (7) The fund has a subadvisory agreement with Davis Advisors. (8) The fund has a subadvisory agreement with Lord, Abbett & Co. (9) The fund has subadvisory agreements with American Century Global Investment Management, Inc. and Liberty Wanger Asset Management, L.P. (10) The fund has subadvisory agreements with Marsico Capital Management LLC and The Boston Company Asset Management. (11) The fund has a subadvisory agreement with Alliance Capital Management L. P. (12) The fund has subadvisory agreements with Wellington Management Company, LLP and Templeton Investment Counsel LLP. (13) The fund has a subadvisory agreement with Gabelli Asset Management Company. (14) The fund has a subadvisory agreement with Kenwood Capital Management LLC. (15) The fund has subadvisory agreements with American Century Investment Management, Inc., Lord, Abbett & Co. and Wellington Management Company, LLP. (16) The fund has subadvisory agreements with Royce & Associates, Inc.; Goldman Sachs Asset Management L.P.; Barrow, Hanley, Mewhinney & Strauss, Inc.; Donald Smith & Co., Inc.; and Franklin Portfolio Associates. (17) The fund has subadvisory agreements with Essex Investment Management Company, LLC, Turner Investment Partners, Inc.; MDT advisers and UBS Global Asset Management (Americas) Inc. RIVERSOURCE FUNDS -- PROXY STATEMENT 65 TABLE D-1. (CONTINUED)
VARIABLE PORTFOLIO CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ------------------------------------------------------------------------------------------------------------------------------- VP Balanced(2) First $.5 - .63%; next $.5 - .615%; next $1 - .60%; next $1 - .585%; next $3 - .57%; over $6 - .55% VP Cash Management First $1 - .51%; next $.5 - .493%; next $.5 - .475%; next $.5 - .458%; over $2.5 - .44% VP Core Bond First $1 - .63%; next $1 - .615%; next .95% until 8/31/06 $1 - .60%; next $3 - .585%; next $3 - .57%; over $9 - .555% VP Core Equity .40% .40% VPDiversified Bond First $1 - .61%; next $1 - .595%; next VP Short Duration U.S. Gov't $1 - .58%; next $3 - .565%; next $3 - .55%; over $9 - .535% VP Diversified Equity Income(1) First $.5 - .56%; next $.5 - .545%; next $1 - .53%; next $1 - .515%; next $3 - .50% over $6 - .47% VP Emerging Markets(2),(3) First $.25 - 1.17%; next $.25 - 1.155%; 1.75% until 8/31/06 next $.25 - 1.14%; next $.25 -1.125%; next $1 - 1.11%; over $2 - 1.095% VP Global Bond First $.25 - .84%; next $.25 - .825%; next $.25 - .81%; next $.25 - .795%; over $1 - .78% VP Growth(2) First $1 - .63%; next $1 - .615%; next For Large Cap Value: 1.05% until VP Large Cap Equity(2) $1 - .60%; next $3 - .585%; over $6 - 8/31/06 VP Large Cap Value(2) .57% VP New Dimensions(2) VP High Yield Bond First $1 - .62%; next $1 - .605%; next $1 - .59%; next $3 - .575%; next $3 - .56%; over $9 - .545% VP Income Opportunities First $1 - .64%; next $1 - .625%; next .99% until 8/31/06 $1 - .61%; next $3 - .595%; next $3 - .58%; over $9 - .565% VP Global Inflation Protected Securities First $1 - .49%; next $1 - .475%; next .75% until 8/31/06 $1 - .46%; next $3 - .445%; next $3 - .43%; over $9 - .415%
RIVERSOURCE FUNDS -- PROXY STATEMENT 66 TABLE D-1. (CONTINUED)
VARIABLE PORTFOLIO CURRENT MANAGEMENT FEE FEE CAP OR WAIVERS FUNDS (ANNUAL RATE; IN BILLIONS) (IF APPLICABLE) ------------------------------------------------------------------------------------------------------------------------------- VP International Opportunity(2),(3) First $.25 - .87%; next $.25 - .855%; next $.25 - .84%; next $.25 - .825%; next $1 - .81%; over $2 - .795% VP Mid Cap Growth(2) First $.25 - .65%; next $.25 - .635%; 1.0% until 8/31/06 next $.25 - .62%; next $.25 - .605%; next $1 - .59%; next $1 - .575%; over $3 - .56% VP Mid Cap Value(2) First $1 - .73%; next $1 - .705%; next 1.08% until 8/31/06 $1 - .68%; next $3 - .655%; next $6 - .63%; next $12 - .62%; over $24 - .61% VP S&P 500 Index First $1 - .29%; next $1 - .28%; next .495% until 8/31/06 $3 - .27%; over $5 - .26% VP Select Value(2),(6) First $.5 - .81%; next $.5 - .795%; 1.15% until 8/31/06 next $1 - .78%; next $1 - .765%; next $3 - .75%; over $6 - .72% VP Small Cap Advantage(2),(5) First $.25 - .79%; next $.25 - .77%; next $.25 - .75%; next $.25 - .73%; next $1 - .71%; over $2 - .65% VP Small Cap Value(2),(4) First $.25 - 1.02%; next $.25 - 1.00%; 1.30% until 8/31/06 next $.25 - .98%; next $.25 -.96%; next $1 - .94%; over $2 - .92% VP Strategy Aggressive First $.25 - .65%; next $.25 - .635%; next $.25 - .62%; next $.25 -.605%; next $1 - .59%; over $2 - .575%
(1) Fees and expenses in excess of the percentage shown will be waived or reimbursed, prior to giving effect to any PIA. (2) The fund has a PIA based on its performance compared to a Lipper index of comparable funds over a rolling 12-month period. (3) The fund has a subadvisory agreement with Threadneedle International Limited. (4) The fund has subadvisory agreements with Royce & Associates, Inc.; Goldman Sachs Asset Management L.P.; Barrow, Hanley, Mewhinney & Strauss, Inc.; Donald Smith & Co., Inc.; and Franklin Portfolio Associates. (5) The fund has a subadvisory agreement with Kenwood Capital Management LLC. (6) The fund has a subadvisory agreement with Gabelli Asset Management Company. RIVERSOURCE FUNDS -- PROXY STATEMENT 67 TABLE D-2. FUND SIZE AND 5% OWNERS AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS RETAIL FUNDS: Aggressive Growth Class A $ 30,462,999 3,807,197 (1) Class B 7,757,666 986,357 None Class C 637,400 81,067 (2) Class I 55,735,958 6,923,089 (3) Class Y 38,714 4,821 (4) Balanced Class A 989,847,242 100,563,086 None Class B 81,235,246 8,306,982 None Class C 3,167,432 324,045 None Class Y 164,003,751 16,664,056 (5) California Tax-Exempt Class A 184,480,530 35,291,948 None Class B 12,739,113 2,438,311 None Class C 2,878,539 550,017 (6) Cash Management Class A 2,969,965,376 2,969,755,089 None Class B 107,414,013 107,605,539 None Class C 2,026,510 2,026,881 (7) Class I 13,215,488 13,216,008 (8) Class Y 139,566,909 139,634,090 (9) Core Bond Class A 35,122,802 3,630,787 (10) Class B 12,106,767 1,251,196 None Class C 605,474 62,555 (11) Class I 122,992,343 12,723,991 (12) Class Y 100,581 10,399 (13) Disciplined Equity Class A 32,276,709 4,753,442 (14) Class B 9,368,502 1,396,861 None Class C 215,153 32,080 (15) Class I 90,562,547 13,259,515 (16) Class Y 34,836 5,118 (17)
RIVERSOURCE FUNDS -- PROXY STATEMENT 68 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Diversified Bond Class A $1,742,668,306 360,929,225 (18) Class B 476,270,093 98,619,257 None Class C 17,722,563 3,665,171 None Class I 9,836 2,037 (19) Class Y 144,541,408 29,933,483 (20) Diversified Equity Income Class A 3,750,582,404 309,712,571 (21) Class B 1,141,019,668 94,507,900 None Class C 58,192,375 4,825,898 None Class I 95,654,501 7,887,479 (22) Class Y 57,831,755 4,771,115 (23) Dividend Opportunity Class A 889,897,301 118,997,386 (24) Class B 289,152,159 38,928,684 None Class C 13,343,663 1,797,479 None Class I 11,337 1,513 (19) Class Y 389,323 51,944 (25) Emerging Markets Class A 313,828,701 35,659,061 (26) Class B 78,466,067 9,430,788 None Class C 2,768,987 332,026 None Class I 19,954,288 2,236,448 (27) Class Y 21,620,897 2,427,357 (28) Equity Value Class A 890,011,764 81,585,220 None Class B 219,010,206 20,036,987 None Class C 3,408,830 314,205 (29) Class I 11,683 1,070 (19) Class Y 9,687,928 887,315 (30)
RIVERSOURCE FUNDS -- PROXY STATEMENT 69 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS European Equity Class A $ 83,096,070 19,221,477 (31) Class B 32,333,856 7,595,255 None Class C 1,453,637 341,461 (32) Class I 12,407 2,865 (19) Class Y 15,877 3,668 (33) Fundamental Growth Class A 17,834,417 2,982,269 (34) Class B 6,910,298 1,178,412 None Class C 350,088 59,641 (35) Class I 99,230,986 16,470,665 (36) Class Y 35,817 5,952 (37) Fundamental Value Class A 721,649,741 126,248,011 (38) Class B 291,432,945 52,324,537 None Class C 18,188,243 3,253,306 None Class I 50,966,087 8,838,871 (39) Class Y 692,384 120,515 (40) Global Bond Class A 364,917,832 54,679,841 (41) Class B 114,417,059 17,124,375 None Class C 4,388,971 659,671 None Class I 83,000,365 12,413,605 (42) Class Y 85,205 12,737 (25) Global Equity Class A 455,785,733 70,888,162 (43) Class B 104,061,342 17,145,801 None Class C 2,244,332 372,030 None Class Y 6,551,615 1,010,179 (44) Global Technology Class A 124,419,109 61,345,765 (45) Class B 48,110,237 27,206,908 None Class C 3,403,255 1,919,217 None Class I 12,047 5,882 (19) Class Y 330,049 162,034 (46)
RIVERSOURCE FUNDS -- PROXY STATEMENT 70 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Growth Class A $2,203,304,395 77,837,603 (47) Class B 523,481,036 20,177,254 None Class C 16,241,663 625,977 None Class I 159,774,716 5,525,838 (48) Class Y 292,709,960 10,170,179 (49) High Yield Bond Class A 1,726,980,660 600,282,256 (50) Class B 527,513,471 183,465,543 None Class C 33,582,470 11,748,841 None Class I 10,137 3,521 (19) Class Y 487,959 169,744 (51) Income Opportunities Class A 204,752,316 19,672,643 (52) Class B 74,389,770 7,149,878 None Class C 7,071,403 679,776 None Class I 74,497,853 7,148,199 (53) Class Y 410,217 39,385 (54) Inflation Protected Securities Class A 93,446,225 9,199,467 (55) Class B 47,670,447 4,695,096 None Class C 3,819,693 376,194 None Class I 58,035,240 5,713,259 (56) Class Y 10,157 1,000 (57) Intermediate Tax-Exempt Bond Class A 106,627,185 20,015,248 (58) Class B 17,466,213 3,281,104 None Class C 6,566,497 1,233,452 None Class Y 1,285 243 (19) International Aggressive Growth Class A 221,743,043 26,725,985 (59) Class B 59,272,357 7,352,091 None Class C 3,382,513 419,633 None Class I 80,949,756 9,664,713 (60) Class Y 465,015 55,744 (61)
RIVERSOURCE FUNDS -- PROXY STATEMENT 71 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS International Equity Class A $ 95,352,103 12,695,477 (62) Class B 24,664,771 3,329,668 None Class C 1,486,163 200,537 (63) Class I 44,481,652 5,890,334 (64) Class Y 96,360 12,808 (65) International Opportunity Class A 424,142,870 53,835,610 (66) Class B 84,430,216 11,021,450 None Class C 2,764,134 363,224 None Class I 49,026,932 6,155,539 (67) Class Y 362,926 45,811 (68) International Select Value Class A 1,022,343,469 109,991,789 (69) Class B 315,518,381 35,007,800 None Class C 17,431,882 1,935,319 None Class I 60,250,633 6,417,520 (70) Class Y 908,843 97,133 (71) International Small Cap Class A 67,746,637 7,437,597 (72) Class B 17,486,625 1,965,173 None Class C 844,258 94,641 None Class I 10,035,932 1,091,527 (73) Class Y 84,692 9,257 (74) Large Cap Equity Class A 1,044,944,281 199,514,923 (75) Class B 372,956,613 72,818,404 None Class C 8,898,385 1,734,333 None Class I 46,831,631 8,852,605 (76) Class Y 253,870 48,212 (77)
RIVERSOURCE FUNDS -- PROXY STATEMENT 72 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Large Cap Value Class A $ 72,486,323 12,434,782 (78) Class B 25,555,403 4,436,034 None Class C 1,276,581 221,632 None Class I 41,242,356 7,030,729 (79) Class Y 117,748 20,125 (80) Limited Duration Bond Class A 81,010,661 8,304,193 (81) Class B 23,332,279 2,391,337 None Class C 1,661,660 170,364 (82) Class I 76,435,968 7,834,086 (83) Class Y 59,987 6,150 (84) Massachusetts Tax-Exempt Class A 55,318,102 10,318,149 (85) Class B 15,136,280 2,823,230 None Class C 1,246,511 232,598 (86) Michigan Tax-Exempt Class A 51,366,096 9,706,841 (87) Class B 4,693,474 886,584 (88) Class C 1,926,971 364,102 (89) Mid Cap Growth Class A 1,369,390,930 97,396,587 (90) Class B 327,603,602 25,385,891 None Class C 12,405,180 961,433 None Class I 39,230,589 2,743,086 (91) Class Y 193,879,455 13,619,592 (92) Mid Cap Value Class A 781,922,066 91,332,628 (93) Class B 242,238,244 28,890,614 None Class C 13,765,853 1,641,443 None Class I 11,962,750 1,382,578 (94) Class Y 817,956 94,943 (95)
RIVERSOURCE FUNDS -- PROXY STATEMENT 73 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Minnesota Tax-Exempt Class A $336,606,720 63,704,128 None Class B 42,526,880 8,046,992 None Class C 8,926,130 1,689,083 None New York Tax-Exempt Class A 70,838,255 13,852,761 (96) Class B 9,242,795 1,807,455 None Class C 1,302,757 254,752 (97) Ohio Tax-Exempt Class A 49,888,439 9,467,139 (98) Class B 7,371,782 1,399,019 (99) Class C 1,849,037 350,777 (100) Portfolio Builder Aggressive Class A 218,947,226 19,377,058 None Class B 62,196,208 5,557,321 None Class C 5,231,913 467,685 None Class Y 87,026 7,693 (101) Portfolio Builder Conservative Class A 59,992,550 5,784,108 None Class B 30,232,453 2,922,068 None Class C 6,219,336 600,940 None Class Y 32,699 3,178 (102) Portfolio Builder Moderate Class A 336,213,095 30,859,805 None Class B 126,014,155 11,603,313 None Class C 14,353,538 1,320,552 None Class Y 33,938 3,119 (103) Portfolio Builder Moderate Aggressive Class A 456,042,200 41,155,187 None Class B 124,634,025 11,282,511 None Class C 12,522,364 1,133,803 None Class Y 70,704 6,376 (104)
RIVERSOURCE FUNDS -- PROXY STATEMENT 74 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Portfolio Builder Moderate Conservative Class A $126,353,145 11,887,101 None Class B 54,413,478 5,130,965 None Class C 9,246,715 871,601 None Class Y 26,266 2,480 (105) Portfolio Builder Total Equity Class A 176,564,460 15,413,673 None Class B 52,116,332 4,592,863 None Class C 4,495,245 396,157 None Class Y 99,865 8,702 (106) Precious Metals Class A 69,126,703 6,576,173 (107) Class B 16,440,817 1,647,821 None Class C 1,830,621 185,149 (108) Class I 10,467 989 (19) Class Y 49,268 4,651 (109) Real Estate Class A 74,321,515 5,319,896 (110) Class B 19,622,739 1,411,899 None Class C 1,046,594 75,305 None Class I 55,514,957 3,967,605 (111) Class Y 28,765 2,063 (112) S&P 500 Index Class D 65,141,971 13,653,518 (25) Class E 217,968,597 45,417,444 (113) Select Value Class A 547,056,024 78,504,743 (114) Class B 189,313,145 27,858,129 None Class C 11,895,508 1,750,301 None Class I 17,705,990 2,515,653 (115) Class Y 94,561 13,494 (116)
RIVERSOURCE FUNDS -- PROXY STATEMENT 75 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Short Duration U.S. Gov't Class A $820,480,655 172,635,517 (117) Class B 463,856,176 97,584,022 None Class C 20,258,420 4,262,297 None Class I 50,510,115 10,614,046 (118) Class Y 32,204,927 6,774,009 (119) Small Cap Advantage Class A 607,717,167 79,464,010 (120) Class B 204,643,195 28,153,629 None Class C 11,925,584 1,640,448 None Class I 8,925,772 1,148,172 (121) Class Y 654,355 84,691 (122) Small Cap Equity Class A 140,497,613 22,370,142 (123) Class B 47,818,274 7,837,487 None Class C 3,841,785 630,386 None Class I 10,123,884 1,596,475 (124) Class Y 293,135 46,319 (125) Small Cap Growth Class A 139,313,934 30,294,588 (126) Class B 60,835,369 13,710,954 None Class C 5,967,033 1,344,464 None Class I 9,587,094 2,058,945 (127) Class Y 132,123 28,541 (128) Small Cap Value Class A 755,648,619 106,905,619 (129) Class B 328,789,656 47,762,801 None Class C 21,307,670 3,089,422 None Class I 11,822,805 1,655,717 (130) Class Y 217,488 30,597 (131)
RIVERSOURCE FUNDS -- PROXY STATEMENT 76 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS Small Company Index Class A $ 865,614,276 96,733,551 (132) Class B 346,782,708 42,102,446 None Class Y 10,897,824 1,199,057 (133) Strategic Allocation Class A 937,599,917 94,157,621 None Class B 96,316,204 9,745,469 None Class C 6,951,649 705,134 None Class Y 4,286,748 430,514 (134) Tax-Exempt Bond Class A 620,913,752 160,136,048 None Class B 30,276,575 7,808,249 None Class C 3,928,709 1,012,887 None Class Y 1,887 487 (19) Tax-Exempt High Income Bond Class A 3,581,661,059 808,428,906 None Class B 197,504,197 44,583,702 None Class C 24,270,554 5,476,132 None Class Y 1,998 450 (19) Tax-Exempt Money Market 113,855,036 113,982,997 None U.S. Gov't Mortgage Class A 153,898,993 30,441,915 (135) Class B 84,767,339 16,760,791 None Class C 9,356,540 1,849,778 None Class I 9,808 1,942 (19) Class Y 33,759,158 6,682,021 (136) Value Class A 260,276,151 46,716,933 (137) Class B 128,769,111 23,679,313 None Class C 8,924,498 1,636,718 (138) Class I 61,275,692 10,907,810 (139) Class Y 106,228 18,985 (140)
RIVERSOURCE FUNDS -- PROXY STATEMENT 77 TABLE D-2. FUND SIZE AND 5% OWNERS (CONTINUED) AS OF SEPTEMBER 30, 2005
FUND NET ASSETS OUTSTANDING SHARES 5% OWNERS VARIABLE PORTFOLIO FUNDS: VP Balanced $2,414,575,668 158,692,917 (141) VP Cash Management 688,876,582 689,122,640 (141) VP Core Bond 57,499,365 5,793,938 (141) VP Core Equity 481,194,512 43,832,498 (141) VP Diversified Bond 1,825,389,081 173,434,677 (141) VP Diversified Equity Income 1,767,297,182 125,390,813 (141) VP Emerging Markets 225,885,649 15,845,639 (141) VP Global Bond 572,251,015 53,077,261 (141) VP Global Inflation Protected Securities 137,581,939 13,561,962 (141) VP Growth 426,597,618 63,767,447 (141) VP High Yield Bond 1,232,046,365 184,819,604 (141) VP Income Opportunitites 47,361,227 4,612,911 (141) VP International Opportunity 1,220,375,783 117,257,076 (141) VP Large Cap Equity 2,522,811,193 116,466,470 (141) VP Large Cap Value 15,554,971 1,402,847 (141) VP Mid Cap Growth 257,201,572 20,343,440 (141) VP Mid Cap Value 8,536,568 738,583 (141) VP S&P 500 Index 370,933,979 44,332,968 (141) VP Select Value 24,361,339 2,135,809 (141) VP Short Duration U.S. Gov't 479,756,279 47,231,205 (141) VP Small Cap Advantage 234,299,870 15,485,771 (141) VP Small Cap Value 426,254,253 29,410,355 (141)
(1) Charles Schwab & Co Inc., a brokerage firm, owns of record 5.45%. (2) Roger J., Sylvia Ann and Matthew Thompson, Eagle, ID own 10.11%. (3) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.12%. RiverSource Portfolio Builder Moderate Fund owns 20.46%. RiverSource Portfolio Builder Aggressive Fund owns 19.50%. RiverSource Portfolio Builder Total Equity Fund owns 19.22%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.95%. (4) Charles Schwab & Co Inc., a brokerage firm, owns of record 58.52%. Ameriprise Financial, Minneapolis, MN owns 41.48%. (5) Ameriprise Trust Company, Minneapolis, MN owns of record 99.82%. (6) Arthur Mendel and Dorothy Mendel as the Trustees of the Dorothy M. Mendel Irrevocable Trust, Richmond, CA, own 6.73%. (7) Jerry J. Meyer and Roma J. Meyer, Williamsburg, IN own 11.34%. Dr. Frank Bernhardt and Monika Bernhardt, West Chester, OH own 5.08%. (8) RiverSource Portfolio Builder Conservative Fund owns 55.88%. RiverSource Portfolio Builder Moderate Conservative Fund owns 44.04%. (9) Ameriprise Trust Company, Minneapolis, MN owns of record 98.34%. RIVERSOURCE FUNDS -- PROXY STATEMENT 78 (10) Charles Schwab & Co. Inc., a brokerage firm, owns of record 14.72%. IDS Life Insurance Company, Minneapolis, MN owns 6.14%. (11) Frank S. Gregory, Derry, NH owns 6.49%. Donald L. Arnold and Helen Arnold, Silver Lake, IN own 5.01%. (12) RiverSource Portfolio Builder Moderate Fund owns 41.26%. RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.54%. RiverSource Portfolio Builder Conservative Fund owns 12.14%. RiverSource Portfolio Builder Moderate Conservative Fund owns 10.27%. (13) Charles Schwab & Co. Inc., a brokerage firm, owns of record 90.38%. IDS Life Insurance Company, Minneapolis, MN owns 9.62%. (14) Charles Schwab & Co Inc., a brokerage firm, owns of record 10.23%. (15) Emmanual A. Madeira and Kelly D. Madeira, S. Dartmouth, MA own 8.49%. Brian L. Hopp and Mary Jane Hopp, Beldenville, WI own 7.33%. Ameriprise Financial, Minneapolis, MN owns 6.23%. Linda L. Lane, Bay Pines, FL owns 5.59%. Paul M. Farmer and Nikki S. Farmer, Franklin, TN own 5.03%. (16) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.04%. RiverSource Portfolio Builder Moderate Fund owns 20.50%. RiverSource Portfolio Builder Aggressive Fund owns 19.57%. RiverSource Portfolio Builder Total Equity Fund owns 19.27%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.90%. (17) Charles Schwab & Co Inc., a brokerage firm, owns of record 60.92%. Ameriprise Financial, Minneapolis, MN owns 39.08%. (18) Charles Schwab & Co Inc., a brokerage firm, owns of record 6.36%. (19) Ameriprise Financial, Minneapolis, MN owns 100%. (20) Ameriprise Trust Company, Minneapolis, MN owns of record 96.62%. (21) Charles Schwab & Co Inc., a brokerage firm, owns of record 14.11%. (22) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.95%. RiverSource Portfolio Builder Moderate Fund owns 20.54%. RiverSource Portfolio Builder Aggressive Fund owns 19.53%. RiverSource Portfolio Builder Total Equity Fund owns 19.24%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.96%. (23) Ameriprise Trust Company, Minneapolis, MN, owns of record 48.92%. Wells Fargo Bank owns of record 27.29%. Wells Fargo Bank as Tr of the Holland American Line, Minneapolis, MN owns 17.35%. (24) Charles Schwab & Co Inc., a brokerage firm, owns of record 11.09%. (25) Charles Schwab & Co Inc., a brokerage firm, owns of record 100%. (26) Charles Schwab & Co Inc., a brokerage firm, owns of record 11.74%. (27) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.80%. RiverSource Portfolio Builder Moderate Fund owns 20.86%. RiverSource Portfolio Builder Aggressive Fund owns 19.92%. RiverSource Portfolio Builder Total Equity Fund owns 19.48%. RiverSource Moderate Conservative Fund owns 5.88%. (28) Ameriprise Trust Company, Minneapolis, MN, owns of record 97.68%. (29) John C. Mullarkey, Willowbrook, IL owns 6.86%. (30) Ameriprise Trust Company, Minneapolis, MN owns of record 98.89%. (31) Charles Schwab & Co Inc., a brokerage firm, owns of record 13.46%. (32) Marilyn O. Matthews, Pasadena, CA, owns 6.37%. (33) Charles Schwab & Co Inc., a brokerage firm, owns of record 83.54%. Ameriprise Financial, Minneapolis, MN owns 16.46%. (34) Charles Schwab & Co Inc., a brokerage firm, owns of record 6.86%. (35) Terry H. Henson, Fairmount, GA owns 8.05%. Richard Louis Moore, Mesa, AZ owns 5.63%. Nancy P. Kofranek, Oxnard, CA owns 5.24%. Christine S. Scarpati, Tempe, AZ owns 5.10%. (36) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.24%. RiverSource Portfolio Builder Moderate Fund owns 20.64%. RiverSource Portfolio Builder Aggressive Fund owns 19.54%. RiverSource Portfolio Builder Total Equity Fund owns 19.12%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.78%. (37) Charles Schwab & Co Inc., a brokerage firm, owns of record 66.40%. Ameriprise Financial, Minneapolis, MN owns 33.60%. (38) Charles Schwab & Co Inc., a brokerage firm, owns of record 14.83%. RIVERSOURCE FUNDS -- PROXY STATEMENT 79 (39) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.14%. RiverSource Portfolio Builder Moderate Fund owns 20.66%. RiverSource Portfolio Builder Aggressive Fund owns 19.55%. RiverSource Portfolio Builder Total Equity Fund owns 19.19%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.73%. (40) Charles Schwab & Co Inc., a brokerage firm, owns of record 98.34%. (41) Charles Schwab & Co Inc., a brokerage firm, owns of record 17.52%. (42) RiverSource Portfolio Builder Moderate Aggressive Fund owns 43.66%. RiverSource Portfolio Builder Moderate Fund owns 33.93%. RiverSource Portfolio Builder Moderate Conservative Fund owns 13.83%. RiverSource Portfolio Builder Aggressive Fund owns 7.22%. (43) Charles Schwab & Co Inc., a brokerage firm, owns of record 8.42%. (44) Ameriprise Trust Company, Minneapolis, MN owns of record 90.62%. Met Life Securities Inc., Jersey City, NJ owns of record 7.86%. (45) Charles Schwab & Co Inc., a brokerage firm, owns of record 11.29%. (46) Ameriprise Trust Company, Minneapolis, MN owns of record 91.13%. Charles Schwab & Co Inc., a brokerage firm, owns of record 8.74%. (47) Charles Schwab & Co Inc., a brokerage firm, owns of record 6.91%. (48) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.15%. RiverSource Portfolio Builder Moderate Fund owns 20.62%. RiverSource Portfolio Builder Aggressive Fund owns 19.57%. RiverSource Portfolio Builder Total Equity Fund owns 19.15%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.81%. (49) Ameriprise Trust Company, Minneapolis, MN owns of record 98.93%. (50) Charles Schwab & Co Inc., a brokerage firm, owns of record 10.62%. (51) Met Life Securities Inc., Jersey City, NJ, owns of record 60.05%. Charles Schwab & Co Inc., a brokerage firm, owns of record 39.95%. (52) Charles Schwab & Co Inc., a brokerage firm, owns of record 19.74%. (53) RiverSource Portfolio Builder Moderate Fund owns 53.12%. RiverSource Portfolio Builder Moderate Aggressive Fund owns 24.83%. RiverSource Portfolio Builder Aggressive Fund owns 12.65%. RiverSource Portfolio Builder Moderate Conservative Fund owns 9.39%. (54) Charles Schwab & Co Inc., a brokerage firm, owns of record 97.46%. (55) Charles Schwab & Co Inc., a brokerage firm, owns of record 17.74%. (56) RiverSource Portfolio Builder Moderate Fund owns 37.87%. RiverSource Portfolio Builder Moderate Aggressive Fund owns 31.89%. RiverSource Portfolio Builder Moderate Conservative Fund owns 20.05%. RiverSource Portfolio Builder Conservative Fund owns 10.17%. (57) IDS Life Insurance Company, Minneapolis, MN owns 100%. (58) Charles Schwab & Co Inc., a brokerage firm, owns of record 11.55%. (59) Charles Schwab & Co Inc., a brokerage firm, owns of record 12.15%. (60) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.13%. RiverSource Portfolio Builder Moderate Fund owns 20.58%. RiverSource Portfolio Builder Aggressive Fund owns 19.49%. RiverSource Portfolio Builder Total Equity Fund owns 18.92%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.94%. (61) Charles Schwab & Co Inc., a brokerage firm, owns of record 96.41%. (62) Ameriprise Financial, Minneapolis, MN owns 13.09%. Charles Schwab & Co Inc., a brokerage firm, owns of record 9.60%. (63) Daniel and Linda L. Miklovic, St. Louis, MO own 5.35%. (64) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.04%. RiverSource Portfolio Builder Moderate Fund owns 20.61%. RiverSource Portfolio Builder Aggressive Fund owns 19.52%. RiverSource Portfolio Builder Total Equity Fund owns 19.08%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.88%. (65) Charles Schwab & Co Inc., a brokerage firm, owns of record 84.38%. Ameriprise Financial, Minneapolis, MN owns 15.62%. (66) Charles Schwab & Co Inc., a brokerage firm, owns of record 12.80%. RIVERSOURCE FUNDS -- PROXY STATEMENT 80 (67) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.89%. RiverSource Portfolio Builder Moderate Fund owns 20.30%. RiverSource Portfolio Builder Aggressive Fund owns 19.69%. RiverSource Portfolio Builder Total Equity Fund owns 19.26%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.88%. (68) Charles Schwab & Co Inc., a brokerage firm, owns of record 94.85%. Met Life Securities Inc., Jersey City, NJ owns of record 5.15%. (69) Charles Schwab & Co Inc., a brokerage firm, owns of record 18.37%. (70) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.13%. RiverSource Portfolio Builder Moderate Fund owns 20.57%. RiverSource Portfolio Builder Aggressive Fund owns 19.53%. RiverSource Portfolio Builder Total Equity Fund owns 18.97%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.88%. (71) Charles Schwab & Co Inc., a brokerage firm, owns of record 97.94%. (72) Ameriprise Financial, Minneapolis, MN owns 15.53%. Charles Schwab & Co Inc., a brokerage firm, owns of record 15.10%. (73) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.87%. RiverSource Portfolio Builder Moderate Fund owns 20.48%. RiverSource Portfolio Builder Aggressive Fund owns 19.41%. RiverSource Portfolio Builder Total Equity Fund owns 18.75%. RiverSource Portfolio Builder Moderate Conservative Fund owns 6.07%. (74) Charles Schwab & Co Inc., a brokerage firm, owns of record 78.39%. Ameriprise Financial, Minneapolis, MN owns 21.61%. (75) Charles Schwab & Co. Inc., a brokerage firm, owns of record 5.47%. (76) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.40%. RiverSource Portfolio Builder Moderate Fund owns 20.69%. RiverSource Portfolio Builder Aggressive Fund owns 19.45%. RiverSource Portfolio Builder Total Equity Fund owns 19.16%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.65%. (77) Charles Schwab & Co. Inc., a brokerage firm, owns of record 80.07%. Wells Fargo Bank as Trustee of the Holland American Line, Minneapolis, MN owns 15.18%. (78) Charles Schwab & Co Inc., a brokerage firm, owns of record 15.44%. (79) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.13%. RiverSource Portfolio Builder Moderate Fund owns 20.61%. RiverSource Portfolio Builder Aggressive Fund owns 19.60%. RiverSource Portfolio Builder Total Equity Fund owns 19.16%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.77%. (80) Charles Schwab & Co Inc., a brokerage firm, owns of record 90.06%. Ameriprise Financial, Minneapolis, MN owns 9.94%. (81) Charles Schwab & Co. Inc., a brokerage firm, owns of record 19.83%. (82) Donald and Elizabeth Snow, Derry, NH own 7.28%. Sylvia Cohen and Barbara Ann Knibbe, Stockton, CA own 5.36%. (83) RiverSource Portfolio Builder Moderate Conservative Fund owns 30.25%. RiverSource Portfolio Builder Moderate Aggressive Fund owns 24.01%. RiverSource Portfolio Builder Aggressive Fund owns 17.13%. RiverSource Portfolio Builder Conservative Fund owns 14.37%. RiverSource Portfolio Builder Moderate Fund owns 14.24%. (84) Charles Schwab & Co Inc., a brokerage firm, owns of record 83.74%. IDS Life Insurance Company, Minneapolis, MN owns 16.26%. (85) Charles Schwab & Co. Inc., a brokerage firm, owns of record 6.50%. (86) June P. Venette and Norman E. Venette as Trustees of the Norman E. Venette Revocable Trust, Orange, MA own 9.51%. Donald A. Simard and Claire G. Simard, Ipswich, MA own 7.34%. Alphonse A. Di Nardo and Linda Di Nardo, Leominster, MA own 6.48%. Harvey W. Levin and Phyllis Levin, Swampscott, MA own 6.28%. Rita Hashem, Tewksbury, MA owns 5.34%. (87) Charles Schwab & Co. Inc., a brokerage firm, owns of record 5.33%. (88) Chester V. Mysliwiec and Rose M. Mysliwiec as Trustees of the Rose M. Mysliwiec Living Trust, Grand Rapids, MI own 8.05%. Sarah Frances Ohm, Lansing, MI owns 5.09%. RIVERSOURCE FUNDS -- PROXY STATEMENT 81 (89) Barry J. Fishman and Teresa A McMahon, as Trustees for the Barry J. Fishman Living Trust, Ann Arbor, MI own 10.39%. Ray W. Butler and Gertrude E. Butler, Clarkston, MI own 6.82%. R. Paul Minger and Diane E. Minger, Huntley, IL own 5.25%. (90) Charles Schwab & Co. Inc., a brokerage firm, owns of record 6.36%. (91) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.88%. RiverSource Portfolio Builder Moderate Fund owns 20.63%. RiverSource Portfolio Builder Aggressive Fund owns 19.50%. RiverSource Portfolio Builder Total Equity Fund owns 19.22%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.98%. (92) Ameriprise Trust Company, Minneapolis, MN owns of record 92.27%. (93) Charles Schwab & Co. Inc., a brokerage firm, owns of record 22.18%. (94) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.89%. RiverSource Portfolio Builder Moderate Fund owns 20.46%. RiverSource Portfolio Builder Aggressive Fund owns 19.72%. RiverSource Portfolio Builder Total Equity Fund owns 19.18%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.92%. (95) Charles Schwab & Co. Inc., a brokerage firm, owns of record 97.89%. (96) Charles Schwab & Co. Inc., a brokerage firm, owns of record 5.07%. (97) Arthur Ezersky and Sandra Ezersky, Woodbury, NY own 7.39%. Charles D. Adler and Judith E. Adler, New York, NY own 6.16%. (98) Charles Schwab & Co. Inc., a brokerage firm, owns of record 5.50%. (99) Sandra K. Ogle and David L. Mazzie, Strongsville, OH own 5.64%. (100) Richard L. Sears, Parma, OH owns 6.37%. Joseph A. Sears, Berea, OH owns 6.37%. James N. Sears, Columbus, OH owns 6.37%. David A. Sears, Brunswick, OH owns 6.15%. (101) Charles Schwab & Co. Inc., a brokerage firm, owns of record 87.00%. Ameriprise Financial, Minneapolis, MN owns 13.00%. (102) Charles Schwab & Co. Inc., a brokerage firm, owns of record 68.54%. Ameriprise Financial, Minneapolis, MN owns 31.46%. (103) Charles Schwab & Co. Inc., a brokerage firm, owns of record 67.94%. Ameriprise Financial, Minneapolis, MN owns 32.06%. (104) Charles Schwab & Co. Inc., a brokerage firm, owns of record 84.32%. Ameriprise Financial, Minneapolis, MN owns 15.68%. (105) Charles Schwab & Co. Inc., a brokerage firm, owns of record 59.68%. Ameriprise Financial, Minneapolis, MN owns 40.32%. (106) Charles Schwab & Co. Inc., a brokerage firm, owns of record 88.51%. Ameriprise Financial, Minneapolis, MN owns 11.49%. (107) Charles Schwab & Co. Inc., a brokerage firm, owns of record 16.40%. (108) Richard L. and Susan Angela Venerable, Argyle, TX own 5.94%. (109) Charles Schwab & Co. Inc., a brokerage firm, owns of record 97.08%. (110) Charles Schwab & Co. Inc., a brokerage firm, owns of record 10.17%. (111) RiverSource Portfolio Builder Moderate Aggressive Fund owns 31.79%. RiverSource Portfolio Builder Moderate fund owns 25.83%. RiverSource Portfolio Builder Aggressive Fund owns 15.31%. RiverSource Portfolio Builder Total Equity Fund owns 12.36%. (112) Charles Schwab & Co. Inc., a brokerage firm, owns of record 51.53%. Ameriprise Financial, Minneapolis, MN owns 48.47%. (113) Ameriprise Trust Company, Minneapolis, MN owns of record 51.53%. Charles Schwab & Co. Inc., a brokerage firm, owns of record 16.71%. (114) Charles Schwab & Co. Inc., a brokerage firm, owns of record 10.99%. (115) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.19%. RiverSource Portfolio Builder Moderate Fund owns 20.54%. RiverSource Portfolio Builder Aggressive Fund owns 19.58%. RiverSource Portfolio Builder Total Equity Fund owns 19.16%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.80%. RIVERSOURCE FUNDS -- PROXY STATEMENT 82 (116) Charles Schwab & Co. Inc., a brokerage firm, owns of record 82.56%. Ameriprise Financial, Minneapolis, MN owns 17.44%. (117) Charles Schwab & Co. Inc., a brokerage firm, owns of record 9.41%. (118) RiverSource Portfolio Builder Moderate Conservative Fund owns 29.81%. RiverSource Portfolio Builder Aggressive Fund owns 26.58%. RiverSource Portfolio Builder Conservative Fund owns 24.71%. RiverSource Portfolio Builder Moderate Aggressive Fund owns 14.53%. (119) Ameriprise Trust Company, Minneapolis, MN owns of record 96.7%. (120) Charles Schwab & Co. Inc., a brokerage firm, owns of record 17.13%. (121) RiverSource Portfolio Builder Moderate Aggressive Fund owns 32.85%. RiverSource Portfolio Builder Moderate Fund owns 20.76%. RiverSource Portfolio Builder Aggressive Fund owns 19.60%. RiverSource Portfolio Builder Total Equity Fund owns 19.19%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.81%. (122) Charles Schwab & Co. Inc., a brokerage firm, owns of record 99.50%. (123) Charles Schwab & Co. Inc., a brokerage firm, owns of record 21.05%. (124) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.44%. RiverSource Portfolio Builder Moderate Fund owns 20.76%. RiverSource Portfolio Builder Aggressive Fund owns 19.25%. RiverSource Portfolio Builder Total Equity Fund owns 19.03%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.68%. (125) Charles Schwab & Co. Inc., a brokerage firm, owns of record 95.68%. (126) Charles Schwab & Co. Inc., a brokerage firm, owns of record 14.20%. (127) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.44%. RiverSource Portfolio Builder Moderate Fund owns 20.49%. RiverSource Portfolio Builder Aggressive Fund owns 19.47%. RiverSource Portfolio Builder Total Equity Fund owns 19.09%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.78%. (128) Ameriprise Trust Company, Minneapolis, MN owns of record 81.97%. Charles Schwab & Co., Inc., a brokerage firm, owns of record 16.62%. (129) Charles Schwab & Co. Inc., a brokerage firm, owns of record 21.22%. (130) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.03%. RiverSource Portfolio Builder Moderate Fund owns 20.75%. RiverSource Portfolio Builder Aggressive Fund owns 19.43%. RiverSource Portfolio Builder Total Equity Fund owns 19.17%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.80%. (131) Charles Schwab & Co. Inc., a brokerage firm, owns of record 93.46%. (132) Charles Schwab & Co. Inc., a brokerage firm, owns of record 9.58%. (133) Ameriprise Trust Company, Minneapolis, MN owns of record 85.74%. Met Life Securities, Inc., Jersey City, NJ, owns of record 11.42%. (134) Ameriprise Trust Company, Minneapolis, MN owns of record 94.54%. Charles Schwab & Co., Inc., a brokerage firm, owns of record 5.46%. (135) Charles Schwab & Co. Inc., a brokerage firm, owns of record 15.14%. (136) Wells Fargo Bank NA, owns of record 99.90%. (137) Charles Schwab & Co. Inc., a brokerage firm, owns of record 12.34%. (138) National Financial Services Corp. owns 17.78%. (139) RiverSource Portfolio Builder Moderate Aggressive Fund owns 33.10%. RiverSource Portfolio Builder Moderate Fund owns 20.57%. RiverSource Portfolio Builder Aggressive Fund owns 19.55%. RiverSource Portfolio Builder Total Equity Fund owns 19.22%. RiverSource Portfolio Builder Moderate Conservative Fund owns 5.85%. (140) Charles Schwab & Co. Inc., a brokerage firm, owns of record 89.47%. Ameriprise Financial, Minneapolis, MN owns 10.53%. (141) 100% of the fund's assets are owned by the subaccounts of IDS Life Insurance Company in Minneapolis, MN, IDS Life Insurance Company of New York in Albany, NY, American Centurion Life Assurance Company in Albany, NY, American Enterprise Life Insurance Company in Minneapolis, MN, and American Partners Life Insurance Company in Minneapolis, MN. RIVERSOURCE FUNDS -- PROXY STATEMENT 83 TABLE D-3. FUND PAYMENTS TO THE INVESTMENT MANAGER AND ITS AFFILIATES* DURING THE FUND'S LAST FISCAL PERIOD
FUND ADMIN DIST. SERVICE TA CUSTODY RETAIL FUNDS: Aggressive Growth $ 24,630 $ 104,711 $ 34 $ 64,474 $124,750 Balanced 588,644 4,219,445 243,190 2,470,027 197,000 California Tax-Exempt 87,771 699,509 N/A 91,207 ** Cash Management 1,016,703 4,465,116 N/A 11,374,578 450,360 Core Bond 78,241 258,538 52 63,985 77,920 Disciplined Equity 29,441 97,138 30 45,400 27,540 Diversified Bond 1,259,427 10,480,135 198,919 4,760,451 ** Diversified Equity Income 942,358 13,923,299 60,399 5,465,729 234,282 Dividend Opportunity 406,110 4,794,080 223 1,962,651 95,670 Emerging Markets 271,857 1,203,938 18,278 764,555 291,850 Equity Value 454,202 5,158,196 5,740 2,385,075 90,845 European Equity 78,835 625,142 22 420,160 65,348 Fundamental Growth 31,978 97,804 72 42,916 76,134 Fundamental Value 458,121 3,739,499 329 1,510,868 79,210 Global Bond 314,640 2,563,496 75 1,113,855 178,550 Global Equity 284,795 2,187,202 4,591 1,658,386 154,577 Global Technology 131,702 1,062,308 361 1,045,369 56,947 Growth 1,370,094 10,829,474 329,679 6,589,850 264,471 High Yield Bond 1,219,476 12,201,690 546 3,681,247 ** Income Opportunities 164,038 1,262,784 348 336,398 42,517 Inflation Protected Securities 61,197 502,630 10 103,995 42,726 Intermediate Tax-Exempt Bond 69,058 692,175 1 102,241 ** International Aggressive Growth 149,750 781,390 118 477,653 246,000 International Equity 88,536 411,570 39 199,825 185,484 International Opportunity 255,871 1,582,591 30,931 1,890,275 164,050 International Select Value 549,050 3,301,526 359 1,612,094 160,566 International Small Cap 46,103 205,340 74 105,340 272,331 Large Cap Equity 860,387 8,240,812 3,664 4,045,271 296,060 Large Cap Value 67,667 475,371 121 192,922 158,870 Limited Duration Bond 88,881 506,494 30 120,583 86,805 Massachusetts Tax-Exempt 30,362 349,028 N/A 53,501 ** Michigan Tax-Exempt 23,283 215,343 N/A 37,436 **
RIVERSOURCE FUNDS -- PROXY STATEMENT 84 TABLE D-3. (CONTINUED)
FUND ADMIN DIST. SERVICE TA CUSTODY RETAIL FUNDS: Mid Cap Growth $1,056,445 $ 8,161,940 $213,175 $4,559,724 $178,721 Mid Cap Value 170,293 1,597,422 201 793,972 43,343 Minnesota Tax-Exempt 163,503 1,486,886 N/A 220,922 ** New York Tax-Exempt 36,031 333,821 N/A 55,750 ** Ohio Tax-Exempt 24,486 243,018 N/A 40,724 ** Portfolio Builder Aggressive 13,785 294,500 24 135,459 *** Portfolio Builder Conservative 5,969 156,166 10 31,246 *** Portfolio Builder Moderate 23,460 551,194 11 150,122 *** Portfolio Builder Moderate 28,002 590,354 15 228,780 *** Aggressive Portfolio Builder Moderate 10,779 271,925 10 60,528 *** Conservative Portfolio Builder Total Equity 10,959 236,859 47 107,336 *** Precious Metals 51,848 370,915 70 183,324 43,910 Real Estate 41,449 213,988 23 109,319 24,743 S&P 500 Index 319,791 169,434 N/A 606,841 79,551 Select Value 427,460 3,270,218 73 1,525,521 77,571 Short Duration U.S. Gov't 960,018 10,661,037 110,896 3,369,129 168,781 Small Cap Advantage 491,869 4,150,433 347 1,955,571 153,750 Small Cap Equity 129,820 741,653 145 407,486 238,100 Small Cap Growth 224,042 1,364,335 141 884,819 211,597 Small Cap Value 824,914 5,632,720 239 2,773,387 272,927 Small Company Index 784,439 6,468,464 17,587 2,535,097 156,295 Strategic Allocation 390,084 3,400,471 6,010 1,666,873 254,021 Tax-Exempt Bond 323,368 2,283,046 3 379,119 ** Tax-Exempt High Income 1,447,459 13,569,367 3 2,080,286 ** Tax-Exempt Money Market 45,528 143,129 N/A 156,687 ** U.S. Gov't Mortgage 152,145 1,662,982 22 547,586 72,460 Value 285,752 2,291,662 145 913,774 58,720
RIVERSOURCE FUNDS -- PROXY STATEMENT 85 TABLE D-3. (CONTINUED)
FUND ADMIN DIST. SERVICE TA CUSTODY VARIABLE PORTFOLIO FUNDS: VP Balanced $ 892,514 $3,258,265 N/A N/A $326,925 VP Cash Management 228,193 886,958 N/A N/A 52,955 VP Core Bond 19,968 57,634 N/A N/A 57,746 VP Core Equity**** 0 0 N/A N/A 0 VP Diversified Bond 863,405 2,163,215 N/A N/A 214,024 VP Diversified Equity Income 468,417 1,559,298 N/A N/A 355,460 VP Emerging Markets 98,265 126,227 N/A N/A 146,667 VP Global Bond 289,959 617,003 N/A N/A 179,440 VP Global Inflation Protected 16,066 42,814 N/A N/A 34,503 Securities VP Growth 149,053 365,846 N/A N/A 63,060 VP High Yield Bond 625,083 1,525,551 N/A N/A 93,250 VP Income Opportunities 15,279 32,273 N/A N/A 23,697 VP International Opportunity 593,033 1,392,429 N/A N/A 398,819 VP Large Cap Equity 1,227,017 3,171,288 N/A N/A 236,000 VP Large Cap Value 5,559 13,898 N/A N/A 123,705 VP Mid Cap Growth 151,155 310,975 N/A N/A 48,280 VP Mid Cap Value 718 1,795 N/A N/A 7,610 VP S&P 500 Index 272,087 419,788 N/A N/A 90,195 VP Select Value 5,557 19,359 N/A N/A 11,370 VP Short Duration U.S. Gov't 258,743 623,988 N/A N/A 69,184 VP Small Cap Advantage 132,967 275,040 N/A N/A 118,470 VP Small Cap Value 251,446 394,484 N/A N/A 205,993
* The Administrative Services Agreement ("Admin") is between the fund and Ameriprise Financial. The Plan and Agreement of Distribution ("Dist.") and Shareholder Service Agreement ("Service") are between the fund and Ameriprise Financial Services, Inc. The Transfer Agent ("TA") Agreement is between the fund and RiverSource Service Corporation. The Custodian Agreement ("Custody") is between the fund and Ameriprise Trust Company. Services under these agreements will continue to be provided after the Agreement is approved. ** For this fund, the Custodian Agreement is with U.S. Bank, N.A., a company that is not affiliated with the investment manager. *** For this fund, the fee paid to the Custodian is de minimis. **** All services are provided under the IMS Agreement. RIVERSOURCE FUNDS -- PROXY STATEMENT 86 TABLE D-4. BROKERAGE COMMISSIONS PAID TO BROKER-DEALER AFFILIATES DURING THE FUND'S LAST FISCAL PERIOD
AMOUNT OF % OF ALL FUND BROKER/DEALER COMMISSIONS COMMISSIONS RETAIL FUNDS: Aggressive Growth JP Morgan Chase(1) $ 27 0.01% Balanced AEIS(2) 8,440 0.64 California Tax-Exempt AEIS(2) N/A N/A Cash Management N/A N/A N/A Core Bond N/A N/A N/A Disciplined Equity N/A N/A N/A Diversified Bond N/A N/A N/A Diversified Equity Income AEIS(2) 73,448 3.04 Dividend Opportunity AEIS(2) 20,898 3.36 Emerging Markets N/A N/A N/A Equity Value AEIS(2) 10,142 1.18 European Equity N/A N/A N/A Fundamental Growth Goldman Sachs 38 0.02 & Company(3) Fundamental Value N/A N/A N/A Global Bond N/A N/A N/A Global Equity N/A N/A N/A Global Technology AEIS(2) 97,718 2.33 Growth AEIS(2) 13,720 0.09 High Yield Bond N/A N/A N/A Income Opportunities N/A N/A N/A Inflation Protected Securities N/A N/A N/A Intermediate Tax-Exempt Bond N/A N/A N/A International Aggressive J.P. Morgan 22,343 3.73 Growth Securities, Inc.(1) International Equity N/A N/A N/A International Opportunity N/A N/A N/A International Select Value SanFord C. Bernstein 20,637 2.46 & Co. LLC(4) International Small Cap N/A N/A N/A Large Cap Equity AEIS(2) 10,214 0.15 Large Cap Value AEIS(2) 276 0.15 Limited Duration Bond N/A N/A N/A
RIVERSOURCE FUNDS -- PROXY STATEMENT 87 TABLE D-4. (CONTINUED)
AMOUNT OF % OF ALL FUND BROKER/DEALER COMMISSIONS COMMISSIONS Massachusetts Tax-Exempt N/A N/A N/A Michigan Tax-Exempt N/A N/A N/A Mid Cap Growth AEIS(2) $ 17,994 1.10% Mid Cap Value AEIS(2) 39,552 10.82 Minnesota Tax-Exempt N/A N/A N/A New York Tax-Exempt N/A N/A N/A Ohio Tax-Exempt N/A N/A N/A Portfolio Builder Aggressive N/A N/A N/A Portfolio Builder Conservative N/A N/A N/A Portfolio Builder Moderate N/A N/A N/A Portfolio Builder Moderate N/A N/A N/A Aggressive Portfolio Builder Moderate N/A N/A N/A Conservative Portfolio Builder Total Equity N/A N/A N/A Precious Metals AEIS(2) 3,614 0.29 Real Estate N/A N/A N/A S&P 500 Index N/A N/A N/A Select Value Gabelli & Co.(5) 143,463 46.14 Short Duration U.S. Gov't N/A N/A N/A Small Cap Advantage N/A N/A N/A Small Cap Equity N/A N/A N/A Small Cap Growth N/A N/A N/A Small Cap Value Goldman Sachs & Company(3) 1,943 0.08 Legg Mason Wood 2,700 0.11 Walker, Inc.(6) Small Company Index N/A N/A N/A Strategic Allocation N/A N/A N/A Tax-Exempt Bond N/A N/A N/A Tax-Exempt High Income N/A N/A N/A Tax-Exempt Money Market N/A N/A N/A U.S. Gov't Mortgage N/A N/A N/A Value N/A N/A N/A
RIVERSOURCE FUNDS -- PROXY STATEMENT 88 TABLE D-4. (CONTINUED)
AMOUNT OF % OF ALL FUND BROKER/DEALER COMMISSIONS COMMISSIONS VARIABLE PORTFOLIO FUNDS: VP Balanced AEIS(2) $ 3,299 0.15% VP Cash Management N/A N/A N/A VP Core Bond N/A N/A N/A VP Core Equity N/A N/A N/A VP Diversified Bond N/A N/A N/A VP Diversified Equity Income AEIS(2) 1,052 0.09 VP Emerging Markets N/A N/A N/A VP Global Bond N/A N/A N/A VP Global Inflation N/A N/A N/A Protected Securities VP Growth AEIS(2) 714 0.04 VP High Yield Bond N/A N/A N/A VP Income Opportunities N/A N/A N/A VP International Opportunity N/A N/A N/A VP Large Cap Equity AEIS(2) 14,132 0.14 VP Large Cap Value N/A N/A N/A VP Mid Cap Growth N/A N/A N/A VP Mid Cap Value N/A N/A N/A VP S&P 500 Index N/A N/A N/A VP Select Value Gabelli & Co.(5) 3,655 15.66 VP Short Duration U.S. Gov't N/A N/A N/A VP Small Cap Advantage N/A N/A N/A VP Small Cap Value Goldman Sachs & Company(3) 457 0.06 Legg Mason Wood Walker, Inc.(6) 297 0.04
(1) Affiliate of American Century, a subadviser. (2) American Enterprise Investment Services, Inc., a wholly-owned subsidiary of Ameriprise Financial. The amount shown represents brokerage clearing fees. (3) Affiliate of Goldman Sachs Asset Management L.P. (4) Affiliate of Alliance Capital, a subadviser. (5) Affiliate of GAMCO Investors, Inc. (6) Affiliate of Royce & Associates, LLC. RIVERSOURCE FUNDS -- PROXY STATEMENT 89 TABLE D-5. DATES RELATING TO APPROVAL OF MANAGEMENT AGREEMENTS
DATE LAST REASON DATE OF APPROVED BY SUBMITTED TO FUND CONTRACT SHAREHOLDERS SHAREHOLDERS RETAIL FUNDS: -------------------------------------------------------------------------------------------------- California Tax-Exempt, Diversified Bond, Massachusetts Tax-Exempt, Michigan Tax-Exempt, Minnesota Tax-Exempt, New York Tax-Exempt, Ohio Tax-Exempt, Tax-Exempt Bond 3/20/95 9/9/94 (1) -------------------------------------------------------------------------------------------------- Tax-Exempt High Income 5/13/96 9/9/94 (1) -------------------------------------------------------------------------------------------------- High Yield Bond, Short Duration U.S. Gov't 6/10/96 9/9/94 (1) -------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 11/13/96 11/13/96 Initial approval -------------------------------------------------------------------------------------------------- Cash, Tax-Exempt Money Market 7/1/99 9/9/94 (1) -------------------------------------------------------------------------------------------------- S&P 500 Index 9/9/99 9/9/99 Initial approval -------------------------------------------------------------------------------------------------- U.S. Gov't Mortgage 1/10/02 1/10/02 Initial approval -------------------------------------------------------------------------------------------------- International Equity, International Small Cap 7/11/02 7/11/02 Initial approval -------------------------------------------------------------------------------------------------- Global Bond 12/1/02 9/9/94 (1) Balanced, Diversified Equity Income, Dividend Opportunity, Emerging Markets, Equity Value, European Equity, Global Equity, Fundamental Value, Global Technology, Growth, International Aggressive Growth, International Opportunity, International Select Value, Large Cap Equity, Large Cap Value, Mid Cap Growth, Mid Cap Value, Precious Metals, Select Value, Small Cap Advantage, Small Cap Growth, Small Cap Equity, Small Cap Value, Strategic Allocation, Value 12/1/02 11/13/2002 (2) -------------------------------------------------------------------------------------------------- Small Company Index 12/1/02 11/13/2002 (3) -------------------------------------------------------------------------------------------------- Aggressive Growth, Fundamental Growth 1/9/03 1/9/03 Initial approval --------------------------------------------------------------------------------------------------
RIVERSOURCE FUNDS -- PROXY STATEMENT 90 TABLE D-5. (CONTINUED)
DATE LAST REASON DATE OF APPROVED BY SUBMITTED TO FUND CONTRACT SHAREHOLDERS SHAREHOLDERS RETAIL FUNDS: -------------------------------------------------------------------------------------------------- Disciplined Equity 1/9/03 1/9/03 Initial approval -------------------------------------------------------------------------------------------------- Core Bond, Limited Duration, Income Opportunities 4/9/03 4/9/03 Initial approval -------------------------------------------------------------------------------------------------- Real Estate, Inflation Protected Securities, Portfolio Builders 11/13/03 11/13/03 Initial approval -------------------------------------------------------------------------------------------------- VARIABLE PORTFOLIO FUNDS -------------------------------------------------------------------------------------------------- VP Balanced, VP Diversified Equity Income, VP Emerging Markets, VP Growth, VP International Opportunity, VP Large Cap Equity, VP Mid Cap Growth, VP S&P 500 Index, VP Short Duration U.S. Gov't, VP Small Cap Advantage, VP Small Cap Value 12/1/02 11/13/2002 (2),(4) -------------------------------------------------------------------------------------------------- VP Cash Management VP Diversified Bond, VP Global Bond, VP High Yield Bond, 12/1/02 11/13/2002 (4) -------------------------------------------------------------------------------------------------- VP Core Bond 7/10/03 7/10/03 Initial approval -------------------------------------------------------------------------------------------------- VP Select Value 7/10/03 7/10/03 Initial approval -------------------------------------------------------------------------------------------------- VP Large Cap Value 9/10/03 9/10/03 Initial approval -------------------------------------------------------------------------------------------------- VP Core Equity 4/7/04 4/7/04 Initial approval -------------------------------------------------------------------------------------------------- VP Income Opportunities 4/8/04 4/8/04 Initial approval -------------------------------------------------------------------------------------------------- VP Global Inflation Protected Securities 4/8/04 4/8/04 Initial approval -------------------------------------------------------------------------------------------------- VP Mid Cap Value 1/12/05 1/12/05 Initial approval --------------------------------------------------------------------------------------------------
(1) Shareholders approved (1) basing the fee solely on the assets of the fund, not on the assets of all of the funds in the fund family and (2) eliminating provisions regarding administration and accounting services. The fund and the investment manager then entered into a separate Administrative Services Agreement. (2) Shareholders approved adding or modifying a performance incentive adjustment. (3) Shareholders approved the elimination of the performance incentive adjustment. (4) Shareholders approved changing the investment manager from IDS Life to AEFC (now Ameriprise Financial). RIVERSOURCE FUNDS -- PROXY STATEMENT 91 TABLE D-6. ACTUAL AND PRO FORMA INVESTMENT MANAGEMENT SERVICES AGREEMENT FEES* based on the fund's last fiscal period
FUND ACTUAL FEE PRO FORMA FEE % CHANGE RETAIL FUNDS: Aggressive Growth $ 399,501 No Change No Change Balanced 7,736,525 $ 7,730,878 -0.07% California Tax-Exempt 1,010,591 882,811 -12.64% Cash Management 12,052,160 11,027,693 -8.50% Core Bond 846,872 755,653 -10.77% Disciplined Equity 408,720 408,720 0.00% Diversified Bond 13,003,467 11,971,972 -7.93% Diversified Equity Income 17,374,369 20,143,797 15.94% Dividend Opportunity 6,201,403 6,210,387 0.14% Emerging Markets 2,770,886 2,770,886 0.00% Equity Value 6,836,800 No Change No Change European Equity 872,149 872,149 0.00% Fundamental Growth 410,475 No Change No Change Fundamental Value 5,556,219 No Change No Change Global Bond 4,143,714 3,888,386 -6.16% Global Equity 3,302,062 3,302,062 0.00% Global Technology 1,812,789 No Change No Change Growth 18,968,320 19,042,512 0.39% High Yield Bond 14,973,845 14,876,083 -0.65% Income Opportunities 1,954,757 1,962,255 0.38% Inflation Protected Securities 552,220 554,198 0.36% Intermediate Tax-Exempt Bond 752,882 648,787 -13.83% International Aggressive Growth 1,878,346 No Change No Change International Equity 1,015,577 No Change No Change International Opportunity 2,926,933 2,926,933 0.00% International Select Value 6,467,621 No Change No Change International Small Cap 600,389 No Change No Change Large Cap Equity 9,680,873 9,721,037 0.41% Large Cap Value 803,736 806,869 0.39% Limited Duration Bond 960,788 857,324 -10.77% Massachusetts Tax-Exempt 372,649 325,537 -12.64% Michigan Tax-Exempt 294,025 256,851 -12.64% Mid Cap Growth 10,550,526 12,623,229 19.65% Mid Cap Value 2,537,342 2,559,873 0.89% Minnesota Tax-Exempt 1,895,714 1,650,838 -12.92%
RIVERSOURCE FUNDS -- PROXY STATEMENT 92 TABLE D-6. (CONTINUED) based on the fund's last fiscal period
FUND ACTUAL FEE PRO FORMA FEE % CHANGE RETAIL FUNDS: New York Tax-Exempt $ 434,449 $ 379,527 -12.64% Ohio Tax-Exempt 307,214 268,379 -12.64% Portfolio Builder Aggressive 55,141 No Change No Change Portfolio Builder Conservative 23,875 No Change No Change Portfolio Builder Moderate 93,838 No Change No Change Portfolio Builder Moderate Aggressive 112,009 No Change No Change Portfolio Builder Moderate Conservative 43,118 No Change No Change Portfolio Builder Total Equity 43,835 No Change No Change Precious Metals 659,595 No Change No Change Real Estate 725,491 No Change No Change S&P 500 Index 933,587 853,268 -8.60% Select Value 5,256,934 No Change No Change Short Duration U.S. Gov't 10,141,504 9,301,445 -8.28% Small Cap Advantage 6,341,134 6,796,738 7.18% Small Cap Equity 1,560,155 No Change No Change Small Cap Growth 2,276,290 No Change No Change Small Cap Value 9,857,858 No Change No Change Small Company Index 4,547,058 4,281,626 -5.84% Strategic Allocation 5,004,559 5,545,838 10.82% Tax-Exempt Bond 3,457,986 3,132,660 -9.41% Tax-Exempt High Income 20,079,644 19,075,485 -5.00% Tax-Exempt Money Market 515,265 472,326 -8.33% U.S. Gov't Mortgage 1,532,464 1,405,399 -8.29% Value 3,311,867 No Change No Change VARIABLE PORTFOLIO FUNDS: VP Balanced 16,475,472 13,975,774 -15.17% VP Cash Management 3,618,791 2,343,813 -35.23% VP Core Bond 290,514 221,481 -23.76% VP Core Equity 1,513,777 No Change No Change VP Diversified Bond 10,446,764 8,131,189 -22.17% VP Diversified Equity Income 7,790,892 8,385,083 7.63% VP Emerging Markets 1,128,628 1,058,519 -6.21% VP Global Bond 4,107,042 3,495,819 -14.88%
RIVERSOURCE FUNDS -- PROXY STATEMENT 93 STABLE D-6. (CONTINUED) based on the fund's last fiscal period
FUND ACTUAL FEE PRO FORMA FEE % CHANGE VARIABLE PORTFOLIO FUNDS: VP Global Inflation Protected Securities $ 167,833 $ 154,787 -7.77% VP Growth 2,023,076 1,936,735 -4.27% VP High Yield Bond 7,533,530 7,151,618 -5.07% VP Income Opportunities 165,239 157,587 -4.63% VP International Opportunity 8,953,186 7,985,002 -10.81% VP Large Cap Equity 15,079,399 14,124,124 -6.33% VP Large Cap Value 70,240 66,953 -4.68% VP Mid Cap Growth 1,435,137 1,561,565 8.81% VP Mid Cap Value** 10,481 29,796 184.29% VP S&P 500 Index 973,909 739,446 -24.07% VP Select Value 123,757 119,188 -3.69% VP Short Duration U.S. Gov't 3,045,061 2,398,346 -21.24% VP Small Cap Advantage 1,570,788 1,572,287 0.10% VP Small Cap Value 3,087,940 2,929,402 -5.13%
* The fund may be subject to an expense cap and management fees may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. ** The fund began operations in 2005. RIVERSOURCE FUNDS -- PROXY STATEMENT 94 TABLE D-7A. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS A, TAX-EXEMPT MONEY MARKET AND VARIABLE PORTFOLIO FUNDS (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
CLASS A, TAX EXEMPT TOTAL FUND MONEY MARKET AND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA RETAIL FUNDS: Aggressive Growth 0.89% 0.89% 0.25% 0.25% 0.83% 0.83% 1.97% 1.97% Balanced 0.51 0.51 0.25 0.25 0.25 0.27 1.01 1.03 California Tax-Exempt 0.47 0.41 0.25 0.25 0.14 0.17 0.86 0.83 Cash Management 0.32 0.29 0.10 0.10 0.38 0.41 0.80 0.80 Core Bond 0.54 0.48 0.25 0.25 0.25 0.27 1.04 1.00 Disciplined Equity 0.62 0.62 0.25 0.25 0.48 0.49 1.35 1.36 Diversified Bond 0.50 0.46 0.25 0.25 0.27 0.29 1.02 1.00 Diversified Equity Income 0.57 0.66 0.25 0.25 0.24 0.26 1.06 1.17 Dividend Opportunity 0.60 0.60 0.25 0.25 0.27 0.29 1.12 1.14 Emerging Markets 1.01 1.02 0.25 0.25 0.57 0.55 1.83 1.82 Equity Value 0.58 0.58 0.25 0.25 0.28 0.30 1.11 1.13 European Equity 0.68 0.68 0.25 0.25 0.56 0.58 1.49 1.51 Fundamental Growth 0.72 0.72 0.25 0.25 0.59 0.59 1.56 1.56 Fundamental Value 0.73 0.73 0.25 0.25 0.32 0.32 1.30 1.30 Global Bond 0.75 0.70 0.25 0.25 0.34 0.36 1.34 1.31 Global Equity 0.67 0.67 0.25 0.25 0.49 0.51 1.41 1.43 Global Technology 0.83 0.83 0.25 0.25 0.66 0.66 1.74 1.74 Growth 0.63 0.63 0.25 0.25 0.31 0.32 1.19 1.20 High Yield Bond 0.57 0.57 0.25 0.25 0.22 0.24 1.04 1.06
RIVERSOURCE FUNDS -- PROXY STATEMENT 95 TABLE D-7A. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
CLASS A, TAX EXEMPT TOTAL FUND MONEY MARKET AND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Income Opportunities 0.61% 0.61% 0.25% 0.25% 0.24% 0.26% 1.10% 1.12% Inflation Protected Securities 0.44 0.44 0.25 0.25 0.32 0.34 1.01 1.03 Intermediate Tax-Exempt Bond 0.45 0.39 0.25 0.25 0.19 0.22 0.89 0.86 International Aggressive Growth 1.02 1.02 0.25 0.25 0.58 0.58 1.85 1.85 International Equity 0.93 0.93 0.25 0.25 0.55 0.55 1.73 1.73 International Opportunity 0.68 0.68 0.25 0.25 0.61 0.63 1.54 1.56 International Select Value 0.90 0.90 0.25 0.25 0.37 0.37 1.52 1.52 International Small Cap 1.06 1.06 0.25 0.25 0.95 0.95 2.26 2.26 Large Cap Equity 0.57 0.57 0.25 0.25 0.35 0.36 1.17 1.18 Large Cap Value 0.59 0.59 0.25 0.25 0.45 0.46 1.29 1.30 Limited Duration Bond 0.54 0.48 0.25 0.25 0.26 0.28 1.05 1.01 Massachusetts Tax-Exempt 0.47 0.41 0.25 0.25 0.22 0.25 0.94 0.91 Michigan Tax-Exempt 0.47 0.41 0.25 0.25 0.24 0.27 0.96 0.93 Mid Cap Growth 0.49 0.60 0.25 0.25 0.29 0.30 1.03 1.15 Mid Cap Value 0.77 0.77 0.25 0.25 0.38 0.39 1.40 1.41 Minnesota Tax-Exempt 0.46 0.40 0.25 0.25 0.14 0.17 0.85 0.82 New York Tax-Exempt 0.47 0.41 0.25 0.25 0.20 0.23 0.92 0.89 Ohio Tax-Exempt 0.47 0.41 0.25 0.25 0.23 0.26 0.95 0.92 Portfolio Builder Aggressive(4) 0.08 0.08 0.25 0.25 0.45 0.45 0.78 0.78 Portfolio Builder Conservative(4) 0.08 0.08 0.25 0.25 0.59 0.59 0.92 0.92
RIVERSOURCE FUNDS -- PROXY STATEMENT 96 TABLE D-7A. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
CLASS A, TAX EXEMPT TOTAL FUND MONEY MARKET AND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Portfolio Builder Moderate(4) 0.08% 0.08% 0.25% 0.25% 0.30% 0.30% 0.63% 0.63% Portfolio Builder Moderate Aggressive(4) 0.08 0.08 0.25 0.25 0.32 0.32 0.65 0.65 Portfolio Builder Moderate Conservative(4) 0.08 0.08 0.25 0.25 0.39 0.39 0.72 0.72 Portfolio Builder Total Equity(4) 0.08 0.08 0.25 0.25 0.50 0.50 0.83 0.83 Precious Metals 0.77 0.77 0.25 0.25 0.48 0.48 1.50 1.50 Real Estate 0.85 0.85 0.25 0.25 0.47 0.48 1.57 1.58 Select Value 0.74 0.74 0.25 0.25 0.34 0.34 1.33 1.33 Short Duration U.S. Gov't 0.51 0.47 0.25 0.25 0.25 0.27 1.01 0.99 Small Cap Advantage 0.72 0.77 0.25 0.25 0.33 0.35 1.30 1.37 Small Cap Equity 0.97 0.97 0.25 0.25 0.59 0.59 1.81 1.81 Small Cap Growth 0.83 0.83 0.25 0.25 0.55 0.55 1.63 1.63 Small Cap Value 0.87 0.87 0.25 0.25 0.39 0.40 1.51 1.52 Small Company Index 0.36 0.34 0.25 0.25 0.30 0.32 0.91 0.91 Strategic Allocation 0.49 0.54 0.25 0.25 0.25 0.29 0.99 1.08 Tax-Exempt Bond 0.45 0.41 0.25 0.25 0.12 0.15 0.82 0.81 Tax-Exempt High Income 0.45 0.43 0.25 0.25 0.10 0.13 0.80 0.81 Tax-Exempt Money Market 0.36 0.33 0.10 0.10 0.27 0.30 0.73 0.73 U.S. Gov't Mortgage 0.52 0.48 0.25 0.25 0.33 0.35 1.10 1.08 Value 0.72 0.72 0.25 0.25 0.32 0.32 1.29 1.29
RIVERSOURCE FUNDS -- PROXY STATEMENT 97 TABLE D-7A. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
CLASS A, TAX EXEMPT TOTAL FUND MONEY MARKET AND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA VARIABLE PORTFOLIO FUNDS:(5) VP Balanced 0.63% 0.54% 0.13% 0.13% 0.06% 0.14% 0.82% 0.81% VP Cash Management 0.51 0.33 0.13 0.13 0.06 0.15 0.70 0.61 VP Core Bond 0.63 0.48 0.13 0.13 0.25 0.33 1.01 0.94 VP Core Equity 0.40 0.40 0.00 0.00 0.00 0.00 0.40 0.40 VP Diversified Bond 0.60 0.47 0.13 0.13 0.09 0.17 0.82 0.77 VP Diversified Equity Income 0.63 0.68 0.13 0.13 0.08 0.16 0.84 0.97 VP Emerging Markets 1.12 1.05 0.13 0.13 0.30 0.34 1.55 1.52 VP Global Bond 0.83 0.71 0.13 0.13 0.12 0.20 1.08 1.04 VP Global Inflation Protected Securities 0.49 0.44 0.13 0.13 0.25 0.33 0.87 0.90 VP Growth 0.69 0.66 0.13 0.13 0.10 0.17 0.92 0.96 VP High Yield Bond 0.62 0.59 0.13 0.13 0.08 0.16 0.83 0.88 VP Income Opportunities 0.64 0.61 0.13 0.13 0.26 0.34 1.03 1.08 VP International Opportunity 0.80 0.72 0.13 0.13 0.11 0.20 1.04 1.05 VP Large Cap Equity 0.60 0.56 0.13 0.13 0.07 0.14 0.80 0.83 VP Large Cap Value 0.63 0.60 0.13 0.13 1.79 1.86 2.55 2.59 VP Mid Cap Growth 0.58 0.63 0.13 0.13 0.11 0.17 0.82 0.93 VP Mid Cap Value 0.73 0.70 0.13 0.13 2.11 2.18 2.97 3.01
RIVERSOURCE FUNDS -- PROXY STATEMENT 98 TABLE D-7A. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
CLASS A, TAX EXEMPT TOTAL FUND MONEY MARKET AND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA VP S&P 500 Index 0.29% 0.22% 0.13% 0.13% 0.14% 0.18% 0.56% 0.53% VP Select Value 0.80 0.77 0.13 0.13 0.24 0.30 1.17 1.20 VP Short Duration U.S. Gov't 0.61 0.48 0.13 0.13 0.09 0.17 0.83 0.78 VP Small Cap Advantage 0.71 0.71 0.13 0.13 0.14 0.22 0.98 1.06 VP Small Cap Value 0.97 0.92 0.13 0.13 0.18 0.24 1.28 1.29
(1) The management fee is shown net of the performance incentive adjustment. (2) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (3) The fund may be subject to an expense cap and the total fund operating expenses may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. (4) Expenses shown are those of the fund of funds. The table does not include expenses of the underlying funds. (5) The table does not reflect separate account expenses, including sales charges. RIVERSOURCE FUNDS -- PROXY STATEMENT 99 EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
CLASS A, TAX-EXEMPT MONEY MARKET AND 1 YEAR 3 YEARS 5 YEARS 10 YEARS VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA RETAIL FUNDS: Aggressive Growth $763 $763 $1,158 $1,158 $1,577 $1,577 $2,743 $2,743 Balanced 672 674 878 884 1,102 1,112 1,744 1,766 California Tax-Exempt 559 556 737 728 930 914 1,489 1,456 Cash Management 82 82 256 256 445 445 994 994 Core Bond 576 572 790 779 1,023 1,002 1,690 1,646 Disciplined Equity 705 706 978 981 1,273 1,278 2,110 2,121 Diversified Bond 574 572 784 779 1,012 1,002 1,668 1,646 Diversified Equity Income 677 687 893 925 1,127 1,183 1,799 1,918 Dividend Opportunity 683 685 911 917 1,157 1,167 1,864 1,886 Emerging Markets 750 749 1,118 1,115 1,509 1,504 2,604 2,594 Equity Value 682 684 908 914 1,152 1,162 1,853 1,875 European Equity 718 720 1,019 1,025 1,342 1,352 2,257 2,278 Fundamental Growth 725 725 1,040 1,040 1,377 1,377 2,329 2,329 Fundamental Value 700 700 964 964 1,248 1,248 2,057 2,057 Global Bond 605 602 880 871 1,175 1,160 2,016 1,984 Global Equity 710 712 996 1,002 1,303 1,313 2,173 2,194 Global Technology 742 742 1,092 1,092 1,465 1,465 2,513 2,513 Growth 689 690 931 934 1,193 1,198 1,940 1,951
RIVERSOURCE FUNDS -- PROXY STATEMENT 100 EXAMPLE: (continued)
CLASS A, TAX-EXEMPT MONEY MARKET AND 1 YEAR 3 YEARS 5 YEARS 10 YEARS VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA RETAIL FUNDS (CONT.) High Yield Bond $576 $578 $ 790 $ 796 $1,023 $1,033 $1,690 $1,712 Income Opportunities 582 584 808 814 1,053 1,063 1,756 1,778 Inflation Protected Securities 573 575 782 787 1,007 1,017 1,657 1,679 Intermediate Tax-Exempt Bond 562 559 746 737 945 930 1,523 1,489 International Aggressive Growth 752 752 1,124 1,124 1,519 1,519 2,624 2,624 International Equity 741 741 1,089 1,089 1,461 1,461 2,503 2,503 International Opportunity 723 725 1,034 1,040 1,367 1,377 2,309 2,329 International Select Value 721 721 1,028 1,028 1,357 1,357 2,288 2,288 International Small Cap 791 791 1,241 1,241 1,716 1,716 3,025 3,025 Large Cap Equity 687 688 925 928 1,183 1,188 1,918 1,929 Large Cap Value 699 700 961 964 1,243 1,248 2,047 2,057 Limited Duration Bond 577 573 793 782 1,028 1,007 1,701 1,657 Massachusetts Tax-Exempt 566 563 761 752 971 956 1,579 1,546 Michigan Tax-Exempt 568 565 767 758 982 966 1,601 1,568 Mid Cap Growth 674 685 884 920 1,112 1,172 1,766 1,897 Mid Cap Value 709 710 993 996 1,298 1,303 2,163 2,173 Minnesota Tax-Exempt 558 555 734 725 925 909 1,478 1,444 New York Tax-Exempt 564 562 755 746 961 945 1,557 1,523 Ohio Tax-Exempt 567 564 764 755 976 961 1,590 1,557
RIVERSOURCE FUNDS -- PROXY STATEMENT 101 EXAMPLE: (continued) CLASS A, TAX-EXEMPT
MONEY MARKET AND 1 YEAR 3 YEARS 5 YEARS 10 YEARS VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA RETAIL FUNDS (CONT.) Portfolio Builder Aggressive $650 $650 $ 810 $ 810 $ 984 $ 984 $1,489 $1,489 Portfolio Builder Conservative 564 564 755 755 961 961 1,557 1,557 Portfolio Builder Moderate 636 636 765 765 907 907 1,319 1,319 Portfolio Builder Moderate Aggressive 638 638 771 771 917 917 1,342 1,342 Portfolio Builder Moderate Conservative 545 545 694 694 857 857 1,331 1,331 Portfolio Builder Total Equity 655 655 825 825 1,010 1,010 1,545 1,545 Precious Metals 719 719 1,022 1,022 1,347 1,347 2,267 2,267 Real Estate 726 726 1,042 1,045 1,382 1,387 2,340 2,350 Select Value 703 703 972 972 1,263 1,263 2,089 2,089 Short Duration U.S. Gov't 573 571 782 776 1,007 997 1,657 1,635 Small Cap Advantage 700 706 964 984 1,248 1,283 2,057 2,131 Small Cap Equity 748 748 1,112 1,112 1,500 1,500 2,584 2,584 Small Cap Growth 731 731 1,060 1,060 1,411 1,411 2,401 2,401 Small Cap Value 720 721 1,025 1,028 1,352 1,357 2,278 2,288 Small Company Index 663 663 849 849 1,051 1,051 1,634 1,634 Strategic Allocation 670 679 872 899 1,091 1,137 1,723 1,821 Tax-Exempt Bond 555 554 725 722 909 904 1,444 1,433 Tax-Exempt High Income 553 554 719 722 899 904 1,422 1,433 Tax-Exempt Money Market 75 75 234 234 407 407 910 910 U.S. Gov't Mortgage 582 580 808 802 1,053 1,043 1,756 1,734 Value 699 699 961 961 1,243 1,243 2,047 2,047
RIVERSOURCE FUNDS -- PROXY STATEMENT 102 EXAMPLE: (continued)
CLASS A, TAX-EXEMPT MONEY MARKET AND 1 YEAR 3 YEARS 5 YEARS 10 YEARS VARIABLE PORTFOLIO FUNDS ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA VARIABLE PORTFOLIO FUNDS: VP Balanced $ 84 $ 83 $262 $259 $456 $450 $1,018 $1,006 VP Cash Management 72 62 224 196 390 341 874 766 VP Core Bond 103 96 322 300 559 521 1,241 1,159 VP Core Equity 41 41 129 129 225 225 508 508 VP Diversified Bond 84 79 262 246 456 429 1,018 958 VP Diversified Equity Income 86 99 268 309 467 537 1,041 1,194 VP Emerging Markets 158 155 490 481 846 830 1,851 1,818 VP Global Bond 110 106 344 331 596 575 1,322 1,276 VP Global Inflation Protected Securities 89 92 278 287 483 499 1,077 1,112 VP Growth 94 98 294 306 510 532 1,136 1,183 VP High Yield Bond 85 90 265 281 461 488 1,029 1,089 VP Income Opportunities 105 110 328 344 570 596 1,264 1,322 VP International Opportunity 106 107 331 334 575 580 1,276 1,287 VP Large Cap Equity 82 85 256 265 445 461 994 1,029 VP Large Cap Value 258 262 794 806 1,356 1,376 2,889 2,928 VP Mid Cap Growth 84 95 262 297 456 516 1,018 1,147 VP Mid Cap Value 300 304 919 930 1,563 1,582 3,293 3,330 VP S&P 500 Index 57 54 180 170 313 297 705 668 VP Select Value 119 122 372 381 645 661 1,425 1,459 VP Short Duration U.S. Gov't 85 80 265 249 461 434 1,029 970 VP Small Cap Advantage 100 108 312 337 543 586 1,206 1,299 VP Small Cap Value 130 131 406 409 703 709 1,550 1,561
RIVERSOURCE FUNDS -- PROXY STATEMENT 103 TABLE D-7B. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS B (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth 0.89% 0.89% 1.00% 1.00% 0.86% 0.86% 2.75% 2.75% Balanced 0.51 0.51 1.00 1.00 0.27 0.29 1.78 1.80 California Tax-Exempt 0.47 0.41 1.00 1.00 0.14 0.17 1.61 1.58 Cash Management 0.32 0.29 0.75 0.85 0.38 0.41 1.45 1.55 Core Bond 0.54 0.48 1.00 1.00 0.29 0.31 1.83 1.79 Disciplined Equity 0.62 0.62 1.00 1.00 0.51 0.52 2.13 2.14 Diversified Bond 0.50 0.46 1.00 1.00 0.28 0.30 1.78 1.76 Diversified Equity Income 0.57 0.66 1.00 1.00 0.26 0.28 1.83 1.94 Dividend Opportunity 0.60 0.60 1.00 1.00 0.28 0.30 1.88 1.90 Emerging Markets 1.01 1.02 1.00 1.00 0.58 0.56 2.59 2.58 Equity Value 0.58 0.58 1.00 1.00 0.30 0.32 1.88 1.90 European Equity 0.68 0.68 1.00 1.00 0.58 0.60 2.26 2.28 Fundamental Growth 0.72 0.72 1.00 1.00 0.62 0.62 2.34 2.34 Fundamental Value 0.73 0.73 1.00 1.00 0.33 0.33 2.06 2.06 Global Bond 0.75 0.70 1.00 1.00 0.35 0.37 2.10 2.07 Global Equity 0.67 0.67 1.00 1.00 0.51 0.53 2.18 2.20 Global Technology 0.83 0.83 1.00 1.00 0.69 0.69 2.52 2.52 Growth 0.63 0.63 1.00 1.00 0.34 0.35 1.97 1.98 High Yield Bond 0.57 0.57 1.00 1.00 0.22 0.24 1.79 1.81 Income Opportunities 0.61 0.61 1.00 1.00 0.25 0.27 1.86 1.88
RIVERSOURCE FUNDS -- PROXY STATEMENT 104 TABLE D-7B. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Inflation Protected Securities 0.44% 0.44% 1.00% 1.00% 0.33% 0.35% 1.77% 1.79% Intermediate Tax-Exempt Bond 0.45 0.39 1.00 1.00 0.19 0.22 1.64 1.61 International Aggressive Growth 1.02 1.02 1.00 1.00 0.60 0.60 2.62 2.62 International Equity 0.93 0.93 1.00 1.00 0.58 0.58 2.51 2.51 International Opportunity 0.68 0.68 1.00 1.00 0.64 0.66 2.32 2.34 International Select Value 0.90 0.90 1.00 1.00 0.38 0.38 2.28 2.28 International Small Cap 1.06 1.06 1.00 1.00 0.98 0.98 3.04 3.04 Large Cap Equity 0.57 0.57 1.00 1.00 0.37 0.38 1.94 1.95 Large Cap Value 0.59 0.59 1.00 1.00 0.46 0.47 2.05 2.06 Limited Duration Bond 0.54 0.48 1.00 1.00 0.28 0.30 1.82 1.78 Massachusetts Tax-Exempt 0.47 0.41 1.00 1.00 0.22 0.25 1.69 1.66 Michigan Tax-Exempt 0.47 0.41 1.00 1.00 0.24 0.27 1.71 1.68 Mid Cap Growth 0.49 0.60 1.00 1.00 0.31 0.32 1.80 1.92 Mid Cap Value 0.77 0.77 1.00 1.00 0.39 0.40 2.16 2.17 Minnesota Tax-Exempt 0.46 0.40 1.00 1.00 0.14 0.17 1.60 1.57 New York Tax-Exempt 0.47 0.41 1.00 1.00 0.20 0.23 1.67 1.64 Ohio Tax-Exempt 0.47 0.41 1.00 1.00 0.23 0.26 1.70 1.67 Portfolio Builder Aggressive(4) 0.08 0.08 1.00 1.00 0.46 0.46 1.54 1.54 Portfolio Builder Conservative(4) 0.08 0.08 1.00 1.00 0.60 0.60 1.68 1.68
RIVERSOURCE FUNDS -- PROXY STATEMENT 105 TABLE D-7B. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Portfolio Builder Moderate(4) 0.08% 0.08% 1.00% 1.00% 0.31% 0.31% 1.39% 1.39% Portfolio Builder Moderate Aggressive(4) 0.08 0.08 1.00 1.00 0.34 0.34 1.42 1.42 Portfolio Builder Moderate Conservative(4) 0.08 0.08 1.00 1.00 0.41 0.41 1.49 1.49 Portfolio Builder Total Equity(4) 0.08 0.08 1.00 1.00 0.51 0.51 1.59 1.59 Precious Metals 0.77 0.77 1.00 1.00 0.49 0.49 2.26 2.26 Real Estate 0.85 0.85 1.00 1.00 0.49 0.50 2.34 2.35 Select Value 0.74 0.74 1.00 1.00 0.35 0.35 2.09 2.09 Short Duration U.S. Gov't 0.51 0.47 1.00 1.00 0.25 0.27 1.76 1.74 Small Cap Advantage 0.72 0.77 1.00 1.00 0.35 0.37 2.07 2.14 Small Cap Equity 0.97 0.97 1.00 1.00 0.61 0.61 2.58 2.58 Small Cap Growth 0.83 0.83 1.00 1.00 0.57 0.57 2.40 2.40 Small Cap Value 0.87 0.87 1.00 1.00 0.41 0.42 2.28 2.29 Small Company Index 0.36 0.34 1.00 1.00 0.31 0.33 1.67 1.67 Strategic Allocation 0.49 0.54 1.00 1.00 0.27 0.31 1.76 1.85 Tax-Exempt Bond 0.45 0.41 1.00 1.00 0.13 0.16 1.58 1.57 Tax-Exempt High Income 0.45 0.43 1.00 1.00 0.10 0.13 1.55 1.56 U.S. Gov't Mortgage 0.52 0.48 1.00 1.00 0.34 0.36 1.86 1.84 Value 0.72 0.72 1.00 1.00 0.34 0.34 2.06 2.06
(1) The management fee is shown net of the performance incentive adjustment. (2) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (3) The fund may be subject to an expense cap and the total fund operating expenses may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. (4) Expenses shown are those of the fund of funds. The table does not include expenses of the underlying funds. RIVERSOURCE FUNDS -- PROXY STATEMENT 106 EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth $278 $278 $853 $853 $1,455 $1,455 $2,896 $2,896 Balanced 181 183 561 567 965 976 1,896 1,918 California Tax-Exempt 164 161 508 499 877 861 1,714 1,681 Cash Management 148 158 459 490 793 846 1,563 1,648 Core Bond 186 182 576 564 991 971 1,945 1,901 Disciplined Equity 216 217 667 670 1,145 1,150 2,268 2,278 Diversified Bond 181 179 561 554 965 955 1,899 1,877 Diversified Equity Income 186 197 576 609 991 1,048 1,950 2,069 Dividend Opportunity 191 193 591 597 1,017 1,027 2,007 2,028 Emerging Markets 262 261 806 803 1,376 1,371 2,743 2,733 Equity Value 191 193 591 597 1,017 1,027 2,004 2,026 European Equity 229 231 707 713 1,211 1,221 2,405 2,426 Fundamental Growth 237 237 731 731 1,251 1,251 2,485 2,485 Fundamental Value 209 209 646 646 1,109 1,109 2,199 2,199 Global Bond 213 210 658 649 1,130 1,114 2,241 2,210 Global Equity 221 223 682 688 1,170 1,181 2,322 2,343 Global Technology 255 255 785 785 1,341 1,341 2,668 2,668 Growth 200 201 619 622 1,063 1,068 2,098 2,109 High Yield Bond 182 184 564 570 971 981 1,912 1,934 Income Opportunities 189 191 585 591 1,007 1,017 1,985 2,007
RIVERSOURCE FUNDS -- PROXY STATEMENT 107 EXAMPLE: (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Inflation Protected Securities $180 $182 $557 $564 $960 $971 $1,888 $1,909 Intermediate Tax-Exempt Bond 167 164 518 508 893 877 1,748 1,714 International Aggressive Growth 265 265 815 815 1,391 1,391 2,771 2,771 International Equity 254 254 782 782 1,336 1,336 2,658 2,658 International Opportunity 234 237 724 731 1,240 1,251 2,464 2,485 International Select Value 231 231 713 713 1,221 1,221 2,429 2,429 International Small Cap 307 307 939 939 1,597 1,597 3,176 3,176 Large Cap Equity 197 198 609 613 1,048 1,053 2,069 2,079 Large Cap Value 208 209 643 646 1,104 1,109 2,188 2,199 Limited Duration Bond 185 181 573 561 986 965 1,939 1,896 Massachusetts Tax-Exempt 172 169 533 524 919 903 1,803 1,770 Michigan Tax-Exempt 174 171 539 530 929 914 1,825 1,792 Mid Cap Growth 183 195 567 603 976 1,038 1,918 2,047 Mid Cap Value 219 220 676 679 1,160 1,165 2,304 2,315 Minnesota Tax-Exempt 163 160 505 496 872 856 1,703 1,670 New York Tax-Exempt 170 167 527 518 908 893 1,781 1,748 Ohio Tax-Exempt 173 170 536 527 924 908 1,814 1,781 Portfolio Builder Aggressive 157 157 487 487 840 840 1,634 1,634 Portfolio Builder Conservative 171 171 530 530 914 914 1,789 1,789 Portfolio Builder Moderate 142 142 440 440 761 761 1,465 1,465 Portfolio Builder Moderate Aggressive 145 145 450 450 777 777 1,496 1,496
RIVERSOURCE FUNDS -- PROXY STATEMENT 108 EXAMPLE: (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS B ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Portfolio Builder Moderate Conservative $152 $152 $471 $471 $814 $814 $1,575 $1,575 Portfolio Builder Total Equity 162 162 502 502 867 867 1,689 1,689 Precious Metals 229 229 707 707 1,211 1,211 2,408 2,408 Real Estate 237 238 731 734 1,251 1,256 2,488 2,498 Select Value 212 212 655 655 1,125 1,125 2,231 2,231 Short Duration U.S. Gov't 179 177 554 548 955 945 1,879 1,858 Small Cap Advantage 210 217 649 670 1,114 1,150 2,207 2,281 Small Cap Equity 261 261 803 803 1,371 1,371 2,731 2,731 Small Cap Growth 243 243 749 749 1,281 1,281 2,549 2,549 Small Cap Value 231 232 713 716 1,221 1,226 2,426 2,436 Small Company Index 170 170 527 527 908 908 1,778 1,778 Strategic Allocation 179 188 554 582 955 1,002 1,874 1,972 Tax-Exempt Bond 161 160 499 496 861 856 1,678 1,667 Tax-Exempt High Income 158 159 490 493 846 851 1,648 1,659 U.S. Gov't Mortgage 189 187 585 579 1,007 996 1,985 1,964 Value 209 209 646 646 1,109 1,109 2,196 2,196
RIVERSOURCE FUNDS -- PROXY STATEMENT 109 TABLE D-7C. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS C (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth 0.89% 0.89% 1.00% 1.00% 0.86% 0.86% 2.75% 2.75% Balanced 0.51 0.51 1.00 1.00 0.27 0.29 1.78 1.80 California Tax-Exempt 0.47 0.41 1.00 1.00 0.15 0.18 1.62 1.59 Cash Management 0.32 0.29 0.75 0.75 0.38 0.41 1.45 1.45 Core Bond 0.54 0.48 1.00 1.00 0.30 0.32 1.84 1.80 Disciplined Equity 0.62 0.62 1.00 1.00 0.51 0.52 2.13 2.14 Diversified Bond 0.50 0.46 1.00 1.00 0.29 0.31 1.79 1.77 Diversified Equity Income 0.57 0.66 1.00 1.00 0.26 0.28 1.83 1.94 Dividend Opportunity 0.60 0.60 1.00 1.00 0.29 0.31 1.89 1.91 Emerging Markets 1.01 1.02 1.00 1.00 0.59 0.57 2.60 2.59 Equity Value 0.58 0.58 1.00 1.00 0.30 0.32 1.88 1.90 European Equity 0.68 0.68 1.00 1.00 0.58 0.60 2.26 2.28 Fundamental Growth 0.72 0.72 1.00 1.00 0.63 0.63 2.35 2.35 Fundamental Value 0.73 0.73 1.00 1.00 0.34 0.34 2.07 2.07 Global Bond 0.75 0.70 1.00 1.00 0.34 0.36 2.09 2.06 Global Equity 0.67 0.67 1.00 1.00 0.52 0.54 2.19 2.21 Global Technology 0.83 0.83 1.00 1.00 0.66 0.66 2.49 2.49 Growth 0.63 0.63 1.00 1.00 0.34 0.35 1.97 1.98 High Yield Bond 0.57 0.57 1.00 1.00 0.22 0.24 1.79 1.81 Income Opportunities 0.61 0.61 1.00 1.00 0.25 0.27 1.86 1.88
RIVERSOURCE FUNDS -- PROXY STATEMENT 110 TABLE D-7C. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Inflation Protected Securities 0.44% 0.44% 1.00% 1.00% 0.32% 0.34% 1.76% 1.78% Intermediate Tax-Exempt Bond 0.45 0.39 1.00 1.00 0.19 0.22 1.64 1.61 International Aggressive Growth 1.02 1.02 1.00 1.00 0.59 0.59 2.61 2.61 International Equity 0.93 0.93 1.00 1.00 0.58 0.58 2.51 2.51 International Opportunity 0.68 0.68 1.00 1.00 0.62 0.64 2.30 2.32 International Select Value 0.90 0.90 1.00 1.00 0.38 0.38 2.28 2.28 International Small Cap 1.06 1.06 1.00 1.00 0.99 0.99 3.05 3.05 Large Cap Equity 0.57 0.57 1.00 1.00 0.37 0.38 1.94 1.95 Large Cap Value 0.59 0.59 1.00 1.00 0.47 0.48 2.06 2.07 Limited Duration Bond 0.54 0.48 1.00 1.00 0.27 0.29 1.81 1.77 Massachusetts Tax-Exempt 0.47 0.41 1.00 1.00 0.23 0.26 1.70 1.67 Michigan Tax-Exempt 0.47 0.41 1.00 1.00 0.25 0.28 1.72 1.69 Mid Cap Growth 0.49 0.60 1.00 1.00 0.32 0.33 1.81 1.93 Mid Cap Value 0.77 0.77 1.00 1.00 0.39 0.40 2.16 2.17 Minnesota Tax-Exempt 0.46 0.40 1.00 1.00 0.15 0.18 1.61 1.58 New York Tax-Exempt 0.47 0.41 1.00 1.00 0.21 0.24 1.68 1.65 Ohio Tax-Exempt 0.47 0.41 1.00 1.00 0.24 0.27 1.71 1.68 Portfolio Builder Aggressive(4) 0.08 0.08 1.00 1.00 0.47 0.47 1.55 1.55 Portfolio Builder Conservative(4) 0.08 0.08 1.00 1.00 0.60 0.60 1.68 1.68
RIVERSOURCE FUNDS -- PROXY STATEMENT 111 TABLE D-7C. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Portfolio Builder Moderate(4) 0.08% 0.08% 1.00% 1.00% 0.32% 0.32% 1.40% 1.40% Portfolio Builder Moderate Aggressive(4) 0.08 0.08 1.00 1.00 0.33 0.33 1.41 1.41 Portfolio Builder Moderate Conservative(4) 0.08 0.08 1.00 1.00 0.44 0.44 1.52 1.52 Portfolio Builder Total Equity(4) 0.08 0.08 1.00 1.00 0.52 0.52 1.60 1.60 Precious Metals 0.77 0.77 1.00 1.00 0.47 0.47 2.24 2.24 Real Estate 0.85 0.85 1.00 1.00 0.48 0.49 2.33 2.34 Select Value 0.74 0.74 1.00 1.00 0.35 0.35 2.09 2.09 Short Duration U.S. Gov't 0.51 0.47 1.00 1.00 0.26 0.28 1.77 1.75 Small Cap Advantage 0.72 0.77 1.00 1.00 0.35 0.37 2.07 2.14 Small Cap Equity 0.97 0.97 1.00 1.00 0.60 0.60 2.57 2.57 Small Cap Growth 0.83 0.83 1.00 1.00 0.57 0.57 2.40 2.40 Small Cap Value 0.87 0.87 1.00 1.00 0.41 0.42 2.28 2.29 Strategic Allocation 0.49 0.54 1.00 1.00 0.28 0.32 1.77 1.86 Tax-Exempt Bond 0.45 0.41 1.00 1.00 0.13 0.16 1.58 1.57 Tax-Exempt High Income 0.45 0.43 1.00 1.00 0.10 0.13 1.55 1.56 U.S. Gov't Mortgage 0.52 0.48 1.00 1.00 0.33 0.35 1.85 1.83 Value 0.72 0.72 1.00 1.00 0.33 0.33 2.05 2.05
(1) The management fee is shown net of the performance incentive adjustment. (2) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (3) The fund may be subject to an expense cap and the total fund operating expenses may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. (4) Expenses shown are those of the fund of funds. The table does not include expenses of the underlying funds. RIVERSOURCE FUNDS -- PROXY STATEMENT 112 EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth $278 $278 $853 $853 $1,455 $1,455 $3,084 $3,084 Balanced 181 183 561 567 965 976 2,100 2,121 California Tax-Exempt 165 162 511 502 882 867 1,927 1,894 Cash Management 148 148 459 459 793 793 1,740 1,740 Core Bond 187 183 579 567 996 976 2,164 2,121 Disciplined Equity 216 217 667 670 1,145 1,150 2,467 2,477 Diversified Bond 182 180 564 557 971 960 2,110 2,089 Diversified Equity Income 186 197 576 609 991 1,048 2,153 2,069 Dividend Opportunity 192 194 594 600 1,022 1,033 2,216 2,238 Emerging Markets 263 262 809 806 1,381 1,376 2,938 2,928 Equity Value 191 193 591 597 1,017 1,027 2,206 2,227 European Equity 229 231 707 713 1,211 1,221 2,600 2,620 Fundamental Growth 238 238 734 734 1,256 1,256 2,690 2,690 Fundamental Value 210 210 649 649 1,114 1,114 2,405 2,405 Global Bond 212 209 655 646 1,125 1,109 2,425 2,394 Global Equity 222 224 685 691 1,175 1,186 2,528 2,549 Global Technology 252 252 776 776 1,326 1,326 2,830 2,830 Growth 200 201 619 622 1,063 1,068 2,301 2,311 High Yield Bond 182 184 564 570 971 981 2,110 2,132 Income Opportunities 189 191 585 591 1,007 1,017 2,185 2,206
RIVERSOURCE FUNDS -- PROXY STATEMENT 113 EXAMPLE: (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Inflation Protected Securities $179 $181 $554 $561 $955 $965 $2,078 $2,100 Intermediate Tax-Exempt Bond 167 164 518 508 893 877 1,949 1,916 International Aggressive Growth 264 264 812 812 1,386 1,386 2,948 2,948 International Equity 254 254 782 782 1,336 1,336 2,850 2,850 International Opportunity 233 235 719 725 1,231 1,241 2,640 2,660 International Select Value 231 231 713 713 1,221 1,221 2,620 2,620 International Small Cap 308 308 942 942 1,602 1,602 3,367 3,367 Large Cap Equity 197 198 609 613 1,048 1,053 2,269 2,280 Large Cap Value 209 210 646 649 1,109 1,114 2,394 2,405 Limited Duration Bond 184 180 570 557 981 960 2,132 2,089 Massachusetts Tax-Exempt 173 170 536 527 924 908 2,014 1,981 Michigan Tax-Exempt 175 172 542 533 934 919 2,035 2,003 Mid Cap Growth 184 196 570 606 981 1,043 2,132 2,259 Mid Cap Value 219 220 676 679 1,160 1,165 2,498 2,508 Minnesota Tax-Exempt 164 161 508 499 877 861 1,916 1,883 New York Tax-Exempt 171 168 530 521 914 898 1,992 1,960 Ohio Tax-Exempt 174 171 539 530 929 914 2,024 1,992 Portfolio Builder Aggressive 158 158 490 490 846 846 1,851 1,851 Portfolio Builder Conservative 171 171 530 530 914 914 1,992 1,992 Portfolio Builder Moderate 143 143 443 443 767 767 1,685 1,685 Portfolio Builder Moderate Aggressive 144 144 447 447 772 772 1,696 1,696
RIVERSOURCE FUNDS -- PROXY STATEMENT 114 EXAMPLE: (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS C ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Portfolio Builder Moderate Conservative $155 $155 $481 $481 $830 $830 $1,818 $1,818 Portfolio Builder Total Equity 163 163 505 505 872 872 1,905 1,905 Precious Metals 227 227 701 701 1,201 1,201 2,579 2,579 Real Estate 236 237 728 731 1,246 1,251 2,670 2,680 Select Value 212 212 655 655 1,125 1,125 2,425 2,425 Short Duration U.S. Gov't 180 178 557 551 960 950 2,089 2,067 Small Cap Advantage 210 217 649 670 1,114 1,150 2,405 2,477 Small Cap Equity 260 260 800 800 1,366 1,366 2,909 2,909 Small Cap Growth 243 243 749 749 1,281 1,281 2,741 2,741 Small Cap Value 231 232 713 716 1,221 1,226 2,620 2,630 Strategic Allocation 180 189 557 585 960 1,007 2,089 2,185 Tax-Exempt Bond 161 160 499 496 861 856 1,883 1,872 Tax-Exempt High Income 158 159 490 493 846 851 1,851 1,862 U.S. Gov't Mortgage 188 186 582 576 1,002 991 2,174 2,153 Value 208 208 643 643 1,104 1,104 2,384 2,384
RIVERSOURCE FUNDS -- PROXY STATEMENT 115 TABLE D-7D. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS D (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT DISTRIBUTION OTHER EXPENSES(1) OPERATING EXPENSES CLASS D ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA S&P 500 Index(2) 0.24% 0.22% 0.25% 0.25% 0.33% 0.31% 0.82% 0.78%
(1) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (2) The fund is subject to an expense cap and the total fund operating expenses will be less for an agreed upon period of time. Refer to Table D-1 for detailed information. EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS D ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA S&P 500 Index $84 $80 $262 $249 $456 $434 $1,018 $970
RIVERSOURCE FUNDS -- PROXY STATEMENT 116 TABLE D-7E. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS E (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT DISTRIBUTION OTHER EXPENSES(1) OPERATING EXPENSES CLASS E ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA S&P 500 Index(2) 0.24% 0.22% 0.00% 0.00% 0.32% 0.30% 0.56% 0.52%
(1) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (2) The fund is subject to an expense cap and the total fund operating expenses will be less for an agreed upon period of time. Refer to Table D-1 for detailed information. EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS E ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA S&P 500 Index $57 $53 $180 $167 $313 $291 $705 $656
RIVERSOURCE FUNDS -- PROXY STATEMENT 117 TABLE D-7I. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS I (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS I ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth 0.89% 0.89% 0.00% 0.00% 0.61% 0.61% 1.50% 1.50% Cash Management 0.32 0.29 0.00 0.00 0.07 0.10 0.39 0.39 Core Bond 0.54 0.48 0.00 0.00 0.18 0.20 0.72 0.68 Disciplined Equity 0.62 0.62 0.00 0.00 0.29 0.30 0.91 0.92 Diversified Bond 0.50 0.46 0.00 0.00 0.10 0.12 0.60 0.58 Diversified Equity Income 0.57 0.66 0.00 0.00 0.06 0.08 0.63 0.74 Dividend Opportunity 0.60 0.60 0.00 0.00 0.10 0.12 0.70 0.72 Emerging Markets 1.01 1.02 0.00 0.00 0.34 0.32 1.35 1.34 Equity Value 0.58 0.58 0.00 0.00 0.09 0.11 0.67 0.69 European Equity 0.68 0.68 0.00 0.00 0.28 0.30 0.96 0.98 Fundamental Growth 0.72 0.72 0.00 0.00 0.39 0.39 1.11 1.11 Fundamental Value 0.73 0.73 0.00 0.00 0.12 0.12 0.85 0.85 Global Bond 0.75 0.70 0.00 0.00 0.14 0.16 0.89 0.86 Global Technology 0.83 0.83 0.00 0.00 0.20 0.20 1.03 1.03 Growth 0.63 0.63 0.00 0.00 0.12 0.13 0.75 0.76 High Yield Bond 0.57 0.57 0.00 0.00 0.07 0.09 0.64 0.66 Income Opportunities 0.61 0.61 0.00 0.00 0.13 0.15 0.74 0.76 Inflation Protected Securities 0.44 0.44 0.00 0.00 0.21 0.23 0.65 0.67
RIVERSOURCE FUNDS -- PROXY STATEMENT 118 TABLE D-7I. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS I ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA International Aggressive Growth 1.02% 1.02% 0.00% 0.00% 0.35% 0.35% 1.37% 1.37% International Equity 0.93 0.93 0.00 0.00 0.36 0.36 1.29 1.29 International Opportunity 0.68 0.68 0.00 0.00 0.19 0.21 0.87 0.89 International Select Value 0.90 0.90 0.00 0.00 0.18 0.18 1.08 1.08 International Small Cap 1.06 1.06 0.00 0.00 0.77 0.77 1.83 1.83 Large Cap Equity 0.57 0.57 0.00 0.00 0.14 0.15 0.71 0.72 Large Cap Value 0.59 0.59 0.00 0.00 0.27 0.28 0.86 0.87 Limited Duration Bond 0.54 0.48 0.00 0.00 0.19 0.21 0.73 0.69 Mid Cap Growth 0.49 0.60 0.00 0.00 0.11 0.12 0.60 0.72 Mid Cap Value 0.77 0.77 0.00 0.00 0.12 0.13 0.89 0.90 Precious Metals 0.77 0.77 0.00 0.00 0.22 0.22 0.99 0.99 Real Estate 0.85 0.85 0.00 0.00 0.25 0.26 1.10 1.11 Select Value 0.74 0.74 0.00 0.00 0.12 0.12 0.86 0.86 Short Duration U.S. Gov't 0.51 0.47 0.00 0.00 0.06 0.08 0.57 0.55 Small Cap Advantage 0.72 0.77 0.00 0.00 0.12 0.14 0.84 0.91 Small Cap Equity 0.97 0.97 0.00 0.00 0.35 0.35 1.32 1.32 Small Cap Growth 0.83 0.83 0.00 0.00 0.24 0.24 1.07 1.07
RIVERSOURCE FUNDS -- PROXY STATEMENT 119 TABLE D-7I. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES CLASS I ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Small Cap Value 0.87% 0.87% 0.00% 0.00% 0.15% 0.16% 1.02% 1.03% U.S. Gov't Mortgage 0.52 0.48 0.00 0.00 0.14 0.16 0.66 0.64 Value 0.72 0.72 0.00 0.00 0.13 0.13 0.85 0.85
(1) The management fee is shown net of the performance incentive adjustment. (2) Other expenses include an administrative services fee, a transfer agency fee and other nonadvisory expenses. (3) The fund may be subject to an expense cap and the total fund operating expenses may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. RIVERSOURCE FUNDS -- PROXY STATEMENT 120 EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS I ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth $153 $153 $474 $474 $819 $819 $1,796 $1,796 Cash Management 40 40 125 125 219 219 495 495 Core Bond 74 69 230 218 401 379 898 850 Disciplined Equity 93 94 290 294 505 510 1,124 1,136 Diversified Bond 61 59 192 186 335 324 753 729 Diversified Equity Income 64 76 202 237 352 412 790 922 Dividend Opportunity 72 74 224 230 390 401 874 898 Emerging Markets 137 136 428 425 740 735 1,629 1,618 Equity Value 68 70 215 221 374 385 838 862 European Equity 98 100 306 312 532 543 1,183 1,206 Fundamental Growth 113 113 353 353 612 612 1,356 1,356 Fundamental Value 87 87 271 271 472 472 1,053 1,053 Global Bond 91 88 284 275 494 478 1,100 1,065 Global Technology 105 105 328 328 570 570 1,264 1,264 Growth 77 78 240 243 418 423 934 946 High Yield Bond 65 67 205 211 357 368 802 826 Income Opportunities 76 78 237 243 412 423 922 946 Inflation Protected Securities 66 68 208 215 363 374 814 838 International Aggressive Growth 139 139 434 434 751 751 1,651 1,651 International Equity 131 131 409 409 709 709 1,561 1,561
RIVERSOURCE FUNDS -- PROXY STATEMENT 121 EXAMPLE: (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS I ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA International Opportunity $ 89 $ 91 $278 $284 $483 $494 $1,077 $1,100 International Select Value 110 110 344 344 596 596 1,322 1,322 International Small Cap 186 186 576 576 991 991 2,153 2,153 Large Cap Equity 73 74 227 230 396 401 886 898 Large Cap Value 88 89 275 278 478 483 1,065 1,077 Limited Duration Bond 75 70 234 221 407 385 910 862 Mid Cap Growth 62 74 194 230 338 401 758 898 Mid Cap Value 91 92 284 287 494 499 1,100 1,112 Precious Metals 101 101 316 316 548 548 1,218 1,218 Real Estate 112 113 350 353 607 612 1,345 1,356 Select Value 88 88 275 275 478 478 1,065 1,065 Short Duration U.S. Gov't 58 56 183 176 319 308 717 692 Small Cap Advantage 86 93 268 290 467 505 1,041 1,124 Small Cap Equity 134 134 419 419 724 724 1,595 1,595 Small Cap Growth 109 109 341 341 591 591 1,310 1,310 Small Cap Value 104 105 325 328 564 570 1,252 1,264 U.S. Gov't Mortgage 67 65 211 205 368 357 826 802 Value 87 87 271 271 472 472 1,053 1,053
RIVERSOURCE FUNDS -- PROXY STATEMENT 122 TABLE D-7Y. ACTUAL AND PRO FORMA FUND EXPENSES - CLASS Y (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth 0.89% 0.89% 0.00% 0.00% 0.91% 0.91% 1.80% 1.80% Balanced 0.51 0.51 0.00 0.00 0.34 0.36 0.85 0.87 Cash Management 0.32 0.29 0.00 0.00 0.34 0.37 0.66 0.66 Core Bond 0.54 0.48 0.00 0.00 0.38 0.40 0.92 0.88 Disciplined Equity 0.62 0.62 0.00 0.00 0.56 0.57 1.18 1.19 Diversified Bond 0.50 0.46 0.00 0.00 0.35 0.37 0.85 0.83 Diversified Equity Income 0.57 0.66 0.00 0.00 0.33 0.35 0.90 1.01 Dividend Opportunity 0.60 0.60 0.00 0.00 0.34 0.36 0.94 0.96 Emerging Markets 1.01 1.02 0.00 0.00 0.64 0.62 1.65 1.64 Equity Value 0.58 0.58 0.00 0.00 0.36 0.38 0.94 0.96 European Equity 0.68 0.68 0.00 0.00 0.61 0.63 1.29 1.31 Fundamental Growth 0.72 0.72 0.00 0.00 0.67 0.67 1.39 1.39 Fundamental Value 0.73 0.73 0.00 0.00 0.40 0.40 1.13 1.13 Global Bond 0.75 0.70 0.00 0.00 0.42 0.44 1.17 1.14 Global Equity 0.67 0.67 0.00 0.00 0.56 0.58 1.23 1.25 Global Technology 0.83 0.83 0.00 0.00 0.72 0.72 1.55 1.55 Growth 0.63 0.63 0.00 0.00 0.39 0.40 1.02 1.03 High Yield Bond 0.57 0.57 0.00 0.00 0.30 0.32 0.87 0.89 Income Opportunities 0.61 0.61 0.00 0.00 0.33 0.35 0.94 0.96 Inflation Protected Securities 0.44 0.44 0.00 0.00 0.42 0.44 0.86 0.88
RIVERSOURCE FUNDS -- PROXY STATEMENT 123 TABLE D-7Y. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Intermediate Tax-Exempt Bond 0.45% 0.39% 0.00% 0.00% 0.25% 0.28% 0.70 0.67 International Aggressive Growth 1.02 1.02 0.00 0.00 0.67 0.67 1.69 1.69 International Equity 0.93 0.93 0.00 0.00 0.64 0.64 1.57 1.57 International Opportunity 0.68 0.68 0.00 0.00 0.68 0.70 1.36 1.38 International Select Value 0.90 0.90 0.00 0.00 0.45 0.45 1.35 1.35 International Small Cap 1.06 1.06 0.00 0.00 1.02 1.02 2.08 2.08 Large Cap Equity 0.57 0.57 0.00 0.00 0.39 0.40 0.96 0.97 Large Cap Value 0.59 0.59 0.00 0.00 0.52 0.53 1.11 1.12 Limited Duration Bond 0.54 0.48 0.00 0.00 0.41 0.43 0.95 0.91 Mid Cap Growth 0.49 0.60 0.00 0.00 0.38 0.39 0.87 0.99 Mid Cap Value 0.77 0.77 0.00 0.00 0.45 0.46 1.22 1.23 Portfolio Builder Aggressive(4) 0.08 0.08 0.00 0.00 0.53 0.53 0.61 0.61 Portfolio Builder Conservative(4) 0.08 0.08 0.00 0.00 0.68 0.68 0.76 0.76 Portfolio Builder Moderate(4) 0.08 0.08 0.00 0.00 0.39 0.39 0.47 0.47 Portfolio Builder Moderate Aggressive(4) 0.08 0.08 0.00 0.00 0.40 0.40 0.48 0.48 Portfolio Builder Moderate Conservative(4) 0.08 0.08 0.00 0.00 0.49 0.49 0.57 0.57 Portfolio Builder Total Equity(4) 0.08 0.08 0.00 0.00 0.58 0.58 0.66 0.66 Precious Metals 0.77 0.77 0.00 0.00 0.58 0.58 1.35 1.35 Real Estate 0.85 0.85 0.00 0.00 0.54 0.55 1.39 1.40
RIVERSOURCE FUNDS -- PROXY STATEMENT 124 TABLE D-7Y. (CONTINUED) (AS A PERCENT OF AVERAGE DAILY NET ASSETS) based on the fund's last fiscal period
ANNUAL OPERATING EXPENSES TOTAL FUND MANAGEMENT AGREEMENT(1) DISTRIBUTION OTHER EXPENSES(2) OPERATING EXPENSES(3) CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Select Value 0.74% 0.74% 0.00% 0.00% 0.41% 0.41% 1.15% 1.15% Short Duration U.S. Gov't 0.51 0.47 0.00 0.00 0.33 0.35 0.84 0.82 Small Cap Advantage 0.72 0.77 0.00 0.00 0.40 0.42 1.12 1.19 Small Cap Equity 0.97 0.97 0.00 0.00 0.66 0.66 1.63 1.63 Small Cap Growth 0.83 0.83 0.00 0.00 0.61 0.61 1.44 1.44 Small Cap Value 0.87 0.87 0.00 0.00 0.47 0.48 1.34 1.35 Small Company Index 0.36 0.34 0.00 0.00 0.38 0.40 0.74 0.74 Strategic Allocation 0.49 0.54 0.00 0.00 0.34 0.38 0.83 0.92 Tax-Exempt Bond 0.45 0.41 0.00 0.00 0.21 0.24 0.66 0.65 Tax-Exempt High Income 0.45 0.43 0.00 0.00 0.21 0.24 0.66 0.67 U.S. Gov't Mortgage 0.52 0.48 0.00 0.00 0.42 0.44 0.94 0.92 Value 0.72 0.72 0.00 0.00 0.40 0.40 1.12 1.12
(1) The management fee is shown net of the performance incentive adjustment. (2) Other expenses include an administrative services fee, a shareholder services fee, a transfer agency fee and other nonadvisory expenses. (3) The fund may be subject to an expense cap and the total fund operating expenses may be less for an agreed upon period of time. Refer to Table D-1 for detailed information. (4) Expenses shown are those of the fund of funds. The table does not include expenses of the underlying funds. RIVERSOURCE FUNDS -- PROXY STATEMENT 125 EXAMPLE: This example is intended to help you compare the cost of investing in the fund with the cost investing in other mutual funds. Assume you invest $10,000 and the fund earns a 5% return. The operating expenses remain the same each year. The following table shows your costs under the current arrangements and your costs if the proposed changes had been in effect:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Aggressive Growth $183 $183 $567 $567 $976 $976 $2,121 $2,121 Balanced 87 89 271 278 472 483 1,053 1,077 Cash Management 67 67 211 211 368 368 826 826 Core Bond 94 90 294 281 510 488 1,136 1,089 Disciplined Equity 120 121 375 378 650 655 1,437 1,448 Diversified Bond 87 85 271 265 472 461 1,053 1,029 Diversified Equity Income 92 103 287 322 499 559 1,112 1,241 Dividend Opportunity 96 98 300 306 521 532 1,159 1,183 Emerging Markets 168 167 521 518 898 893 1,960 1,949 Equity Value 96 98 300 306 521 532 1,159 1,183 European Equity 131 133 409 415 709 719 1,561 1,584 Fundamental Growth 142 142 440 440 761 761 1,674 1,674 Fundamental Value 115 115 359 359 623 623 1,379 1,379 Global Bond 119 116 372 362 645 629 1,425 1,391 Global Equity 125 127 391 397 677 687 1,494 1,516 Global Technology 158 158 490 490 846 846 1,851 1,851 Growth 104 105 325 328 564 570 1,252 1,264 High Yield Bond 89 91 278 284 483 494 1,077 1,100 Income Opportunities 96 98 300 306 521 532 1,159 1,183 Inflation Protected Securities 88 90 275 281 478 488 1,065 1,089
RIVERSOURCE FUNDS -- PROXY STATEMENT 126 EXAMPLE (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Intermediate Tax-Exempt Bond $ 72 $ 68 $224 $215 $ 390 $ 374 $ 874 $ 838 International Aggressive Growth 172 172 533 533 919 919 2,003 2,003 International Equity 160 160 496 496 856 856 1,872 1,872 International Opportunity 138 140 431 437 746 756 1,640 1,662 International Select Value 137 137 428 428 740 740 1,629 1,629 International Small Cap 211 211 652 652 1,120 1,120 2,415 2,415 Large Cap Equity 98 99 306 309 532 537 1,183 1,194 Large Cap Value 113 114 353 356 612 618 1,356 1,368 Limited Duration Bond 97 93 303 290 526 505 1,171 1,124 Mid Cap Growth 89 101 278 316 483 548 1,077 1,218 Mid Cap Value 124 125 387 391 671 677 1,482 1,494 Portfolio Builder Aggressive 62 62 196 196 341 341 766 766 Portfolio Builder Conservative 78 78 243 243 423 423 946 946 Portfolio Builder Moderate 48 48 151 151 264 264 594 594 Portfolio Builder Moderate Aggressive 49 49 154 154 269 269 607 607 Portfolio Builder Moderate Conservative 58 58 154 154 319 319 717 717 Portfolio Builder Total Equity 67 67 211 211 368 368 826 826 Precious Metals 137 137 428 428 740 740 1,629 1,629 Real Estate 142 143 440 443 761 767 1,674 1,685 Select Value 117 117 366 366 634 634 1,402 1,402 Short Duration U.S. Gov't 86 84 268 262 467 456 1,041 1,018
RIVERSOURCE FUNDS -- PROXY STATEMENT 127 EXAMPLE (continued)
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS Y ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL PRO FORMA Small Cap Advantage $114 $121 $356 $378 $618 $655 $1,368 $1,448 Small Cap Equity 166 166 514 514 888 888 1,938 1,938 Small Cap Growth 147 147 456 456 788 788 1,729 1,729 Small Cap Value 136 137 425 428 735 740 1,618 1,629 Small Company Index 76 76 237 237 412 412 922 922 Strategic Allocation 85 94 265 294 461 510 1,029 1,136 Tax-Exempt Bond 67 66 211 208 368 363 826 814 Tax-Exempt High Income 67 68 211 215 368 374 826 838 U.S. Gov't Mortgage 96 94 300 294 521 510 1,159 1,136 Value 114 114 356 356 618 618 1,368 1,368
RIVERSOURCE FUNDS -- PROXY STATEMENT 128 THE FUND'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANT. The 1940 Act provides that every registered investment company must be audited at least once each year by independent registered public accountants selected by a majority of the independent Board members. The fund's Board has selected KPMG LLP to be the fund's independent registered public accountant for the current fiscal year. KPMG LLP, in accordance with Independence Standards Board Standard No. 1 (ISB No. 1), has confirmed in writing to the Board's Joint Audit Committee that they are independent accountants with respect to the fund. The independent accountants examine the financial statements for the fund that are set forth in the annual report to shareholders and provide other requested non-audit and tax-related services to the fund. The Joint Audit Committee reviewed and discussed the audited financial statements with RiverSource Investments and reviewed with KPMG LLP the matters required to be discussed by SAS 61 (for example, methods used to account for significant unusual transactions). The Joint Audit Committee does not consider other non-audit services provided by KPMG LLP to be incompatible with maintaining the independence of KPMG LLP in its audits of the fund, taking into account representations from KPMG LLP, in accordance with ISB No. 1, regarding its independence from the fund and its related entities. Representatives of KPMG LLP are expected to be present at the meeting. They will be given the opportunity to make a statement to shareholders and are expected to be available to respond to any questions that may be raised at the meeting. JOINT AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. Pursuant to the pre-approval requirements of the Sarbanes-Oxley Act of 2002, all services to be performed by KPMG LLP for the fund; the fund's investment adviser; and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the fund, must be pre-approved by the Joint Audit Committee. AUDIT FEES. During the last two fiscal years, the aggregate fees paid to KPMG LLP for professional services rendered for the audit of the annual financial statements or services that are normally provided in connection with statutory and regulatory filings for the fund were as follows: RIVERSOURCE FUNDS -- PROXY STATEMENT 129 TABLE D-8A. AUDIT FEES during the fund's last two fiscal periods
LAST FISCAL PREVIOUS FUND PERIOD FISCAL PERIOD RETAIL FUNDS: Aggressive Growth $18,000 $17,000 Balanced 45,000 45,000 California Tax-Exempt 20,500 19,500 Cash Management 37,000 36,500 Core Bond 20,000 18,000 Disciplined Equity 20,500 18,000 Diversified Bond 45,000 43,000 Diversified Equity Income 40,000 36,000 Dividend Opportunity 30,000 29,000 Emerging Markets 32,000 28,000 Equity Value 25,500 25,000 European Equity 20,000 18,000 Fundamental Growth 18,000 17,000 Fundamental Value 20,000 18,000 Global Bond 36,000 34,000 Global Equity 38,000 36,000 Global Technology 32,000 28,000 Growth 44,000 42,000 High Yield Bond 52,000 52,000 Income Opportunities 20,000 18,000 Inflation Protected Securities 21,000 18,000 Intermediate Tax-Exempt Bond 20,500 19,000 International Aggressive Growth 20,000 18,000 International Equity 19,000 17,000 International Opportunity 39,500 39,500 International Select Value 20,000 18,000 International Small Cap 18,000 17,000 Large Cap Equity 30,000 23,000 Large Cap Value 20,500 18,500 Limited Duration Bond 20,000 18,000 Massachusetts Tax-Exempt 19,000 18,250
RIVERSOURCE FUNDS -- PROXY STATEMENT 130 TABLE D-8A. (CONTINUED)
LAST FISCAL PREVIOUS FUND PERIOD FISCAL PERIOD RETAIL FUNDS (CONT.) Michigan Tax-Exempt $19,000 $18,250 Mid Cap Growth 30,000 29,000 Mid Cap Value 19,000 17,000 Minnesota Tax-Exempt 22,000 21,250 New York Tax-Exempt 19,500 18,750 Ohio Tax-Exempt 19,000 18,250 Portfolio Builder Aggressive 14,500 N/A Portfolio Builder Conservative 14,500 N/A Portfolio Builder Moderate 14,500 N/A Portfolio Builder Moderate Aggressive 14,500 N/A Portfolio Builder Moderate Conservative 14,500 N/A Portfolio Builder Total Equity 14,500 N/A Precious Metals 23,000 20,500 Real Estate 20,500 18,000 S&P 500 Index 19,500 18,500 Select Value 20,000 18,000 Short Duration U.S. Gov't 49,500 49,500 Small Cap Advantage 22,500 19,000 Small Cap Equity 19,500 17,500 Small Cap Growth 20,000 18,000 Small Cap Value 20,000 18,000 Small Company Index 24,000 23,000 Strategic Allocation 48,000 44,000 Tax-Exempt Bond 37,000 37,000 Tax-Exempt High Income 50,000 50,000 Tax-Exempt Money Market 23,250 22,500 U.S. Gov't Mortgage 21,000 19,000 Value 20,000 18,000
RIVERSOURCE FUNDS -- PROXY STATEMENT 131 TABLE D-8A. (CONTINUED)
LAST FISCAL PREVIOUS FUND PERIOD FISCAL PERIOD VARIABLE PORTFOLIO FUNDS: VP Balanced $26,500 $25,000 VP Cash Management 20,000 19,250 VP Core Bond 19,500 18,000 VP Core Equity 18,000 N/A VP Diversified Bond 26,500 25,500 VP Diversified Equity Income 22,000 19,000 VP Emerging Markets 20,000 18,000 VP Global Bond 23,500 21,250 VP Global Inflation Protected Securities 19,500 18,000 VP Growth 20,500 19,000 VP High Yield Bond 26,500 25,250 VP Income Opportunities 19,500 18,000 VP International Opportunity 26,000 23,500 VP Large Cap Equity 27,000 24,500 VP Large Cap Value 19,000 18,000 VP Mid Cap Growth 19,000 18,000 VP Mid Cap Value 19,000 N/A VP S&P 500 Index 20,000 18,000 VP Select Value 19,000 18,000 VP Short Duration U.S. Gov't 21,500 20,500 VP Small Cap Advantage 20,000 18,000 VP Small Cap Value 20,500 18,500
The following table shows aggregate fees paid by the fund to KPMG LLP in each of the last two fiscal periods for services that are not included in Table D-8A. All of the services performed were pre-approved by the Joint Audit Committee. - AUDIT-RELATED FEES. Assurance and related services that are reasonably related to the performance of the audit or review. - TAX FEES. Tax compliance, tax consulting services related to Class I shares and tax work related to fund mergers and liquidations - ALL OTHER FEES. All other services rendered by KMPG LLP. RIVERSOURCE FUNDS -- PROXY STATEMENT 132 TABLE D-8B. AUDIT-RELATED, TAX AND OTHER FEES during the fund's last two fiscal periods
AGGREGATE AUDIT- RELATED FEES AGGREGATE TAX FEES AGGREGATE OTHER FEES FUND LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD RETAIL FUNDS: Aggressive Growth $ 14 $ 3 $2,650 $2,550 $298 $ 0 Balanced 322 294 6,650 6,250 0 21 California Tax-Exempt 50 49 2,750 2,550 40 0 Cash Management 806 879 2,750 2,550 958 0 Core Bond 38 16 2,750 2,550 318 0 Disciplined Equity 22 3 2,750 2,550 304 0 Diversified Bond 589 639 2,750 2,550 776 0 Diversified Equity Income 651 346 6,650 6,250 0 23 Dividend Opportunity 245 215 2,750 2,550 490 0 Emerging Markets 61 38 6,650 6,470 0 0 Equity Value 255 0 2,650 2,550 0 0 European Equity 28 24 2,550 2,495 0 0 Fundamental Growth 20 4 2,650 2,550 303 0 Fundamental Value 220 107 2,650 2,550 469 0 Global Bond 117 107 6,650 6,700 0 0 Global Equity 105 99 6,650 6,470 0 0 Global Technology 49 8,759 6,650 6,470 0 0 Growth 661 707 7,100 6,650 836 0 High Yield Bond 563 569 6,950 6,650 755 0
RIVERSOURCE FUNDS -- PROXY STATEMENT 133 TABLE D-8B. (CONTINUED) during the fund's last two fiscal periods
AGGREGATE AUDIT- RELATED FEES AGGREGATE TAX FEES AGGREGATE OTHER FEES FUND LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD RETAIL FUNDS (CONT.) Income Opportunities $ 76 $ 42 $2,750 $2,550 $ 349 $0 Inflation Protected Securities 36 0 2,750 2,550 315 0 Intermediate Tax-Exempt Bond 35 29 2,650 2,550 0 0 International Aggressive Growth 38 19 2,550 2,495 0 0 International Equity 23 8 2,550 2,495 0 0 International Opportunity 91 78 2,550 2,725 0 0 International Select Value 149 54 2,550 2,495 0 0 International Small Cap 11 3 2,550 2,495 0 0 Large Cap Equity 362 72 2,750 2,550 1,787 0 Large Cap Value 32 18 2,750 2,550 312 0 Limited Duration Bond 43 23 2,750 2,550 322 0 Massachusetts Tax-Exempt 18 18 2,750 2,550 15 0 Michigan Tax-Exempt 14 14 2,750 2,550 12 0 Mid Cap Growth 455 301 2,650 2,550 0 0 Mid Cap Value 70 20 2,550 2,275 0 1 Minnesota Tax-Exempt 94 91 2,750 2,550 78 0 New York Tax-Exempt 20 21 2,750 2,550 17 0 Ohio Tax-Exempt 14 16 2,750 2,550 12 0 Portfolio Builder Aggressive 0 0 2,650 850 0 0
RIVERSOURCE FUNDS -- PROXY STATEMENT 134 TABLE D-8B. (CONTINUED) during the fund's last two fiscal periods
AGGREGATE AUDIT- RELATED FEES AGGREGATE TAX FEES AGGREGATE OTHER FEES FUND LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD RETAIL FUNDS (CONT.) Portfolio Builder Conservative $ 0 $ 0 $2,650 $ 850 $ 0 $ 0 Portfolio Builder Moderate 0 0 2,650 850 0 0 Portfolio Builder Moderate Aggressive 0 0 2,650 850 0 0 Portfolio Builder Moderate Conservative 0 0 2,650 850 0 0 Portfolio Builder Total Equity 0 0 2,650 850 0 0 Precious Metals 23 0 2,650 2,550 0 0 Real Estate 25 0 2,750 2,550 307 0 S&P 500 Index 89 63 2,650 2,550 0 6,000 Select Value 167 101 2,650 2,550 1,625 0 Short Duration U.S. Gov't 391 507 6,950 6,650 611 0 Small Cap Advantage 180 0 2,650 2,550 0 0 Small Cap Equity 40 28 2,650 2,550 319 0 Small Cap Growth 67 0 2,650 2,550 0 0 Small Cap Value 252 215 2,650 2,550 495 0 Small Company Index 268 180 2,650 2,550 0 0 Strategic Allocation 219 189 6,650 6,250 0 13 Tax-Exempt Bond 165 180 2,650 2,550 0 0 Tax-Exempt High Income 949 976 6,750 6,525 0 0 Tax-Exempt Money Market 32 39 2,650 2,550 0 0
RIVERSOURCE FUNDS -- PROXY STATEMENT 135 TABLE D-8B. (CONTINUED) during the fund's last two fiscal periods
AGGREGATE AUDIT- RELATED FEES AGGREGATE TAX FEES AGGREGATE OTHER FEES FUND LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD RETAIL FUNDS (CONT.) U.S. Gov't Mortgage $ 63 $ 72 $2,650 $2,550 $ 338 $0 Value 108 86 2,650 2,550 375 0 VARIABLE PORTFOLIO FUNDS: VP Balanced 587 509 1,850 1,700 1,689 0 VP Cash Management 162 149 1,850 1,700 1,335 0 VP Core Bond 11 5 2,750 2,550 9 0 VP Core Equity 0 0 2,650 850 0 0 VP Diversified Bond 402 350 1,850 1,700 1,534 0 VP Diversified Equity Income 308 140 1,850 1,700 1,456 0 VP Emerging Markets 27 7 2,750 2,550 23 0 VP Global Bond 122 81 1,850 1,700 102 0 VP Global Inflation Protected Securities 9 0 2,750 2,550 8 0 VP Growth 65 56 1,850 1,700 54 0 VP High Yield Bond 281 221 1,850 1,700 234 0 VP Income Opportunities 7 0 2,750 2,550 6 0
RIVERSOURCE FUNDS -- PROXY STATEMENT 136 TABLE D-8B. (CONTINUED) during the fund's last two fiscal periods
AGGREGATE AUDIT- RELATED FEES AGGREGATE TAX FEES AGGREGATE OTHER FEES FUND LAST PREVIOUS LAST PREVIOUS LAST PREVIOUS FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD VARIABLE PORTFOLIO FUNDS (CONT.) VP International Opportunity $261 $175 $1,850 $1,700 $1,418 $0 VP Large Cap Equity 567 423 1,850 1,700 1,672 0 VP Large Cap Value 4 0 2,750 2,550 3 0 VP Mid Cap Growth 54 47 1,850 2,550 45 0 VP Mid Cap Value 0 0 2,750 N/A 0 0 VP S&P 500 Index 79 53 1,850 1,700 66 0 VP Select Value 4 2 2,750 2,550 3 0 VP Short Duration U.S. Gov't 115 96 1,850 1,700 1,296 0 VP Small Cap Advantage 48 35 1,850 1,700 40 0 VP Small Cap Value 74 42 1,850 2,550 61 0
AGGREGATE NON-AUDIT FEES TO FUNDS, INVESTMENT MANAGER AND AFFILIATES For the year ended Sept. 30, 2005, the aggregate non-audit fees billed for services rendered to all of the funds, to the investment manager and to any entity controlling, controlled by or under common control with the investment manager that provides ongoing services to the funds was $418,415. For the year ended Sept. 30, 2004, the aggregate amount was $414,969. RIVERSOURCE FUNDS -- PROXY STATEMENT 137 SECTION E - BOARD MEMBER INFORMATION This section contains the following information: - Table E-1 shows the compensation paid to Board members by each fund in its last fiscal year - Table E-2 shows the dollar range of shares of all the funds owned by the Board members and the dollar range of shares owned in each individual fund. TABLE E-1. BOARD MEMBER COMPENSATION* during the fund's last fiscal period
FUND FLYNN JONES LEWIS PAGLIA SIMPSON TAUNTON-RIGBY Aggressive Growth - total $ 750 $1,347 $1,448 $ 758 $ 842 $1,092 Amount deferred 271 556 Balanced - total 0 1,754 1,904 0 1,550 1,750 Amount deferred 770 California Tax-Exempt - total 808 1,405 1,557 867 900 1,200 Amount deferred 300 583 Cash Management - total 2,700 4,004 4,155 2,975 3,500 3,800 Amount deferred 1,138 1,515 Core Bond - total 967 1,404 1,555 1,025 900 1,200 Amount deferred 379 562 Disciplined Equity - total 967 1,288 1,433 1,025 783 1,083 Amount deferred 379 554 Diversified Bond - total 2,308 3,188 3,339 2,517 2,683 2,983 Amount deferred 975 1,196 Diversified Equity Income - total 0 2,204 2,354 0 2,000 2,200 Amount deferred 939 Dividend Opportunity - total 1,100 1,905 2,057 1,200 1,400 1,700 Amount deferred 425 769 Emerging Markets - total 0 2,374 2,674 0 2,066 2,266 Amount deferred 1,049 Equity Value - total 692 1,905 2,005 758 1,450 1,700 Amount deferred 213 803 European Equity - total 0 1,204 1,354 0 1,050 1,150 Amount deferred 532 Fundamental Growth - total 992 1,755 1,857 1,033 1,250 1,500 Amount deferred 375 715 Fundamental Value - total 892 1,597 1,748 917 1,142 1,392 Amount deferred 333 670 Global Bond - total 0 2,524 2,824 0 2,217 2,417 Amount deferred 1,112 Global Equity - total 0 2,508 2,808 0 2,200 2,400 Amount deferred 1,102
RIVERSOURCE FUNDS -- PROXY STATEMENT 138 TABLE E-1. (CONTINUED)
FLYNN JONES LEWIS PAGLIA SIMPSON TAUNTON-RIGBY Global Technology - total $ 0 $2,308 $2,608 $ 0 $2,000 $2,200 Amount deferred 1,027 Growth - total 1,367 2,004 2,155 1,475 1,500 1,800 Amount deferred 554 782 High Yield Bond - total 2,300 4,310 4,614 2,450 3,400 3,900 Amount deferred 875 1,758 Income Opportunities - total 1,025 1,463 1,614 1,083 958 1,258 Amount deferred 408 584 Inflation Protected Securities - total 967 1,404 1,555 1,025 900 1,200 Amount deferred 379 562 Intermediate Tax-Exempt Bond - total 208 1,204 1,404 158 1,050 1,150 Amount deferred 506 International Aggressive Growth - total 0 1,320 1,470 0 1,167 1,267 Amount deferred 571 International Equity - total 0 1,204 1,354 0 1,050 1,150 Amount deferred 532 International Opportunity - total 0 1,337 1,487 0 1,183 1,283 Amount deferred 581 International Select Value - total 0 1,237 1,387 0 1,083 1,183 Amount deferred 552 International Small Cap - total 0 887 1,037 0 783 833 Amount deferred 342 Large Cap Equity - total 1,700 2,521 2,672 1,850 2,017 2,317 Amount deferred 700 970 Large Cap Value - total 967 1,404 1,555 1,025 900 1,200 Amount deferred 379 562 Limited Duration Bond - total 967 1,404 1,555 1,025 900 1,200 Amount deferred 379 562 Massachusetts Tax-Exempt - total 808 1,405 1,557 867 900 1,200 Amount deferred 300 583 Michigan Tax-Exempt - total 808 1,405 1,557 867 900 1,200 Amount deferred 300 583 Mid Cap Growth - total 317 2,462 2,662 267 2,308 2,408 Amount deferred 945 Mid Cap Value - total 0 1,204 1,354 0 1,000 1,200 Amount deferred 548 Minnesota Tax-Exempt - total 925 1,605 1,757 1,000 1,100 1,400 Amount deferred 300 583
RIVERSOURCE FUNDS -- PROXY STATEMENT 139 TABLE E-1. (CONTINUED)
FLYNN JONES LEWIS PAGLIA SIMPSON TAUNTON-RIGBY New York Tax-Exempt - total $ 808 $1,405 $1,557 $ 867 $ 900 $12,00 Amount deferred 300 583 Ohio Tax-Exempt - total 808 1,405 1,557 867 900 1,200 Amount deferred 300 583 Portfolio Builder Aggressive ** ** ** ** ** ** Portfolio Builder Conservative ** ** ** ** ** ** Portfolio Builder Moderate ** ** ** ** ** ** Portfolio Builder Moderate Aggressive ** ** ** ** ** ** Portfolio Builder ** ** ** ** ** ** Moderate Conservative Portfolio Builder ** ** ** ** ** ** Total Equity Precious Metals - total 483 1,255 1,355 492 800 1,050 Amount deferred 138 550 Real Estate - total 808 1,027 1,172 867 625 925 Amount deferred 300 489 S&P 500 Index - total 442 1,445 1,595 417 1,042 1,242 Amount deferred 108 638 Select Value - total 900 1,647 1,798 933 1,192 1,442 Amount deferred 333 686 Short Duration U.S. Gov't - total 2,108 3,986 4,288 2,233 3,075 3,575 Amount deferred 791 1,631 Small Cap Advantage - total 642 1,680 1,780 683 1,225 1,475 Amount deferred 200 722 Small Cap Equity - total 750 1,355 1,507 758 900 1,150 Amount deferred 271 575 Small Cap Growth - total 517 1,355 1,455 533 900 1,150 Amount deferred 150 590 Small Cap Value - total 1,050 1,922 2,073 1,108 1,467 1,717 Amount deferred 396 792 Small Company Index - total 533 1,954 2,104 550 1,550 1,750 Amount deferred 133 827 Strategic Allocation - total 0 1,529 1,679 0 1,325 1,525 Amount deferred 675 Tax-Exempt Bond - total 242 1,612 1,812 192 1,458 1,558 Amount deferred 652 Tax-Exempt High Income - total 650 5,249 5,649 550 4,942 5,142 Amount deferred 2,017
RIVERSOURCE FUNDS -- PROXY STATEMENT 140 TABLE E-1. (CONTINUED)
FLYNN JONES LEWIS PAGLIA SIMPSON TAUNTON-RIGBY Tax-Exempt Money Market - total $ 208 $1,154 $1,304 $ 167 $ 950 $1,000 Amount deferred 430 U.S. Gov't Mortgage - total 800 1,455 1,607 817 1,000 1,250 Amount deferred 292 613 Value - total 850 1,547 1,698 875 1,092 1,342 Amount deferred 313 648 VARIABLE PORTFOLIO FUNDS: VP Balanced - total $2,283 $3,088 $3,239 $2,467 $2,583 $2,883 Amount deferred 975 1,163 VP Cash Management - total 1,317 1,821 1,972 1,400 1,317 1,617 Amount deferred 542 706 VP Core Bond - total 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 408 573 VP Core Equity - total 0 0 0 0 0 0 Amount deferred VP Diversified Bond - total 1,775 2,446 2,597 1,917 1,942 2,242 Amount deferred 742 931 VP Diversified Equity Income - total 1,383 1,888 2,039 1,467 1,383 1,683 Amount deferred 575 731 VP Emerging Markets - total 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 408 573 VP Global Bond - total 1,167 1,621 1,772 1,233 1,117 1,417 Amount deferred 475 634 VP Global Inflation Protected Securities - total 217 319 319 217 217 217 Amount deferred 108 80 VP Growth - total 1,100 1,554 1,705 1,167 1,050 1,350 Amount deferred 442 609 VP High Yield Bond - total 1,542 2,121 2,272 1,650 1,617 1,917 Amount deferred 642 814 VP Income Opportunities - total 383 486 537 433 383 433 Amount deferred 192 134 VP International Opportunity - total 1,458 1,988 2,139 1,550 1,483 1,783 Amount deferred 608 767 VP Large Cap Equity - total 2,200 2,946 3,097 2,367 2,442 2,742 Amount deferred 942 1,114
RIVERSOURCE FUNDS -- PROXY STATEMENT 141 TABLE E-1. (CONTINUED)
FLYNN JONES LEWIS PAGLIA SIMPSON TAUNTON-RIGBY VARIABLE PORTFOLIO FUNDS: VP Large Cap Value - total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Amount deferred VP Mid Cap Growth - total 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 408 573 VP Mid Cap Value - total 0 0 0 0 0 0 Amount deferred VP S&P 500 Index - total 1,092 1,521 1,672 1,150 1,017 1,317 Amount deferred 442 598 VP Select Value - total 0 0 0 0 0 0 Amount deferred VP Short Duration U.S. Gov't - total 1,175 1,654 1,805 1,250 1,150 1,450 Amount deferred 475 645 VP Small Cap Advantage - total 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 408 573 VP Small Cap Value - total 1,092 1,521 1,672 1,150 1,017 1,317 Amount deferred 442 598
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. Mr. Laikind, Ms. Pryor and Ms. Blatz were not Board members prior to September 30, 2005 and therefore are not included in the table. ** Portfolio Builder funds do not pay additional compensation to the Board members for attending meetings. Compensation is paid directly from the underlying funds in which each Portfolio Builder fund invests. RIVERSOURCE FUNDS -- PROXY STATEMENT 142 TABLE E-2. BOARD MEMBER HOLDINGS* As of Aug. 31, 2005
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL RIVERSOURCE FUNDS OVERSEEN BY DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND** BOARD MEMBER BOARD MEMBER FUND RANGE RANGE Carlson New Dimensions $50,000-100,000 $50,000-$100,000 Select Value $1-$10,000 Flynn $0 Jones Cash Management $10,001-$50,000 Diversified Bond $50,001-$100,000 Emerging Markets $10,001-$50,000 Global Bond $50,000-$100,000 Growth $10,001-$50,000 High Yield Bond Over $100,000 Over $100,000 New Dimensions Over $100,000 Short Duration U.S. Gov't Over $100,000 Small Cap Advantage $10,001-$50,000 Small Company Index $10,001-$50,000 Tax-Exempt Bond $10,001-$50,000 Lewis Diversified Equity Income $50,000-$100,000 $50,000-$100,000 Mid Cap Growth $10,000-$50,000 Paglia $0 Simpson Diversified Bond $10,001-$50,000 Dividend Opportunity $10,001-$50,000 High Yield Bond $10,001-$50,000 Over $100,000 New Dimensions $10,001-$50,000 Taunton-Rigby $0
RIVERSOURCE FUNDS -- PROXY STATEMENT 143 TABLE E-2. BOARD MEMBER HOLDINGS* (CONTINUED)
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL RIVERSOURCE FUNDS OVERSEEN BY DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND** BOARD MEMBER BOARD MEMBER FUND RANGE RANGE Truscott Balanced $50,001-$100,000 Disciplined Equity $50,001-$100,000 Diversified Bond $10,001-$50,000 Dividend Opportunity Over $100,000 Emerging Markets $10,001-$50,000 Global Equity $50,001-$100,000 Global Technology $10,001-$50,000 Growth $50,001-$100,000 High Yield Bond $50,001-$100,000 High Yield Tax-Exempt $50,001-$100,000 Income Opportunities $10,001-$50,000 Intermediate Tax-Exempt $50,001-$100,000 Over $100,000 International Opportunity Over $100,000 Large Cap Equity Over $100,000 Large Cap Value $50,001-$100,000 Massachusetts Tax-Exempt Over $100,000 Mid Cap Growth $50,001-$100,000 Mid Cap Value Over $100,000 Portfolio Builder Moderate Aggressive Growth Over $100,000 Real Estate $50,001-$100,000 Strategic Allocation Over $100,000
* Ms. Blatz, Mr. Laikind and Ms. Pryor were not Board members as of Sept. 30, 2005 and therefore are not included in the table. All shares of the variable portfolio funds are owned by life insurance companies. Shares of the variable portfolio funds are not available for purchase by individuals, including Board members. ** The percentage of shares beneficially owned by all Board members and officers as a group does not exceed 1% of any class of shares of any fund. RIVERSOURCE FUNDS -- PROXY STATEMENT 144 EXHIBIT A BOARD EFFECTIVENESS COMMITTEE CHARTER RESOLVED, That the Board Effectiveness Committee be composed of the independent members appointed annually by the Board and the Chair of the Board; RESOLVED, That one member shall be appointed to Chair the Committee and the Committee shall meet upon call of the Chair; RESOLVED, That the Committee will make recommendations to the Board on: - The responsibilities and duties of the Board; - The criteria to be used to determine the size and structure of the Boards and the background and characteristics of independent Board members; - The persons to serve as Board members based on approved criteria whenever necessary to fill a vacancy or in conjunction with a regular meeting of shareholders in which nominees are required to be submitted for a vote of shareholders; - The annual evaluation of the Board's performance and the attendance of members; and - The compensation to be paid to independent members; and further RESOLVED, That the Committee shall be assigned such further areas of responsibility as appropriate to assist the Board in meeting its fiduciary duties in an efficient and effective manner. RIVERSOURCE FUNDS -- PROXY STATEMENT A.1 EXHIBIT B JOINT AUDIT COMMITTEE CHARTER This charter is scheduled to be reviewed at an upcoming meeting of the Board. At that time, the Board is expected to update the charter, including changing references from American Express Financial Corporation and its subsidiaries to Ameriprise Financial, Inc. and its subsidiaries. In addition, references to American Express Company will be eliminated. MEMBERSHIP AND QUALIFICATIONS The Joint Audit Committee shall consist of at least three members appointed by the Board. The Board may replace members of the Committee for any reason. No member shall be an "interested person" as that term is defined in Section 2(a)(19) of the Investment Company Act, nor shall any member receive any compensation from the Fund except compensations for service as a member of the Board and Board committees. At least one member of the Committee shall be an "audit committee financial expert." An "audit committee financial expert" means a person who has the following attributes: - An understanding of generally accepted accounting principles and financial statements; - The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves; - Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant's financial statements, or experience actively supervising one or more persons engaged in such activities; - An understanding of internal controls and procedures for financial reporting; and - An understanding of audit committee functions. A person shall have acquired such attributes through: - Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions; - Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions; RIVERSOURCE FUNDS -- PROXY STATEMENT B.1 - Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or - Other relevant experience. The Board shall determine "audit committee financial experts" annually. PURPOSES OF THE COMMITTEE The Committee is to assist independent members of the Boards in fulfilling their oversight responsibilities to the shareholders, potential shareholders and investment community relating to the reliability of financial reporting, the effectiveness and efficiency of operations, the work done by external auditors, the adequacy of internal controls, and the compliance with applicable laws and regulations by: - Overseeing the accounting and financial reporting processes of the Fund and its internal control over financial reporting and, as the Committee deems appropriate, to inquire into the internal control over financial reporting of certain third-party service providers; - Overseeing, or, as appropriate, assisting Board oversight of, the quality and integrity of the Fund's financial statements and the independent audit thereof; - Overseeing, or, as appropriate, assisting Board oversight of, the Fund's compliance with legal and regulatory requirements that relate to the Fund's accounting and financial reporting, internal control over financial reporting and independent audits; and - Approving prior to appointment the engagement of the Fund's independent auditor (Auditor) and, in connection therewith, to review and evaluate the qualifications, independence and performance of the Fund's Auditor. The Auditor for the Fund shall report directly to the Committee. DUTIES AND POWERS To carry out its purposes, the Committee shall have the following duties and powers: - Recommend the Auditor that the Committee believes is qualified to examine and report on the financial statements to the independent members of the Board within 90 days before or after the fiscal year end of the Fund; - Meet with representatives of the Auditor to: - Review and evaluate matters potentially affecting its independence and capabilities by: - Approving prior to appointment the professional services the Auditor requests to perform for American Express Financial Corporation and any of its subsidiaries that provide services to the Fund; RIVERSOURCE FUNDS -- PROXY STATEMENT B.2 - Considering the controls applied by the Auditor and measures taken by American Express Financial Corporation to assure that all items requiring pre-approval are identified and referred to the Committee in a timely fashion; and - Evaluating the auditor's independence by receiving a report on business relationships at each meeting setting forth the work it has been engaged to do for American Express Company or its subsidiaries. - Consider the scope of the annual audit and any special audits and review and approve the estimated fees to be charged; - Consider the information and comments from the Auditor with respect to the Fund's accounting and financial reporting policies, procedures and internal controls over financial reporting; the responses to the comments by American Express Financial Corporation; and possible improvements that can be made in the quality of the Fund's accounting and financial reporting; - Meet with representatives of American Express Enterprise Risk and Assurance Services to: - Discuss its responsibility to the Fund with respect to its review of operations of American Express Financial Corporation and affiliates to the extent they pertain to the registered investment companies; - Consider its authority, including the support it receives from American Express Financial Corporation's senior management and American Express Company's General Auditor; - Discuss whether it complies with the Institute of Internal Auditors' "Standard for the Professional Practice of Internal Auditing;" - Review its budget, staffing and proposed audit plans each year; and - Review reports issued by American Express Enterprise Risk and Assurance Services that pertain to American Express Financial Corporation's operations related to the registered investment companies. - Encourage open lines of communications among the Committee, the Auditor, and American Express Enterprise Risk and Assurance Services to: - Consider information and comments from the Auditor with respect to the Fund's financial statements, including any adjustments to such statements recommended by the Auditor and to review the opinion of the Auditor; - Resolve any disagreements between American Express Financial Corporation and the Auditor; - Review, in connection with required certifications of Form N-CSR, any significant deficiencies in the design or operations of internal control over financial reporting or material weaknesses therein and any reported evidence of fraud involving any person who has a significant role in the Fund's internal control over financial reporting; RIVERSOURCE FUNDS -- PROXY STATEMENT B.3 - Establish procedures for the receipt, retention and treatment of complaints received by the Fund relating to accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of American Express Financial Corporation of concerns about accounting or auditing matters, and address reports from attorneys or auditors of possible violations of federal or state laws or fiduciary duty; - Investigate or initiate an investigation of reports of improprieties or suspected improprieties in connection with the Fund's accounting or financial reporting; - Consider the adequacy and effectiveness of internal controls, including the controls over computerized information systems, through discussions with the Auditor, American Express Enterprise Risk and Assurance Services and appropriate American Express Financial Corporation managers who provide reports to the Committee and elicit their recommendations for improving or identifying particular areas where new or more detailed controls or procedures are desirable giving particular emphasis to the adequacy of internal controls for exposing any payments, transactions, or procedures that might be deemed illegal or otherwise improper; - Request to be informed about all new or changed accounting principles and disclosure practices on a timely basis and inquire regarding the judgment and reasoning regarding the appropriateness, not just the acceptability, of the changes or proposed changes; - Report the work of the Committee to the Board as frequently as the Committee deems appropriate; - Review and assess the adequacy of the Committee's charter at least annually and recommend any changes to the Board; - Meet at least once a year in a private meeting with each of the three following groups: the Auditor, the American Express Financial Corporation's management personnel responsible for the financial statements and recordkeeping of the Fund, the Senior Vice President - Enterprise Risk and Assurance Services for American Express Financial Corporation, and the General Auditor and Chief Operational Risk Officer for American Express Company; - Consider such other matters as any Board or Committee deems appropriate and perform such additional tasks as directed by resolution of any Board; - Conduct its own investigations into issues related to its responsibilities and is authorized to employ such professional and technical assistance as it deems necessary. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including appropriate funding, as determined by the Committee, for payment of compensation to the Auditor for the purpose of RIVERSOURCE FUNDS -- PROXY STATEMENT B.4 conducting the audit and rendering their audit report, the authority to retain and compensate special counsel and other experts or consultants as the Committee deems necessary, and the authority to obtain specialized training for Committee members, at the expense of the Fund, as appropriate. The Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services to one or more members. Any decisions of the member to grant pre-approvals shall be presented to the Committee at its next regularly scheduled meeting. ROLE AND RESPONSIBILITIES The function of the Committee is oversight; it is American Express Financial Corporation's responsibility to maintain appropriate systems for accounting and internal control over financial reporting, and the Auditor's responsibility to plan and carry out a proper audit. Specifically, American Express Financial Corporation is responsible for: (1) the preparation, presentation and integrity of the Fund's financial statements; (2) the maintenance of appropriate accounting and financial reporting principles and policies; and (3) the maintenance of internal control over financial reporting and other procedures designed to assure compliance with accounting standards and related laws and regulations. The Auditor is responsible for planning and carrying out an audit consistent with applicable legal and professional standards and the terms of their engagement letter. Nothing in the Charter shall be construed to reduce the responsibilities or liabilities of the Fund's service providers, including the Auditor. Although the Committee is expected to take a detached and questioning approach to the matters that come before it, the review of a Fund's financial statements by the Committee is not an audit, nor does the Committee's review substitute for the responsibilities of American Express Financial Corporation's for preparing, or the Auditor for auditing, the financial statements. Members of the Committee are not employees of the Fund and, in serving on this Committee, are not, and do not hold themselves out to be, acting as accountants or auditors. As such, it is not the duty or responsibility of the Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures. In discharging their duties, the members of the Committee are entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: (1) one or more officers of the Fund whom the director reasonably believes to be reliable and competent in the matters presented; (2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or (3) a Board committee of which the director is not a member. RIVERSOURCE FUNDS -- PROXY STATEMENT B.5 OPERATIONS The Board shall adopt and approve this Charter and may amend it on the Board's own motion. The Committee shall review this Charter at least annually and recommend to the full Board any changes the Committee deems appropriate. The Committee may select one of its members to be the chair and may select a vice chair. A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee. The action of a majority of the members of the Audit Committee present at a meeting at which a quorum is present shall be the action of the Committee. The Committee shall meet on a regular basis and at least four times annually and is empowered to hold special meetings as circumstances require. The Chairperson or a majority of the members shall be authorized to call a meeting of the Committee or meetings may be fixed in advance by the Committee. The agenda shall be prepared under the direction and control of the Chairperson. The Committee shall ordinarily meet in person; however, members may attend telephonically, and the Committee may act by written consent, to the extent permitted by law and by the Fund's bylaws. The Committee shall have the authority to meet privately and to admit non-members individually. The Committee may also request to meet with internal legal counsel and compliance personnel of American Express Financial Corporation and with entities that provide significant accounting or administrative services to the Fund to discuss matters relating to the Fund's accounting and compliance as well as other Fund-related matters. The Committee shall prepare and retain minutes of its meetings and appropriate documentation of decisions made outside of meetings by delegated authority. The Committee shall evaluate its performance at least annually. RIVERSOURCE FUNDS -- PROXY STATEMENT B.6 FUND NAMES FORMER AXP FUND NAME NEW RIVERSOURCE FUND NAME RETAIL FUNDS: RETAIL FUNDS: AXP California Tax-Exempt RiverSource California Tax-Exempt AXP Cash Management RiverSource Cash Management AXP Core Bond RiverSource Core Bond AXP Diversified Bond RiverSource Diversified Bond AXP Diversified Equity Income RiverSource Diversified Equity Income AXP Dividend Opportunity RiverSource Dividend Opportunity AXP Equity Select RiverSource Mid Cap Growth AXP Equity Value RiverSource Equity Value AXP Global Bond RiverSource Global Bond AXP Global Technology RiverSource Global Technology AXP Growth RiverSource Growth AXP High Yield Bond RiverSource High Yield Bond AXP High Yield Tax-Exempt RiverSource Tax-Exempt High Income AXP Income Opportunities RiverSource Income Opportunities AXP Inflation Protected Securities RiverSource Inflation Protected Securities AXP Intermediate Tax-Exempt RiverSource Intermediate Tax-Exempt AXP Large Cap Equity RiverSource Large Cap Equity AXP Large Cap Value RiverSource Large Cap Value AXP Limited Duration Bond RiverSource Limited Duration Bond AXP Managed Allocation RiverSource Strategic Allocation AXP Massachusetts Tax-Exempt RiverSource Massachusetts Tax-Exempt AXP Michigan Tax-Exempt RiverSource Michigan Tax-Exempt AXP Mid Cap Value RiverSource Mid Cap Value AXP Minnesota Tax-Exempt RiverSource Minnesota Tax-Exempt AXP Mutual RiverSource Balanced AXP New York Tax-Exempt RiverSource New York Tax-Exempt AXP Ohio Tax-Exempt RiverSource Ohio Tax-Exempt AXP Partners Aggressive Growth RiverSource Aggressive Growth AXP Partners Fundamental Value RiverSource Fundamental Value AXP Partners Growth RiverSource Fundamental Growth AXP Partners International Aggressive Growth RiverSource International Aggressive Growth AXP Partners International Core RiverSource International Equity AXP Partners International Select Value RiverSource International Select Value AXP Partners International Small Cap RiverSource International Small Cap AXP Partners Select Value RiverSource Select Value AXP Partners Small Cap Core RiverSource Small Cap Equity AXP Partners Small Cap Growth RiverSource Small Cap Growth AXP Partners Small Cap Value RiverSource Small Cap Value AXP Partners Value RiverSource Value AXP Portfolio Builder Aggressive RiverSource Portfolio Builder Aggressive AXP Portfolio Builder Conservative RiverSource Portfolio Builder Conservative
RIVERSOURCE FUNDS -- PROXY STATEMENT B.7 FUND NAMES (CONTINUED) FORMER AXP FUND NAME NEW RIVERSOURCE FUND NAME RETAIL FUNDS: (CONT.) RETAIL FUNDS: (CONT.) AXP Portfolio Builder Moderate RiverSource Portfolio Builder Moderate AXP Portfolio Builder Moderate Aggressive RiverSource Portfolio Builder Moderate Aggressive AXP Portfolio Builder Moderate Conservative RiverSource Portfolio Builder Moderate Conservative AXP Portfolio Builder Total Equity RiverSource Portfolio Builder Total Equity AXP Precious Metals RiverSource Precious Metals AXP Quantitative Large Cap Equity RiverSource Disciplined Equity AXP Real Estate RiverSource Real Estate AXP S&P 500 Index RiverSource S&P 500 Index AXP Short Duration U.S. Government RiverSource Short Duration U.S. Government AXP Small Cap Advantage RiverSource Small Cap Advantage AXP Small Company Index RiverSource Small Company Index AXP Tax-Exempt Bond RiverSource Tax-Exempt Bond AXP Tax-Free Money RiverSource Tax-Exempt Money Market AXP Threadneedle Emerging Markets RiverSource Emerging Markets AXP Threadneedle European Equity RiverSource European Equity AXP Threadneedle Global Equity RiverSource Global Equity AXP Threadneedle International RiverSource International Opportunity AXP U.S. Government Mortgage RiverSource U.S. Government Mortgage
RIVERSOURCE FUNDS -- PROXY STATEMENT B.8 FUND NAMES (CONTINUED) FORMER AXP FUND NAME NEW RIVERSOURCE FUND NAME VARIABLE PORTFOLIO FUNDS: VARIABLE PORTFOLIO FUNDS: AXP VP - Cash Management RiverSource VP - Cash Management AXP VP - Core Bond RiverSource VP - Core Bond AXP VP - Core Equity RiverSource VP - Core Equity AXP VP - Diversified Bond RiverSource VP - Diversified Bond AXP VP - Diversified Equity Income RiverSource VP - Diversified Equity Income AXP VP - Equity Select RiverSource VP - Mid Cap Growth AXP VP - Global Bond RiverSource VP - Global Bond AXP VP - Global Inflation Protected Securities RiverSource VP - Global Inflation Protected Securities AXP VP - Growth RiverSource VP - Growth AXP VP - High Yield Bond RiverSource VP - High Yield Bond AXP VP - Income Opportunities RiverSource VP - Income Opportunities AXP VP - Large Cap Equity RiverSource VP - Large Cap Equity AXP VP - Large Cap Value RiverSource VP - Large Cap Value AXP VP - Managed RiverSource VP - Balanced AXP VP - Mid Cap Value RiverSource VP - Mid Cap Value AXP VP - Partners Select Value RiverSource VP - Select Value AXP VP - Partners Small Cap Value RiverSource VP - Small Cap Value AXP VP - S&P 500 Index RiverSource VP - S&P 500 Index AXP VP - Short Duration U.S. Government RiverSource VP - Short Duration U.S. Government AXP VP - Small Cap Advantage RiverSource VP - Small Cap Advantage AXP VP - Threadneedle Emerging Markets RiverSource VP - Emerging Markets AXP VP - Threadneedle International RiverSource VP - International Opportunity
RIVERSOURCE FUNDS -- PROXY STATEMENT B.9 S-6380 A (12/05)
ezVote(SM) Consolidated Proxy Card PROXY TABULATOR P.O. BOX 9132 This form is your EzVote Consolidated Proxy. It reflects all of your HINGHAM, MA 02043-9132 accounts registered to the same Social Security or Tax I.D. number at this address. By voting and signing the Consolidated Proxy Card, you are voting all of these accounts in the same manner as indicated on the reverse side of the form. 999 999 999 999 99 RIVERSOURCE(SM) FUNDS (formerly known as AMERICAN EXPRESS FUNDS) PROXY FOR THE REGULAR MEETING OF SHAREHOLDERS FEBRUARY 15, 2006
Your fund will hold a shareholders' meeting in the Galaxy Room on the 50th floor of the IDS Center, 80 South Eighth Street, Minneapolis, MN, at 10:00 a.m. on February 15, 2006. You are entitled to vote at the meeting if you were a shareholder on December 16, 2005. Please read the proxy statement and vote immediately by mail, telephone or internet, even if you plan to attend the meeting. Just follow the instructions on this proxy card. The Board of Directors/Trustees recommends that you vote FOR each proposal. The undersigned hereby appoints Arne H. Carlson and Leslie L. Ogg or any one of them, as proxies, with full power of substitution, to represent and to vote all of the shares of the undersigned at the regular meeting to be held on February 15, 2006, and any adjournment thereof. Date __________________ Signature(s) (Joint owners) (Sign in the Box) Note: Please sign this proxy exactly as your name or names appears on this card. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. AMEX COMMON EZ - 1 IF VOTING THE CONSOLIDATED PROXY CARD DO NOT SIGN, DATE OR RETURN THE INDIVIDUAL BALLOTS
THREE EASY WAYS TO VOTE To vote by Telephone To vote by Internet To vote by Mail 1) Read the proxy statement and have the 1) Read the proxy statement and have 1) Read the Proxy Statement. Consolidated Proxy Card at hand. Consolidated Proxy Card at hand. 2) Check the appropriate boxes on the 2) Call 1-888-221-0697. 2) Go to www.proxyweb.com reverse side. 3) Follow the recorded instructions. 3) Follow the on-line directions. 3) Sign and date the proxy card. 4) Return the proxy card in the envelope provided.
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL YOUR CARD.
LABEL BELOW FOR MIS USE ONLY! INDIVIDUAL BALLOTS M1197 On the reverse side of this form (and on accompanying pages, AMERICAN EXPRESS - AMERIPRISE if necessary) you will find individual ballots, one for each of ORIGINAL EZVOTE 9-16-05 KD your accounts. If you would wish to vote each of these accounts DOREEN (AMEX EZVOTE FEB 2006 DH) separately, sign in the signature box below, mark each individual REVIEW #1 10-18-05 KD ballot to indicate your vote, detach the form at the perforation REVISION #1 10-19-05 KD above and return the individual ballots portion only. NOTE: If you choose to vote each account separately, do not return the Consolidated Proxy Card above. MIS EDITS: # OF CHANGES ___/___ PRF 1 ___ PRF 2 ___ Date __________________ OK TO PRINT AS IS* _______________________ *By signing this form you are authorizing MIS to print this form in its current state. ________________________________________________________________ SIGNATURE OF PERSON AUTHORIZING PRINTING DATE Signature(s) (Joint owners) (Sign in the Box) Note: Please sign this proxy exactly as your name or names appears on this card. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. AMEX COMMON IND - 1
ezVote(SM) Consolidated Proxy Card Please refer to Pages 3 and 4 in the Proxy Statement to determine if Proposals are applicable to your Fund(s). Please fill in box(es) as shown using black or blue ink or number 2 pencil. [X] PLEASE DO NOT USE FINE POINT PENS.
If you do not mark a proposal, your proxy will be voted FOR the proposal. FOR WITHHOLD FOR ALL 1. ELECTION OF BOARD MEMBERS. ALL ALL EXCEPT (01) Kathleen Blatz (04)Anne P. Jones (07)Catherine James Paglia (10) Alison Taunton-Rigby (02) Arne H. Carlson (05)Jeffrey Laikind (08)Vikki L. Pryor (11) William F. Truscott [ ] [ ] [ ] 1. (03) Patricia M. Flynn (06)Stephen R. Lewis, Jr. (09)Alan K. Simpson (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "FOR ALL EXCEPT" box and write the nominee's number on the line above.) FOR AGAINST ABSTAIN 2. Amend the Articles of Incorporation to permit the Board to establish the minimum account value and to change the name of the corporation [ ] [ ] [ ] 2. 3. Approve an Investment Management Services Agreement with RiverSource Investments, LLC [ ] [ ] [ ] 3. 4. Approve a Subadvisory Agreement between RiverSource Investments and Kenwood Capital Management LLC [ ] [ ] [ ] 4. 5. Approve a Subadvisory Agreement between RiverSource Investments and Threadneedle International Limited [ ] [ ] [ ] 5. 6. Approve a Subadvisory Agreement between RiverSource Investments and Davis Advisors [ ] [ ] [ ] 6. 7. Approve changes in fundamental investment policies A. Diversification [ ] [ ] [ ] 7A. B. Ten Percent Limitation in Single Issuer [ ] [ ] [ ] 7B. C. Lending [ ] [ ] [ ] 7C. D. Borrowing [ ] [ ] [ ] 7D. E. Precious Metals [ ] [ ] [ ] 7E. PLEASE SIGN AND DATE ON THE REVERSE SIDE. AMEX COMMON EZ - 1 IF VOTING THE CONSOLIDATED PROXY CARD DO NOT SIGN, DATE OR RETURN THE INDIVIDUAL BALLOTS
INDIVIDUAL BALLOTS NOTE: IF YOU HAVE USED THE CONSOLIDATED BALLOT ABOVE, DO NOT VOTE THE INDIVIDUAL BALLOTS BELOW. 000 0000000000 000 0 000 0000000000 000 0 JOHN Q. PUBLIC JOHN Q. PUBLIC 123 MAIN STREET 123 MAIN STREET ANYTOWN, MA 02030 999 999 999 999 99 ANYTOWN, MA 02030 999 999 999 999 99 FUND NAME PRINTS HERE FUND NAME PRINTS HERE FOR WITHHOLD FOR ALL 1. ELECTION OF BOARD MEMBERS. ALL ALL EXCEPT* (See Nominee list on consolidated ballot.) [ ] [ ] [ ] *EXCEPT___________________________ LABEL BELOW FOR MIS USE ONLY! FOR AGAINST ABSTAIN M1197 2. Amend the Articles of Incorporation [ ] [ ] [ ] AMERICAN EXPRESS - AMERIPRISE 3. Approve Investment Management Services ORIGINAL EZVOTE 9-16-05 KD Agreement [ ] [ ] [ ] DOREEN (AMEX EZVOTE FEB 2006 DH) REVISION #1 10-19-05 KD 4. Approve a Subadvisory Agreement w/Kenwood [ ] [ ] [ ] REVIEW #1 10-20-05 KD 5. Approve a Subadvisory Agreement w/ Threadneedle [ ] [ ] [ ] 6. Approve a Subadvisory Agreement w/ Davis Advisors [ ] [ ] [ ] 7. Approve changes in fundamental policies A. Diversification [ ] [ ] [ ] B. Ten Percent Limitation in Single Issuer [ ] [ ] [ ] C. Lending [ ] [ ] [ ] D. Borrowing [ ] [ ] [ ] E. Precious Metals [ ] [ ] [ ] AMEX COMMON IND - 1
PROXY STATEMENT December 16, 2005 HERE IS A BRIEF OVERVIEW OF SOME OF THE CHANGES BEING RECOMMENDED FOR YOUR RIVERSOURCE MUTUAL FUND OR VARIABLE PORTFOLIO FUND. WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT. Q: WHAT ORGANIZATION CHANGES HAVE RECENTLY TAKEN PLACE? On Sept. 30, Ameriprise Financial, Inc. (formerly American Express Financial Corporation) became an independent company from American Express. An affiliate of Ameriprise Financial, RiverSource Investments now serves as investment manager to your fund. As a result, your fund's name and the names of service providers to your fund have changed. Your statements should now reflect this new name and the funds are now listed under RiverSource in the newspaper. Q: WHY AM I BEING ASKED TO VOTE? Mutual funds are required to get shareholders' votes for certain kinds of changes, like the ones included in this proxy statement. You have a right to vote on these changes either by mailing your proxy card, calling a toll-free number, responding by internet or attending the shareholder meeting. Q: IS MY VOTE IMPORTANT? Absolutely! While the Board of Directors/Trustees (Board) for RiverSource Funds has reviewed these changes and recommends you approve them, you have the right to voice your opinion. Until the Fund is sure that a quorum has been reached (in most cases, 50% of existing shares), it will continue to contact shareholders asking them to vote. These efforts cost money -- so please, vote immediately. Q: WHAT AM I BEING ASKED TO VOTE ON? At all regular meetings, shareholders elect Board members. In addition, shareholders at this meeting will vote on other proposals. These include: - Amending the Fund's Articles of Incorporation to permit the Board to establish the minimum account value and to change the name of the corporation. - Approving an Investment Management Services Agreement (IMS Agreement) with RiverSource Investments, LLC. - Approving a subadvisory agreement with Kenwood Capital Management LLC (Kenwood), Threadneedle International Limited or Davis Advisors (Davis). - Approving changes in fundamental investment policies related to diversification, lending and borrowing. Some of these changes affect all Funds, while others affect only certain Funds. Please refer to "Section A - Overview" of the proxy statement to see what proposals apply to your Fund. We encourage you to read the full text of the proxy statement to obtain a more detailed understanding of the issues. Q: WHAT DO BOARD MEMBERS DO? Board members represent the interests of the shareholders and oversee the management of the Fund. Q: WHAT CHANGES ARE PROPOSED TO THE INVESTMENT MANAGEMENT SERVICES AGREEMENT? In September, the Fund's investment manager, Ameriprise Financial, Inc. (formerly known as American Express Financial Corporation) was spun off from its parent company, American Express Company. The investment management functions were then moved to RiverSource Investments, LLC, a wholly owned subsidiary of Ameriprise Financial. While this change did not cause a termination of the IMS Agreement, or otherwise affect its terms and conditions, the Board determined that it would be prudent to give shareholders an opportunity to vote on the new arrangement. For equity and balanced funds, the new agreement also clarifies the circumstances under which the Board may change an index for purposes of calculating a performance incentive adjustment. For variable portfolio funds, the agreement eliminates transfer agency services, which will be provided under a separate agreement if shareholders approve the new agreements. Finally, for many funds the new agreement includes revised fee schedules. The fee schedules reflect the pricing philosophy recommended by the investment manager and approved by the Board. Under that pricing philosophy, management fees are set so that net expenses for most funds will be at or below median net expenses relative to a peer group of comparable funds. Q: WHAT CHANGES ARE PROPOSED TO THE SUBADVISORY AGREEMENTS? Certain subadvisers are considered affiliates of RiverSource Investments. Shareholders of funds advised by those subadvisers are being asked to approve the subadvisory agreements as a result of the spin off described in the previous paragraph. In addition, the subadvisory agreements with Kenwood and Davis include proposed changes in the fee schedules. Because subadvisory fees are paid to Kenwood and Davis by RiverSource Investments, not by the Funds, the proposed change will not affect the expenses of the Funds or the cost to shareholders. Q: WHAT CHANGES ARE PROPOSED TO FUND POLICIES? Policies are being standardized to match the other funds in the group and to eliminate unnecessary limitations. This will not change the way your Fund is managed. Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE? After careful consideration, the Board recommends that you vote FOR each proposal. Q: HOW DO I VOTE? - You can vote in one of four ways: - By mail with the enclosed proxy card - By telephone - By web site - In person at the meeting Please refer to the enclosed voting instruction card for the telephone number and internet address. If you own more than one Fund, it is important that you vote for each Fund. Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS? If you have questions about any of the issues described in the proxy statement or about voting procedures, please call your financial advisor or call client services toll free at (877) 256-6085.