-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HtOio6QBCHKDKBXVePx2uNqSmPcBCO5oHBaz8KcmFDhYuPGhHedDssGnmEBj2gTL NXMzK1B3nC/9HXtfcNtpaQ== 0000950134-08-017525.txt : 20081003 0000950134-08-017525.hdr.sgml : 20081003 20081003084245 ACCESSION NUMBER: 0000950134-08-017525 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080731 FILED AS OF DATE: 20081003 DATE AS OF CHANGE: 20081003 EFFECTIVENESS DATE: 20081003 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE LARGE CAP SERIES, INC. CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410962638 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02111 FILM NUMBER: 081105317 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH SERIES INC/MN DATE OF NAME CHANGE: 20001011 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 0000049702 S000003287 RiverSource Disciplined Equity Fund C000008741 RiverSource Disciplined Equity Fund Class B AQEBX C000008742 RiverSource Disciplined Equity Fund Class C RDCEX C000008744 RiverSource Disciplined Equity Fund Class A AQEAX C000008745 RiverSource Disciplined Equity Fund Class I ALEIX C000042888 RiverSource Disciplined Equity Fund Class R2 C000042889 RiverSource Disciplined Equity Fund Class R3 RSDEX C000042890 RiverSource Disciplined Equity Fund Class R4 RQEYX C000042891 RiverSource Disciplined Equity Fund Class R5 RSIPX C000042892 RiverSource Disciplined Equity Fund Class W RDEWX 0000049702 S000003288 RiverSource Growth Fund C000008746 RiverSource Growth Fund Class A INIDX C000008747 RiverSource Growth Fund Class B IGRBX C000008748 RiverSource Growth Fund Class C AXGCX C000008749 RiverSource Growth Fund Class I AGWIX C000042893 RiverSource Growth Fund Class W C000042894 RiverSource Growth Fund Class R2 C000042895 RiverSource Growth Fund Class R3 RSCGX C000042896 RiverSource Growth Fund Class R4 IGRYX C000042897 RiverSource Growth Fund Class R5 RSWHX 0000049702 S000003289 RiverSource Large Cap Equity Fund C000008751 RiverSource Large Cap Equity Fund Class I ALRIX C000008752 RiverSource Large Cap Equity Fund Class A ALEAX C000008753 RiverSource Large Cap Equity Fund Class B ALEBX C000008754 RiverSource Large Cap Equity Fund Class C ARQCX C000042898 RiverSource Large Cap Equity Fund Class R2 C000042899 RiverSource Large Cap Equity Fund Class R3 C000042900 RiverSource Large Cap Equity Fund Class R4 ALEYX C000042901 RiverSource Large Cap Equity Fund Class R5 0000049702 S000003290 RiverSource Large Cap Value Fund C000008756 RiverSource Large Cap Value Fund Class C RLVCX C000008758 RiverSource Large Cap Value Fund Class A ALVAX C000008759 RiverSource Large Cap Value Fund Class B ALVBX C000008760 RiverSource Large Cap Value Fund Class I ALCIX C000042902 RiverSource Large Cap Value Fund Class R2 C000042903 RiverSource Large Cap Value Fund Class R3 C000042904 RiverSource Large Cap Value Fund Class R4 RSLVX C000042905 RiverSource Large Cap Value Fund Class R5 N-CSR 1 c35055nvcsr.txt FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-2111 RIVERSOURCE LARGE CAP SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 7/31 Date of reporting period: 7/31 Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE DISCIPLINED EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 6 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Financial Statements............... 23 Notes to Financial Statements...... 29 Report of Independent Registered Public Accounting Firm........... 51 Federal Income Tax Information..... 53 Board Members and Officers......... 54 Approval of Investment Management Services Agreement............... 58 Proxy Voting....................... 60
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Disciplined Equity Fund (the Fund) Class A shares declined 13.40% (excluding sales charge) for the 12 months ended July 31, 2008. > The Fund underperformed the unmanaged Standard & Poor's 500 (S&P 500 Index) Index which fell 11.09% for the annual period. > The Fund also underperformed the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which declined 10.11% for the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
Since 1 year 3 years 5 years inception(a) - ----------------------------------------------------------------------- RiverSource Disciplined Equity Fund Class A (excluding sales charge) -13.40% +2.17% +6.73% +8.09% - ----------------------------------------------------------------------- S&P 500 Index (unmanaged) -11.09% +2.85% +7.03% +8.35% - ----------------------------------------------------------------------- Lipper Large-Cap Core Funds Index -10.11% +3.12% +6.31% +7.48% - -----------------------------------------------------------------------
(a) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. (See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - -------------------------------------------------------------------------------- LOGO
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Total Net Expenses(a) - ---------------------------------------- Class A 0.96% 0.96% - ---------------------------------------- Class B 1.72% 1.72% - ---------------------------------------- Class C 1.72% 1.72% - ---------------------------------------- Class I 0.61% 0.61% - ---------------------------------------- Class R2 1.41% 1.41% - ---------------------------------------- Class R3 1.15% 1.15% - ---------------------------------------- Class R4 0.91% 0.84% - ---------------------------------------- Class R5 0.66% 0.66% - ---------------------------------------- Class W 1.06% 1.06% - ----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.04% for the year ended July 31, 2008), will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.72% for Class I, 1.52% for Class R2, 1.27% for Class R3, 0.88% for Class R4, 0.77% for Class R5 and 1.17% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 4/24/03) -13.40% +2.17% +6.73% +8.09% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -14.07% +1.43% +5.89% +7.25% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -14.11% +1.42% +5.90% +7.25% - ----------------------------------------------------------------------- Class I (inception 7/15/04) -12.98% +2.60% N/A +5.67% - ----------------------------------------------------------------------- Class R2 (inception 12/11/06) -13.51% N/A N/A -6.65% - ----------------------------------------------------------------------- Class R3 (inception 12/11/06) -13.26% N/A N/A -6.40% - ----------------------------------------------------------------------- Class R4 (inception 4/24/03) -13.26% +2.37% +6.89% +8.28% - ----------------------------------------------------------------------- Class R5 (inception 12/11/06) -13.09% N/A N/A -6.13% - ----------------------------------------------------------------------- Class W (inception 12/1/06) -13.52% N/A N/A -5.63% - ----------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -18.38% +0.17% +5.48% +6.87% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -18.14% +0.28% +5.57% +7.11% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -14.93% +1.42% +5.90% +7.25% - -----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 4/24/03) -15.36% +4.05% +6.98% +8.55% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -16.04% +3.21% +6.14% +7.69% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -16.08% +3.21% +6.15% +7.70% - ----------------------------------------------------------------------- Class I (inception 7/15/04) -15.08% +4.37% N/A +6.15% - ----------------------------------------------------------------------- Class R2 (inception 12/11/06) -15.33% N/A N/A -5.98% - ----------------------------------------------------------------------- Class R3 (inception 12/11/06) -15.22% N/A N/A -5.82% - ----------------------------------------------------------------------- Class R4 (inception 4/24/03) -15.21% +4.20% +7.17% +8.74% - ----------------------------------------------------------------------- Class R5 (inception 12/11/06) -15.05% N/A N/A -5.53% - ----------------------------------------------------------------------- Class W (inception 12/1/06) -15.47% N/A N/A -5.01% - ----------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -20.25% +2.04% +5.73% +7.30% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -20.01% +2.04% +5.83% +7.55% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -16.87% +3.21% +6.15% +7.70% - -----------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Disciplined Equity Fund (the Fund) Class A shares declined 13.40% (excluding sales charge) for the 12 months ended July 31, 2008. The Fund underperformed the unmanaged Standard & Poor's 500 Index (S&P 500 Index), which fell 11.09%, as well as the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which declined 10.11%, for the same period. SIGNIFICANT PERFORMANCE FACTORS The annual period was a most challenging one, characterized by heightened concerns about weakness in the economy, ongoing turmoil in the housing and financial markets, a credit crunch and soaring commodity prices. As a result, equity volatility increased as the year progressed, peaking in March with the collapse of Bear Stearns and rearing its head again in June. Given the extreme pressure on the financial system, it makes sense that the financials sector, the largest weighting in the S&P 500 Index, performed worst. The resulting equity market decline was only partially mitigated by the impressive double-digit gains SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Consumer Discretionary 10.1% - ------------------------------------------------ Consumer Staples 11.3% - ------------------------------------------------ Energy 15.6% - ------------------------------------------------ Financials 20.0% - ------------------------------------------------ Health Care 16.9% - ------------------------------------------------ Industrials 7.6% - ------------------------------------------------ Information Technology 10.3% - ------------------------------------------------ Materials 5.6% - ------------------------------------------------ Telecommunication Services 0.9% - ------------------------------------------------ Utilities 0.7% - ------------------------------------------------ Other(2) 1.0% - ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. The 1.0% is due to security lending activity. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- generated by the energy sector, as crude oil prices surged past $140 per barrel before falling back a bit to end July at just over $124 per barrel. The Fund's performance resulted from the three quantitative investment models we employ in selecting stocks for the Fund's portfolio: momentum, value and quality. During the 12-month period, the momentum and quality models outperformed the S&P 500 Index, but not enough to offset the underperformance of the value model. The momentum model is designed, in part, to capture investor sentiment over the near to mid term, and it indeed did that, taking a strong lead during these challenging months. The quality model was intended to serve, in part, as a defensive measure during equity market corrections when investor risk aversion increases, and it, too, performed strongly. The value model was challenged primarily by exposure to financials and select consumer discretionary names. However, the value model performed well when the beaten-up financials sector rallied somewhat in January 2008 and again in July 2008. We believe that the style diversification provided by the three quantitative models is advantageous over the long-term, even though the Fund may experience underperformance in the short term. TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Johnson & Johnson 4.9% - ------------------------------------------------ Pfizer 4.8% - ------------------------------------------------ Chevron 4.5% - ------------------------------------------------ Citigroup 3.0% - ------------------------------------------------ Wal-Mart Stores 2.8% - ------------------------------------------------ Apple 2.7% - ------------------------------------------------ Occidental Petroleum 2.6% - ------------------------------------------------ Monsanto 2.6% - ------------------------------------------------ Exxon Mobil 2.6% - ------------------------------------------------ Intel 2.3% - ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Following a specific, disciplined process, we do not make sector or industry bets based on economic or equity market outlooks. That said, the Fund's quantitative models led to a bias toward quality stocks, which boosted results during the period, as these stocks performed comparatively well. At the same time, the Fund's models positioned the equity portfolios toward the cheapest P/E stocks and toward the mega-cap, or largest cap stocks, both of which detracted from results, as these equity sectors posted weak results. Stock selection within the mega-cap segment of the market, however, proved effective, contributing to the Fund's results. Overall, sector allocation contributed to the Fund's performance, with sizable weightings in energy, health care and materials and only modest positions in industrials and telecommunications particularly helpful. Partially offsetting these positives were the detracting effects of having moderate allocations to the strongly performing consumer staples and utilities sectors and a significant exposure to the weaker financials and consumer discretionary sectors. Because we use a bottom-up approach, it is not surprising that most of the Fund's underperformance came from stock selection. Specifically, stock selection in the financials sector detracted most, as it did to a lesser extent in consumer discretionary, health care and energy. This more than offset the combined effect of positive stock selection in industrials, materials and telecommunications. Among individual holdings, information technology company APPLE, selected by the momentum model, contributed most to the Fund's During the 12-month period, the momentum and quality models outperformed the S&P 500 Index, but not enough to offset the underperformance of the value model. - -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- return. Other strong positive contributors included chemicals firm MONSANTO, selected by the momentum model; pharmaceutical company JOHNSON & JOHNSON, selected by the quality and momentum models; and energy companies OCCIDENTAL PETROLEUM, favored by the momentum model, and CHEVRON, initially chosen by the value model and then a quality model pick. Stocks that detracted from the Fund's return included four financials companies, each selected by the value model, namely FANNIE MAE, CITIGROUP, FREDDIE MAC and WASHINGTON MUTUAL. Other poor performers during the period were pharmaceutical giant PFIZER, a value and quality model choice, and retailer HOME DEPOT, also a value and quality model selection. At the end of July, the Fund's largest individual stock holdings were pharmaceutical companies JOHNSON & JOHNSON and PFIZER, the former a quality and momentum model choice and the latter a quality and value model pick; energy company CHEVRON, a quality model selection; information technology company APPLE, selected by the momentum model; and retailing giant WAL-MART STORES, a momentum and quality model pick. CHANGES TO THE FUND'S PORTFOLIO As a result of quantitative models-driven stock selection during the period, the Fund's sector allocations changed somewhat. For example, the Fund's exposure to financials, health care and materials increased relative to the S&P 500 Index. The Fund's positions in utilities and telecommunications decreased. Our risk models limit the size of individual holdings, as well as sector and industry allocations, relative to the S&P 500 Index. For instance, the Fund's weightings by sector and industry can never be more than 6% overweighted or underweighted relative to the S&P 500 Index. We also apply additional risk measures that impose constraints on market capitalization, price, quality, turnover, transaction costs and other variables. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR FUTURE STRATEGY We intend to continue seeking optimal returns for the Fund through the style diversification offered by our three quantitative investment models. We are convinced of the merit of our multifaceted, disciplined approach to managing risk in the portfolio and believe this combination of style diversification and rigorous risk management will allow us to maintain the high quality of the Fund's portfolio in whatever market conditions lie ahead. (PHOTO - Dimitris Bertsimas) (PHOTO - Gina Mourtzinou) Dimitris Bertsimas, Ph.D. Gina Mourtzinou, Ph.D. Senior Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Disciplined Equity Fund Class A shares (from 5/1/03 to 7/31/08)* as compared to the performance of two widely cited performance indices, the Standard & Poor's 500 Index and the Lipper Large-Cap Core Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. * Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at July 31, 2008 SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE DISCIPLINED EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $8,162 $10,051 $13,057 $14,202 - ---------------------------------------------------------------------------------------------- Average annual total return -18.38% +0.17% +5.48% +6.87% - ---------------------------------------------------------------------------------------------- S&P 500 INDEX(1) Cumulative value of $10,000 $8,891 $10,880 $14,045 $15,236 - ---------------------------------------------------------------------------------------------- Average annual total return -11.09% +2.85% +7.03% +8.35% - ---------------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $8,989 $10,966 $13,579 $14,602 - ---------------------------------------------------------------------------------------------- Average annual total return -10.11% +3.12% +6.31% +7.48% - ----------------------------------------------------------------------------------------------
Results for other share classes can be found on pages 4 and 5. - -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED EQUITY FUND LINE GRAPH)
RIVERSOURCE DISCIPLINED EQUITY FUND CLASS A LIPPER LARGE-CAP (INCLUDES SALES S&P 500 CORE FUNDS CHARGE) INDEX(1) INDEX(2) ----------------------- ------------------ ------------------ 5/1/03 $ 9,425 $10,000 $10,000 7/03 10,254 10,849 10,755 7/04 11,483 12,278 11,832 7/05 13,315 14,003 13,318 7/06 14,147 14,756 13,984 7/07 16,399 17,136 16,244 7/08 14,202 15,236 14,602
(1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.20 $4.46 .94% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.19 $4.72 .94% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 906.20 $8.06 1.70% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.41 $8.52 1.70% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 906.00 $8.01 1.69% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.46 $8.47 1.69% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 912.30 $2.76 .58% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.98 $2.92 .58% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 908.80 $6.64 1.40% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.90 $7.02 1.40% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.40 $5.46 1.15% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.14 $5.77 1.15% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.60 $3.85 .81% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.84 $4.07 .81% - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 911.90 $3.04 .64% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.68 $3.22 .64% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 908.50 $4.89 1.03% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.74 $5.17 1.03% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2008: -8.98% for Class A, -9.38% for Class B, -9.40% for Class C, -8.77% for Class I, -9.12% for Class R2, -8.96% for Class R3, -8.94% for Class R4, -8.81% for Class R5 and -9.15% for Class W. - -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (99.3%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.8%) General Dynamics 150,467 $13,412,629 United Technologies 170,133 10,885,109 --------------- Total 24,297,738 - ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) CH Robinson Worldwide 104,757 5,049,287 United Parcel Service Cl B 29,657 1,870,764 --------------- Total 6,920,051 - ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.7%) Johnson Controls 666,450 20,100,132 - ------------------------------------------------------------------------------------- AUTOMOBILES (0.6%) Ford Motor 1,207,269(b) 5,794,891 General Motors 561,121(d) 6,211,609 Harley-Davidson 144,208 5,456,831 --------------- Total 17,463,331 - ------------------------------------------------------------------------------------- BEVERAGES (2.6%) Coca-Cola 523,483 26,959,375 Coca-Cola Enterprises 139,108 2,355,098 Pepsi Bottling Group 80,083 2,230,312 PepsiCo 690,410 45,953,689 --------------- Total 77,498,474 - ------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.4%) Biogen Idec 170,084(b) 11,865,060 Gilead Sciences 566,217(b) 30,564,394 --------------- Total 42,429,454 - ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.2%) Masco 390,239 6,435,041 - ------------------------------------------------------------------------------------- CAPITAL MARKETS (3.2%) Charles Schwab 175,448 4,016,005 E*TRADE Financial 256,004(b) 773,132 Goldman Sachs Group 25,923 4,770,869 Lehman Brothers Holdings 433,434 7,515,746 Merrill Lynch & Co 719,901 19,185,362 Morgan Stanley 998,145 39,406,764 State Street 238,016 17,051,466 T Rowe Price Group 28,175 1,686,274 --------------- Total 94,405,618 - ------------------------------------------------------------------------------------- CHEMICALS (4.6%) Air Products & Chemicals 55,173 5,253,021 Ashland 8,000 334,160 Dow Chemical 471,165 15,694,506 Ecolab 67,323 3,009,338 Monsanto 650,758 77,511,786 PPG Inds 66,308 4,020,917 Praxair 254,218 23,827,853 Sigma-Aldrich 99,276 6,030,024 --------------- Total 135,681,605 - ------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.6%) BB&T 447,110(d) 12,528,022 Comerica 171,854 4,935,647 Fifth Third Bancorp 368,605 5,149,412 First Horizon Natl 264,891(d) 2,489,975 Huntington Bancshares 363,386 2,550,970 KeyCorp 218,200 2,302,010 Marshall & Ilsley 55,025 836,380 Natl City 934,379(d) 4,419,613 SunTrust Banks 64,075 2,630,920 Synovus Financial 135,983(d) 1,293,198 US Bancorp 128,076 3,920,406 Wachovia 285,836 4,936,388 --------------- Total 47,992,941 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL SERVICES & SUPPLIES (0.1%) Avery Dennison 38,795 $1,707,368 RR Donnelley & Sons 79,664 2,127,029 --------------- Total 3,834,397 - ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.1%) Juniper Networks 104,860(b) 2,729,506 - ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.2%) Apple 513,868(b) 81,679,319 IBM 34,285 4,387,794 Lexmark Intl Cl A 180,264(b) 6,323,661 QLogic 139,178(b) 2,622,114 --------------- Total 95,012,888 - ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) Fluor 35,437 2,882,800 Jacobs Engineering Group 46,748(b) 3,615,490 --------------- Total 6,498,290 - ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.1%) SLM 101,227(b) 1,734,019 - ------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 157,293 6,309,022 - ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.1%) H&R Block 128,936 3,137,013 - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (5.5%) Bank of America 819,279 26,954,279 CIT Group 293,875 2,492,060 Citigroup 4,776,349 89,269,962 CME Group 10,890 3,921,816 JPMorgan Chase & Co 1,027,716 41,756,101 --------------- Total 164,394,218 - ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%) Embarq 90,976 4,163,972 Verizon Communications 706,965 24,065,088 --------------- Total 28,229,060 - ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.5%) Duke Energy 113,096 1,988,228 FirstEnergy 187,110 13,761,940 --------------- Total 15,750,168 - ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) Emerson Electric 124,001 6,038,849 - ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.6%) BJ Services 67,770 1,992,438 Cameron Intl 68,834(b) 3,287,512 ENSCO Intl 20,563 1,421,726 Nabors Inds 113,617(b,c) 4,142,476 Natl Oilwell Varco 82,932(b) 6,520,943 Smith Intl 877 65,231 Transocean 113,792(b) 15,479,125 Weatherford Intl 396,020(b) 14,941,835 --------------- Total 47,851,286 - ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (3.7%) Costco Wholesale 183,079 11,475,392 Safeway 318,606 8,513,152 SUPERVALU 79,252 2,030,436 Walgreen 155,755 5,348,627 Wal-Mart Stores 1,428,204 83,721,318 --------------- Total 111,088,925 - ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.5%) Archer-Daniels-Midland 133,678 3,827,201 Dean Foods 27,032(b) 575,782 HJ Heinz 77,259 3,892,308 Sara Lee 476,830 6,513,498 --------------- Total 14,808,789 - ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Becton Dickinson & Co 52,477 4,455,822 CR Bard 61,637 5,722,379 Varian Medical Systems 97,154(b) 5,829,240 --------------- Total 16,007,441 - ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.1%) Aetna 110,399 4,527,463 Cardinal Health 193,112 10,375,908 CIGNA 511,572 18,938,395 Express Scripts 312,689(b) 22,057,082 Health Management Associates Cl A 67,300(b) 413,895 Humana 103,989(b) 4,566,157 Laboratory Corp of America Holdings 9,029(b) 610,180 Medco Health Solutions 554,391(b) 27,486,706
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) Quest Diagnostics 37,962 $2,018,060 Tenet Healthcare 456,110(b) 2,640,877 --------------- Total 93,634,723 - ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.2%) Intl Game Technology 192,159 4,171,772 McDonald's 493,202 29,488,548 Wendy's Intl 50,234 1,152,870 Wyndham Worldwide 46,479 833,833 --------------- Total 35,647,023 - ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Black & Decker 29,679 1,781,334 Centex 168,771 2,477,558 DR Horton 693,693 7,713,867 KB Home 68,347 1,202,224 Lennar Cl A 165,396 2,001,292 Pulte Homes 202,526 2,472,842 Snap-On 23,267 1,309,699 Stanley Works 13,005 578,462 --------------- Total 19,537,278 - ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (3.5%) Colgate-Palmolive 392,107 29,121,787 Kimberly-Clark 257,974 14,918,636 Procter & Gamble 898,023 58,802,546 --------------- Total 102,842,969 - ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.5%) 3M 664,986 46,808,365 Textron 180,304 7,837,815 Tyco Intl 422,577(c) 18,830,031 --------------- Total 73,476,211 - ------------------------------------------------------------------------------------- INSURANCE (7.9%) ACE 378,651(c) 19,197,606 AFLAC 447,992 24,912,835 Allstate 913,087 42,202,881 Ambac Financial Group 288,197 726,256 American Intl Group 803,418 20,929,039 Assurant 27,878 1,676,025 Chubb 428,603 20,590,088 Cincinnati Financial 28,900 804,576 Genworth Financial Cl A 656,721 10,487,834 Lincoln Natl 18,186 867,472 Marsh & McLennan Companies 236,739 6,687,877 MBIA 209,475(d) 1,242,187 Progressive 1,404,343 28,437,946 Prudential Financial 81,341 5,610,089 Safeco 97,345 6,440,345 Torchmark 89,376 5,188,277 Travelers Companies 639,459 28,212,931 Unum Group 358,253 8,655,392 XL Capital Cl A 94,342(c) 1,687,778 --------------- Total 234,557,434 - ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Amazon.com 61,740(b) 4,713,232 - ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.7%) Google Cl A 46,428(b) 21,995,265 - ------------------------------------------------------------------------------------- IT SERVICES (1.6%) Affiliated Computer Services Cl A 18,684(b) 900,569 Automatic Data Processing 78,311 3,344,663 MasterCard Cl A 86,337 21,079,178 Paychex 98,702 3,249,270 Total System Services 65,805 1,288,462 Western Union 593,498 16,404,285 --------------- Total 46,266,427 - ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.5%) Brunswick 100,213 1,292,748 Eastman Kodak 232,404 3,402,395 Mattel 530,174 10,629,988 --------------- Total 15,325,131 - ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.3%) Applied Biosystems 96,483(g) 3,563,117 Waters 59,289(b) 4,028,095 --------------- Total 7,591,212 - ------------------------------------------------------------------------------------- MACHINERY (1.4%) Deere & Co 337,116 23,652,058 Illinois Tool Works 99,790 4,675,162 Ingersoll-Rand Cl A 296,130(c) 10,660,680 Manitowoc 41,277 1,088,062 Parker Hannifin 19,313 1,191,226 --------------- Total 41,267,188 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MEDIA (0.8%) CBS Cl B 836,744 $13,689,132 Gannett 498,635 9,035,266 Meredith 14,134 361,265 New York Times Cl A 109,515(d) 1,378,794 --------------- Total 24,464,457 - ------------------------------------------------------------------------------------- METALS & MINING (1.0%) Freeport-McMoRan Copper & Gold 37,306 3,609,356 Newmont Mining 264,476 12,684,269 Nucor 251,492 14,390,372 --------------- Total 30,683,997 - ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.2%) Family Dollar Stores 102,849 2,396,382 Kohl's 85,519(b) 3,584,101 --------------- Total 5,980,483 - ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.2%) NiSource 121,389 2,073,324 TECO Energy 83,991 1,558,033 Xcel Energy 89,446 1,794,287 --------------- Total 5,425,644 - ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (14.0%) Anadarko Petroleum 273,837 15,857,901 Apache 49,069 5,504,070 Chevron 1,592,569 134,667,634 ConocoPhillips 213,132 17,395,834 CONSOL Energy 146,591 10,904,904 Devon Energy 48,553 4,607,194 EOG Resources 152,412 15,321,978 Exxon Mobil 962,007 77,374,223 Hess 54,510 5,527,314 Marathon Oil 363,777 17,996,048 Massey Energy 64,559 4,793,506 Murphy Oil 110,749 8,830,018 Occidental Petroleum 1,003,658 79,118,360 Peabody Energy 262,364 17,748,925 Sunoco 29,899 1,214,198 Tesoro 98,048 1,513,861 --------------- Total 418,375,968 - ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Estee Lauder Companies Cl A 46,161 2,035,700 - ------------------------------------------------------------------------------------- PHARMACEUTICALS (11.6%) Allergan 56,596 2,939,030 Barr Pharmaceuticals 9,508(b) 627,338 Eli Lilly & Co 295,088 13,901,596 Forest Laboratories 149,667(b) 5,314,675 Johnson & Johnson 2,120,920 145,219,392 King Pharmaceuticals 400,546(b) 4,610,284 Merck & Co 772,283 25,408,111 Mylan 138,890(b) 1,801,403 Pfizer 7,750,509 144,702,003 --------------- Total 344,523,832 - ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) HCP 198,201 7,149,110 Public Storage 99,036 8,110,058 --------------- Total 15,259,168 - ------------------------------------------------------------------------------------- ROAD & RAIL (1.8%) Burlington Northern Santa Fe 118,327 12,321,391 CSX 248,524 16,795,252 Norfolk Southern 72,837 5,238,437 Ryder System 35,293 2,327,926 Union Pacific 208,552 17,193,027 --------------- Total 53,876,033 - ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.4%) Intel 3,083,693 68,427,147 MEMC Electronic Materials 44,937(b) 2,076,539 NVIDIA 95,822(b) 1,096,204 Xilinx 54,132 1,344,098 --------------- Total 72,943,988 - ------------------------------------------------------------------------------------- SOFTWARE (2.4%) BMC Software 153,194(b) 5,038,551 Electronic Arts 70,423(b) 3,040,865 Microsoft 1,151,519 29,617,069 Oracle 1,507,562(b) 32,457,809 --------------- Total 70,154,294 - ------------------------------------------------------------------------------------- SPECIALTY RETAIL (4.0%) Abercrombie & Fitch Cl A 47,279 2,610,746 AutoNation 173,695(b) 1,792,532 AutoZone 41,363(b) 5,389,185 Bed Bath & Beyond 172,209(b) 4,792,576 Best Buy 144,404 5,735,727
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SPECIALTY RETAIL (CONT.) GameStop Cl A 92,505(b) $3,747,378 Gap 368,056 5,933,063 Home Depot 2,249,714 53,610,686 Lowe's Companies 1,222,095 24,832,970 Office Depot 149,209(b) 1,014,621 RadioShack 168,700 2,813,916 Sherwin-Williams 53,160 2,830,770 Staples 28,256 635,760 TJX Companies 93,120 3,139,075 --------------- Total 118,879,005 - ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.0%) Coach 206,729(b) 5,273,657 Jones Apparel Group 116,009 1,941,991 Liz Claiborne 229,550 3,000,219 Nike Cl B 250,207 14,682,146 VF 80,201 5,740,787 --------------- Total 30,638,800 - ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.3%) Fannie Mae 1,336,093 15,365,070 Freddie Mac 794,150 6,488,206 Hudson City Bancorp 416,370 7,602,916 MGIC Investment 217,148(d) 1,389,747 Sovereign Bancorp 259,714 2,472,477 Washington Mutual 1,140,168(d) 6,077,095 --------------- Total 39,395,511 - ------------------------------------------------------------------------------------- TOBACCO (1.0%) Altria Group 377,005 7,672,052 Philip Morris Intl 377,005 19,472,308 UST 30,691 1,614,654 --------------- Total 28,759,014 - ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.1%) WW Grainger 42,704 3,822,435 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $3,449,006,497) $2,958,720,678 - ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.0%)(e) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 2.54% 29,160,041(f) $29,160,041 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $29,160,041) $29,160,041 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,478,166,538)(h) $2,987,880,719 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the value of foreign securities represented 1.8% of net assets. (d) At July 31, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (e) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 1.0% of net assets. See Note 5 to the financial statements. (f) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (g) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 21 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (h) At July 31, 2008, the cost of securities for federal income tax purposes was $3,482,874,307 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $182,589,649 Unrealized depreciation (677,583,237) - ------------------------------------------------------------ Net unrealized depreciation $(494,993,588) - ------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $3,449,006,497) $2,958,720,678 Affiliated money market fund (identified cost $29,160,041) 29,160,041 - ----------------------------------------------------------------------------- Total investments in securities (identified cost $3,478,166,538) 2,987,880,719 Capital shares receivable 7,901,741 Dividends receivable 3,662,482 Receivable for investment securities sold 18,579,000 - ----------------------------------------------------------------------------- Total assets 3,018,023,942 - ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 4,942,098 Payable for investment securities purchased 5,434,457 Payable upon return of securities loaned 28,947,000 Accrued investment management services fees 47,412 Accrued distribution fees 17,809 Accrued transfer agency fees 8,141 Accrued administrative services fees 4,325 Accrued plan administration services fees 874 Other accrued expenses 245,899 - ----------------------------------------------------------------------------- Total liabilities 39,648,015 - ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $2,978,375,927 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
REPRESENTED BY Capital stock -- $.01 par value $ 5,066,590 Additional paid-in capital 3,372,897,811 Undistributed net investment income 26,278,639 Accumulated net realized gain (loss) 64,376,402 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (490,243,515) - ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $2,978,375,927 - ----------------------------------------------------------------------------- *Including securities on loan, at value $ 26,940,910 - -----------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,067,408,739 181,520,585 $5.88(1) Class B $ 35,383,368 6,102,723 $5.80 Class C $ 2,787,743 482,134 $5.78 Class I $ 391,424,906 66,059,325 $5.93 Class R2 $ 3,886 661 $5.88 Class R3 $ 3,892 661 $5.89 Class R4 $ 126,215,819 21,367,300 $5.91 Class R5 $ 3,897 661 $5.90 Class W $1,355,143,677 231,124,956 $5.86 - ----------------------------------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.24. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008
INVESTMENT INCOME Income: Dividends $ 73,023,497 Interest 34,939 Income distributions from affiliated money market fund 2,535,607 Fee income from securities lending 371,237 - ---------------------------------------------------------------------------- Total income 75,965,280 - ---------------------------------------------------------------------------- Expenses: Investment management services fees 17,556,244 Distribution fees Class A 3,199,228 Class B 550,860 Class C 31,395 Class R2 22 Class R3 11 Class W 3,483,017 Transfer agency fees Class A 1,263,544 Class B 61,169 Class C 3,295 Class R2 3 Class R3 3 Class R4 71,684 Class R5 3 Class W 2,786,414 Administrative services fees 1,701,542 Plan administration services fees Class R2 11 Class R3 11 Class R4 358,419 Compensation of board members 63,212 Custodian fees 246,979 Printing and postage 231,535 Registration fees 174,925 Professional fees 73,045 Other 117,553 - ---------------------------------------------------------------------------- Total expenses 31,974,124 Expenses waived/reimbursed by the Investment Manager and its affiliates (101,556) Earnings and bank fee credits on cash balances (79,613) - ---------------------------------------------------------------------------- Total net expenses 31,792,955 - ---------------------------------------------------------------------------- Investment income (loss) -- net 44,172,325 - ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 25 STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 112,424,784 Futures contracts (8,587,777) - ---------------------------------------------------------------------------- Net realized gain (loss) on investments 103,837,007 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (641,572,651) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (537,735,644) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(493,563,319) - ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 44,172,325 $ 26,328,359 Net realized gain (loss) on investments 103,837,007 175,329,400 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (641,572,651) 99,972,248 - --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (493,563,319) 301,630,007 - --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (11,230,396) (11,770,748) Class B -- (119,376) Class C (4,379) (7,167) Class I (5,698,153) (4,503,510) Class R2 (28) (53) Class R3 (40) (53) Class R4 (1,390,578) (2,093,617) Class R5 (54) (54) Class W (14,867,518) (4,357) Net realized gain Class A (68,772,061) (98,698,411) Class B (3,058,960) (5,457,193) Class C (169,022) (199,900) Class I (24,176,366) (28,282,528) Class R2 (244) (338) Class R3 (244) (338) Class R4 (7,584,972) (15,612,336) Class R5 (244) (338) Class W (74,056,615) (27,397) - --------------------------------------------------------------------------------------------- Total distributions (211,009,874) (166,777,714) - ---------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 49,740,163 $ 88,546,740 Class B shares 5,505,096 11,644,836 Class C shares 976,461 962,793 Class I shares 120,762,575 268,920,269 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 25,111,692 96,913,115 Class R5 shares -- 5,000 Class W shares 1,465,443,768 847,280,579 Reinvestment of distributions at net asset value Class A shares 74,058,485 101,787,281 Class B shares 3,022,150 5,504,829 Class C shares 167,943 204,516 Class I shares 29,873,023 32,784,089 Class R4 shares 8,975,550 17,705,953 Class W shares 88,923,836 31,356 Payments for redemptions Class A shares (215,746,354) (248,119,981) Class B shares (24,117,349) (34,806,536) Class C shares (1,059,851) (749,148) Class I shares (108,422,258) (138,117,054) Class R4 shares (37,030,416) (203,796,200) Class W shares (622,614,805) (82,651,517) - --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 863,569,709 764,060,920 - --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 158,996,516 898,913,213 Net assets at beginning of year 2,819,379,411 1,920,466,198 - --------------------------------------------------------------------------------------------- Net assets at end of year $2,978,375,927 $2,819,379,411 - --------------------------------------------------------------------------------------------- Undistributed net investment income $ 26,278,639 $ 15,309,316 - ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Disciplined Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 29 VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of - -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At July 31, 2008, and for the year then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At July 31, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 31 The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At July 31, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of REIT distributions and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $11,856 and accumulated net realized gain has been increased by $11,856. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income.................... $29,513,520 $55,821,524 Long-term capital gain............. 50,488,937 54,647,635 CLASS B Distributions paid from: Ordinary income.................... 813,265 2,555,014 Long-term capital gain............. 2,245,695 3,021,555 CLASS C Distributions paid from: Ordinary income.................... 49,313 96,386 Long-term capital gain............. 124,088 110,681 CLASS I Distributions paid from: Ordinary income.................... 12,125,448 17,126,482 Long-term capital gain............. 17,749,071 15,659,556 CLASS R2 Distributions paid from: Ordinary income.................... 93 204 Long-term capital gain............. 179 187 CLASS R3 Distributions paid from: Ordinary income.................... 105 204 Long-term capital gain............. 179 187 CLASS R4 Distributions paid from: Ordinary income.................... 3,407,046 9,061,667 Long-term capital gain............. 5,568,504 8,644,286 CLASS R5 Distributions paid from: Ordinary income.................... 119 205 Long-term capital gain............. 179 187 CLASS W Distributions paid from: Ordinary income.................... 34,555,495 16,585 Long-term capital gain............. 54,368,638 15,169
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception Date) to July 31, 2007. Class W is for the period from Dec. 1, 2006 (inception date) to July 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 33 At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ 26,316,607 Undistributed accumulated long-term gain....... $ 69,084,171 Unrealized appreciation (depreciation)......... $(494,989,252)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $1,361,345 for the year ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.53% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended July 31, 2008, other expenses paid to this company were $12,086. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 35 TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $923,000 and $23,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGE Sales charges received by the Distributor for distributing Fund shares were $384,412 for Class A, $28,089 for Class B and $320 for Class C for the year ended July 31, 2008. - -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class R2............................................ 1.16% Class R3............................................ 0.90 Class R4............................................ 0.84
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4.......................................... $99,480
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.......................................... $ 11 Class R3.......................................... 11 Class R4.......................................... 2,054
Under an agreement which was effective until July 31, 2008, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.09% Class B............................................. 1.85 Class C............................................. 1.85 Class I............................................. 0.78 Class R2............................................ 1.58 Class R3............................................ 1.33 Class R4............................................ 0.88 Class R5............................................ 0.83 Class W............................................. 1.23
Effective August 1, 2008, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 37 performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.05% Class B............................................. 1.81 Class C............................................. 1.81 Class I............................................. 0.72 Class R2............................................ 1.52 Class R3............................................ 1.27 Class R4............................................ 0.88 Class R5............................................ 0.77 Class W............................................. 1.17
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $79,613 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,581,232,117 and $1,875,992,176, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------ Class A 7,609,621 10,923,080 (32,329,627) (13,796,926) Class B 826,089 449,725 (3,897,874) (2,622,060) Class C 150,658 25,066 (161,175) 14,549 Class I 17,804,029 4,380,209 (16,813,974) 5,370,264 Class R4 3,752,567 1,317,996 (5,442,436) (371,873) Class W 213,069,694 13,134,983 (98,243,751) 127,960,926 - ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------ Class A 12,174,430 14,582,705 (34,507,399) (7,750,264) Class B 1,639,136 796,647 (4,750,576) (2,314,793) Class C 135,752 29,640 (105,911) 59,481 Class I 37,783,228 4,670,098 (18,989,372) 23,463,954 Class R2(a) 661 -- -- 661 Class R3(a) 661 -- -- 661 Class R4 13,970,887 2,529,422 (27,927,795) (11,427,486) Class R5(a) 661 -- -- 661 Class W(b) 114,252,036 4,492 (11,092,498) 103,164,030 - ------------------------------------------------------------------------------------
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At July 31, 2008, securities valued at $26,940,910 were on loan to brokers. For collateral, the Fund received $28,947,000 in cash. Cash collateral received is invested in an affiliated money market fund and short- term securities, including U.S. government securities or other high-grade debt obligations, which are included in the Portfolio of Investments. Income from securities lending amounted to $371,237 for the year ended July 31, 2008. Expenses paid to the Investment Manager as securities lending agent were $9,660 for the year ended July 31, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 39 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $1,215,814,562 and $1,194,979,908, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. - -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 41 9. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.22 $6.74 $6.70 $5.95 $5.44 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(b) .08(b) .06 .04 .02 Net gains (losses) (both realized and unrealized) (1.00) .97 .35 .90 .63 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.91) 1.05 .41 .94 .65 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.06) (.03) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.43) (.57) (.37) (.19) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.22 $6.74 $6.70 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,067 $1,410 $1,368 $28 $13 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .96% 1.05% 1.05% 1.35% 1.91% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .96% 1.03% 1.02% 1.25% 1.13% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.35% 1.13% .95% .84% .65% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (13.4- Total return(g) 0%) 15.92% 6.25% 15.95% 11.99% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.12 $6.65 $6.62 $5.90 $5.43 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .02 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .34 .86 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .35 .88 .59 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) (.01) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.37) (.52) (.32) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.80 $7.12 $6.65 $6.62 $5.90 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $35 $62 $73 $9 $3 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.82% 1.85% 2.13% 2.73% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.82% 2.04% 1.95% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .37% .20% .06% (.16%) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (14.0- Total return(g) 7%) 15.18% 5.42% 15.03% 10.95% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 43 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.11 $6.65 $6.62 $5.90 $5.43 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .01 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .35 .87 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .36 .88 .59 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.02) (.02) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.38) (.53) (.33) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.78 $7.11 $6.65 $6.62 $5.90 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $3 $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.81% 1.84% 2.13% 2.73% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.81% 2.06% 1.95% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .36% .20% .02% (.17%) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (14.1- Total return(g) 1%) 15.14% 5.51% 15.03% 10.96% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004(b) Net asset value, beginning of period $7.27 $6.78 $6.73 $5.96 $5.99 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(c) .11(c) .08 .04 .02 Net gains (losses) (both realized and unrealized) (.99) .97 .36 .92 (.05) - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.88) 1.08 .44 .96 (.03) - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.08) (.08) (.03) -- Distributions from realized gains (.37) (.51) (.31) (.16) -- - -------------------------------------------------------------------------------------------------------------- Total distributions (.46) (.59) (.39) (.19) -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.93 $7.27 $6.78 $6.73 $5.96 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $391 $441 $252 $82 $9 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .61% .70% .72% .91% 1.27%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .61% .67% .70% .91% .93%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.69% 1.47% 1.41% 1.19% 5.35%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - -------------------------------------------------------------------------------------------------------------- Total return (12.98%) 16.29% 6.73% 16.29% (.50%)(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from July 15, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 45 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.21 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .23 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.41) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.21 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.41% 1.49%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.16% 1.48%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .55%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.51%) 3.31%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.22 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .04 Net gains (losses) (both realized and unrealized) (.99) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.90) .24 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.43) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.89 $7.22 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.15% 1.24%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .90% 1.22%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss)(f) 1.41% .81%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.26%) 3.46%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 47 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.25 $6.76 $6.71 $5.95 $5.45 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .09(b) .07 .05 .03 Net gains (losses) (both realized and unrealized) (1.00) .98 .36 .91 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.90) 1.07 .43 .96 .64 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.07) (.04) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.44) (.58) (.38) (.20) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.91 $7.25 $6.76 $6.71 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $126 $158 $224 $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .91% .95% .87% 1.18% 1.76% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .84% .87% .84% 1.06% .98% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.47% 1.29% 1.10% 1.03% .78% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (13.2- Total return 6%) 16.15% 6.48% 16.25% 11.87% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. - -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.24 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .06 Net gains (losses) (both realized and unrealized) (1.00) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.89) .26 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.45) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.90 $7.24 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .66% .75%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .66% .74%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.66% 1.28%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.09%) 3.76%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 49 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.22 $7.46 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .32 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .35 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.44) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.86 $7.22 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,355 $745 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.06% 1.18%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.06% 1.13%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.22% .59%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.52%) 5.01%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 50 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE DISCIPLINED EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Disciplined Equity Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 51 In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Disciplined Equity Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- 52 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100% Dividends Received Deduction for corporations................ 100% U.S. Government Obligations.................................. 0.00% CAPITAL GAIN DISTRIBUTION - the Fund designates $130,545,470 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 53 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 54 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None 901 S. Marquette Ave. 1999 Minnesota Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 53 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley College Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 72 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Board member since President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. 2002 and Chair of College Inc. (manufactures Minneapolis, MN 55402 the Board since 2007 irrigation systems) Age 69 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 54 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc. Minneapolis, MN 55402 Biotech (biotechnology); Age 64 Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President, Financial Center Vice President since Chairman of the Board and Chief Investment Officer, Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director, Age 47 President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001- 2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 55 The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center since 2006; Director and Vice President -- Asset Minneapolis, MN 55474 Management, Products and Marketing, RiverSource Age 42 Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 44 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company 5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice Center Minneapolis, MN President -- Operations and Compliance, RiverSource 55474 Investments, LLC, 2004-2006; Director of Product Age 42 Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 Minneapolis, MN 55474 Age 53 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. since 2006; Vice Minneapolis, MN 55474 President, General Counsel and Secretary, Ameriprise Age 49 Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - -------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, 172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006; Center Director -- Mutual Funds, Voyageur Asset Management, Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset Age 47 Management, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 56 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer, 2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti- Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003- Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer, Age 44 American Express Centurion Bank, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 57 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services - -------------------------------------------------------------------------------- 58 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and market conditions involved Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 59 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote all proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 60 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT RIVERSOURCE DISCIPLINED EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6263 H (9/08)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE GROWTH FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE GROWTH FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE-STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Financial Statements............... 23 Notes to Financial Statements...... 29 Report of Independent Registered Public Accounting Firm........... 53 Federal Income Tax Information..... 55 Board Members and Officers......... 56 Approval of Investment Management Services Agreement............... 60 Proxy Voting....................... 63
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Growth Fund (the Fund) Class A shares declined 16.14%, excluding sales charge, for the 12 months ended July 31, 2008. > The Fund underperformed its benchmark, the Russell 1000(R) Growth Index, which fell 6.29% for the same 12-month period. > The Fund also underperformed its peer group as represented by the Lipper Large-Cap Growth Funds Index, which declined 4.89% for the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
1 year 3 years 5 years 10 years - --------------------------------------------------------------------- RiverSource Growth Fund Class A (excluding sales charge) -16.14% -0.82% +3.94% -1.59% - --------------------------------------------------------------------- Russell 1000 Growth Index (unmanaged) -6.29% +3.57% +6.39% +0.83% - --------------------------------------------------------------------- Lipper Large-Cap Growth Funds Index -4.89% +3.18% +6.20% +0.43% - ---------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Net Fund and Acquired Fund Total (Underlying Fund)(a) - --------------------------------------------- Class A 1.00% 1.04% - --------------------------------------------- Class B 1.76% 1.80% - --------------------------------------------- Class C 1.76% 1.80% - --------------------------------------------- Class I 0.54% 0.58% - --------------------------------------------- Class R2 1.36% 1.40% - --------------------------------------------- Class R3 1.12% 1.16% - --------------------------------------------- Class R4 0.84% 0.88% - --------------------------------------------- Class R5 0.61% 0.65% - --------------------------------------------- Class W 1.00% 1.04% - ---------------------------------------------
(a) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, was 0.04% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 3/1/72) -16.14% -0.82% +3.94% -1.59% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) -16.78% -1.59% +3.13% -2.35% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) -16.78% -1.59% +3.14% N/A -8.18% - --------------------------------------------------------------------------- Class I (inception 3/4/04) -15.74% -0.37% N/A N/A +2.54% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -16.11% N/A N/A N/A -8.04% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -15.91% N/A N/A N/A -7.82% - --------------------------------------------------------------------------- Class R4 (inception 3/20/95) -15.85% -0.59% +4.15% -1.42% N/A - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -15.80% N/A N/A N/A -7.57% - --------------------------------------------------------------------------- Class W (inception 12/1/06) -16.15% N/A N/A N/A -7.22% - --------------------------------------------------------------------------- With sales charge Class A (inception 3/1/72) -20.97% -2.76% +2.72% -2.10% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) -20.95% -2.92% +2.77% -2.35% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) -17.61% -1.59% +3.14% N/A -8.18% - ---------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* Class A (inception 3/1/72) -17.65% +0.32% +3.84% -1.64% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) -18.29% -0.46% +3.04% -2.40% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) -18.26% -0.45% +3.05% N/A -8.18% - --------------------------------------------------------------------------- Class I (inception 3/4/04) -17.26% +0.77% N/A N/A +2.74% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -17.62% N/A N/A N/A -8.06% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -17.43% N/A N/A N/A -7.85% - --------------------------------------------------------------------------- Class R4 (inception 3/20/95) -17.37% +0.54% +4.05% -1.47% N/A - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -17.32% N/A N/A N/A -7.60% - --------------------------------------------------------------------------- Class W (inception 12/1/06) -17.66% N/A N/A N/A -7.21% - --------------------------------------------------------------------------- With sales charge Class A (inception 3/1/72) -22.39% -1.64% +2.62% -2.15% N/A - --------------------------------------------------------------------------- Class B (inception 3/20/95) -22.38% -1.81% +2.68% -2.40% N/A - --------------------------------------------------------------------------- Class C (inception 6/26/00) -19.08% -0.45% +3.05% N/A -8.18% - ---------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * For classes with less than 10 years performance. - -------------------------------------------------------------------------------- 4 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Growth Fund's Class A shares declined 16.14%, excluding sales charge, for the fiscal year ended July 31, 2008. The Fund underperformed its benchmark, the Russell 1000(R) Growth Index (Russell Index), which fell 6.29%, and its peer group as represented by the Lipper Large-Cap Growth Funds Index, which declined 4.89% for the same period. SIGNIFICANT PERFORMANCE FACTORS Two market trends created a significant headwind for the Fund during the past fiscal year. Paying attention to value within the growth universe, as we do, was detrimental during the past year. Additionally, a very narrow group of companies, mainly global cyclical stocks, led the Russell Index during this period. The Fund has been underweight in this group compared with the Russell Index, and became more underweight during the year. We believed these stocks would come under pressure from slowing global growth, particularly as economic slowing in developed nations spread to emerging markets and began to depress commodity prices. SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Consumer Discretionary 15.7% - ------------------------------------------------ Consumer Staples 8.5% - ------------------------------------------------ Energy 1.2% - ------------------------------------------------ Financials 5.7% - ------------------------------------------------ Health Care 20.4% - ------------------------------------------------ Industrials 5.7% - ------------------------------------------------ Information Technology 20.5% - ------------------------------------------------ Materials 2.5% - ------------------------------------------------ Options Purchased 1.0% - ------------------------------------------------ Telecommunication Services 15.6% - ------------------------------------------------ Other(2) 3.2% - ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 3.2%, 1.1% is due to security lending activity and 2.1% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- The Fund's stock selections and sector allocations detracted from return relative to the Russell Index. Positioning in the consumer discretionary, industrials and energy sectors had the largest negative effect on relative performance. Conversely, positioning in the consumer staples and technology sectors added value. In the consumer discretionary sector, stock selection had a negative effect on performance. The Fund's media holdings, such as VIRGIN MEDIA and SIRIUS XM RADIO, underperformed during the period. VIRGIN MEDIA, a British telecommunications company, received an attractive acquisition bid in July 2007 and subsequently conducted an auction where multiple suitors showed interest. However, difficulties in the high-yield bond market prevented the company from completing the auction. Since then the stock price has fallen sharply amid additional concerns about the company's leverage and susceptibility to economic weakness. We believe VIRGIN MEDIA'S fundamentals are now better than they were a year ago, while the stock stands at about half the price. In our view, the stock's market price has disconnected from the underlying value of the company, creating an attractive opportunity. We held SIRIUS XM RADIO because we believed the merger with XM Satellite Radio had a high probability of occurring and that SIRIUS XM RADIO was worth more as a combined TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Virgin Media 6.8% - ------------------------------------------------ Vodafone Group 5.3% - ------------------------------------------------ Microsoft 4.1% - ------------------------------------------------ Sirius XM Radio 4.0% - ------------------------------------------------ Telefonica 3.6% - ------------------------------------------------ Pfizer 3.1% - ------------------------------------------------ Boeing 2.8% - ------------------------------------------------ Bristol-Myers Squibb 2.7% - ------------------------------------------------ KKR Private Equity Investors LP Unit 2.6% - ------------------------------------------------ Genentech 2.4% - ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- 6 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- entity. However, now that the merger has been approved, the market seems to doubt the viability of the satellite radio business model and is also worried about the effect of slower automotive sales on the company. We believe SIRIUS XM RADIO has the ability to make its model work longer term and, in the meantime, can benefit from merger-related synergies. Another consumer discretionary company, HARMAN INTERNATIONAL INDUSTRIES, which manufactures audio and electronic products for automotive, consumer and professional use, also detracted from return. Early in the period, the stock declined when a private equity deal to purchase the company fell apart amid the credit market difficulties. The company now has a new CEO with a long-term plan to bring the company's cost structure in line. However, weak auto sales and near-term challenges in executing the strategic plan forced the company to lower earnings forecasts. We reduced the Fund's holdings of HARMAN INTERNATIONAL because the fundamental story has weakened. On the positive side, consumer products company AVON PRODUCTS was a leading contributor to return, benefiting from strong global growth and a corporate restructuring that is improving margins and driving earnings growth. In the industrials sector, stock selection was the main detractor. Having a smaller energy allocation than the Russell Index was disadvantageous, as energy stocks led the market during the past fiscal year. Our focus remains on stocks that appear reasonably valued, can grow faster and exhibit a better earnings trend than their peers. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Stock selection in the technology and consumer staples sectors added to return. In technology, particularly strong results came from communications technology stocks, including QUALCOMM. In July 2008, the company finally settled its litigation with Nokia, presenting a clearer outlook for earnings growth. The company is also benefiting from the transitioning of cell phones to third generation technology where QUALCOMM has a dominant position across all technologies. Also adding to return were biotherapeutics company GENENTECH and German telecommunications company DEUTSCHE TELEKOM. GENENTECH'S minority owner Roche is trying to buy out GENENTECH and offered a substantial premium. The market has also become more optimistic about the company's growth potential in anticipation of several upcoming studies on GENENTECH cancer treatments. DEUTSCH TELEKOM was an inexpensive stock that has appreciated based on some improvement in its earnings trend. CHANGES TO THE FUND'S PORTFOLIO We reduced the Fund's energy component because commodity prices rose even higher, increasing the risk of a reversal. We also believe economic growth rates in emerging markets appear likely to slow, potentially reducing or eliminating a key support for energy demand and high commodity prices. We also reduced the Fund's weighting in the materials sector, selling some precious metals stocks that had performed well. We shifted some assets from consumer staples to health care. Consumer staples was one of the few stable growth segments to perform well in the tough economic environment and as a result, we believed the stocks had become overvalued compared to other stable growth groups, such as health care and telecommunications services. The Fund had a very small financials allocation at the start of the period. We made some highly selective purchases during the year, focusing on stocks that don't seem to have bad news in their futures, but rather, suffered from extreme weakness due to negative sentiment toward financial stocks as a whole. The Fund continues to hold moderate exposure to financial stocks. - -------------------------------------------------------------------------------- 8 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- We added to individual stocks where we thought company fundamentals were strong, but the market bid the stock prices down. Examples include Spanish telecommunications company TELEFONICA, pharmaceutical firm BRISTOL-MEYERS SQUIBB and software giant MICROSOFT. We also increased the Fund's holdings of SIRIUS XM RADIO. We reduced holdings of HARMAN INTERNATIONAL as discussed above. We also trimmed the Fund's holdings of technology communications company CISCO because we consider nearer term fundamentals questionable and the stock valuation unappealing. We moved to a very small position in GENERAL ELECTRIC because we see risks to both its financial and global industrial businesses. The turnover rate for the Fund was 112%. OUR FUTURE STRATEGY Our focus remains on stocks that appear reasonably valued, can grow faster and exhibit a better earnings trend than their peers. Valuation has not worked as a determinant of stock performance for some time, but we believe there are indications that sensitivity to value will become more critical. The differences in valuation among stocks have become increasingly wide, reaching a historically rare level. In the past, such extreme valuation spreads have foreshadowed a period when valuation was more important to investors. With no meaningful signs of an economic turnaround, we believe weakness is spreading globally and could begin to affect emerging markets. We doubt that the emerging markets have fully decoupled from the developed nations as many are suggesting. Consequently, a key driver of results for global cyclical companies may disappear. Such a scenario should make the earnings growth of more stable growth stocks, like those in the Fund, more appealing to investors. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- We conclude that whether you are investing in growth stocks or value stocks, the equity markets are probably entering a period when a stock's valuation will be a more important factor and its momentum less important. (PHOTO - NICK THAKORE) Nick Thakore Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- 10 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Growth Fund Class A shares (from 8/1/98 to 7/31/08) as compared to the performance of two widely cited performance indices, the Russell 1000 Growth Index and the Lipper Large-Cap Growth Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at July 31, 2008 1 YEAR 3 YEARS 5 YEARS 10 YEARS RIVERSOURCE GROWTH FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,903 $9,195 $11,436 $8,025 - ------------------------------------------------------------------------------------------ Average annual total return -20.97% -2.76% +2.72% -2.10% - ------------------------------------------------------------------------------------------ RUSSELL 1000 GROWTH INDEX(1) Cumulative value of $10,000 $9,371 $11,110 $13,630 $10,862 - ------------------------------------------------------------------------------------------ Average annual total return -6.29% +3.57% +6.39% +0.83% - ------------------------------------------------------------------------------------------ LIPPER LARGE-CAP GROWTH FUNDS INDEX(2) Cumulative value of $10,000 $9,511 $10,985 $13,509 $10,436 - ------------------------------------------------------------------------------------------ Average annual total return -4.89% +3.18% +6.20% +0.43% - ------------------------------------------------------------------------------------------
Results for other share classes can be found on page 4. - -------------------------------------------------------------------------------- 12 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GROWTH FUND LINE GRAPH)
RIVERSOURCE GROWTH FUND CLASS LIPPER LARGE-CAP A (INCLUDES RUSSELL 1000 GROWTH FUNDS SALES CHARGE) GROWTH INDEX(1) INDEX(2) ------------------ --------------- ------------------ '98 $9,425 $10,000 $10,000 '99 11,356 12,404 12,293 '00 14,877 15,428 15,005 '01 8,608 10,019 9,843 '02 6,067 7,139 7,089 '03 6,615 7,970 7,725 '04 6,888 8,648 8,199 '05 8,226 9,776 9,502 '06 8,307 9,702 9,325 '07 9,570 11,591 10,973 '08 8,025 10,862 10,436
(1) The Russell 1000 Growth Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Growth Funds Index includes the 30 largest large-cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
DIRECT DIRECT AND INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) THE PERIOD(B) - ------------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 896.00 $4.76 $5.00 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.84 $5.07 $5.32 - ------------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 892.40 $8.33 $8.56 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.06 $8.87 $9.12 - ------------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 892.50 $8.33 $8.56 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.06 $8.87 $9.12 - ------------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 898.30 $2.55 $2.78 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.18 $2.72 $2.97 - ------------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 896.10 $6.41 $6.65 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.10 $6.82 $7.07 - ------------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 897.40 $5.24 $5.47 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.34 $5.57 $5.82 - ------------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 897.60 $3.87 $4.10 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.79 $4.12 $4.37 - ------------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 897.80 $2.93 $3.16 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.78 $3.12 $3.37 - ------------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 895.90 $4.71 $4.95 - ------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.89 $5.02 $5.27 - ------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES - ---------------------------------------------------------------------- Class A 1.01% .05% 1.06% - ---------------------------------------------------------------------- Class B 1.77% .05% 1.82% - ---------------------------------------------------------------------- Class C 1.77% .05% 1.82% - ---------------------------------------------------------------------- Class I .54% .05% .59% - ---------------------------------------------------------------------- Class R2 1.36% .05% 1.41% - ---------------------------------------------------------------------- Class R3 1.11% .05% 1.16% - ---------------------------------------------------------------------- Class R4 .82% .05% .87% - ---------------------------------------------------------------------- Class R5 .62% .05% .67% - ---------------------------------------------------------------------- Class W 1.00% .05% 1.05% - ----------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (c) Based on the actual return for the six months ended July 31, 2008: -10.40% for Class A, -10.76% for Class B, -10.75% for Class C, -10.17% for Class I, -10.39% for Class R2, -10.26% for Class R3, -10.24% for Class R4, -10.22% for Class R5 and -10.41% for Class W. - -------------------------------------------------------------------------------- 16 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.3%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.8%) Boeing 1,009,089 $61,665,429 - ------------------------------------------------------------------------------------- AIRLINES (0.3%) Northwest Airlines 523,670(b) 4,796,817 UAL 256,858 2,134,490 --------------- Total 6,931,307 - ------------------------------------------------------------------------------------- BEVERAGES (2.4%) Coca-Cola 640,617 32,991,775 Molson Coors Brewing Cl B 130,344 7,034,666 PepsiCo 187,892 12,506,092 --------------- Total 52,532,533 - ------------------------------------------------------------------------------------- BIOTECHNOLOGY (4.7%) Amgen 526,236(b) 32,958,161 Genentech 553,388(b) 52,710,207 Genzyme 148,199(b) 11,359,453 ImClone Systems 96,773(b) 6,186,698 --------------- Total 103,214,519 - ------------------------------------------------------------------------------------- CAPITAL MARKETS (3.1%) KKR Private Equity Investors LP Unit 4,197,361 55,406,164 Lehman Brothers Holdings 347,240 6,021,142 Oaktree Capital Group LLC Cl A Unit 246,000(d,h) 6,888,000 --------------- Total 68,315,306 - ------------------------------------------------------------------------------------- COMMERCIAL BANKS (--%) Wachovia 41,820 722,231 - ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (7.0%) Cisco Systems 1,111,240(b) 24,436,168 Motorola 342,377 2,958,137 Nokia 1,177,400(c,j) 32,131,033 Nokia ADR 1,261,829(c) 34,473,168 Nortel Networks 549(b,c) 4,194 QUALCOMM 919,526 50,886,569 Starent Networks 565,584(b,e) 7,409,150 --------------- Total 152,298,419 - ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.1%) Apple 115,848(b) 18,414,039 EMC 583,727(b) 8,761,742 Hewlett-Packard 352,176 15,777,485 SanDisk 156,076(b) 2,200,672 --------------- Total 45,153,938 - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.7%) Apollo Mgmt LP 1,690,500(d,h) 23,667,000 Interactive Brokers Group Cl A 196,880(b) 5,524,453 KKR Financial Holdings LLC 799,612 8,212,015 --------------- Total 37,403,468 - ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (8.5%) AT&T 412,927 12,722,281 Deutsche Telekom 2,485,460(c) 43,020,807 Embarq 122,360 5,600,417 Qwest Communications Intl 4,745,445 18,175,054 Telefonica 2,995,486(c) 77,718,236 Telefonica ADR 157,260(c) 12,239,546 Verizon Communications 423,090 14,401,984 --------------- Total 183,878,325 - ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (--%) Gamesa Tecnologica 22,505(c) 1,069,918 - ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) Sara Lee 367,423 5,018,998 - ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.4%) Boston Scientific 1,965,620(b) 23,371,222 Medtronic 140,934 7,445,543 --------------- Total 30,816,765 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (4.2%) AmerisourceBergen 321,167 $13,447,262 Cardinal Health 337,722 18,145,803 Express Scripts 67,879(b) 4,788,185 Humana 280,672(b) 12,324,308 McKesson 465,383 26,056,794 Medco Health Solutions 242,748(b) 12,035,446 UnitedHealth Group 175,540 4,929,163 --------------- Total 91,726,961 - ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.1%) Starbucks 158,099(b) 2,322,474 - ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) Harman Intl Inds 251,890 10,370,311 Jarden 36,185(b) 869,526 --------------- Total 11,239,837 - ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.4%) Colgate-Palmolive 190,043 14,114,494 Procter & Gamble 247,700 16,219,396 --------------- Total 30,333,890 - ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.6%) Siemens 47,944(c) 5,827,378 Textron 155,787 6,772,061 --------------- Total 12,599,439 - ------------------------------------------------------------------------------------- INSURANCE (0.3%) AFLAC 102,950 5,725,049 Prudential Financial 16,782 1,157,455 --------------- Total 6,882,504 - ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.7%) Expedia 823,655(b) 16,118,928 - ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.5%) Google Cl A 65,124(b) 30,852,495 Yahoo! 52,282(b) 1,039,889 --------------- Total 31,892,384 - ------------------------------------------------------------------------------------- IT SERVICES (0.7%) MasterCard Cl A 59,864 14,615,796 Redecard 63,600(c) 1,174,466 --------------- Total 15,790,262 - ------------------------------------------------------------------------------------- MACHINERY (0.1%) Flowserve 10,826 1,443,539 - ------------------------------------------------------------------------------------- MEDIA (14.4%) Comcast Cl A 1,163,000 23,981,060 Liberty Entertainment Series A 488,465(b,g) 12,026,008 Liberty Media -- Capital Series A 52,545(b,g) 816,549 News Corp Cl A 1,131,017 15,981,270 Sirius XM Radio 54,167,369(b,j) 86,667,790 Time Warner 1,188,300 17,016,456 Time Warner Cable Cl A 189,731(b) 5,394,052 Virgin Media 13,151,621(h) 147,561,188 WorldSpace Cl A 447,419(b,e) 590,593 --------------- Total 310,034,966 - ------------------------------------------------------------------------------------- METALS & MINING (2.5%) Coeur d'Alene Mines 7,242,276(b,e) 20,930,178 Lihir Gold 4,979,621(b,c) 12,939,420 Newmont Mining 246,590 11,826,456 Timminco 379,173(b,c,e) 8,963,550 --------------- Total 54,659,604 - ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.2%) Chevron 26,954 2,279,230 ConocoPhillips 27,224 2,222,023 Exxon Mobil 264,068 21,238,989 --------------- Total 25,740,242 - ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (2.0%) Avon Products 791,974 33,579,697 Herbalife 240,929(c) 10,405,724 --------------- Total 43,985,421 - ------------------------------------------------------------------------------------- PHARMACEUTICALS (10.1%) Bristol-Myers Squibb 2,769,452 58,490,826 Elan ADR 94,982(b,c) 1,904,389 Eli Lilly & Co 161,691 7,617,263 Johnson & Johnson 55,266 3,784,063 Merck & Co 1,335,016 43,922,026 Pfizer 3,608,236 67,365,766 Schering-Plough 689,509 14,534,850 Wyeth 475,433 19,264,545 --------------- Total 216,883,728 - ------------------------------------------------------------------------------------- ROAD & RAIL (1.8%) Hertz Global Holdings 4,662,027(b) 39,767,090 - ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.2%) Advanced Micro Devices 918,531(b) 3,867,016 Cypress Semiconductor 78,257(b) 2,132,503
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.) Himax Technologies ADR 1,204,350(c) $4,576,530 Infineon Technologies 946,516(b,c) 7,105,431 Intel 1,177,376 26,125,974 Micron Technology 971,352(b) 4,691,630 ON Semiconductor 144,324(b) 1,355,202 Spansion Cl A 4,774,024(b) 10,932,515 Texas Instruments 382,833 9,333,469 --------------- Total 70,120,270 - ------------------------------------------------------------------------------------- SOFTWARE (5.9%) Electronic Arts 115,262(b) 4,977,013 Microsoft 3,473,733 89,344,413 Nintendo ADR 576,794(c) 33,381,953 --------------- Total 127,703,379 - ------------------------------------------------------------------------------------- SPECIALTY RETAIL (--%) Office Depot 49,757(b) 338,348 - ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.4%) Freddie Mac 1,105,068 9,028,406 - ------------------------------------------------------------------------------------- TOBACCO (2.4%) Altria Group 761,251 15,491,458 Philip Morris Intl 702,635 36,291,098 --------------- Total 51,782,556 - ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (7.1%) Sprint Nextel 178,341 1,451,696 Turkcell ADR 170,844(c) 3,297,289 Vodafone Group 42,642,386(c) 114,228,498 Vodafone Group ADR 1,317,422(c) 35,346,432 --------------- Total 154,323,915 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,392,119,954) $2,073,739,299 - -------------------------------------------------------------------------------------
OPTIONS PURCHASED (1.0%) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(a) CALLS Altria Group(i) Virgin Media(i) Vodafone Group ADR(i) 409,530 $100.00 Jan. 2009 $483,245 AmeriSource-Bergen(i) Bristol-Myers Squibb(i) Nokia ADR(i) 370,200 100.00 Jan. 2009 818,142 Hertz Global Holdings(i) Telefonica(i) Vodafone Group ADR(i) 322,776 100.00 Jan. 2009 226,201 Hong Kong Dollar 1,727,158 7.73 March 2009 384,465 Nokia 8,158 15.00 Dec. 2008 4,389,791 Nokia 12,254 18.00 Dec. 2008 3,029,341 Nokia ADR 3,548 25.00 Jan. 2009 1,507,900 Sirius XM Radio 14,542 9.00 Aug. 2008 72,710 Sirius XM Radio(i) Virgin Media(i) Vodafone Group ADR(i) 364,026 100.00 Jan. 2009 91,007 - ------------------------------------------------------------------------------------- PUTS Goldman Sachs Group 401,882 446.25 Aug. 2008 1,811,321 NASDAQ 100 Index 46,514 43.00 Aug. 2008 1,162,850 Research in Motion 1,808 115.00 Dec. 2008 2,165,081 S&P 500 Index 1,749 1,240.00 Aug. 2008 2,317,425 S&P 500 Index 1,980 1,260.00 Aug. 2008 3,969,900 - ------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $37,731,398) $22,429,379 - -------------------------------------------------------------------------------------
MONEY MARKET FUND (3.2%)(f) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 2.54% 68,827,880(k) $68,827,880 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $68,827,880) $68,827,880 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,498,679,232)(l) $2,164,996,558 =====================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 19 INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2008
CURRENCY TO BE CURRENCY TO BE UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION - ----------------------------------------------------------------------------------------- Aug. 5, 2008 1,079,383 692,391 $538 U.S. Dollar European Monetary Unit - ----------------------------------------------------------------------------------------- Sept. 4, 2008 36,028,000 71,855,324 608,274 British Pound U.S. Dollar - ----------------------------------------------------------------------------------------- Sept. 5, 2008 10,586,000 10,075,967 150,112 Australian Dollar U.S. Dollar - ----------------------------------------------------------------------------------------- Sept. 5, 2008 27,368,000 54,592,044 474,837 British Pound U.S. Dollar - ----------------------------------------------------------------------------------------- Sept. 11, 2008 70,034,000 109,379,802 308,884 European Monetary Unit U.S. Dollar - ----------------------------------------------------------------------------------------- Sept. 12, 2008 60,462,000 94,320,720 157,230 European Monetary Unit U.S. Dollar - ----------------------------------------------------------------------------------------- Total $1,699,875 - -----------------------------------------------------------------------------------------
OPEN OPTIONS CONTRACTS WRITTEN AT JULY 31, 2008
NUMBER OF EXERCISE PREMIUM EXPIRATION ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(a) - ---------------------------------------------------------------------------------------- Nokia Call 12,254 E 18 $1,515,038 Dec. 2008 $3,029,341 Research in Put 1,808 $ 100 1,378,502 Dec. 2008 1,184,240 Motion S&P 500 Index Put 1,980 1,220 1,281,060 Aug. 2008 1,712,700 S&P 500 Index Put 1,749 1,200 1,307,937 Aug. 2008 953,205 Sirius XM Radio Call 14,542 10 647,535 Aug. 2008 36,355 - ---------------------------------------------------------------------------------------- Total $6,915,841 - ----------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At July 31, 2008, the value of foreign securities represented 20.2% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2008, the value of these securities amounted to $30,555,000 or 1.4% of net assets. (e) At July 31, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (f) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 1.1% of net assets. See Note 5 to the financial statements. The Fund's cash equivalent position is 2.1% of net assets. - -------------------------------------------------------------------------------- 20 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (g) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (h) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at July 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------- Apollo Mgmt LP* 08-02-07 thru 03-07-08 $37,534,010 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 11-19-07 9,952,680 Virgin Media 07-19-06 thru 07-09-08 255,754,031
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (i) Represents a worst-of-call-option that is a bundle of long forwards. All mature on the option's expiration date but have different underliers. At expiration, only one settles and this is chosen in the issuer's favor. (j) At July 31, 2008, securities valued at $35,767,664 were held to cover open call options written. See Note 6 to the financial statements. (k) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (l) At July 31, 2008, the cost of securities for federal income tax purposes was $2,575,032,211 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $77,946,593 Unrealized depreciation (487,982,246) - ------------------------------------------------------------ Net unrealized depreciation $(410,035,653) - ------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 21 HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 22 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $2,429,851,352) $2,096,168,678 Affiliated money market fund (identified cost $68,827,880) 68,827,880 - ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,498,679,232) 2,164,996,558 Cash 2,150,010 Capital shares receivable 436,884 Dividends and accrued interest receivable 7,065,881 Receivable for investment securities sold 82,731,017 Unrealized appreciation on forward foreign currency contracts 1,699,875 - ----------------------------------------------------------------------------- Total assets 2,259,080,225 - ----------------------------------------------------------------------------- LIABILITIES Options contracts written, at value (premiums received $6,130,072) 6,915,841 Capital shares payable 4,510,976 Payable for investment securities purchased 45,582,789 Payable upon return of securities loaned 24,777,000 Accrued investment management services fees 34,992 Accrued distribution fees 16,524 Accrued transfer agency fees 7,695 Accrued administrative services fees 3,200 Accrued plan administration services fees 391 Other accrued expenses 337,340 Collateral and deposits payable 1,578,358 - ----------------------------------------------------------------------------- Total liabilities 83,765,106 - ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $2,175,315,119 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
REPRESENTED BY Capital stock -- $.01 par value $ 803,094 Additional paid-in capital 2,783,876,357 Undistributed net investment income 1,574,083 Accumulated net realized gain (loss) (278,240,488) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (332,697,927) - ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $2,175,315,119 - ----------------------------------------------------------------------------- *Including securities on loan, at value $ 18,554,548 - -----------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,590,672,418 58,435,801 $27.22(1) Class B $ 189,224,073 7,631,999 $24.79 Class C $ 13,114,426 530,243 $24.73 Class I $ 326,363,923 11,697,509 $27.90 Class R2 $ 4,280 155 $27.61 Class R3 $ 4,286 155 $27.65 Class R4 $ 55,923,087 2,013,270 $27.78 Class R5 $ 4,290 155 $27.68 Class W $ 4,336 157 $27.62 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $28.88. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008
INVESTMENT INCOME Income: Dividends $ 48,200,617 Interest 7,186 Income distributions from affiliated money market fund 4,168,447 Fee income from securities lending 931,265 Less foreign taxes withheld (1,469,526) - ---------------------------------------------------------------------------- Total income 51,837,989 - ---------------------------------------------------------------------------- Expenses: Investment management services fees 12,541,267 Distribution fees Class A 5,186,203 Class B 3,166,050 Class C 179,547 Class R2 24 Class R3 12 Class W 12 Transfer agency fees Class A 4,354,973 Class B 712,528 Class C 38,952 Class R2 3 Class R3 3 Class R4 56,338 Class R5 3 Class W 10 Administrative services fees 1,477,804 Plan administration services fees Class R2 12 Class R3 12 Class R4 281,689 Compensation of board members 52,406 Custodian fees 333,560 Printing and postage 536,305 Registration fees 83,595 Professional fees 65,391 Other 98,773 - ---------------------------------------------------------------------------- Total expenses 29,165,472 Expenses waived/reimbursed by the Investment Manager and its affiliates (195,742) Earnings and bank fee credits on cash balances (123,553) - ---------------------------------------------------------------------------- Total net expenses 28,846,177 - ---------------------------------------------------------------------------- Investment income (loss) -- net 22,991,812 - ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 25 STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 41,629,262 Foreign currency transactions (22,669,790) Options contracts written (3,638,346) Swap transactions 3,123,946 - ---------------------------------------------------------------------------- Net realized gain (loss) on investments 18,445,072 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (492,536,692) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (474,091,620) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(451,099,808) - ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 26 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 22,991,812 $ 22,797,497 Net realized gain (loss) on investments 18,445,072 245,132,519 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (492,536,692) 227,422,901 - ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (451,099,808) 495,352,917 - ---------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (18,613,899) (17,087,134) Class C (35,082) (21,069) Class I (3,250,974) (3,983,286) Class R2 (34) (55) Class R3 (46) (55) Class R4 (1,320,924) (1,999,289) Class R5 (63) (56) Class W (42) (55) - ---------------------------------------------------------------------------------------------- Total distributions (23,221,064) (23,090,999) - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 158,922,224 $ 279,305,597 Class B shares 21,028,069 40,223,465 Class C shares 2,204,302 3,730,834 Class I shares 38,802,667 102,896,983 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 25,787,191 28,815,906 Class R5 shares -- 5,000 Class W shares -- 5,000 Fund merger (Note 10) Class A shares 18,206,825 N/A Class B shares 5,395,871 N/A Class C shares 739,026 N/A Class I shares 161,620,525 N/A Class R4 shares 39,465 N/A Reinvestment of distributions at net asset value Class A shares 18,132,589 16,669,054 Class C shares 34,035 20,543 Class I shares 3,250,578 3,983,218 Class R4 shares 1,320,795 1,999,289 Payments for redemptions Class A shares (642,466,071) (574,909,608) Class B shares (151,381,443) (201,026,288) Class C shares (7,113,707) (4,753,464) Class I shares (132,345,429) (110,663,694) Class R4 shares (99,292,710) (184,854,678) - ---------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (577,115,198) (598,542,843) - ---------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,051,436,070) (126,280,925) Net assets at beginning of year 3,226,751,189 3,353,032,114 - ---------------------------------------------------------------------------------------------- Net assets at end of year $ 2,175,315,119 $3,226,751,189 - ---------------------------------------------------------------------------------------------- Undistributed net investment income $ 1,574,083 $ 21,380,472 - ----------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 28 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Growth Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in common stocks of U.S. and foreign companies that appear to offer growth opportunities. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3, Class R5 and Class W shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 29 VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2008, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at July 31, 2008 was $178,116,188 representing 8.2% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. - -------------------------------------------------------------------------------- 30 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT OPTION TRANSACTIONS To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At July 31, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 31 on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. TOTAL RETURN EQUITY SWAP TRANSACTIONS The Fund may enter into swap agreements to gain exposure to the total return on a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Under the terms of a total return equity swap agreement, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. The notional amounts of swap contracts are not recorded in the financial statements. Swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk associated with the investment in the underlying securities and also the risk of the counterparty not fulfilling its obligations under the agreement. At July 31, 2008, the Fund had no outstanding total return equity swap contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service - -------------------------------------------------------------------------------- 32 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, investments in partnerships, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $15,360,642 and accumulated net realized loss has been decreased by $12,893,994 resulting in a net reclassification adjustment to increase paid-in capital by $2,466,648. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 33 The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income.................... $18,613,899 $17,087,134 Long-term capital gain............. -- -- CLASS B Distributions paid from: Ordinary income.................... -- -- Long-term capital gain............. -- -- CLASS C Distributions paid from: Ordinary income.................... 35,082 21,069 Long-term capital gain............. -- -- CLASS I Distributions paid from: Ordinary income.................... 3,250,974 3,983,286 Long-term capital gain............. -- -- CLASS R2 Distributions paid from: Ordinary income.................... 34 55 Long-term capital gain............. -- -- CLASS R3 Distributions paid from: Ordinary income.................... 46 55 Long-term capital gain............. -- -- CLASS R4 Distributions paid from: Ordinary income.................... 1,320,924 1,999,289 Long-term capital gain............. -- -- CLASS R5 Distributions paid from: Ordinary income.................... 63 56 Long-term capital gain............. -- -- CLASS W Distributions paid from: Ordinary income.................... 42 55 Long-term capital gain............. -- --
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception date) to July 31, 2007. Class W is for the period from Dec. 1, 2006 (inception date) to July 31, 2007. - -------------------------------------------------------------------------------- 34 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income................. $ 5,844,093 Undistributed accumulated long-term gain...... $ -- Accumulated realized loss..................... $(202,027,584) Unrealized appreciation (depreciation)........ $(413,180,841)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 35 including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Growth Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $3,707,468 for the year ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.45% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended, July 31, 2008, other expenses paid to this company were $12,107. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market - -------------------------------------------------------------------------------- 36 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $5,875,000 and $128,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $1,732,402 for Class A, $267,901 for Class B and $3,193 for Class C for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 37 EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class R2............................................ 1.11% Class R3............................................ 0.86 Class R4............................................ 0.66
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2......................................... $ 12 Class R3......................................... 12 Class R4......................................... 195,718
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class R4............................................ 0.97%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $123,553 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $3,235,230,035 (including $199,606,656 from RiverSource Fundamental Growth Fund that was acquired in the fund merger as described in Note 10) and $3,845,558,468, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- 38 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR FUND REINVESTED NET SOLD MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------- Class A 5,325,900 647,067 561,728 (21,198,973) (14,664,278) Class B 733,992 209,948 -- (5,712,960) (4,769,020) Class C 78,462 28,823 1,155 (261,120) (152,680) Class I 1,272,282 5,614,412 98,532 (4,180,720) 2,804,506 Class R4 815,040 1,376 40,170 (3,217,095) (2,360,509) - ---------------------------------------------------------------------------------------- YEAR ENDED JULY 31, 2007 ISSUED FOR FUND REINVESTED NET SOLD MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------- Class A 8,592,129 N/A 525,999 (18,184,913) (9,066,785) Class B 1,395,545 N/A -- (6,731,640) (5,336,095) Class C 129,341 N/A 709 (165,607) (35,557) Class I 3,255,973 N/A 123,015 (3,216,500) 162,488 Class R2* 155 N/A -- -- 155 Class R3* 155 N/A -- -- 155 Class R4 887,179 N/A 62,013 (5,678,782) (4,729,590) Class R5* 155 N/A -- -- 155 Class W** 157 N/A -- -- 157 - ----------------------------------------------------------------------------------------
*For the period from Dec. 11, 2006 (inception date) to July 31, 2007. **For the period from Dec. 1, 2006 (inception date) to July 31, 2007. 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At July 31, 2008, securities valued at $18,554,548 were on loan to brokers. For collateral, the Fund received $24,777,000 in cash. Cash collateral received is - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 39 invested in an affiliated money market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the Portfolio of Investments. Income from securities lending amounted to $931,265 for the year ended July 31, 2008. Expenses paid to the Investment Manager as securities lending agent were $10,108 for the year ended July 31, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 6. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows:
CALLS PUTS CONTRACTS PREMIUMS CONTRACTS PREMIUMS - --------------------------------------------------------------------------- Balance July 31, 2007 36,314 $ 5,116,314 25,224 $ 3,203,448 Opened 304,969 11,137,724 90,000 19,502,848 Closed (224,770) (11,868,541) (107,979) (17,746,415) Expired (89,717) (2,222,924) (1,708) (992,382) - --------------------------------------------------------------------------- Balance July 31, 2008 26,796 $ 2,162,573 5,537 $ 3,967,499 - ---------------------------------------------------------------------------
See Note 1 "Summary of Significant Accounting Policies." 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Funds purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $1,541,962,691 and $1,549,005,592, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the - -------------------------------------------------------------------------------- 40 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 9. CAPITAL LOSS CARRY-OVER, POST OCTOBER LOSS AND RECOGNIZED BUILT-IN LOSSES For federal income tax purposes, the Fund had a capital loss carry-over of $178,158,939 at July 31, 2008, that if not offset by capital gains will expire in 2011. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post October loss of $22,735,098 that is treated for income tax purposes as occurring on Aug. 1, 2008. The Fund had recognized built-in losses of $1,133,547 at July 31, 2008, that if not offset by capital gains will expire in 2017. As a result of the fund merger (Note 10) the Fund acquired unrealized capital losses, which are limited by Internal Revenue Code section 382. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over and recognized built- in losses have been offset or expire. 10. FUND MERGER At the close of business on March 14, 2008, RiverSource Growth Fund acquired the assets and assumed the identified liabilities of RiverSource Fundamental Growth Fund. The reorganization was completed after shareholders approved the plan on Jan. 29, 2008. The aggregate net assets of RiverSource Growth Fund immediately before the acquisition were $2,444,672,413 and the combined net assets immediately after the acquisition were $2,630,674,125. The merger was accomplished by a tax-free exchange of 36,872,082 shares of RiverSource Fundamental Growth Fund valued at $186,001,712. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 41 In exchange for the RiverSource Fundamental Growth Fund shares and net assets, RiverSource Growth Fund issued the following number of shares:
SHARES - ------------------------------------------------------------ Class A.......................................... 647,067 Class B.......................................... 209,948 Class C.......................................... 28,823 Class I.......................................... 5,614,412 Class R4......................................... 1,376
RiverSource Fundamental Growth Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows, which include the following amounts of capital stock, unrealized depreciation, accumulated net realized gain and excess of distributions over net investment income.
EXCESS OF ACCUMULATED DISTRIBUTIONS OVER TOTAL CAPITAL UNREALIZED NET NET INVESTMENT NET ASSETS STOCK DEPRECIATION REALIZED GAIN INCOME - ---------------------------------------------------------------------------------------------- RiverSource Fundamental Growth Fund $186,001,712 $209,335,799 $(24,043,308) $4,925,716 $(4,216,495)
11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of - -------------------------------------------------------------------------------- 42 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 43 12. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $32.73 $28.61 $28.34 $23.73 $22.80 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .26(b) .23(b) .18 .04 .02 Net gains (losses) (both realized and unrealized) (5.50) 4.11 .10 4.57 .91 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.24) 4.34 .28 4.61 .93 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.22) (.01) -- -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.22 $32.73 $28.61 $28.34 $23.73 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,591 $2,393 $2,351 $2,101 $2,117 - -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.00% 1.19% 1.14% 1.19% 1.03% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .84% .71% .72% .16% .07% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% 134% 136% 171% - -------------------------------------------------------------------------------------------------------------- Total return(e) (16.14%) 15.20% .98% 19.43% 4.08% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 44 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $29.79 $26.06 $26.01 $21.95 $21.25 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) (.02)(b) (.05) (.16) (.16) Net gains (losses) (both realized and unrealized) (5.02) 3.75 .10 4.22 .86 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.00) 3.73 .05 4.06 .70 - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $24.79 $29.79 $26.06 $26.01 $21.95 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $189 $369 $462 $578 $598 - -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.76% 1.96% 1.91% 1.97% 1.81% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .08% (.06%) (.06%) (.62%) (.71%) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% 134% 136% 171% - -------------------------------------------------------------------------------------------------------------- Total return(e) (16.78%) 14.31% .19% 18.50% 3.29% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 45 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $29.77 $26.07 $26.01 $21.95 $21.25 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) (.01)(b) (.04) (.16) (.16) Net gains (losses) (both realized and unrealized) (5.01) 3.74 .10 4.22 .86 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (4.99) 3.73 .06 4.06 .70 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.03) -- -- -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $24.73 $29.77 $26.07 $26.01 $21.95 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $13 $20 $19 $15 $13 - -------------------------------------------------------------------------------------------------------------- Total expenses(c),(d) 1.76% 1.95% 1.91% 1.97% 1.81% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .08% (.03%) (.03%) (.62%) (.71%) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% 134% 136% 171% - -------------------------------------------------------------------------------------------------------------- Total return(e) (16.78%) 14.31% .23% 18.50% 3.29% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 46 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $33.54 $29.31 $28.93 $24.10 $25.61 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .44(c) .40(c) .32 .12 .09 Net gains (losses) (both realized and unrealized) (5.66) 4.19 .10 4.71 (1.60) - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.22) 4.59 .42 4.83 (1.51) - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.42) (.36) (.04) -- -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.90 $33.54 $29.31 $28.93 $24.10 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $326 $298 $256 $147 $18 - -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) .54% .74% .68% .75% .57%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.40% 1.21% 1.22% .55% .43%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% 134% 136% 171% - -------------------------------------------------------------------------------------------------------------- Total return (15.74%) 15.70% 1.44% 20.04% (5.90%)(g) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 47 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $33.13 $32.23 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .24 .13 Net gains (losses) (both realized and unrealized) (5.54) 1.12 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.30) 1.25 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.35) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.61 $33.13 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.36% 1.50%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after waiver/reimbursement(e),(g),(h) 1.11% 1.50%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .76% .63%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% - -------------------------------------------------------------------------------------------------------------- Total return (16.11%) 3.93%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 48 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $33.18 $32.23 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .31 .18 Net gains (losses) (both realized and unrealized) (5.54) 1.13 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.23) 1.31 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.30) (.36) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.65 $33.18 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.12% 1.27%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after waiver/reimbursement(e),(g),(h) .86% 1.27%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.00% .87%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% - -------------------------------------------------------------------------------------------------------------- Total return (15.91%) 4.09%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 49 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $33.34 $29.13 $28.81 $24.07 $23.09 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .35(b) .25(b) .24 .09 .07 Net gains (losses) (both realized and unrealized) (5.58) 4.22 .10 4.65 .91 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.23) 4.47 .34 4.74 .98 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.33) (.26) (.02) -- -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.78 $33.34 $29.13 $28.81 $24.07 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $56 $146 $265 $304 $350 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .84% 1.03% .95% 1.02% .86% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .66% 1.03% .95% 1.02% .86% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.11% .79% .89% .34% .25% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% 134% 136% 171% - -------------------------------------------------------------------------------------------------------------- Total return (15.85%) 15.39% 1.17% 19.69% 4.24% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. - -------------------------------------------------------------------------------- 50 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $33.28 $32.23 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .39 .29 Net gains (losses) (both realized and unrealized) (5.59) 1.12 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.20) 1.41 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.40) (.36) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.68 $33.28 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) .61% .76%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.25% 1.38%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% - -------------------------------------------------------------------------------------------------------------- Total return (15.80%) 4.41%(g) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 51 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $33.21 $31.89 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .27 .24 Net gains (losses) (both realized and unrealized) (5.59) 1.43 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (5.32) 1.67 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.35) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $27.62 $33.21 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Total expenses(d),(e) 1.00% 1.17%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .86% 1.09%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 112% 98% - -------------------------------------------------------------------------------------------------------------- Total return (16.15%) 5.29%(g) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. - -------------------------------------------------------------------------------- 52 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE GROWTH FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Growth Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 53 In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Growth Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- 54 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100% Dividends Received Deduction for corporations................ 100% U.S. Government Obligations.................................. 0.08%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 55 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 54 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None 901 S. Marquette Ave. 1999 Minnesota Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 53 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley College Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 72 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Board member since President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. 2002 and Chair of College Inc. (manufactures Minneapolis, MN 55402 the Board since 2007 irrigation systems) Age 69 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 56 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc. Minneapolis, MN 55402 Biotech (biotechnology); Age 64 Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President, Financial Center Vice President since Chairman of the Board and Chief Investment Officer, Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director, Age 47 President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001- 2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 57 The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President, Asset Management; 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center since 2006; Director and Vice President -- Asset Minneapolis, MN 55474 Management, Products and Marketing, RiverSource Age 42 Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 44 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company 5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice Center Minneapolis, MN President -- Operations and Compliance, RiverSource 55474 Investments, LLC, 2004-2006; Director of Product Age 42 Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 Minneapolis, MN 55474 Age 53 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. since 2006; Vice Minneapolis, MN 55474 President, General Counsel and Secretary, Ameriprise Age 49 Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - -------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, 172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006; Center Director -- Mutual Funds, Voyageur Asset Management, Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset Age 47 Management, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 58 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer, 2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti- Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003- Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer, Age 44 American Express Centurion Bank, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 59 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services - -------------------------------------------------------------------------------- 60 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance, although somewhat weaker than previous years, reflected the interrelationship of particularly volatile market conditions with the investment strategies employed by the portfolio management team. Further, the Board noted that measures have been taken to enhance risk management oversight. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 61 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Fund's total expense ratio (after considering proposed expense caps/waivers) was slightly below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. - -------------------------------------------------------------------------------- 62 RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote all proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2008 ANNUAL REPORT 63 RIVERSOURCE GROWTH FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6455 AD (9/08)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE LARGE CAP EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE LARGE CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUND ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 5 The Fund's Long-term Performance ... 10 Fund Expenses Example............... 12 Portfolio of Investments............ 15 Financial Statements................ 26 Notes to Financial Statements....... 32 Report of Independent Registered Public Accounting Firm........... 55 Federal Income Tax Information...... 57 Board Members and Officers.......... 58 Approval of Investment Management Services Agreement............... 62 Proxy Voting........................ 64
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Large Cap Equity Fund (the Fund) Class A shares declined 15.40%, excluding sales charge, for the fiscal year ended July 31, 2008. > The Fund underperformed its benchmarks, the Russell 1000(R) Index and the Standard & Poor's 500 Index (S&P 500 Index), which fell 10.62% and 11.09%, respectively, for the same 12-month period. > The Fund's peer group, the Lipper Large-Cap Core Funds Index, declined 10.11% during the same time period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
Since 1 year 3 years 5 years inception(a) - -------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class A (excluding sales charge) -15.40% +0.48% +4.39% +1.86% - -------------------------------------------------------------------------------- Russell 1000 Index (unmanaged) -10.62% +3.08% +7.55% +4.00% - -------------------------------------------------------------------------------- S&P 500 Index (unmanaged) -11.09% +2.85% +7.03% +3.47% - -------------------------------------------------------------------------------- Lipper Large-Cap Core Funds Index -10.11% +3.12% +6.31% +2.86% - --------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (a) Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Net Fund and Acquired Fund Total Net (Underlying Fund Expenses(a) Fund)(b) - -------------------------------------------------------------- Class A 1.03% 0.96% 0.98% - -------------------------------------------------------------- Class B 1.79% 1.73% 1.75% - -------------------------------------------------------------- Class C 1.79% 1.72% 1.74% - -------------------------------------------------------------- Class I 0.57% 0.54% 0.56% - -------------------------------------------------------------- Class R2 1.39% 1.34% 1.36% - -------------------------------------------------------------- Class R3 1.14% 1.09% 1.11% - -------------------------------------------------------------- Class R4 0.87% 0.82% 0.84% - -------------------------------------------------------------- Class R5 0.67% 0.59% 0.61% - --------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.08% for the year ended July 31, 2008), will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. (b) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, was 0.02% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -15.40% +0.48% +4.39% +1.86% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -15.97% -0.33% +3.58% +1.05% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -16.11% -0.36% +3.55% +1.06% - -------------------------------------------------------------------------------- Class I (inception 3/4/04) -15.02% +0.89% N/A +2.41% - -------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -15.45% N/A N/A -7.72% - -------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -15.19% N/A N/A -7.45% - -------------------------------------------------------------------------------- Class R4 (inception 3/28/02) -15.40% +0.64% +4.55% +2.02% - -------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -15.38% N/A N/A -7.39% - -------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/28/02) -20.30% -1.48% +3.14% +0.90% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -19.70% -1.49% +3.24% +1.05% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -16.85% -0.36% +3.55% +1.06% - --------------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -17.04% +1.76% +4.62% +2.06% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -17.66% +0.90% +3.77% +1.24% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -17.61% +0.94% +3.79% +1.29% - -------------------------------------------------------------------------------- Class I (inception 3/4/04) -16.68% +2.17% N/A +2.72% - -------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -17.06% N/A N/A -7.35% - -------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -16.86% N/A N/A -7.19% - -------------------------------------------------------------------------------- Class R4 (inception 3/28/02) -16.87% +1.92% +4.77% +2.26% - -------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -17.05% N/A N/A -7.13% - -------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/28/02) -21.80% -0.22% +3.37% +1.09% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -21.32% -0.27% +3.42% +1.24% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -18.34% +0.94% +3.79% +1.29% - --------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. - -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Large Cap Equity Fund (the Fund) Class A shares declined 15.40%, excluding sales charge, for the fiscal year ended July 31, 2008. The Fund underperformed its benchmarks, the Russell 1000(R) Index (Russell Index) and the Standard & Poor's 500 Index (S&P 500 Index), which declined 10.62% and 11.09%, respectively. The Fund's peer group, the Lipper Large-Cap Core Funds Index, fell 10.11% during the same time frame. SIGNIFICANT PERFORMANCE FACTORS Through most of the fiscal year, valuation was not an effective characteristic for choosing stocks that would outperform. Though the Fund includes a value-oriented and a growth-oriented portfolio segment in its strategy, consideration of stock valuations is a thread running through the entire portfolio. Given the Fund's valuation sensitivity, the market's aversion to value was an insurmountable headwind during this fiscal period. Stock selection detracted from the Fund's return relative to the Russell Index. Though stock selection in the consumer staples, information SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Consumer Discretionary 10.8% - -------------------------------------------------------------- Consumer Staples 9.0% - -------------------------------------------------------------- Energy 10.5% - -------------------------------------------------------------- Financials 13.4% - -------------------------------------------------------------- Health Care 13.8% - -------------------------------------------------------------- Industrials 9.3% - -------------------------------------------------------------- Information Technology 15.6% - -------------------------------------------------------------- Materials 2.8% - -------------------------------------------------------------- Options Purchased 0.3% - -------------------------------------------------------------- Telecommunication Services 8.7% - -------------------------------------------------------------- Utilities 2.7% - -------------------------------------------------------------- Other(2) 3.1% - --------------------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 3.1%, 0.8% is due to security lending activity and 2.3% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- technology and utilities sectors was advantageous, the Fund holdings in the consumer discretionary, financials, industrials and energy sectors significantly underperformed the respective sectors of the Russell Index. Sector allocations had a positive impact. The Fund's cash position was beneficial, as would be expected in a declining equity market. Having a substantially smaller financials position than the Russell Index was a meaningful contributor to relative performance, as was a larger-than-Russell Index health care weighting. However, the Fund had a smaller energy position than the Russell Index and a larger telecommunications position, which were both disadvantageous. Individual contributors to return included QUALCOMM, GENENTECH, AVON PRODUCTS and FLOWSERVE, all positions that were larger than those in the Russell Index. We owned technology stock QUALCOMM because we believe the company can benefit from a strong upcoming product cycle. The market has recently been gaining conviction that the product cycle will be favorable, as the company has begun to see traction with its third-generation cell phone chip. In July 2008, QUALCOMM settled its protracted litigation with Nokia. Biotherapeutics company GENENTECH'S minority owner Roche is trying to buy out GENENTECH and offered a substantial premium. The stock price has also risen on a promising outlook for growth in GENENTECH'S cancer treatments, fueled by favorable TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Exxon Mobil 3.8% - -------------------------------------------------------------- Virgin Media 2.5% - -------------------------------------------------------------- Pfizer 2.3% - -------------------------------------------------------------- Microsoft 2.3% - -------------------------------------------------------------- Vodafone Group 1.9% - -------------------------------------------------------------- Chevron 1.8% - -------------------------------------------------------------- Boeing 1.7% - -------------------------------------------------------------- Bristol-Myers Squibb 1.7% - -------------------------------------------------------------- AT&T 1.6% - -------------------------------------------------------------- Philip Morris Intl 1.5% - --------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- Given the Fund's valuation sensitivity, the market's aversion to value was an insurmountable headwind during this fiscal period. expectations for several upcoming studies. FLOWSERVE makes valves and pumping machinery for industrial companies, particularly oil, gas and chemical companies, and has benefited from the high level of activity in those end markets. Individual detractors from return included VIRGIN MEDIA, HARMAN INTERNATIONAL INDUSTRIES, COUNTRYWIDE FINANCIAL and FEDERAL HOME LOAN MORTGAGE CORP. (FREDDIE MAC). British telecommunications company VIRGIN MEDIA received an attractive acquisition bid in July 2007 and subsequently conducted an auction where multiple suitors showed interest. However, difficulties in the high-yield bond market prevented the company from completing the auction. Since then, the stock price has fallen sharply amid additional concerns about the company's leverage levels and susceptibility to economic weakness. We believe VIRGIN MEDIA'S fundamentals are now better than they were a year ago, while the stock stands at about half the price. In our view, the stock's market price has disconnected from the underlying value of the company, creating an attractive opportunity. HARMAN INTERNATIONAL'S main business is producing car radios, and the company suffered as auto production has come under intense pressure in the difficult economic environment. Mortgage lender COUNTRYWIDE FINANCIAL continued to suffer from credit market difficulties, but BANK OF AMERICA finally completed its takeover of the company and the Fund's small remaining holdings of Countrywide converted into BANK OF AMERICA stock. Though the majority of government-sponsored FREDDIE MAC'S business isn't directly connected to the subprime mortgage breakdown, - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- continued weakness in the North American residential market has hurt the company due to mortgage losses and performance of securities owned by the company. CHANGES TO THE FUND'S PORTFOLIO In the first half of the fiscal year, we decreased the Fund's health care weighting relative to the Russell Index. We trimmed exposure to biotechnology stocks and some large-cap pharmaceutical stocks because of valuation concerns and, in the case of pharmaceuticals, worry that they might be negatively affected by the change in presidential administrations. Also in the first half, the Fund's weighting in materials stocks decreased, as we reduced exposure to gold stocks. We increased exposure to the consumer staples sector relative to the Russell Index, focusing on stocks with a consumer cyclical dimension rather than food and consumer goods companies. In the latter half of the Fund's fiscal year, the Fund's position in the financials sector decreased. Market performance was partially responsible for the reduction, as financial stocks generally declined in value. We also cut back the Fund's holdings of lending-based financial companies, specifically banks and savings and loans. The Fund's energy position increased in the second half of the year, also due to a combination of market results and active management. The energy sector's steep appreciation boosted the Fund's energy weighting. Meanwhile, we increased the Fund's holdings of energy services companies. Selected energy services stocks became relatively inexpensive and we believe they will benefit from increased exploration and production activity. We increased the Fund's information technology position in the second half of the year. Technology stocks, particularly some of the larger, more mature companies, seem inexpensive to us. They appear to have relatively limited downside risk due to attractive valuations, with the ability to capitalize on any improvement in economic activity. OUR FUTURE STRATEGY We manage the Fund's portfolio in three segments - a growth-oriented strategy, a value-oriented strategy and an analyst-driven segment. A - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- common theme across the three segments is our belief that valuation as a selection criterion is likely to be more effective going forward. Differences in valuations among stocks have become increasingly wide, reaching a historically rare level. In the past, such extreme valuation spreads have foreshadowed a period when valuation was more important to investors. Because each portfolio segment takes value into consideration when selecting stocks, we believe we are entering a period that could be more favorable for the Fund's strategy. Large-cap companies still have roughly the same valuation as mid- and small-cap companies. However, larger companies tend to have more stable business models, which can better withstand a decelerating economic environment, and they tend to have more international exposure, which may benefit from the tail end of the current period of dollar depreciation. (PHOTO - BOB (PHOTO - NICK EWING) THAKORE) Bob Ewing, Nick Thakore CFA(R) Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Large Cap Equity Fund Class A shares (from 4/1/02 to 7/31/08)* as compared to the performance of three widely cited performance indices, the Russell 1000 Index, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Large-Cap Core Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. * Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
SINCE Results at July 31, 2008 1 YEAR 3 YEARS 5 YEARS INCEPTION(4) RIVERSOURCE LARGE CAP EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,970 $9,563 $11,672 $10,590 - --------------------------------------------------------------------------------------------------- Average annual total return -20.30% -1.48% +3.14% +0.90% - --------------------------------------------------------------------------------------------------- RUSSELL 1000 INDEX(1) Cumulative value of $10,000 $8,938 $10,953 $14,390 $12,819 - --------------------------------------------------------------------------------------------------- Average annual total return -10.62% +3.08% +7.55% +4.00% - --------------------------------------------------------------------------------------------------- S&P 500 INDEX(2) Cumulative value of $10,000 $8,891 $10,880 $14,045 $12,409 - --------------------------------------------------------------------------------------------------- Average annual total return -11.09% +2.85% +7.03% +3.47% - --------------------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS INDEX(3) Cumulative value of $10,000 $8,989 $10,966 $13,579 $11,958 - --------------------------------------------------------------------------------------------------- Average annual total return -10.11% +3.12% +6.31% +2.86% - ---------------------------------------------------------------------------------------------------
Results for other share classes can be found on page 4. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP EQUITY FUND LINE GRAPH)
RIVERSOURCE LARGE CAP EQUITY FUND CLASS A (INCLUDES SALES LIPPER LARGE-CAP CHARGE) RUSSELL 1000 INDEX(1) S&P 500 INDEX(2) CORE FUNDS INDEX(3) ----------------------- --------------------- ---------------- ------------------- 4/1/02 $ 9,425 $10,000 $10,000 $10,000 7/02 7,766 8,014 7,985 8,108 7/03 8,546 8,911 8,835 8,808 7/04 9,160 10,072 9,999 9,690 7/05 10,441 11,704 11,404 10,907 7/06 10,807 12,316 12,018 11,452 7/07 12,493 14,342 13,957 13,303 7/08 10,590 12,819 12,409 11,958
(1) The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (4) Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A),(B) THE PERIOD(B),(C) - ------------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 900.40 $4.35 $4.44 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.29 $4.62 $4.72 - ------------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 896.30 $7.87 $7.97 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.56 $8.37 $8.47 - ------------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 894.50 $7.87 $7.96 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.56 $8.37 $8.47 - ------------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 901.00 $2.46 $2.55 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.28 $2.61 $2.72 - ------------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 897.40 $6.32 $6.42 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.72 $6.82 - ------------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 899.40 $5.15 $5.24 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.44 $5.47 $5.57 - ------------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 898.00 $3.63 $3.73 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.03 $3.87 $3.97 - ------------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 900.40 $2.79 $2.88 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.93 $2.97 $3.07 - -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES - ------------------------------------------------------------------------------------- Class A .92% .02% .94% - ------------------------------------------------------------------------------------- Class B 1.67% .02% 1.69% - ------------------------------------------------------------------------------------- Class C 1.67% .02% 1.69% - ------------------------------------------------------------------------------------- Class I .52% .02% .54% - ------------------------------------------------------------------------------------- Class R2 1.34% .02% 1.36% - ------------------------------------------------------------------------------------- Class R3 1.09% .02% 1.11% - ------------------------------------------------------------------------------------- Class R4 .77% .02% .79% - ------------------------------------------------------------------------------------- Class R5 .59% .02% .61% - -------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. Any amounts waived will not be reimbursed by the Fund. This change was effective August 1, 2008. Had this change been in place for the entire six month period ended July 31, 2008, the actual direct expenses paid would have been: $4.30 for Class A, $8.53 for Class B, $7.82 for Class C, $2.27 for Class I, $6.09 for Class R2, $4.91 for Class R3, $3.63 for Class R4 and $2.55 for Class R5; the hypothetical direct expenses paid would have been: $4.57 for Class A, $9.07 for Class B, $8.32 for Class C, $2.41 for Class I, $6.47 for Class R2, $5.22 for Class R3, $3.87 for Class R4 and $2.72 for Class R5. Additionally, had this change been in place for the entire six month period ended July 31, 2008, the actual direct and indirect expenses paid would have been: $4.39 for Class A, $8.63 for Class B, $7.91 for Class C, $2.36 for Class I, $6.18 for Class R2, $5.01 for Class R3, $3.73 for Class R4 and $2.65 for Class R5; the hypothetical direct and indirect expenses paid would have been: $4.67 for Class A, $9.17 for Class B, $8.42 for Class C, $2.51 for Class I, $6.57 for Class R2, $5.32 for Class R3, $3.97 for Class R4 and $2.82 for Class R5. (c) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (d) Based on the actual return for the six months ended July 31, 2008: -9.96% for Class A, - 10.37% for Class B, -10.55% for Class C, -9.90% for Class I, -10.26% for Class R2, -10.06% for Class R3, -10.20% for Class R4 and -9.96% for Class R5. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.1%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (4.1%) Boeing 1,158,424 $70,791,290 General Dynamics 52,948 4,719,785 Goodrich 138,405 6,801,222 Honeywell Intl 531,950 27,044,338 L-3 Communications Holdings 118,424 11,687,265 Lockheed Martin 184,756 19,275,593 Spirit AeroSystems Holdings Cl A 241,611(b) 5,233,294 United Technologies 306,402 19,603,600 --------------- Total 165,156,387 - -------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.1%) United Parcel Service Cl B 32,815 2,069,970 - -------------------------------------------------------------------------------------- AIRLINES (0.1%) Northwest Airlines 401,506(b) 3,677,795 UAL 173,328 1,440,356 --------------- Total 5,118,151 - -------------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Goodyear Tire & Rubber 28,780(b) 564,951 Johnson Controls 70,967 2,140,365 --------------- Total 2,705,316 - -------------------------------------------------------------------------------------- AUTOMOBILES (0.1%) Ford Motor 526,712(b) 2,528,217 General Motors 67,728(f) 749,749 Harley-Davidson 28,277 1,070,002 --------------- Total 4,347,968 - -------------------------------------------------------------------------------------- BEVERAGES (2.5%) Anheuser-Busch Companies 39,259 2,660,190 Coca-Cola 1,040,306 53,575,759 Molson Coors Brewing Cl B 302,505 16,326,195
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) BEVERAGES (CONT.) Pepsi Bottling Group 14,745 $410,648 PepsiCo 443,504 29,519,626 --------------- Total 102,492,418 - -------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.9%) Amgen 714,833(b) 44,769,991 Genentech 377,556(b) 35,962,209 Genzyme 249,477(b) 19,122,412 ImClone Systems 262,974(b) 16,811,928 --------------- Total 116,666,540 - -------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) Masco 250,330 4,127,942 - -------------------------------------------------------------------------------------- CAPITAL MARKETS (3.3%) Bank of New York Mellon 281,459 9,991,795 BlackRock 9,386 2,034,040 Blackstone Group LP 139,163 2,584,257 Goldman Sachs Group 122,537 22,551,709 KKR Private Equity Investors LP Unit 2,752,976 36,339,938 Legg Mason 116,839 4,714,454 Lehman Brothers Holdings 1,142,970 19,819,100 Merrill Lynch & Co 163,870 4,367,136 Morgan Stanley 433,275 17,105,697 Oaktree Capital Group LLC Cl A Unit 331,941(d,h) 9,294,348 Och-Ziff Capital Management Group LLC Cl A 78,518 1,282,984 State Street 38,363 2,748,325 --------------- Total 132,833,783 - -------------------------------------------------------------------------------------- CHEMICALS (1.1%) Air Products & Chemicals 25,197 2,399,006 Ashland 6,745 281,739 Dow Chemical 404,782 13,483,289
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 15
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CHEMICALS (CONT.) Eastman Chemical 47,239 $2,832,450 Ecolab 20,992 938,342 EI du Pont de Nemours & Co 266,501 11,675,409 Hercules 13,504 270,755 Intl Flavors & Fragrances 9,639 387,681 Monsanto 65,630 7,817,189 PPG Inds 19,619 1,189,696 Praxair 37,441 3,509,345 Rohm & Haas 15,002 1,125,150 --------------- Total 45,910,051 - -------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.5%) BancorpSouth 57,883 1,232,908 BB&T 162,258(f) 4,546,469 Comerica 18,838 541,027 Fifth Third Bancorp 756,147 10,563,374 PNC Financial Services Group 99,353 7,082,875 Regions Financial 1 9 SunTrust Banks 102,054 4,190,337 Wachovia 1,178,853 20,358,792 Wells Fargo & Co 387,434 11,727,628 --------------- Total 60,243,419 - -------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Allied Waste Inds 40,342(b) 488,138 Avery Dennison 12,748 561,039 Cintas 15,638 444,745 Equifax 15,374 539,474 Monster Worldwide 14,877(b) 263,918 Pitney Bowes 24,852 787,560 Robert Half Intl 18,984 480,105 RR Donnelley & Sons 25,417 678,634 Waste Management 58,668 2,085,061 --------------- Total 6,328,674 - -------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.0%) Cisco Systems 1,131,946(b) 24,891,493 Corning 215,740 4,316,957 Motorola 610,279 5,272,811 Nokia 729,400(c,k) 19,905,194 Nokia ADR 1,879,494(c) 51,347,775 Nortel Networks 342(b,c) 2,613
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) COMMUNICATIONS EQUIPMENT (CONT.) QUALCOMM 926,698 $51,283,467 Starent Networks 356,126(b,f) 4,665,251 --------------- Total 161,685,561 - -------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.1%) Apple 187,048(b) 29,731,280 Dell 266,915(b) 6,558,102 EMC 645,118(b) 9,683,221 Hewlett-Packard 940,865 42,150,752 IBM 261,527 33,470,225 SanDisk 221,899(b) 3,128,776 --------------- Total 124,722,356 - -------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) Fluor 83,260 6,773,201 KBR 189,049 5,387,897 --------------- Total 12,161,098 - -------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (--%) Vulcan Materials 13,081 839,669 - -------------------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) American Express 180,325 6,693,664 Capital One Financial 82,648 3,459,645 SLM 55,909(b) 957,721 --------------- Total 11,111,030 - -------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (--%) Ball 11,691 521,186 Bemis 11,926 335,836 Pactiv 15,630(b) 376,839 Sealed Air 19,132 415,164 --------------- Total 1,649,025 - -------------------------------------------------------------------------------------- DISTRIBUTORS (--%) Genuine Parts 19,592 785,835 - -------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (--%) Apollo Group Cl A 16,503(b) 1,027,972 H&R Block 38,956 947,799 --------------- Total 1,975,771 - -------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.4%) Apollo Mgmt LP 1,426,700(d,h) 19,973,800 Bank of America 1,605,532 52,822,002 CIT Group 22,723 192,691 Citigroup 1,394,941 26,071,447 CME Group 6,127 2,206,517
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) DIVERSIFIED FINANCIAL SERVICES (CONT.) Interactive Brokers Group Cl A 447,495(b) $12,556,710 IntercontinentalExchange 76,455(b) 7,630,209 iShares Dow Jones US Healthcare Sector Index Fund 1 65 JPMorgan Chase & Co 1,177,978 47,861,246 KKR Financial Holdings LLC 580,995 5,966,819 Leucadia Natl 21,149 946,841 Materials Select Sector SPDR Fund 71,566(f) 2,889,835 NYSE Euronext 30,511 1,441,340 --------------- Total 180,559,522 - -------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.9%) AT&T 2,177,373 67,084,863 Chunghwa Telecom ADR 1(c) 25 Deutsche Telekom 1,804,355(c) 31,231,566 Embarq 77,675 3,555,185 Frontier Communications 180,802 2,090,071 Qwest Communications Intl 4,256,424(f) 16,302,104 Telefonica 2,070,662(c) 53,723,568 Telefonica ADR 97,827(c) 7,613,875 Verizon Communications 1,646,345 56,041,584 Windstream 175,967 2,097,527 --------------- Total 239,740,368 - -------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.8%) Allegheny Energy 20,100 972,840 American Electric Power 48,037 1,897,462 Duke Energy 151,259 2,659,133 Edison Intl 38,965 1,883,568 Entergy 132,929 14,212,769 Exelon 232,129 18,249,982 FirstEnergy 36,460 2,681,633 FPL Group 98,810 6,376,209 Pepco Holdings 24,087 600,730 Pinnacle West Capital 12,030 403,847 PPL 112,549 5,285,301
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ELECTRIC UTILITIES (CONT.) Progress Energy 31,715 $1,341,862 Southern 461,644 16,337,581 --------------- Total 72,902,917 - -------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.4%) Emerson Electric 338,633 16,491,428 Gamesa Tecnologica 13,814(c) 656,736 --------------- Total 17,148,164 - -------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Agilent Technologies 3,004(b) 108,324 Tyco Electronics 136,863(c) 4,535,640 --------------- Total 4,643,964 - -------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.6%) Baker Hughes 70,053 5,808,094 ENSCO Intl 15,095 1,043,668 Halliburton 207,050 9,279,981 Nabors Inds 30,012(b,c) 1,094,238 Natl Oilwell Varco 122,206(b) 9,609,058 Noble 29,594 1,535,041 Pride Intl 55,056(b) 2,133,971 Rowan Companies 12,564 500,047 Schlumberger 165,535 16,818,355 Transocean 80,630(b) 10,968,099 Weatherford Intl 129,293(b) 4,878,225 --------------- Total 63,668,777 - -------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.5%) Costco Wholesale 56,905 3,566,805 CVS Caremark 268,637 9,805,251 Kroger 79,418 2,245,941 Safeway 132,565 3,542,137 SUPERVALU 23,305 597,074 SYSCO 69,319 1,965,887 Walgreen 169,526 5,821,523 Wal-Mart Stores 595,006 34,879,251 --------------- Total 62,423,869 - -------------------------------------------------------------------------------------- FOOD PRODUCTS (0.4%) Archer-Daniels-Midland 73,221 2,096,317 Kellogg 144,371 7,660,325 Kraft Foods Cl A 92,141 2,931,927 Sara Lee 228,562 3,122,157 --------------- Total 15,810,726 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) GAS UTILITIES (0.1%) Nicor 5,402 $215,108 ONEOK 96,709 4,398,325 Questar 20,732 1,096,308 --------------- Total 5,709,741 - -------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.3%) Becton Dickinson & Co 32,876 2,791,501 Boston Scientific 2,059,138(b) 24,483,151 China Medical Technologies ADR 110,635(c,f) 5,301,629 Covidien 198,175 9,758,137 Medtronic 216,057 11,414,291 --------------- Total 53,748,709 - -------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.6%) Aetna 193,362 7,929,776 AmerisourceBergen 219,065 9,172,252 Cardinal Health 327,758 17,610,437 CIGNA 126,376 4,678,440 Coventry Health Care 18,160(b) 642,319 Express Scripts 73,371(b) 5,175,590 Humana 261,683(b) 11,490,501 Laboratory Corp of America Holdings 13,323(b) 900,368 McKesson 365,600 20,469,944 Medco Health Solutions 211,662(b) 10,494,202 Patterson Companies 14,526(b) 453,647 Quest Diagnostics 18,891 1,004,246 Tenet Healthcare 57,375(b) 332,201 UnitedHealth Group 356,181 10,001,562 WellPoint 62,989(b) 3,303,773 --------------- Total 103,659,258 - -------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) IMS Health 21,711 453,760 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HOTELS, RESTAURANTS & LEISURE (0.6%) Chipotle Mexican Grill Cl B 1(b) $64 Darden Restaurants 260,562 8,486,504 Intl Game Technology 252,174 5,474,698 Marriott Intl Cl A 173,799 4,503,132 Starbucks 290,004(b) 4,260,159 Starwood Hotels & Resorts Worldwide 24,972 856,290 --------------- Total 23,580,847 - -------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.0%) Black & Decker 7,305 438,446 Centex 251,388 3,690,376 DR Horton 427,706 4,756,091 Harman Intl Inds 226,936 9,342,954 Hovnanian Enterprises Cl A 314,091(b,f) 2,208,060 Jarden 22,309(b) 536,085 KB Home 372,092(f) 6,545,098 Leggett & Platt 19,887 387,797 Lennar Cl A 220,369 2,666,465 Meritage Homes 58,457(b) 1,055,149 Newell Rubbermaid 96,030 1,587,376 NVR 1,977(b) 1,091,937 Snap-On 6,903 388,570 Stanley Works 9,373 416,911 Whirlpool 54,642 4,136,399 --------------- Total 39,247,714 - -------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.2%) Clorox 71,006 3,869,827 Colgate-Palmolive 212,982 15,818,173 Procter & Gamble 449,018 29,401,699 --------------- Total 49,089,699 - -------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) AES 80,357(b) 1,296,962 Constellation Energy Group 21,336 1,774,301 Dynegy Cl A 59,446(b) 400,072 --------------- Total 3,471,335 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) INDUSTRIAL CONGLOMERATES (1.8%) 3M 36,650 $2,579,794 General Electric 2,016,361 57,042,852 Siemens 29,231(c) 3,552,897 Textron 98,300 4,273,101 Tyco Intl 105,559(c) 4,703,709 --------------- Total 72,152,353 - -------------------------------------------------------------------------------------- INSURANCE (3.3%) ACE LTD 428,806(c) 21,740,464 AFLAC 442,260 24,594,080 Allstate 21,365 987,490 American Intl Group 661,931 17,243,303 Aon 7,738 354,400 Arch Capital Group 36,503(b,c) 2,545,354 Assurant 14,256 857,071 Assured Guaranty 126,640(c,f) 1,451,294 Chubb 146,361 7,031,182 Endurance Specialty Holdings 61,099(c) 1,869,629 Hartford Financial Services Group 254,581 16,137,890 Max Capital Group 143,701(c) 3,372,662 MetLife 140,630 7,139,785 Principal Financial Group 19,201 816,235 Prudential Financial 346,699 23,911,830 Validus Holdings 97,234(c) 2,217,908 XL Capital Cl A 67,497(c) 1,207,521 --------------- Total 133,478,098 - -------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.3%) Amazon.com 37,016(b) 2,825,801 Expedia 537,369(b) 10,516,312 IAC/InterActiveCorp 21,698(b) 378,847 --------------- Total 13,720,960 - -------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.1%) Akamai Technologies 20,111(b) 469,391 eBay 132,377(b) 3,331,929 Equinix 22,237(b) 1,809,202 Google Cl A 69,127(b) 32,748,916 VeriSign 23,302(b) 758,247 Yahoo! 197,291(b) 3,924,118 --------------- Total 43,041,803 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) IT SERVICES (1.2%) Affiliated Computer Services Cl A 11,529(b) $555,698 Automatic Data Processing 165,598 7,072,691 Broadridge Financial Solutions 1 21 Cognizant Technology Solutions Cl A 34,291(b) 962,548 Computer Sciences 17,942(b) 849,913 Convergys 14,670(b) 186,309 Electronic Data Systems 168,116 4,170,958 Fidelity Natl Information Services 20,379 386,182 Fiserv 19,460(b) 930,577 MasterCard Cl A 83,783(f) 20,455,618 Paychex 38,069 1,253,231 Redecard 254,120(c) 4,692,695 Total System Services 23,527 460,659 Unisys 42,291(b) 156,054 Visa Cl A 33,382(b) 2,438,889 Western Union 87,834 2,427,732 --------------- Total 46,999,775 - -------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Eastman Kodak 34,500 505,080 Hasbro 27,327 1,058,102 Mattel 45,784 917,969 --------------- Total 2,481,151 - -------------------------------------------------------------------------------------- MACHINERY (1.5%) Caterpillar 195,634 13,600,476 Danaher 33,928 2,702,365 Deere & Co 232,541 16,315,077 Flowserve 147,120 19,616,980 Ingersoll-Rand Cl A 37,369(c) 1,345,284 Navistar Intl 7,584(b) 427,624 Parker Hannifin 118,219 7,291,748 --------------- Total 61,299,554 - -------------------------------------------------------------------------------------- MEDIA (7.3%) Comcast Cl A 1,441,247 29,718,513 Comcast Special Cl A 186,779 3,836,441 DIRECTV Group 195,760(b) 5,289,435 EW Scripps Cl A 3,689 25,530 Gannett 21,746 394,038
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEDIA (CONT.) Liberty Entertainment Series A 303,858(b,e) $7,480,984 Liberty Media - Capital Series A 32,687(b,e) 507,956 McGraw-Hill Companies 31,647 1,287,083 Meredith 3,593 91,837 New York Times Cl A 13,438 169,184 News Corp Cl A 1,737,878 24,556,216 Scripps Networks Interactive Cl A 11,068(b) 448,697 Sirius XM Radio 36,484,405(b,k) 58,375,048 Time Warner 2,278,213 32,624,010 Time Warner Cable Cl A 118,025(b) 3,355,451 Viacom Cl B 211,741(b) 5,913,926 Virgin Media 9,044,507(h) 101,479,370 Vivendi 232,631(c) 9,725,494 Walt Disney 349,839 10,617,614 Washington Post Cl B 553 341,892 WorldSpace Cl A 263,942(b,f) 348,403 --------------- Total 296,587,122 - -------------------------------------------------------------------------------------- METALS & MINING (1.3%) Alcoa 280,794(i) 9,476,798 Allegheny Technologies 12,083 571,405 Coeur d'Alene Mines 4,505,183(b,f) 13,019,979 Freeport-McMoRan Copper & Gold 45,827 4,433,762 Lihir Gold 3,224,058(b,c) 8,377,633 Newmont Mining 207,694 9,960,985 Nucor 36,494 2,088,187 Timminco 265,292(b,c) 6,271,433 Titanium Metals 11,658 131,269 --------------- Total 54,331,451 - -------------------------------------------------------------------------------------- MULTILINE RETAIL (0.3%) JC Penney 137,459 4,237,861 Kohl's 96,693(b) 4,052,404 Macy's 57,315 1,078,095 Target 79,614 3,600,941 --------------- Total 12,969,301 - -------------------------------------------------------------------------------------- MULTI-UTILITIES (0.7%) Ameren 25,059 1,029,674 CenterPoint Energy 39,263 619,178
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MULTI-UTILITIES (CONT.) CMS Energy 26,962 $363,987 Consolidated Edison 32,613 1,294,736 Dominion Resources 236,970 10,469,334 DTE Energy 19,512 799,602 Integrys Energy Group 9,142 466,791 NiSource 32,787 560,002 PG&E 42,734 1,646,541 Public Service Enterprise Group 60,818 2,542,192 Sempra Energy 29,947 1,681,824 TECO Energy 25,205 467,553 Xcel Energy 307,787 6,174,207 --------------- Total 28,115,621 - -------------------------------------------------------------------------------------- OFFICE ELECTRONICS (--%) Xerox 106,725 1,455,729 - -------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (9.1%) Anadarko Petroleum 57,901 3,353,047 Apache 20,018 2,245,419 BP ADR 141,792(c) 8,711,700 Chesapeake Energy 32,146 1,612,122 Chevron 886,464 74,959,396 ConocoPhillips 474,900 38,761,338 CONSOL Energy 24,334 1,810,206 Devon Energy 123,144 11,685,134 El Paso 85,556 1,534,019 EOG Resources 15,627 1,570,982 Exxon Mobil 1,915,009 154,024,174 Marathon Oil 139,671 6,909,524 Massey Energy 9,624 714,582 Occidental Petroleum 113,036 8,910,628 Patriot Coal 3,558(b) 448,842 Peabody Energy 34,016 2,301,182 Range Resources 2,370 115,087 Royal Dutch Shell ADR 68,458(c) 4,846,142 Ship Finance Intl 104,732(c) 3,114,730 Spectra Energy 78,605 2,135,698 Sunoco 62,954 2,556,562 Tesoro 17,661 272,686 Total 305,847(c) 23,416,154 Valero Energy 181,512 6,064,316 Williams Companies 75,121 2,407,628 XTO Energy 32,351 1,527,938 --------------- Total 366,009,236 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) PAPER & FOREST PRODUCTS (0.3%) Intl Paper 234,954 $6,512,925 MeadWestvaco 20,757 556,495 Weyerhaeuser 98,119 5,245,442 --------------- Total 12,314,862 - -------------------------------------------------------------------------------------- PERSONAL PRODUCTS (1.2%) Avon Products 877,466 37,204,558 Herbalife 256,100(c) 11,060,959 --------------- Total 48,265,517 - -------------------------------------------------------------------------------------- PHARMACEUTICALS (7.1%) Bristol-Myers Squibb 3,256,206 68,771,071 Elan ADR 58,998(b,c) 1,182,910 Eli Lilly & Co 102,634 4,835,088 Johnson & Johnson 311,557 21,332,308 Merck & Co 1,642,017 54,022,359 Pfizer 5,088,066 94,994,192 Schering-Plough 515,979 10,876,837 Shire ADR 29,747(c) 1,497,464 Wyeth 795,773 32,244,722 --------------- Total 289,756,951 - -------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.3%) Apartment Investment & Management Cl A 80,423 2,748,054 AvalonBay Communities 4,673 465,945 Boston Properties 9,881 950,453 HCP 28,116 1,014,144 Kimco Realty 12,399 437,561 Plum Creek Timber 20,135 980,977 ProLogis 26,369 1,288,917 Public Storage 11,000 900,790 Simon Property Group 15,787 1,462,350 Vornado Realty Trust 11,357 1,079,710 --------------- Total 11,328,901 - -------------------------------------------------------------------------------------- ROAD & RAIL (0.8%) CSX 31,756 2,146,070 Hertz Global Holdings 3,057,405(b) 26,079,665 Norfolk Southern 45,485 3,271,281 --------------- Total 31,497,016 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.7%) Advanced Micro Devices 1,585,279(b) $6,674,025 Applied Materials 149,554 2,590,275 Atmel 684,885(b) 2,417,644 Broadcom Cl A 48,957(b) 1,189,166 Cypress Semiconductor 47,876(b) 1,304,621 Himax Technologies ADR 742,532(c) 2,821,622 Infineon Technologies 766,243(b,c) 5,752,134 Infineon Technologies ADR 271,122(b,c) 2,038,837 Intel 2,050,731 45,505,720 LSI 2(b) 14 MEMC Electronic Materials 16,280(b) 752,299 Micron Technology 1,922,816(b) 9,287,201 Microsemi 28,004(b) 726,984 Natl Semiconductor 43,190 904,831 ON Semiconductor 362,514(b) 3,404,006 Skyworks Solutions 84,398(b) 798,405 Spansion Cl A 3,791,334(b) 8,682,155 Teradyne 574,117(b) 5,379,476 Texas Instruments 466,539 11,374,221 --------------- Total 111,603,636 - -------------------------------------------------------------------------------------- SOFTWARE (3.5%) Adobe Systems 63,649(b) 2,631,886 Autodesk 26,806(b) 854,843 BMC Software 22,854(b) 751,668 CA 46,727 1,114,906 Citrix Systems 21,966(b) 585,174 Compuware 31,307(b) 344,377 Electronic Arts 111,588(b) 4,818,370 Intuit 38,420(b) 1,050,019 Microsoft 3,657,420 94,068,843 Nintendo ADR 363,822(c) 21,056,199 Oracle 664,725(b) 14,311,529 SAP 4,190(c) 243,499 Symantec 100,556(b) 2,118,715 --------------- Total 143,950,028 - -------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.9%) Abercrombie & Fitch Cl A 26,590 1,468,300 AutoNation 16,031(b) 165,440 AutoZone 5,144(b) 670,212
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 21
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SPECIALTY RETAIL (CONT.) Bed Bath & Beyond 34,454(b) $958,855 Gap 112,983 1,821,286 Home Depot 481,084 11,464,231 Lowe's Companies 486,644(i) 9,888,605 Office Depot 30,952(b) 210,474 RadioShack 15,719 262,193 Sherwin-Williams 11,888 633,036 Staples 88,968 2,001,780 Tiffany & Co 17,789 672,246 TJX Companies 191,512 6,455,870 --------------- Total 36,672,528 - -------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.1%) Nike Cl B 48,509 2,846,508 VF 21,966 1,572,326 --------------- Total 4,418,834 - -------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.4%) Freddie Mac 2,057,347 16,808,526 Hudson City Bancorp 48,993 894,607 Washington Federal 12,857 239,140 --------------- Total 17,942,273 - -------------------------------------------------------------------------------------- TOBACCO (2.2%) Altria Group 1,150,407 23,410,782 Lorillard 17,965(b) 1,205,631 Philip Morris Intl 1,183,814 61,143,994 UST 67,961 3,575,428 --------------- Total 89,335,835 - -------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (--%) WW Grainger 7,786 696,925 - -------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.8%) American Tower Cl A 21,603(b) 905,166 Sprint Nextel 619,353 5,041,533 Turkcell ADR 106,276(c) 2,051,127 Vodafone Group 28,897,564(c) 77,409,489 Vodafone Group ADR 1,110,412(c) 29,792,354 --------------- Total 115,199,669 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $4,277,268,678) $3,944,415,463 - --------------------------------------------------------------------------------------
OPTIONS PURCHASED (0.3%) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) CALLS Altria Group(j) Virgin Media(j) Vodafone Group ADR(j) 240,674 $100.00 Jan. 2009 $283,995 AmeriSourceBergen(j) Bristol-Myers Squibb(j) Nokia ADR(j) 224,040 100.00 Jan. 2009 495,128 Hertz Global Holdings(j) Telefonica(j) Vodafone Group ADR(j) 194,617 100.00 Jan. 2009 136,388 Hong Kong Dollar 1,012,421 7.73 March 2009 225,365 Nokia 5,033 15.00 Dec. 2008 2,708,239 Nokia 7,559 18.00 Dec. 2008 1,868,679 Nokia ADR 2,180 25.00 Jan. 2009 926,500 Sirius XM Radio 8,852 9.00 Aug. 2008 44,260 Sirius XM Radio(j) Virgin Media(j) Vodafone Group ADR(j) 213,932 100.00 Jan. 2009 53,483 - -------------------------------------------------------------------------------------------------------------------------- PUTS Goldman Sachs Group 239,727 446.25 Aug. 2008 1,080,474 NASDAQ 100 Index 28,351 43.00 Aug. 2008 708,775 Research in Motion 1,123 115.00 Dec. 2008 1,344,792 S&P 500 Index 1,072 1,240.00 Aug. 2008 1,420,400 S&P 500 Index 1,232 1,260.00 Aug. 2008 2,470,160 - -------------------------------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $22,945,180) $13,766,638 - --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (3.1%)(g) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.54% 124,337,493(l) $124,337,493 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $124,337,493) $124,337,493 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $4,424,551,351)(m) $4,082,519,594 ===================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2008
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------- S&P 500 Index 60 $19,006,500 Sept. 2008 $365,881
OPEN OPTIONS CONTRACTS WRITTEN AT JULY 31, 2008
NUMBER OF EXERCISE PREMIUM EXPIRATION ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(A) - -------------------------------------------------------------------------------------------------------------- Nokia Call 7,559 18 $934,566 Dec. 2008 $1,868,679 Research in Motion Put 1,123 100 856,227 Dec. 2008 735,565 S&P 500 Index Put 1,072 1,200 801,663 Aug. 2008 584,240 S&P 500 Index Put 1,232 1,220 797,104 Aug. 2008 1,065,680 Sirius XM Radio Call 8,852 10 394,191 Aug. 2008 22,130 - -------------------------------------------------------------------------------------------------------------- Total $4,276,294 - --------------------------------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2008
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION - --------------------------------------------------------------------------------------------------------------- Aug. 1, 2008 805,674 1,255,519 $-- $(1,902) European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Aug. 5, 2008 662,546 425,003 331 -- U.S. Dollar European Monetary Unit - --------------------------------------------------------------------------------------------------------------- Sept. 4, 2008 22,571,000 45,016,280 381,074 -- British Pound U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 5, 2008 6,683,000 6,361,013 94,766 -- Australian Dollar U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 5, 2008 17,493,000 34,893,987 303,505 -- British Pound U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 11, 2008 44,722,000 69,847,267 197,246 -- European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 12, 2008 36,981,000 57,690,360 96,168 -- European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Total $1,073,090 $(1,092) - ---------------------------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the value of foreign securities represented 10.9% of net assets. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 23 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2008, the value of these securities amounted to $29,268,148 or 0.7% of net assets. (e) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (f) At July 31, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (g) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.8% of net assets. See Note 5 to the financial statements. The Fund's cash equivalent position is 2.3% of net assets. (h) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at July 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- Apollo Mgmt LP* 08-02-07 thru 07-10-08 $31,700,520 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 03-14-08 12,205,136 Virgin Media 11-15-06 thru 04-15-08 182,208,894
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (i) At July 31, 2008, investments in securities included securities valued at $4,835,700 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (j) Represents a worst-of-call-option that is a bundle of long forwards. All mature on the option's expiration date but have different underliers. At expiration, only one settles and this is chosen in the issuer's favor. (k) At July 31, 2008, securities valued at $22,044,694 were held to cover open call options written. See Note 6 to the financial statements. (l) Affiliated Money Market Fund - See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (m) At July 31, 2008, the cost of securities for federal income tax purposes was $4,609,836,302 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $300,203,674 Unrealized depreciation (827,520,382) - ------------------------------------------------------------------------------ Net unrealized depreciation $(527,316,708) - ------------------------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 25 FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008 ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $4,300,213,858) $3,958,182,101 Affiliated money market fund (identified cost $124,337,493) 124,337,493 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $4,424,551,351) 4,082,519,594 Cash 1,338,804 Foreign currency holdings (identified cost $1) 1 Capital shares receivable 376,695 Dividends and accrued interest receivable 9,079,663 Receivable for investment securities sold 84,128,464 Unrealized appreciation on forward foreign currency contracts 1,073,090 - ------------------------------------------------------------------------------ Total assets 4,178,516,311 - ------------------------------------------------------------------------------ LIABILITIES Options contracts written, at value (premiums received $3,783,751) 4,276,294 Capital shares payable 15,079,716 Payable for investment securities purchased 64,094,744 Payable upon return of securities loaned 32,299,100 Variation margin payable 308,000 Unrealized depreciation on forward foreign currency contracts 1,092 Accrued investment management services fees 63,204 Accrued distribution fees 35,986 Accrued transfer agency fees 12,123 Accrued administrative services fees 5,528 Accrued plan administration services fees 1,300 Other accrued expenses 681,310 Collateral and deposits payable 1,175,000 - ------------------------------------------------------------------------------ Total liabilities 118,033,397 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $4,060,482,914 ============================================================================== REPRESENTED BY Capital stock -- $.01 par value $ 9,010,201 Additional paid-in capital 4,751,328,658 Undistributed net investment income 47,429,271 Accumulated net realized gain (loss) (406,243,610) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (341,041,606) - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $4,060,482,914 ============================================================================== *Including securities on loan, at value $ 28,188,444 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $3,388,815,212 750,529,476 $4.52(1) Class B $ 432,695,950 98,119,285 $4.41 Class C $ 20,752,067 4,701,508 $4.41 Class I $ 38,943,788 8,562,931 $4.55 Class R2 $ 3,743 822 $4.55 Class R3 $ 3,749 822 $4.56 Class R4 $ 179,264,616 39,104,432 $4.58 Class R5 $ 3,789 822 $4.61 - -------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $4.80. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 27 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008 INVESTMENT INCOME Income: Dividends $ 113,500,028 Interest 4,306 Income distributions from affiliated money market fund 8,770,462 Fee income from securities lending 1,125,485 Less foreign taxes withheld (1,262,602) - ----------------------------------------------------------------------------- Total income 122,137,679 - ----------------------------------------------------------------------------- Expenses: Investment management services fees 25,467,893 Distribution fees Class A 10,775,702 Class B 7,098,566 Class C 270,367 Class R2 22 Class R3 11 Transfer agency fees Class A 9,066,345 Class B 1,605,617 Class C 59,194 Class R2 3 Class R3 3 Class R4 128,910 Class R5 3,535 Administrative services fees 2,524,199 Plan administration services fees Class R2 11 Class R3 11 Class R4 644,550 Compensation of board members 99,527 Custodian fees 589,410 Printing and postage 1,398,700 Registration fees 91,517 Professional fees 119,264 Other 186,595 - ----------------------------------------------------------------------------- Total expenses 60,129,952 Expenses waived/reimbursed by the Investment Manager and its affiliates (3,079,363) Earnings and bank fee credits on cash balances (400,856) - ----------------------------------------------------------------------------- Total net expenses 56,649,733 - ----------------------------------------------------------------------------- Investment income (loss) -- net 65,487,946 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 10,407,715 Foreign currency transactions (14,523,705) Futures contracts (11,520,899) Options contracts written (2,376,453) Swap transactions (2,348,917) - ----------------------------------------------------------------------------- Net realized gain (loss) on investments (20,362,259) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (865,038,637) - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (885,400,896) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(819,912,950) =============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 65,487,946 $ 63,564,209 Net realized gain (loss) on investments (20,362,259) 703,349,838 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (865,038,637) 323,820,329 - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (819,912,950) 1,090,734,376 - ---------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (36,389,921) (51,279,745) Class B -- (2,969,618) Class C -- (121,537) Class I (866,696) (1,522,653) Class R2 (32) (65) Class R3 (44) (66) Class R4 (2,588,075) (5,679,767) Class R5 -- (322,641) Net realized gain Class A (503,800,045) (125,265,857) Class B (85,854,373) (27,693,216) Class C (3,230,993) (831,229) Class I (7,554,314) (2,640,713) Class R2 (539) (115) Class R3 (539) (115) Class R4 (31,125,821) (13,607,896) Class R5 (539) (560,037) - ---------------------------------------------------------------------------------------- Total distributions (671,411,931) (232,495,270) - ----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 211,484,181 $ 370,676,879 Class B shares 33,647,160 57,068,487 Class C shares 2,226,679 2,755,399 Class I shares 10,561,864 15,570,677 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 34,516,064 28,329,694 Class R5 shares -- 26,931,801 Reinvestment of distributions at net asset value Class A shares 523,659,899 171,429,375 Class B shares 85,230,086 30,416,192 Class C shares 3,174,765 939,571 Class I shares 8,419,823 4,163,008 Class R4 shares 33,713,417 19,287,529 Class R5 shares -- 882,497 Payments for redemptions Class A shares (1,190,365,828) (1,564,111,579) Class B shares (315,875,480) (569,109,428) Class C shares (8,714,618) (10,923,150) Class I shares (30,081,251) (69,035,113) Class R4 shares (150,506,498) (882,819,499) Class R5 shares (26,533,250) (2,629,011) - ---------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (775,442,987) (2,370,166,671) - ---------------------------------------------------------------------------------------- Total increase (decrease) in net assets (2,266,767,868) (1,511,927,565) Net assets at beginning of year 6,327,250,782 7,839,178,347 - ---------------------------------------------------------------------------------------- Net assets at end of year $ 4,060,482,914 $ 6,327,250,782 ======================================================================================== Undistributed net investment income $ 47,429,271 $ 40,157,282 - ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Large Cap Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds, owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by - -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2008, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at July 31, 2008 was $130,747,518 representing 3.22% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 33 obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At July 31, 2008, foreign currency holdings were entirely comprised of Taiwan dollars. The Fund may enter into forward foreign currency contracts for operational purposes. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. TOTAL RETURN EQUITY SWAP TRANSACTIONS The Fund may enter into swap agreements to gain exposure to the total return on a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Under the terms of a total return equity swap agreement, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. The notional amounts of swap contracts are not recorded in the financial statements. Swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk associated with the investment in the underlying securities and also the risk of the counterparty not fulfilling its obligations under the agreement. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 35 FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures and options contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, re-characterization of REIT distributions, investments in partnerships, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $18,371,189 and accumulated net realized loss has been decreased by $18,360,779 resulting in a net reclassification adjustment to increase paid-in capital by $10,410. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income....................... $211,882,459 $ 114,060,835 Long-term capital gain................ 328,307,507 62,484,767 CLASS B Distributions paid from: Ordinary income....................... 29,908,842 16,848,997 Long-term capital gain................ 55,945,531 13,813,837
- -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------------------- CLASS C Distributions paid from: Ordinary income....................... $ 1,125,566 $ 538,139 Long-term capital gain................ 2,105,427 414,627 CLASS I Distributions paid from: Ordinary income....................... 3,498,173 2,846,125 Long-term capital gain................ 4,922,837 1,317,241 CLASS R2 Distributions paid from: Ordinary income....................... 220 123 Long-term capital gain................ 351 57 CLASS R3 Distributions paid from: Ordinary income....................... 232 124 Long-term capital gain................ 351 57 CLASS R4 Distributions paid from: Ordinary income....................... 13,430,477 12,499,767 Long-term capital gain................ 20,283,419 6,787,896 CLASS R5 Distributions paid from: Ordinary income....................... 188 603,320 Long-term capital gain................ 351 279,358
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception date) to July 31, 2007. At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income............................ $ 64,131,416 Undistributed accumulated long-term gain................. $ -- Accumulated realized loss................................ $(235,009,471) Unrealized appreciation (depreciation)................... $(528,977,890)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 37 financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $4,214,418 for the year - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.47% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Funds and the Board. For the year ended July 31, 2008 other expenses paid to this company were $27,518. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 39 attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $13,585,000 and $175,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $2,642,943 for Class A, $697,051 for Class B and $2,614 for Class C for the year ended July 31, 2008. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class A..................................................... 0.97% Class B..................................................... 1.73 Class C..................................................... 1.73 Class R2.................................................... 1.14 Class R3.................................................... 0.89 Class R4.................................................... 0.82
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A..................................................... $2,485,731 Class B..................................................... 451,611 Class C..................................................... 15,549 Class R4.................................................... 118,737
- -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.................................................... $ 11 Class R3.................................................... 11 Class R4.................................................... 7,713
Under an agreement which was effective until July 31, 2008, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would not exceed the following percentage of the Fund's average daily net assets: Class A..................................................... 1.05% Class B..................................................... 1.81 Class C..................................................... 1.81 Class I..................................................... 0.67 Class R2.................................................... 1.47 Class R3.................................................... 1.22 Class R4.................................................... 0.90 Class R5.................................................... 0.72
Effective Aug. 1, 2008, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A..................................................... 1.04% Class B..................................................... 1.81 Class C..................................................... 1.80 Class I..................................................... 0.62 Class R2.................................................... 1.42 Class R3.................................................... 1.17 Class R4.................................................... 0.90 Class R5.................................................... 0.67
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 41 EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $400,856 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $3,532,920,686 and $4,856,373,311, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 43,972,212 98,990,509 (225,955,886) (82,993,165) Class B 6,351,542 16,421,985 (65,543,343) (42,769,816) Class C 430,927 611,708 (1,682,294) (639,659) Class I 2,016,152 1,585,654 (6,198,548) (2,596,742) Class R4 6,389,837 6,289,817 (27,462,232) (14,782,578) Class R5 -- -- (4,152,231) (4,152,231) - ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 59,268,105 29,154,657 (265,432,267) (177,009,505) Class B 9,841,913 5,262,317 (95,077,518) (79,973,288) Class C 475,544 162,555 (1,886,761) (1,248,662) Class I 2,660,792 705,595 (11,591,197) (8,224,810) Class R2 822 -- -- 822 Class R3 822 -- -- 822 Class R4 4,699,528 3,241,602 (149,629,106) (141,687,976) Class R5 4,421,287 149,070 (417,304) 4,153,053 - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At July 31, 2008, securities valued at $28,188,444 were on loan to brokers. For collateral, the Fund received $32,299,100 in cash. Cash collateral received is invested in an affiliated money market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the Portfolio of Investments. Income from securities lending amounted to $1,125,485 for the year ended July 31, 2008. Expenses paid to the Investment Manager as securities lending agent were $25,365 for the year ended July 31, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 6. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written during the year ended July 31, 2008, are as follows:
PUTS CALLS CONTRACTS PREMIUMS CONTRACTS PREMIUMS - ------------------------------------------------------------------------------------------ Balance July 31, 2007 20,639 $ 2,621,153 27,883 $ 3,953,892 Opened 67,904 13,043,749 189,456 7,088,685 Closed (84,243) (12,702,678) (147,275) (8,353,184) Expired (873) (507,230) (53,653) (1,360,636) - ------------------------------------------------------------------------------------------ Balance July 31, 2008 3,427 $ 2,454,994 16,411 $ 1,328,757 - ------------------------------------------------------------------------------------------
See "Summary of Significant Accounting Policies." 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 43 fund aggregated $3,280,001,945 and $3,389,054,584, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 9. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, the Fund had a capital loss carry-over of $91,172,850 at July, 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2011 $60,717,128 $20,982,455 $9,473,267
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post-October loss of $143,836,621 that is treated for income tax purposes as occurring on Aug. 1, 2008. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/ Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 45 and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 11. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.05 $5.40 $5.26 $4.64 $4.53 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .06(b) .06 .04 .01 Net gains (losses) (both realized and unrealized) (.90) .79 .12 .61 .32 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.83) .85 .18 .65 .33 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.06) (.04) (.02) -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.70) (.20) (.04) (.03) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.52 $6.05 $5.40 $5.26 $4.64 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3,389 $5,039 $5,461 $1,030 $1,248 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.03% 1.09% 1.06% 1.16% 1.23% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .97% 1.09% 1.06% 1.11% 1.20% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.31% .99% 1.08% .79% .36% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.40%) 15.79% 3.51% 13.99% 7.19% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.96% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 47 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.91 $5.29 $5.15 $4.56 $4.48 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.88) .76 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .77 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.15) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.91 $5.29 $5.15 $4.56 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $433 $833 $1,169 $472 $572 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 1.98% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.95% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .56% .23% .28% .02% (.46%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.97%) 14.71% 2.72% 13.09% 6.48% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.92 $5.30 $5.16 $4.57 $4.49 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.89) .77 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.86) .78 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.02) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.16) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.92 $5.30 $5.16 $4.57 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $32 $35 $9 $11 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 2.01% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.98% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .55% .23% .28% .02% (.43%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (16.11%) 14.80% 2.71% 13.06% 6.46% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 49 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $6.09 $5.44 $5.31 $4.67 $5.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(c) .09(c) .10 .05 -- Net gains (losses) (both realized and unrealized) (.90) .78 .12 .63 (.28) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.81) .87 .22 .68 (.28) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) (.09) (.03) -- Distributions from realized gains (.65) (.14) -- (.01) (.13) - ----------------------------------------------------------------------------------------------------------- Total distributions (.73) (.22) (.09) (.04) (.13) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.09 $5.44 $5.31 $4.67 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $39 $68 $105 $43 $14 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (d),(e) .57% .63% .59% .70% .72%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .57% .63% .59% .65% .71%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.74% 1.44% 1.53% 1.24% .74%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.02%) 16.13% 4.06% 14.64% (5.65%)(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.56% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.08 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .06 .03 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .22 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.69) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.08 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.39% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.14% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .67%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.45%) 3.71%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 51 CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.09 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .04 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.82) .23 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.56 $6.09 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.14% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .89% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.40% .92%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.19%) 3.88%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.13 $5.47 $5.28 $4.66 $4.54 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .07(b) .09 .04 .01 Net gains (losses) (both realized and unrealized) (.92) .79 .12 .61 .34 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .86 .21 .65 .35 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.02) (.02) (.01) Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.20) (.02) (.03) (.23) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.58 $6.13 $5.47 $5.28 $4.66 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $179 $330 $1,069 $-- $8 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .87% .90% .81% .95% 1.03% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .82% .89% .81% .90% 1.00% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.46% 1.14% 1.41% 1.08% .50% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.40%) 15.80% 4.03% 14.06% 7.44% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.81% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 53 CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.11 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .06 Net gains (losses) (both realized and unrealized) (.93) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .25 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.61 $6.11 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $25 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.21% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.38%) 4.24%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.66% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE LARGE CAP EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Large Cap Equity Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 55 In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Large Cap Equity Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals............. 100.00% Dividends Received Deduction for corporations......... 100.00% U.S. Government Obligations........................... 0.00% CAPITAL GAIN DISTRIBUTION - the Fund designates $411,565,774 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 57 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme None 901 S. Marquette Ave. since 2006 Court, 1998-2006; Attorney Minneapolis, MN 55402 Age 54 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, None 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners None 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 53 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and None 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 57 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant None 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 73 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 69 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 58 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None 901 S. Marquette Ave. since 2004 Management, Inc. (private real Minneapolis, MN 55402 estate and asset management Age 55 company) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Pharmaceutical, Inc. Minneapolis, MN 55402 2003 (biotechnology); former (biotechnology); Age 64 President, Forester Biotech Healthways, Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- William F. Truscott Board member President -- U.S. Asset Management None 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; Director, President, and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 59 The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Patrick T. Bannigan President since Director and Senior Vice President, Asset 172 Ameriprise 2006 Management, Products and Marketing, Financial Center RiverSource Investments, LLC since 2006; Minneapolis, MN 55474 Director and Vice President -- Asset Age 42 Management, Products and Marketing, RiverSource Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 44 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 42 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Chief Financial Center Financial Officer, RiverSource Distributors, Minneapolis, MN 55474 Inc. since 2006 Age 53 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Chief Counsel, RiverSource Distributors, Minneapolis, MN 55474 since 2006 Inc. since 2006; Vice President, General Age 49 Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 47 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering 2934 Ameriprise Prevention Officer, Ameriprise Financial, Inc. since Financial Center Officer since 2004; Manager Anti-Money Laundering, Minneapolis, MN 55474 2004 Ameriprise Financial, Inc., 2003-2004; Age 44 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 61 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. - -------------------------------------------------------------------------------- 62 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance, although somewhat weaker than previous years, reflected the interrelationship of particularly volatile market conditions with the investment strategies employed by the portfolio management team. Further, the Board noted that measures had been taken to enhance risk management oversight. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board observed that the Fund's expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 63 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING ---------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 64 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT RIVERSOURCE LARGE CAP EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6244 J (9/08)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE LARGE CAP VALUE FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE LARGE CAP VALUE FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 6 The Fund's Long-term Performance ... 12 Fund Expenses Example............... 14 Portfolio of Investments............ 16 Financial Statements................ 22 Notes to Financial Statements....... 28 Report of Independent Registered Public Accounting Firm........... 48 Federal Income Tax Information...... 50 Board Members and Officers.......... 51 Approval of Investment Management Services Agreement............... 55 Proxy Voting........................ 58
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Large Cap Value Fund (the Fund) Class A shares declined 18.65%, excluding sales charge, for the 12-month period ended July 31, 2008. > The Fund's benchmark, the Russell 1000(R) Value Index, fell 15.15% during the same annual period. > The Fund's peer group, the Lipper Large-Cap Value Funds Index, declined 14.23% during the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
Since 1 year 3 years 5 years inception(a) - ------------------------------------------------------------------------------------- RiverSource Large Cap Value Fund Class A (excluding sales charge) -18.65% +0.00% +5.26% +4.63% - ------------------------------------------------------------------------------------- Russell 1000 Value Index (unmanaged) -15.15% +2.42% +8.52% +7.03% - ------------------------------------------------------------------------------------- Lipper Large-Cap Value Funds Index -14.23% +2.27% +7.22% +5.76% - -------------------------------------------------------------------------------------
(a) Fund data is from June 27, 2002. Russell 1000 Value Index and Lipper peer group data is from July 1, 2002. (See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Total Net expenses - ---------------------------------------------------- Class A 1.31% 1.31% - ---------------------------------------------------- Class B 2.07% 2.07% - ---------------------------------------------------- Class C 2.08% 2.08% - ---------------------------------------------------- Class I 0.86% 0.86% - ---------------------------------------------------- Class R2 1.65% 1.65% - ---------------------------------------------------- Class R3 1.39% 1.39% - ---------------------------------------------------- Class R4 1.15% 1.06%(a) - ---------------------------------------------------- Class R5 0.92% 0.92% - ----------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.07 for the year ended July 31, 2008), will not exceed 1.13% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 6/27/02) -18.65% +0.00% +5.26% +4.63% - ---------------------------------------------------------------------------------- Class B (inception 6/27/02) -19.35% -0.77% +4.46% +3.84% - ---------------------------------------------------------------------------------- Class C (inception 6/27/02) -19.25% -0.78% +4.48% +3.83% - ---------------------------------------------------------------------------------- Class I (inception 3/4/04) -18.41% +0.43% N/A +2.62% - ---------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -18.44% N/A N/A -10.19% - ---------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -18.38% N/A N/A -10.05% - ---------------------------------------------------------------------------------- Class R4 (inception 6/27/02) -17.99% +0.38% +5.59% +4.93% - ---------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -18.41% N/A N/A -9.88% - ---------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 6/27/02) -23.34% -1.97% +4.04% +3.62% - ---------------------------------------------------------------------------------- Class B (inception 6/27/02) -23.01% -1.75% +4.18% +3.84% - ---------------------------------------------------------------------------------- Class C (inception 6/27/02) -19.98% -0.78% +4.48% +3.83% - ----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 6/27/02) -20.67% +1.24% +5.82% +4.95% - ---------------------------------------------------------------------------------- Class B (inception 6/27/02) -21.38% +0.47% +4.97% +4.15% - ---------------------------------------------------------------------------------- Class C (inception 6/27/02) -21.28% +0.46% +5.00% +4.14% - ---------------------------------------------------------------------------------- Class I (inception 3/4/04) -20.29% +1.66% N/A +3.01% - ---------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -20.68% N/A N/A -10.04% - ---------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -20.42% N/A N/A -9.74% - ---------------------------------------------------------------------------------- Class R4 (inception 6/27/02) -20.21% +1.53% +6.09% +5.21% - ---------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -20.33% N/A N/A -9.58% - ---------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 6/27/02) -25.21% -0.75% +4.57% +3.91% - ---------------------------------------------------------------------------------- Class B (inception 6/27/02) -24.95% -0.53% +4.69% +4.15% - ---------------------------------------------------------------------------------- Class C (inception 6/27/02) -22.00% +0.46% +5.00% +4.14% - ----------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Large Cap Value Fund (the Fund) Class A shares declined 18.65%, excluding sales charge, for the fiscal year ended July 31, 2008. The Fund underperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which fell 15.15% and its peer group as represented by the Lipper Large-Cap Value Funds Index, which declined 14.23% during the same time frame. SIGNIFICANT PERFORMANCE FACTORS The Fund's fiscal year was marked by intensified economic concerns and widespread credit uncertainty precipitated by subprime mortgage lending difficulties. The Fund faced a strong headwind because investors did not consider low valuation to be an attractive characteristic in choosing stocks. Given the Fund's emphasis on valuation as a selection criterion for portfolio holdings, the stocks that we preferred were generally out of favor during this time. Stock selection had a negative impact on the Fund's return compared with the Russell Index, while sector allocations added value. The Fund's holdings in the information technology, consumer staples and industrials sectors outperformed the corresponding sectors within the Russell Index, SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Consumer Discretionary 9.9% - -------------------------------------------------------------- Consumer Staples 7.1% - -------------------------------------------------------------- Energy 16.8% - -------------------------------------------------------------- Financials 21.5% - -------------------------------------------------------------- Health Care 8.6% - -------------------------------------------------------------- Industrials 11.2% - -------------------------------------------------------------- Information Technology 9.1% - -------------------------------------------------------------- Materials 2.6% - -------------------------------------------------------------- Telecommunication Services 7.4% - -------------------------------------------------------------- Utilities 4.5% - -------------------------------------------------------------- Other(2) 1.3% - --------------------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- but this was overshadowed by stock selection in the financials, health care, materials and consumer discretionary sectors. Having a smaller financials position than the Russell Index was advantageous for the Fund; financial stocks struggled under the weight of credit market upheaval and the weak U.S. housing market. As expected in a declining equity market, the Fund's small cash position helped cushion performance as well. Offsetting some of this positive impact were the Fund's weightings in energy, utilities and consumer staples, which were smaller than those of the Russell Index, and an overweight in information technology. Having smaller positions in WASHINGTON MUTUAL and GENERAL ELECTRIC compared with the Russell Index was advantageous. West coast savings and loan WASHINGTON MUTUAL is a large mortgage issuer and its stock was hard hit by the difficult credit and housing environment. GENERAL ELECTRIC has a high degree of sensitivity to economic activity and suffered as people began to worry more about slower U.S. and global economic growth. The Fund also benefited from its positions in QUALCOMM and FLOWSERVE, which were larger than those of the Russell Index. Communications equipment company QUALCOMM has begun to see traction with its third-generation cell phone chip and in July 2008 settled its legal issues TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Exxon Mobil 5.6% - -------------------------------------------------------------- Chevron 3.6% - -------------------------------------------------------------- AT&T 3.1% - -------------------------------------------------------------- Bank of America 3.0% - -------------------------------------------------------------- Pfizer 2.6% - -------------------------------------------------------------- Verizon Communications 2.6% - -------------------------------------------------------------- ConocoPhillips 2.5% - -------------------------------------------------------------- General Electric 2.3% - -------------------------------------------------------------- JPMorgan Chase & Co 2.2% - -------------------------------------------------------------- Citigroup 1.6% - --------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- with Nokia. FLOWSERVE makes valves and pumping machinery for industrial companies, particularly oil and gas and chemical companies, and has benefited from the high level of activity in those end markets. The Fund's holdings of the government-sponsored FEDERAL HOME LOAN MORTGAGE CORP. (FREDDIE MAC) were the most significant individual detractor from return relative to the Russell Index. Though the majority of FREDDIE MAC'S business isn't directly connected to the subprime mortgage breakdown, continued weakness in the North American residential market hurt the company due to mortgage losses and performance of securities owned by the company. Mortgage lender COUNTRYWIDE FINANCIAL continued to suffer from credit market difficulties, but BANK OF AMERICA finally completed its takeover of the company and the Fund's small remaining holdings of COUNTRYWIDE converted into BANK OF AMERICA stock. Holdings of JOHNSON & JOHNSON also detracted from return. The consumer products firm suffered as raw material costs rose to a greater extent than the company was able to raise its prices. Having no exposure to Occidental Petroleum detracted from return compared with the Russell Index. As strong energy sector performance pushed stock prices to levels that appeared overvalued to us, we focused on companies where we considered valuations reasonable and growth potential attractive. We preferred other energy stocks over Occidental Petroleum. CHANGES TO THE FUND'S PORTFOLIO In the first half of the year, we increased exposure to the consumer discretionary sector relative to the Russell Index. Stocks in this sector had become fairly inexpensive and we concluded that the Federal Reserve's efforts to fight economic deceleration by reducing short-term interest rates would benefit the sector. Also during the first half of the period, we decreased the Fund's utilities position relative to the Russell Index and increased exposure to the telecommunication services sector. Several telecommunication services stocks, specifically telephone companies, had become inexpensive and consequently quite attractive to us. - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- The Fund faced a strong headwind because investors did not consider low valuation to be an attractive characteristic in choosing stocks. The Fund's financials position decreased over the year, due partly to our active repositioning and market performance as financial stocks generally declined in value. We reduced the Fund's holdings of lending-based financial companies, specifically banks and savings and loans. The Fund's energy position increased during the period and this also resulted from a combination of market performance and active management. The energy sector's steep appreciation boosted the Fund's energy weighting. In addition, we added to the Fund's holdings of energy services companies as selected stocks became relatively inexpensive and seemed poised to benefit from increased exploration and production activity. We increased the Fund's information technology position. Technology stocks, particularly some of the larger, more mature companies, appear inexpensive to us. They also fit well with a developing portfolio theme - an emphasis on companies that we believe have relatively limited downside risk due to attractive valuations, but are positioned to capitalize on any improvement in economic activity. OUR FUTURE STRATEGY For the past year or more, using valuation as a factor in stock selection has been counterproductive. Valuations in the equity market were very tight, with little difference in a stock's valuation, whether it was a traditional growth stock or a traditional value stock. Under those conditions, it made sense to emphasize growth over value and growth stocks outperformed. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- Recently, we have begun to see greater variation in valuation, which leads us to believe valuation is likely to be a greater determinant of a stock's performance going forward. As a result, we have been increasing exposure to valuation-driven opportunities. An example is technology stocks, as discussed above. In addition, the Fund's portfolio is positioned for a period of global economic deceleration, with a de-emphasis on global commodity-based industries. The Fund has smaller-than-Russell Index positions in areas such as energy and materials, particularly industrial metals such as aluminum and copper. We expect the tight supply and demand equation in the commodities markets to ease amid economic slowing, leading these companies to underperform. Large-cap stocks still have roughly the same valuation as mid- and small-cap stocks. However, larger companies tend to have more stable business models, which can better withstand a decelerating economic environment, and they tend to have more international exposure, which may benefit from the tail end of the current period of dollar depreciation. (PHOTO - BOB EWING) Robert Ewing, CFA(R) Portfolio Manager Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Large Cap Value Fund Class A shares (from 7/1/02 to 7/31/08)* as compared to the performance of two widely cited performance indices, the Russell 1000 Value Index and the Lipper Large-Cap Value Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. * Fund data is from June 27, 2002. Russell 1000 Value Index and Lipper peer group data is from July 1, 2002. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at July 31, 2008 SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE LARGE CAP VALUE FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,666 $9,421 $12,190 $12,421 - --------------------------------------------------------------------------------------------------- Average annual total return -23.34% -1.97% +4.04% +3.62% - --------------------------------------------------------------------------------------------------- RUSSELL 1000 VALUE INDEX(1) Cumulative value of $10,000 $8,485 $10,744 $15,050 $15,119 - --------------------------------------------------------------------------------------------------- Average annual total return -15.15% +2.42% +8.52% +7.03% - --------------------------------------------------------------------------------------------------- LIPPER LARGE-CAP VALUE FUNDS INDEX(2) Cumulative value of $10,000 $8,577 $10,697 $14,170 $14,060 - --------------------------------------------------------------------------------------------------- Average annual total return -14.23% +2.27% +7.22% +5.76% - ---------------------------------------------------------------------------------------------------
Results for other share classes can be found on pages 4 and 5. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP VALUE FUND LINE GRAPH)
RIVERSOURCE LARGE CAP VALUE FUND CLASS A RUSSELL 1000 LIPPER LARGE-CAP VALUE (INCLUDES SALES CHARGE) VALUE INDEX(1) FUNDS INDEX(2) ----------------------- -------------- ------------------------ 7/1/02 $ 9,425 $ 10,000 $ 10,000 7/02 8,695 9,070 9,136 7/03 9,610 10,045 9,923 7/04 10,845 11,821 11,424 7/05 12,420 14,072 13,144 7/06 13,338 15,703 14,276 7/07 15,268 17,818 16,393 7/08 12,421 15,119 14,060
(1) The Russell 1000 Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from June 27, 2002. Russell 1000 Value Index and Lipper peer group data is from July 1, 2002. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.30 $ 6.72 1.44% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.70 $ 7.22 1.44% - ------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 871.80 $10.24 2.20% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.92 $11.02 2.20% - ------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 871.30 $10.24 2.20% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.92 $11.02 2.20% - ------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.80 $ 4.57 .98% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.99 $ 4.92 .98% - ------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.30 $ 7.98 1.71% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.36 $ 8.57 1.71% - ------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.30 $ 6.72 1.44% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.70 $ 7.22 1.44% - ------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 879.20 $ 4.77 1.02% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.79 $ 5.12 1.02% - ------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------- Actual(b) $1,000 $ 876.50 $ 4.71 1.01% - ------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.84 $ 5.07 1.01% - -------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2008: -12.37% for Class A, -12.82% for Class B, -12.87% for Class C, -12.32% for Class I,-12.37% for Class R2, -12.37% for Class R3, -12.08% for Class R4 and -12.35% for Class R5. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.4%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (4.6%) Boeing 7,055 $431,131 General Dynamics 2,153 191,918 Goodrich 4,275 210,074 Honeywell Intl 10,525 535,091 L-3 Communications Holdings 2,536 250,278 Lockheed Martin 4,969 518,416 Spirit AeroSystems Holdings Cl A 3,905(b) 84,582 United Technologies 4,640 296,867 --------------- Total 2,518,357 - ------------------------------------------------------------------------------------ AUTOMOBILES (0.1%) Ford Motor 10,412(b) 49,978 - ------------------------------------------------------------------------------------ BEVERAGES (1.3%) Coca-Cola 7,809 402,163 Molson Coors Brewing Cl B 2,476 133,630 PepsiCo 2,852 189,829 --------------- Total 725,622 - ------------------------------------------------------------------------------------ BIOTECHNOLOGY (0.9%) Amgen 3,923(b) 245,697 Genzyme 1,790(b) 137,204 ImClone Systems 1,795(b) 114,754 --------------- Total 497,655 - ------------------------------------------------------------------------------------ BUILDING PRODUCTS (0.3%) Masco 8,420 138,846 - ------------------------------------------------------------------------------------ CAPITAL MARKETS (3.9%) Bank of New York Mellon 7,429 263,730 Blackstone Group LP 5,659 105,088 Goldman Sachs Group 1,773 326,303 KKR Private Equity Investors LP Unit 5,866 77,433 Legg Mason 2,763 111,487 Lehman Brothers Holdings 21,149 366,723
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CAPITAL MARKETS (CONT.) Merrill Lynch & Co 6,517 $173,678 Morgan Stanley 11,799 465,824 Oaktree Capital Group LLC Cl A Unit 4,000(d,e) 112,000 State Street 1,556 111,472 --------------- Total 2,113,738 - ------------------------------------------------------------------------------------ CHEMICALS (1.4%) Dow Chemical 11,730 390,726 Eastman Chemical 1,550 92,938 EI du Pont de Nemours & Co 6,458 282,925 --------------- Total 766,589 - ------------------------------------------------------------------------------------ COMMERCIAL BANKS (2.7%) Fifth Third Bancorp 14,281 199,506 PNC Financial Services Group 4,041 288,083 SunTrust Banks 2,954 121,291 Wachovia 27,982 483,249 Wells Fargo & Co 11,853 358,790 --------------- Total 1,450,919 - ------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT (2.1%) Cisco Systems 16,949(b) 372,709 Motorola 15,682 135,492 Nokia ADR 12,391(c) 338,522 QUALCOMM 4,985 275,870 --------------- Total 1,122,593 - ------------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS (2.5%) Dell 3,489(b) 85,725 Hewlett-Packard 14,168 634,726 IBM 4,392 562,088 SanDisk 3,795(b) 53,510 --------------- Total 1,336,049 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CONSTRUCTION & ENGINEERING (0.5%) Fluor 1,566 $127,394 KBR 4,723 134,606 --------------- Total 262,000 - ------------------------------------------------------------------------------------ CONSUMER FINANCE (0.6%) American Express 4,751 176,357 Capital One Financial 3,323 139,101 --------------- Total 315,458 - ------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES (7.1%) Apollo Mgmt LP 11,000(d,e) 154,000 Bank of America 49,900 1,641,709 Citigroup 47,000 878,430 JPMorgan Chase & Co 29,783 1,210,083 --------------- Total 3,884,222 - ------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES (6.6%) AT&T 55,258 1,702,499 Deutsche Telekom 9,220(c) 159,589 Frontier Communications 7,353 85,001 Qwest Communications Intl 12,281 47,036 Telefonica 3,200(c) 83,024 Verizon Communications 41,329 1,406,839 Windstream 7,157 85,311 --------------- Total 3,569,299 - ------------------------------------------------------------------------------------ ELECTRIC UTILITIES (3.2%) Entergy 4,474 478,360 Exelon 6,249 491,296 FPL Group 2,032 131,125 PPL 2,763 129,750 Southern 15,043 532,373 --------------- Total 1,762,904 - ------------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT (0.4%) Emerson Electric 4,023 195,920 - ------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%) Tyco Electronics 3,241(c) 107,407 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ENERGY EQUIPMENT & SERVICES (2.1%) Baker Hughes 2,244 $186,050 Halliburton 4,770 213,791 Natl Oilwell Varco 2,706(b) 212,773 Schlumberger 1,353 137,465 Transocean 1,683(b) 228,939 Weatherford Intl 4,084(b) 154,089 --------------- Total 1,133,107 - ------------------------------------------------------------------------------------ FOOD & STAPLES RETAILING (1.4%) CVS Caremark 3,962 144,613 Safeway 3,367 89,966 Walgreen 2,069 71,049 Wal-Mart Stores 8,024 470,368 --------------- Total 775,996 - ------------------------------------------------------------------------------------ FOOD PRODUCTS (0.6%) Kellogg 3,759 199,452 Kraft Foods Cl A 3,702 117,798 --------------- Total 317,250 - ------------------------------------------------------------------------------------ GAS UTILITIES (0.3%) ONEOK 3,932 178,827 - ------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES (0.4%) Boston Scientific 16,981(b) 201,904 - ------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES (1.6%) Aetna 5,504 225,718 Cardinal Health 2,963 159,202 CIGNA 3,749 138,788 Humana 2,704(b) 118,733 McKesson 1,744 97,647 UnitedHealth Group 4,000 112,320 --------------- Total 852,408 - ------------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE (0.4%) Darden Restaurants 2,021 65,824 Intl Game Technology 3,402 73,857 Marriott Intl Cl A 3,953 102,423 --------------- Total 242,104 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HOUSEHOLD DURABLES (1.8%) Centex 10,238 $150,294 DR Horton 17,395 193,432 Harman Intl Inds 2,504 103,090 Hovnanian Enterprises Cl A 12,778(b) 89,829 KB Home 12,588 221,423 Lennar Cl A 6,415 77,622 Whirlpool 1,820 137,774 --------------- Total 973,464 - ------------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS (1.1%) Clorox 1,485 80,933 Colgate-Palmolive 1,237 91,872 Procter & Gamble 6,592 431,644 --------------- Total 604,449 - ------------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES (2.9%) 3M 1,489 104,811 General Electric 44,447 1,257,406 Tyco Intl 4,304(c) 191,786 --------------- Total 1,554,003 - ------------------------------------------------------------------------------------ INSURANCE (6.3%) ACE 12,336(c) 625,435 AFLAC 8,764 487,366 American Intl Group 18,887 492,006 Arch Capital Group 1,483(b,c) 103,410 Assured Guaranty 2,840(c) 32,546 Chubb 4,870 233,955 Endurance Specialty Holdings 2,484(c) 76,010 Hartford Financial Services Group 8,021 508,451 Max Capital Group 2,561(c) 60,107 MetLife 3,986 202,369 Prudential Financial 8,080 557,278 Validus Holdings 1,388(c) 31,660 XL Capital Cl A 1,882(c) 33,669 --------------- Total 3,444,262 - ------------------------------------------------------------------------------------ IT SERVICES (0.6%) Automatic Data Processing 4,232 180,749 Electronic Data Systems 4,409 109,387 MasterCard Cl A 237 57,864 --------------- Total 348,000 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MACHINERY (2.5%) Caterpillar 3,092 $214,956 Danaher 1,340 106,731 Deere & Co 6,019 422,293 Flowserve 2,599 346,551 Ingersoll-Rand Cl A 1,519(c) 54,684 Parker Hannifin 3,555 219,272 --------------- Total 1,364,487 - ------------------------------------------------------------------------------------ MEDIA (5.5%) Comcast Cl A 11,717 241,605 Comcast Special Cl A 7,596 156,022 News Corp Cl A 33,510 473,496 Sirius XM Radio 104,331(b) 166,930 Time Warner 42,098 602,844 Viacom Cl B 6,215(b) 173,585 Virgin Media 31,552(e) 354,013 Vivendi 9,607(c) 401,635 Walt Disney 14,078 427,267 --------------- Total 2,997,397 - ------------------------------------------------------------------------------------ METALS & MINING (0.5%) Alcoa 7,455 251,606 - ------------------------------------------------------------------------------------ MULTILINE RETAIL (0.8%) JC Penney 5,530 170,490 Kohl's 2,341(b) 98,111 Target 3,237 146,410 --------------- Total 415,011 - ------------------------------------------------------------------------------------ MULTI-UTILITIES (0.9%) Dominion Resources 6,826 301,573 Xcel Energy 10,422 209,065 --------------- Total 510,638 - ------------------------------------------------------------------------------------ OIL, GAS & CONSUMABLE FUELS (14.6%) Anadarko Petroleum 1,142 66,133 BP ADR 4,276(c) 262,717 Chesapeake Energy 1,298 65,095 Chevron 22,856 1,932,703 ConocoPhillips 16,415 1,339,792 Devon Energy 3,863 366,560 Exxon Mobil 37,576 3,022,238 Marathon Oil 3,522 174,233 Royal Dutch Shell ADR 2,781(c) 196,867 Total 7,139(c) 546,574 --------------- Total 7,972,912 - ------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) PAPER & FOREST PRODUCTS (0.7%) Intl Paper 7,476 $207,234 Weyerhaeuser 2,962 158,349 --------------- Total 365,583 - ------------------------------------------------------------------------------------ PERSONAL PRODUCTS (0.5%) Avon Products 4,928 208,947 Herbalife 1,484(c) 64,094 --------------- Total 273,041 - ------------------------------------------------------------------------------------ PHARMACEUTICALS (5.7%) Bristol-Myers Squibb 20,512 433,213 Johnson & Johnson 5,384 368,642 Merck & Co 13,623 448,197 Pfizer 75,357 1,406,914 Schering-Plough 3,536 74,539 Wyeth 9,159 371,123 --------------- Total 3,102,628 - ------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS (REITS) (0.2%) Apartment Investment & Management Cl A 3,270 111,736 - ------------------------------------------------------------------------------------ ROAD & RAIL (0.1%) Hertz Global Holdings 6,520(b) 55,616 - ------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.6%) Advanced Micro Devices 30,146(b) 126,915 Atmel 27,856(b) 98,332 Infineon Technologies 6,770(b,c) 50,822 Infineon Technologies ADR 8,275(b,c) 62,228 Intel 21,913 486,250 Micron Technology 38,110(b) 184,071 ON Semiconductor 6,124(b) 57,504 Spansion Cl A 28,780(b) 65,906 Teradyne 18,655(b) 174,797 Texas Instruments 4,465 108,857 --------------- Total 1,415,682 - ------------------------------------------------------------------------------------ SOFTWARE (1.1%) Microsoft 17,694 455,090 Oracle 7,653(b) 164,769 --------------- Total 619,859 - ------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SPECIALTY RETAIL (1.3%) Gap 4,539 $73,169 Home Depot 9,240 220,189 Lowe's Companies 10,635 216,103 TJX Companies 5,067 170,809 --------------- Total 680,270 - ------------------------------------------------------------------------------------ THRIFTS & MORTGAGE FINANCE (0.6%) Freddie Mac 42,734 349,137 - ------------------------------------------------------------------------------------ TOBACCO (2.1%) Altria Group 13,961 284,106 Philip Morris Intl 15,131 781,517 UST 1,341 70,550 --------------- Total 1,136,173 - ------------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES (0.8%) Sprint Nextel 14,119 114,929 Vodafone Group ADR 11,342(c) 304,306 --------------- Total 419,235 - ------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $58,190,075) $53,484,341 - ------------------------------------------------------------------------------------
MONEY MARKET FUND (1.3%) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.54% 679,485(f) $679,485 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $679,485) $679,485 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $58,869,560)(g) $54,163,826 ===================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 19 INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2008
CURRENCY TO BE CURRENCY TO BE UNREALIZED EXCHANGE DATE DELIVERED RECEIVED DEPRECIATION - -------------------------------------------------------------------------------------------------- Aug. 1, 2008 32,973 51,383 $(45) European Monetary Unit U.S. Dollar
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the value of foreign securities represented 7.0% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2008, the value of these securities amounted to $266,000 or 0.5% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at July 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- Apollo Mgmt LP* 08-02-07 thru 01-16-08 $242,920 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 07-19-07 164,500 Virgin Media 01-05-06 thru 04-10-08 645,420
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (f) Affiliated Money Market Fund - See Note 5 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (g) At July 31, 2008, the cost of securities for federal income tax purposes was $60,286,046 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 5,408,118 Unrealized depreciation (11,530,338) - ------------------------------------------------------------------------------ Net unrealized depreciation $ (6,122,220) - ------------------------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 21 FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008 ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $58,190,075) $53,484,341 Affiliated money market fund (identified cost $679,485) 679,485 - --------------------------------------------------------------------------- Total investments in securities (identified cost $58,869,560) 54,163,826 Capital shares receivable 25,614 Dividends receivable 120,368 Receivable for investment securities sold 726,237 - --------------------------------------------------------------------------- Total assets 55,036,045 - --------------------------------------------------------------------------- LIABILITIES Capital shares payable 146,101 Payable for investment securities purchased 463,454 Unrealized depreciation on forward foreign currency contracts 45 Accrued investment management services fees 905 Accrued distribution fees 466 Accrued transfer agency fees 65 Accrued administrative services fees 90 Other accrued expenses 90,754 - --------------------------------------------------------------------------- Total liabilities 701,880 - --------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $54,334,165 =========================================================================== REPRESENTED BY Capital stock - $.01 par value $ 130,021 Additional paid-in capital 59,563,353 Undistributed net investment income 491,247 Accumulated net realized gain (loss) (1,144,717) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,705,739) - --------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $54,334,165 ===========================================================================
- -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $35,085,132 8,397,421 $4.18(1) Class B $ 7,328,116 1,765,846 $4.15 Class C $ 659,182 159,562 $4.13 Class I $11,230,530 2,671,840 $4.20 Class R2 $ 3,187 763 $4.18 Class R3 $ 3,192 763 $4.18 Class R4 $ 21,573 5,115 $4.22 Class R5 $ 3,253 763 $4.26 - ------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $4.44. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 23 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008 INVESTMENT INCOME Income: Dividends $ 2,003,351 Income distributions from affiliated money market fund 89,627 Less foreign taxes withheld (12,625) - ---------------------------------------------------------------------------- Total income 2,080,353 - ---------------------------------------------------------------------------- Expenses: Investment management services fees 401,168 Distribution fees Class A 123,733 Class B 118,887 Class C 8,842 Class R2 19 Class R3 9 Transfer agency fees Class A 102,465 Class B 26,100 Class C 1,909 Class R2 2 Class R3 2 Class R4 15 Class R5 2 Administrative services fees 45,929 Plan administration services fees Class R2 9 Class R3 9 Class R4 75 Compensation of board members 1,406 Custodian fees 48,440 Printing and postage 41,295 Registration fees 71,110 Professional fees 39,424 Other 6,027 - ---------------------------------------------------------------------------- Total expenses 1,036,877 Expenses waived/reimbursed by the Investment Manager and its affiliates (123) Earnings and bank fee credits on cash balances (2,151) - ---------------------------------------------------------------------------- Total net expenses 1,034,603 - ---------------------------------------------------------------------------- Investment income (loss) - net 1,045,750 - ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008 REALIZED AND UNREALIZED GAIN (LOSS) - NET Net realized gain (loss) on: Security transactions $ 930,456 Foreign currency transactions (649) Futures contracts (2,300) - ---------------------------------------------------------------------------- Net realized gain (loss) on investments 927,507 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (16,296,453) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (15,368,946) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(14,323,196) ============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 25 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,045,750 $ 917,420 Net realized gain (loss) on investments 927,507 7,965,867 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (16,296,453) 4,751,162 - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,323,196) 13,634,449 - --------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (682,628) (754,607) Class B (32,633) (58,266) Class C (4,493) (4,777) Class I (311,395) (250,586) Class R2 (49) (78) Class R3 (60) (78) Class R4 (623) (453) Class R5 -- (79) Net realized gain Class A (4,625,594) (9,225,989) Class B (1,148,253) (2,795,600) Class C (84,730) (166,141) Class I (1,493,181) (2,248,825) Class R2 (369) (708) Class R3 (369) (708) Class R4 (3,183) (5,335) Class R5 (369) (708) - --------------------------------------------------------------------------------------- Total distributions (8,387,929) (15,512,938) - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 4,629,689 $ 10,152,788 Class B shares 701,838 1,711,166 Class C shares 135,278 211,888 Class I shares 2,612,695 2,650,378 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 1,000 1,000 Class R5 shares -- 2,488,893 Reinvestment of distributions at net asset value Class A shares 5,196,120 9,755,373 Class B shares 1,166,160 2,826,941 Class C shares 87,581 162,715 Class I shares 1,804,061 2,498,502 Class R4 shares 2,650 3,775 Payments for redemptions Class A shares (22,746,329) (19,024,336) Class B shares (6,130,946) (8,203,518) Class C shares (340,594) (420,058) Class I shares (5,559,082) (1,080,983) Class R4 shares (10,330) -- Class R5 shares -- (2,561,087) - --------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (18,450,209) 1,183,437 - --------------------------------------------------------------------------------------- Total increase (decrease) in net assets (41,161,334) (695,052) Net assets at beginning of year 95,495,499 96,190,551 - --------------------------------------------------------------------------------------- Net assets at end of year $ 54,334,165 $ 95,495,499 ======================================================================================= Undistributed net investment income $ 491,247 $ 496,785 - ---------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Large Cap Value Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the- - -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2008, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at July 31, 2008 was $620,013 representing 1.14% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 29 be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At July 31, 2008, and for the year then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At July 31, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign - -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of REIT distributions, investments in partnerships and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 31 dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $19,407 and accumulated net realized loss has been decreased by $19,407. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ---------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income........................... $1,307,656 $2,470,246 Long-term capital gain.................... 4,000,566 7,510,350 CLASS B Distributions paid from: Ordinary income........................... 187,794 578,128 Long-term capital gain.................... 993,092 2,275,738 CLASS C Distributions paid from: Ordinary income........................... 15,942 35,672 Long-term capital gain.................... 73,281 135,246 CLASS I Distributions paid from: Ordinary income........................... 513,160 668,771 Long-term capital gain.................... 1,291,416 1,830,640 CLASS R2 Distributions paid from: Ordinary income........................... 99 210 Long-term capital gain.................... 319 576 CLASS R3 Distributions paid from: Ordinary income........................... 110 210 Long-term capital gain.................... 319 576 CLASS R4 Distributions paid from: Ordinary income........................... 1,053 1,445 Long-term capital gain.................... 2,753 4,343 CLASS R5 Distributions paid from: Ordinary income........................... 50 211 Long-term capital gain.................... 319 576
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception date) to July 31, 2007. - -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.............................. $ 498,551 Undistributed accumulated long-term gain................... $ 265,156 Unrealized appreciation (depreciation)..................... $ (6,122,916)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 33 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Value Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $58,120 for the year ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.53% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended July 31, 2008, other expenses paid to this company were $447. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $228,000 and $5,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $51,849 for Class A, $12,242 for Class B and $43 for Class C for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 35 EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class R2.................................................... 1.41% Class R3.................................................... 1.15 Class R4.................................................... 0.81
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4.................................................... $30
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.................................................... $ 9 Class R3.................................................... 9 Class R4.................................................... 75
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class R4.................................................... 1.13%
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $2,151 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $18,259,592 and $41,262,559, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 972,781 1,043,398 (4,547,178) (2,530,999) Class B 144,597 234,640 (1,285,647) (906,410) Class C 26,989 17,693 (69,667) (24,985) Class I 513,889 361,535 (1,138,246) (262,822) Class R4 213 530 (2,217) (1,474) - ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 1,700,418 1,738,926 (3,203,244) 236,100 Class B 290,285 506,620 (1,386,106) (589,201) Class C 36,321 29,213 (71,502) (5,968) Class I 440,786 443,784 (184,695) 699,875 Class R2* 763 -- -- 763 Class R3* 763 -- -- 763 Class R4 165 671 -- 836 Class R5* 439,307 -- (438,544) 763 - ----------------------------------------------------------------------------------------------
* For the period from Dec. 11, 2006 (inception date) to July 31, 2007. 5. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $25,920,004 and $28,557,816, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 6. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 37 agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT and have made regular reports to the RiverSource Funds' Boards of Directors/ Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 39 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.71 $5.88 $5.83 $5.34 $4.98 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .06(b) .09 .06 .04 Net gains (losses) (both realized and unrealized) (1.05) .77 .32 .70 .59 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.98) .83 .41 .76 .63 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.07) (.04) (.03) Distributions from realized gains (.48) (.93) (.29) (.23) (.24) - ----------------------------------------------------------------------------------------------------------- Total distributions (.55) (1.00) (.36) (.27) (.27) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.18 $5.71 $5.88 $5.83 $5.34 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $35 $62 $63 $74 $67 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.31% 1.28% 1.21% 1.29% 1.54% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.31% 1.28% 1.21% 1.29% 1.24% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.41% .99% 1.35% 1.07% .95% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% 46% 57% 59% - ----------------------------------------------------------------------------------------------------------- Total return(g) (18.65%) 14.47% 7.39% 14.52% 12.85% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.66 $5.82 $5.77 $5.29 $4.95 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .04 .01 -- Net gains (losses) (both realized and unrealized) (1.04) .78 .32 .70 .59 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.01) .79 .36 .71 .59 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) (.02) -- (.01) Distributions from realized gains (.48) (.93) (.29) (.23) (.24) - ----------------------------------------------------------------------------------------------------------- Total distributions (.50) (.95) (.31) (.23) (.25) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.15 $5.66 $5.82 $5.77 $5.29 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 $15 $19 $28 $25 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.07% 2.05% 1.97% 2.05% 2.30% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 2.07% 2.05% 1.97% 2.05% 2.00% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .65% .23% .59% .30% .16% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% 46% 57% 59% - ----------------------------------------------------------------------------------------------------------- Total return(g) (19.35%) 13.75% 6.51% 13.66% 12.00% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 41 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.64 $5.82 $5.77 $5.29 $4.94 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .04 .01 -- Net gains (losses) (both realized and unrealized) (1.03) .76 .32 .70 .60 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (1.00) .77 .36 .71 .60 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.02) (.02) -- (.01) Distributions from realized gains (.48) (.93) (.29) (.23) (.24) - ----------------------------------------------------------------------------------------------------------- Total distributions (.51) (.95) (.31) (.23) (.25) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.13 $5.64 $5.82 $5.77 $5.29 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $1 $1 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 2.08% 2.04% 1.98% 2.06% 2.30% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 2.08% 2.04% 1.98% 2.06% 2.00% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .65% .23% .58% .30% .19% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% 46% 57% 59% - ----------------------------------------------------------------------------------------------------------- Total return(g) (19.25%) 13.50% 6.56% 13.62% 12.19% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $5.75 $5.91 $5.86 $5.36 $5.57 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(c) .08(c) .12 .07 .03 Net gains (losses) (both realized and unrealized) (1.07) .79 .32 .72 (.24) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.97) .87 .44 .79 (.21) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.10) (.10) (.06) -- Distributions from realized gains (.48) (.93) (.29) (.23) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.58) (1.03) (.39) (.29) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.20 $5.75 $5.91 $5.86 $5.36 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $17 $13 $38 $16 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .86% .85% .75% .86% 1.02%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .86% .85% .75% .86% .93%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.87% 1.41% 1.85% 1.50% 1.33%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% 46% 57% 59% - ----------------------------------------------------------------------------------------------------------- Total return (18.41%) 15.10% 7.86% 14.97% (3.77%)(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 43 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $5.69 $6.55 - ------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .07 .02 Net gains (losses) (both realized and unrealized) (1.03) .15 - ------------------------------------------------------------------------------------- Total from investment operations (.96) .17 - ------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.10) Distributions from realized gains (.48) (.93) - ------------------------------------------------------------------------------------- Total distributions (.55) (1.03) - ------------------------------------------------------------------------------------- Net asset value, end of period $4.18 $5.69 - ------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.65% 1.63%(f) - ------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.41% 1.63%(f) - ------------------------------------------------------------------------------------- Net investment income (loss) 1.32% .55%(f) - ------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% - ------------------------------------------------------------------------------------- Total return (18.44%) 2.84%(i) - -------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $5.70 $6.55 - ------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.04) .15 - ------------------------------------------------------------------------------------- Total from investment operations (.96) .18 - ------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.10) Distributions from realized gains (.48) (.93) - ------------------------------------------------------------------------------------- Total distributions (.56) (1.03) - ------------------------------------------------------------------------------------- Net asset value, end of period $4.18 $5.70 - ------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.39% 1.38%(f) - ------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.15% 1.38%(f) - ------------------------------------------------------------------------------------- Net investment income (loss) 1.58% .80%(f) - ------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% - ------------------------------------------------------------------------------------- Total return (18.38%) 3.03%(i) - -------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 45 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.74 $5.90 $5.85 $5.36 $4.99 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .07(b) .10 .07 .04 Net gains (losses) (both realized and unrealized) (1.04) .78 .32 .70 .61 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.94) .85 .42 .77 .65 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.08) (.08) (.05) (.04) Distributions from realized gains (.48) (.93) (.29) (.23) (.24) - ----------------------------------------------------------------------------------------------------------- Total distributions (.58) (1.01) (.37) (.28) (.28) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.22 $5.74 $5.90 $5.85 $5.36 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.15% 1.13% 1.00% 1.11% 1.36% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .81% 1.12% 1.00% 1.11% 1.06% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.90% 1.14% 1.69% 1.25% 1.12% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% 46% 57% 59% - ----------------------------------------------------------------------------------------------------------- Total return (17.99%) 14.67% 7.55% 14.67% 13.14% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $5.72 $6.55 - ------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .05 Net gains (losses) (both realized and unrealized) (1.07) .15 - ------------------------------------------------------------------------------------- Total from investment operations (.98) .20 - ------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.10) Distributions from realized gains (.48) (.93) - ------------------------------------------------------------------------------------- Total distributions (.48) (1.03) - ------------------------------------------------------------------------------------- Net asset value, end of period $4.26 $5.72 - ------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ------------------------------------------------------------------------------------- Total expenses(d),(e) .92% .83%(f) - ------------------------------------------------------------------------------------- Net investment income (loss) 1.81% 1.45%(f) - ------------------------------------------------------------------------------------- Portfolio turnover rate 24% 35% - ------------------------------------------------------------------------------------- Total return (18.41%) 3.40%(g) - -------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ---------------------------------------------------------------- TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE LARGE CAP VALUE FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Large Cap Value Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Large Cap Value Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 49 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008 INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100% U.S. Government Obligations........................... 1.83%
CAPITAL GAIN DISTRIBUTION - the Fund designates $6,362,065 to be taxed as long-term capital gain. The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme None 901 S. Marquette Ave. since 2006 Court, 1998-2006; Attorney Minneapolis, MN 55402 Age 54 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, None 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners None 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 53 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and None 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 57 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant None 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 73 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 69 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 51 INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None 901 S. Marquette Ave. since 2004 Management, Inc. (private real Minneapolis, MN 55402 estate and asset management Age 55 company) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Pharmaceutical, Inc. Minneapolis, MN 55402 2003 (biotechnology); former (biotechnology); Age 64 President, Forester Biotech Healthways, Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- William F. Truscott Board member President -- U.S. Asset Management None 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; Director, President, and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Patrick T. Bannigan President since Director and Senior Vice President, Asset 172 Ameriprise 2006 Management, Products and Marketing, Financial Center RiverSource Investments, LLC since 2006; Minneapolis, MN 55474 Director and Vice President -- Asset Age 42 Management, Products and Marketing, RiverSource Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 44 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 42 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Chief Financial Center Financial Officer, RiverSource Distributors, Minneapolis, MN 55474 Inc. since 2006 Age 53 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Chief Counsel, RiverSource Distributors, Minneapolis, MN 55474 since 2006 Inc. since 2006; Vice President, General Age 49 Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 47 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 53 FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering 2934 Ameriprise Prevention Officer, Ameriprise Financial, Inc. since Financial Center Officer since 2004; Manager Anti-Money Laundering, Minneapolis, MN 55474 2004 Ameriprise Financial, Inc., 2003-2004; Age 44 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 55 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and market conditions involved. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was slightly below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT 57 PROXY VOTING ---------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 58 RIVERSOURCE LARGE CAP VALUE FUND -- 2008 ANNUAL REPORT RIVERSOURCE LARGE CAP VALUE FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6246 J (9/08)
Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Pamela G. Carlton, Jeffrey Laikind and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services Fund - Related Fees (a) Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP for professional services rendered for the audits of the annual financial statements for RiverSource Large Cap Series, Inc. were as follows: 2008 - $79,060 2007 - $74,600 (b) Audit - Related Fees. The fees for the year ended July 31, to Ernst & Young LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 and the semiannual financial statement reviews for RiverSource Large Cap Series, Inc. were as follows: 2008 - $3,500 2007 - $3,180 (c) Tax Fees. The fees for the year ended July 31, to Ernst & Young LLP for tax compliance related services for RiverSource Large Cap Series, Inc. were as follows: 2008 - $51,540 2007 - $11,400 (d) All Other Fees. The fees for the year ended July 31, to Ernst & Young LLP for additional professional services rendered for RiverSource Large Cap Series, Inc. were as follows: 2008 - $0 2007 - $0 (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by Ernst & Young LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2008 and 2007 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP by the registrant for non-audit fees and by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2008 - $668,240 2007 - $246,660 (h) 100% of the services performed in item (g) above during 2008 and 2007 were pre-approved by the Ameriprise Financial Audit Committee and/or the RiverSource Mutual Funds Audit Committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Large Cap Series, Inc. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date October 3, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date October 3, 2008 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date October 3, 2008 EX-99.CODEETH 2 c35055exv99wcodeeth.txt CODE OF ETHICS RIVERSOURCE FUNDS' CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS PURPOSE OF THE CODE; COVERED OFFICERS This code of ethics ("Code") for the RiverSource Funds (collectively, "Funds," and each, "Fund") applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers," each of whom is identified in Exhibit A) for the purpose of promoting, in connection with his or her duties: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; compliance with laws and governmental rules and regulations applicable to the conduct of the Funds' business and their financial reporting; the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions, such as the purchase or sale of securities or other property, with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and procedures of the Funds and of Ameriprise Financial, Inc. and its affiliates ("Ameriprise") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and Ameriprise, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, whether formally for the Funds or for Ameriprise, or for both, be involved in establishing policies and implementing decisions that will have different effects on Ameriprise and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and Ameriprise and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must: not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; and not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. DISCLOSURE AND COMPLIANCE Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including any member of the Board of Directors or Board of Trustees of any Fund ("Boards"), auditors, governmental regulators, and representatives of self-regulatory organizations; should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and Ameriprise with the goal of promoting full, fair, accurate, timely, and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, and regulations. REPORTING AND ACCOUNTABILITY Each Covered Officer must: i. upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code; ii. annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; iii. not retaliate against any other Covered Officer or any employee of Ameriprise for reports of potential violations that are made in good faith; and - notify the Funds' General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. APPLYING THE CODE The Funds' General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. Any approvals or waivers sought by a Covered Officers will be considered by each Board or appropriate committee of the Board. The Funds' General Counsel iv. shall notify the Boards whenever any evidence of a material violation has been reported, it being understood that the Funds' General Counsel may determine whether to provide such notice immediately or at the next meetings of the Boards based on the nature of the violation; v. will take all appropriate action to investigate such reported violations; vi. shall make a determination after the investigation and if the Funds' General Counsel believes that no violation has occurred, the Boards will be so notified and no further action is required; if the Funds' General Counsel believes a violation has occurred, the matter shall be reported to the Boards or the committees of the Funds affected by the potential violation for further determination; if the Boards or the committees determine that a violation has occurred the Boards will consider appropriate action, which may include: a review of applicable policies and procedures; the appropriate modifications to such policies and procedures; the notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; will cause to be made such disclosures as are required by SEC rules if any changes to or waivers of this Code is made by the Boards; and shall maintain a record of each reported evidence of material violation, the response thereto, and all related correspondence for a period of not less than 10 years. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or Ameriprise govern or purport to govern the activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. Ameriprise's code of ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Fund's Board, including a majority of its independent directors. Adopted: July 9, 2003; Amended: April 12, 2006 EXHIBIT A Persons Covered by this Code of Ethics: Patrick T. Bannigan President Jeffrey P. Fox Treasurer EX-99.CERT 3 c35055exv99wcert.txt CERTIFICATION Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Patrick T. Bannigan, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Large Cap Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 22, 2008 /s/ Patrick T. Bannigan - ------------------------------------------ Name: Patrick T. Bannigan Title: President and Principal Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey P. Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Large Cap Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 22, 2008 /s/ Jeffrey P. Fox - ------------------------------------------ Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 4 c35055exv99w906cert.txt SECTION 906 CERTIFICATION CERTIFICATION RIVERSOURCE LARGE CAP SERIES, INC. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: September 22, 2008 /s/ Patrick T. Bannigan ---------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: September 22, 2008 /s/ Jeffrey P. Fox ---------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----