-----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, Iyhh1Xv04a15g20ypA1ByzwGbY2bL1dKVtGjBKyk2csP8xY9vAw54RL7Yqm1uKhG cUO3DoH29FsLHruxptDnxA== 0000950137-07-015048.txt : 20071003 0000950137-07-015048.hdr.sgml : 20071003 20071003164306 ACCESSION NUMBER: 0000950137-07-015048 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070731 FILED AS OF DATE: 20071003 DATE AS OF CHANGE: 20071003 EFFECTIVENESS DATE: 20071003 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: 071154130 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 c18115nvcsr.txt CERTIFIED SHAREHOLDER REPORT 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(R) DISCIPLINED EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2007 (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. TABLE OF CONTENTS Fund Snapshot....................... 3 Performance Summary................. 5 Questions & Answers with Portfolio Management........ 8 The Fund's Long-term Performance ... 12 Fund Expenses Example............... 14 Investments in Securities........... 17 Financial Statements................ 23 Notes to Financial Statements....... 29 Report of Independent Registered Public Accounting Firm........... 52 Federal Income Tax Information...... 54 Board Members and Officers.......... 57 Approval of Investment Management Services Agreement............... 61 Proxy Voting........................ 63 Change in Independent Registered Public Accounting Firm........... 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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT FUND SNAPSHOT AT JULY 31, 2007 FUND OBJECTIVE RiverSource Disciplined Equity Fund seeks to provide shareholders with long-term capital growth. SECTOR BREAKDOWN* Percentage of portfolio assets (PIE CHART) Financials 16.7% Consumer Discretionary 15.9% Energy 15.2% Information Technology 13.5% Health Care 11.6% Industrials 7.6% Other(1) 19.5%
* Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Consumer Staples 6.7%, Telecommunication Services 5.7%, Materials 3.4%, Utilities 3.4% and Cash & Cash Equivalents(2) 0.3%. (2) Of the 0.3%, 0.2% is due to security lending activity and 0.1% is the Fund's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets Exxon Mobil 5.0% Chevron 4.8% AT&T 4.4% Pfizer 3.4% Apple 3.1% Microsoft 2.6% Johnson & Johnson 2.5% Fannie Mae 2.1% ConocoPhillips 1.9% Intl Business Machines 1.9%
For further detail about these holdings, please refer to the section entitled "Investments in Securities." The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 3 FUND SNAPSHOT AT JULY 31, 2007 STYLE MATRIX STYLE MATRIX GRAPHIC
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund generally invests. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and serves as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO MANAGERS
YEARS IN INDUSTRY Dimitris Bertsimas, Ph.D. 14 Gina Mourtzinou, Ph.D. 11
FUND FACTS
TICKER SYMBOL INCEPTION DATE Class A AQEAX 04/24/03 Class B AQEBX 04/24/03 Class C RDCEX 04/24/03 Class I ALEIX 07/15/04 Class R2 -- 12/11/06 Class R3 RSDEX 12/11/06 Class R4(1) RQEYX 04/24/03 Class R5 RSIPX 12/11/06 Class W RDEWX 12/01/06 (1) Effective Dec. 11, 2006, Class Y was renamed Class R4. Total net assets $2.819 billion Number of holdings 251
- -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY PERFORMANCE COMPARISON For the year ended July 31, 2007 (BAR CHART) RiverSource Disciplined Equity Fund Class A (excluding sales charge) +15.92 Standard & Poor's 500 Index (unmanaged) +16.13 Lipper Large-Cap Core Funds Index +16.16
(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 bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
TOTAL NET EXPENSES(A) Class A 1.05% 1.05% Class B 1.82% 1.82% Class C 1.81% 1.81% Class I 0.70% 0.70% Class R2(b) 1.49% 1.49% Class R3(b) 1.25% 1.25% Class R4(c) 1.00% 0.91% Class R5(b) 0.75% 0.75% Class W(d) 1.18% 1.18%
(a) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.03%), will not exceed 1.09% for Class A, 1.85% for Class B, 1.85% for Class C, 0.78% for Class I, 1.58% for Class R2, 1.33% for Class R3, 0.88% for Class R4, 0.83% for Class R5 and 1.23% for Class W. (b) Inception date for Class R2, Class R3 and Class R5 was Dec. 11, 2006. (c) Effective Dec. 11, 2006, Class Y was renamed Class R4. (d) Inception date for Class W was Dec. 1, 2006. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 5 PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS
AT JULY 31, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS INCEPTION Class A (inception 4/24/03) +15.92% +12.61% +13.86% Class B (inception 4/24/03) +15.18% +11.78% +12.97% Class C (inception 4/24/03) +15.14% +11.80% +12.98% Class I (inception 7/15/04) +16.29% +13.01% +12.63% Class R2 (inception 12/11/06) N/A N/A +3.31%* Class R3 (inception 12/11/06) N/A N/A +3.46%* Class R4** (inception 4/24/03) +16.15% +12.87% +14.06% Class R5 (inception 12/11/06) N/A N/A +3.76%* Class W (inception 12/1/06) N/A N/A +5.01%* WITH SALES CHARGE Class A (inception 4/24/03) +9.26% +10.41% +12.29% Class B (inception 4/24/03) +10.18% +10.70% +12.65% Class C (inception 4/24/03) +14.14% +11.80% +12.98%
- -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY
AT JUNE 30, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS INCEPTION Class A (inception 4/24/03) +21.13% +12.25% +15.20% Class B (inception 4/24/03) +20.25% +11.43% +14.30% Class C (inception 4/24/03) +20.40% +11.39% +14.32% Class I (inception 7/15/04) +21.49% +0.00% +14.47% Class R2 (inception 12/11/06) N/A N/A +7.33%* Class R3 (inception 12/11/06) N/A N/A +7.48%* Class R4** (inception 4/24/03) +21.35% +12.50% +15.40% Class R5 (inception 12/11/06) N/A N/A +7.77%* Class W (inception 12/1/06) N/A N/A +9.08%* WITH SALES CHARGE Class A (inception 4/24/03) +14.16% +10.06% +13.58% Class B (inception 4/24/03) +15.25% +10.34% +13.98% Class C (inception 4/24/03) +19.40% +11.39% +14.32%
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. * Not annualized. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 7 QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT Below, Portfolio Managers Dimitris Bertsimas and Gina Mourtzinou discuss RiverSource Disciplined Equity Fund's positioning and results for the 12 months ended July 31, 2007. Q: How did RiverSource Disciplined Equity Fund perform for the annual period? A: RiverSource Disciplined Equity Fund's Class A shares (excluding sales charge) returned 15.92% for the 12 months ended July 31, 2007. The Fund underperformed the unmanaged Standard & Poor's 500 Index (S&P 500 Index), which gained 16.13%, as well as the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which returned 16.16%, for the same period. ALL THREE MODELS OUTPERFORMED THE S&P 500 INDEX FOR THE 12-MONTH PERIOD, WITH THE QUALITY MODEL THE STRONGEST PERFORMER, FOLLOWED BY MOMENTUM AND THEN VALUE. Q: What factors most significantly affected the Fund's performance? A: The Fund's performance benefited from the three quantitative investment models -- momentum, value and quality -- we employ in selecting stocks for the Fund's portfolio, the quality model the strongest performer, followed by momentum and then value for the 12-month period. This was the first annual period since the Fund's inception during which the quality model took the lead. The quality model was intended to serve as a defensive measure during equity market corrections when investor risk aversion increases, and it indeed did so by tracking the performance of the S&P 500 Index during the significant market slump in July. In comparison, the value and momentum models lagged the S&P 500 Index during the last month of the period. We believe the style diversification provided by the three quantitative models continued to be a notable investment advantage during the annual period overall. The Fund's significant positions in energy and telecommunication services and its more modest exposure to financials contributed to performance. Conversely, the Fund's sizable allocation to consumer discretionary and its moderate positions in the strongly performing information technology and industrials sectors detracted. Stock selection was effective in nearly all of the sectors in which the Fund invests, and was particularly strong in the industrials, financials and - -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS telecommunications sectors. The only sector in which stock selection was weak during the period was consumer discretionary. Among individual holdings, energy company Chevron, selected by the quality and value models, contributed most to the Fund's return. Other strong, positive contributors included drug manufacturer Merck & Co., which was favored by all three models; telecommunications leaders AT&T, selected by the momentum and value models; Verizon Communications, a value model pick; and mortgage loan company Fannie Mae, favored by both the value and quality models. Stocks that detracted from the Fund's return included pharmaceutical giant Pfizer, which was a quality model pick; consumer staples leader Archer- Daniels-Midland, a momentum model selection; and media behemoth Time Warner, also a momentum model pick. The Fund had significant positions in each of these stocks, and each posted losses for the annual period. At the end of July, the Fund's largest individual stock holdings were energy companies Exxon Mobil and Chevron, telecommunications leader AT&T, pharmaceutical company Pfizer, and information technology company Apple. The Fund's small exposure to international markets through iShares MSCI EAFE Index Fund through February 2007 also helped performance. iShares MSCI EAFE Index Fund is an exchange-traded fund based on the MSCI EAFE Index of stocks from developed international markets. The Fund's position in iShares MSCI EAFE Index Fund was established -- and eliminated -- based on a separate asset allocation model. Q: What changes did you make to the Fund's portfolio during the period? A: The Fund's position in iShares MSCI EAFE Index Fund was eliminated in February 2007 in an effort to reduce overall portfolio risk. We had increased the Fund's exposure to iShares MSCI EAFE Index Fund in September 2006, and subsequently began to reduce the allocation in December 2006. 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 consumer discretionary and utilities relative to the S&P 500 Index increased. The Fund's positions in health care and materials 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 example, the portfolio's weightings by sector and industry can never be more than 6% overweighted or - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 9 QUESTIONS & ANSWERS 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. WE INTEND TO CONTINUE SEEKING OPTIMAL RETURNS FOR THE FUND THROUGH THE STYLE DIVERSIFICATION OFFERED BY OUR THREE QUANTITATIVE INVESTMENT MODELS. Q: How do you intend to manage the Fund in the coming months? A: 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 lay ahead. 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 -- 2007 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 7/31/07)* as compared to the performance of two widely cited performance indices, the 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 April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. COMPARATIVE RESULTS
SINCE Results at July 31, 2007 1 YEAR 3 YEARS INCEPTION(3) RIVERSOURCE DISCIPLINED EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,926 $13,459 $16,399 Average annual total return +9.26% +10.41% +12.29% S&P 500 INDEX(1) Cumulative value of $10,000 $11,613 $13,959 $17,136 Average annual total return +16.13% +11.76% +13.51% LIPPER LARGE-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $11,616 $13,728 $16,244 Average annual total return +16.16% +11.14% +12.09%
Results for other share classes can be found on pages 6 and 7. - -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED FUND LINE GRAPH)
RIVERSOURCE DISCIPLINED EQUITY FUND CLASS A (INCLUDES SALES CHARGE) LIPPER LARGE-CAP CORE ($16,399) S&P 500 INDEX(1) ($17,136) FUNDS INDEX(2) ($16,244) ----------------------- -------------------------- ------------------------ 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
(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 -- 2007 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds expense ratio as of the most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2007. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class A Actual(b) $1,000 $1,015.50 $5.10(c) 1.02% Hypothetical (5% return before expenses) $1,000 $1,019.74 $5.11(c) 1.02% Class B Actual(b) $1,000 $1,012.80 $8.88(c) 1.78% Hypothetical (5% return before expenses) $1,000 $1,015.97 $8.90(c) 1.78% Class C Actual(b) $1,000 $1,012.80 $8.88(c) 1.78% Hypothetical (5% return before expenses) $1,000 $1,015.97 $8.90(c) 1.78% Class I Actual(b) $1,000 $1,016.80 $3.35(c) .67% Hypothetical (5% return before expenses) $1,000 $1,021.47 $3.36(c) .67% Class R2 Actual(b) $1,000 $1,014.10 $7.39(c) 1.48% Hypothetical (5% return before expenses) $1,000 $1,017.46 $7.40(c) 1.48% Class R3 Actual(b) $1,000 $1,015.50 $6.10(c) 1.22% Hypothetical (5% return before expenses) $1,000 $1,018.74 $6.11(c) 1.22% Class R4* Actual(b) $1,000 $1,016.80 $4.40(c) .88% Hypothetical (5% return before expenses) $1,000 $1,020.43 $4.41(c) .88% Class R5 Actual(b) $1,000 $1,016.90 $3.70(c) .74% Hypothetical (5% return before expenses) $1,000 $1,021.12 $3.71(c) .74%
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 15
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class W Actual(b) $1,000 $1,015.50 $5.65(c) 1.13% Hypothetical (5% return before expenses) $1,000 $1,019.19 $5.66(c) 1.13%
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2007: +1.55% for Class A, +1.28% for Class B, +1.28% for Class C, +1.68% for Class I, +1.41% for Class R2, +1.55% for Class R3, +1.68% for Class R4, +1.69% for Class R5 and +1.55% for Class W. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board, such that net expenses, (excluding fees and expenses of acquired funds) before giving effect to any performance incentive adjustment, will not exceed 1.09% for Class A, 1.85% for Class B, 1.85% for Class C, 0.78% for Class I, 1.58% for Class R2, 1.33% for Class R3, 0.88% for Class R4, 0.83% for Class R5 and 1.23% for Class W. Any amounts waived will not be reimbursed by the Fund. This change was effective Aug. 1, 2007. If this change had been in place for the entire six month period ended July 31, 2007, the actual expenses paid would have been $5.22 for Class A, $8.99 for Class B, $8.99 for Class C, $3.50 for Class I, $7.41 for Class R2, $6.16 for Class R3, $4.58 for Class R4, $3.72 for Class R5 and $5.89 for Class W; the hypothetical expenses paid would have been $5.23 for Class A, $9.01 for Class B, $9.00 for Class C, $3.51 for Class I, $7.42 for Class R2, $6.17 for Class R3, $4.58 for Class R4, $3.73 for Class R5 and $5.90 for Class W. - -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT INVESTMENTS IN SECURITIES JULY 31, 2007 (Percentages represent value of investments compared to net assets)
COMMON STOCKS (98.7%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (2.4%) General Dynamics 98,044 $7,702,337 Goodrich 38,815 2,441,852 Honeywell Intl 236,834 13,620,323 Lockheed Martin 109,106 10,744,759 Precision Castparts 127,995 17,542,994 Rockwell Collins 39,213 2,693,933 United Technologies 170,133 12,414,605 --------------- Total 67,160,803 - ----------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) United Parcel Service Cl B 69,400 5,254,968 - ----------------------------------------------------------------------------------- AUTO COMPONENTS (0.5%) Cooper Tire & Rubber 13,328 306,411 Goodyear Tire & Rubber 194,143(b) 5,575,787 Johnson Controls 65,282 7,386,658 --------------- Total 13,268,856 - ----------------------------------------------------------------------------------- AUTOMOBILES (1.0%) Ford Motor 949,756 8,082,424 General Motors 375,737 12,173,878 Harley-Davidson 144,208 8,266,003 --------------- Total 28,522,305 - ----------------------------------------------------------------------------------- BEVERAGES (1.9%) Coca-Cola 473,330 24,665,226 Molson Coors Brewing Cl B 10,957 974,516 PepsiCo 442,003 29,004,237 --------------- Total 54,643,979 - ----------------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) American Standard Companies 63,234 3,417,798 Masco 136,787 3,721,974 --------------- Total 7,139,772 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CAPITAL MARKETS (3.5%) Bear Stearns Companies 32,004 $3,879,525 Franklin Resources 155,884 19,854,945 Janus Capital Group 57,498 1,728,390 Legg Mason 26,523(f) 2,387,070 Lehman Brothers Holdings 328,565 20,371,030 Merrill Lynch & Co 426,443 31,642,070 Morgan Stanley 290,085 18,527,729 T Rowe Price Group 3,814 198,824 --------------- Total 98,589,583 - ----------------------------------------------------------------------------------- CHEMICALS (1.4%) Ashland 8,000 488,480 Dow Chemical 115,065 5,003,026 Ecolab 67,323 2,834,972 EI du Pont de Nemours & Co 279,188 13,046,455 Intl Flavors & Fragrances 45,228 2,266,375 Monsanto 165,680 10,678,076 PPG Inds 27,638 2,107,950 Sigma-Aldrich 59,672 2,704,335 --------------- Total 39,129,669 - ----------------------------------------------------------------------------------- COMMERCIAL BANKS (1.3%) BB&T 129,347 4,840,165 Comerica 123,145 6,484,816 Fifth Third Bancorp 10,200 376,278 First Horizon Natl 130,956 4,153,924 Huntington Bancshares 41,800 802,560 KeyCorp 80,436 2,790,325 Natl City 393,484 11,564,495 Synovus Financial 54,813 1,532,571 US Bancorp 128,076 3,835,876 --------------- Total 36,381,010 - ----------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.1%) Monster Worldwide 58,736(b) 2,284,243 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND - 2007 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) COMMUNICATIONS EQUIPMENT (0.9%) Avaya 72,746(b) $1,203,219 Corning 242,756(b) 5,787,303 Juniper Networks 175,616(b) 5,261,455 QUALCOMM 261,676 10,898,805 Tellabs 315,628(b) 3,582,378 --------------- Total 26,733,160 - ----------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (6.1%) Apple 665,941(b) 87,744,385 EMC 1,286,621(b) 23,815,355 Intl Business Machines 480,561 53,174,075 Lexmark Intl Cl A 113,857(b) 4,501,906 NCR 83,977(b) 4,385,279 --------------- Total 173,621,000 - ----------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.1%) Fluor 13,844 1,599,120 - ----------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.2%) Vulcan Materials 44,481 4,257,721 - ----------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.3%) Ball 31,661 1,623,259 Pactiv 98,053(b) 3,099,455 Sealed Air 50,522 1,376,725 Temple-Inland 16,613 965,714 --------------- Total 7,065,153 - ----------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 101,046 4,807,769 - ----------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.1%) H&R Block 71,860 1,433,607 - ----------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (2.5%) Bank of America 420,777 19,953,245 CIT Group 120,412 4,958,566 Citigroup 977,792 45,535,774 --------------- Total 70,447,585 - ----------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.5%) AT&T 3,145,269 123,168,734 Embarq 78,688 4,862,132 Verizon Communications 706,965 30,130,848 --------------- Total 158,161,714 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ELECTRIC UTILITIES (1.8%) American Electric Power 346,619 $15,074,460 Edison Intl 49,383 2,611,867 Entergy 125,035 12,498,499 FPL Group 318,654 18,395,896 Pinnacle West Capital 47,828 1,792,593 Progress Energy 21,334 931,442 --------------- Total 51,304,757 - ----------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.1%) Emerson Electric 48,625 2,288,779 - ----------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.5%) BJ Services 67,770 1,772,186 Nabors Inds 75,642(b,c) 2,211,772 Natl Oilwell Varco 27,414(b) 3,292,696 Noble 21,064 2,158,217 Transocean 44,475(b) 4,778,838 --------------- Total 14,213,709 - ----------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.0%) Kroger 100,259 2,602,724 Safeway 318,606 10,153,973 SUPERVALU 208,803 8,700,821 SYSCO 74,978 2,390,299 Wal-Mart Stores 717,641 32,975,603 --------------- Total 56,823,420 - ----------------------------------------------------------------------------------- FOOD PRODUCTS (0.4%) Sara Lee 375,839 5,957,048 Tyson Foods Cl A 223,365 4,757,675 WM Wrigley Jr 8,183 471,995 --------------- Total 11,186,718 - ----------------------------------------------------------------------------------- GAS UTILITIES (--%) Nicor 32,448 1,278,776 - ----------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.3%) Baxter Intl 96,193 5,059,752 Becton Dickinson & Co 44,419 3,391,835 Stryker 229,919 14,353,843 Zimmer Holdings 182,299(b) 14,175,570 --------------- Total 36,981,000 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HEALTH CARE PROVIDERS & SERVICES (1.5%) Cardinal Health 85,343 $5,609,595 CIGNA 430,592 22,235,772 Express Scripts 124,816(b) 6,257,026 Health Management Associates Cl A 67,300 542,438 Medco Health Solutions 41,361(b) 3,361,408 Quest Diagnostics 38,786(d) 2,151,459 Tenet Healthcare 261,345(b) 1,353,767 --------------- Total 41,511,465 - ----------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (2.7%) Harrah's Entertainment 116,274 9,847,245 Hilton Hotels 243,528 10,766,373 Marriott Intl Cl A 168,444 6,998,848 McDonald's 1,025,655 49,098,105 --------------- Total 76,710,571 - ----------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.8%) Centex 82,847 3,091,022 DR Horton 466,472 7,612,822 KB HOME 94,169 2,995,516 Lennar Cl A 201,361 6,173,728 Pulte Homes 188,605 3,647,621 --------------- Total 23,520,709 - ----------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.5%) Kimberly-Clark 207,731 13,974,064 - ----------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.7%) Constellation Energy Group 140,900 11,807,420 Dynegy Cl A 437,931(b) 3,901,965 TXU 55,953 3,650,933 --------------- Total 19,360,318 - ----------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.3%) 3M 393,613 35,000,068 Tyco Intl 22,489(c) 1,063,505 --------------- Total 36,063,573 - ----------------------------------------------------------------------------------- INSURANCE (4.6%) ACE 116,429(c) 6,720,282 Allstate 451,018 23,971,608 Ambac Financial Group 60,196 4,042,161 Chubb 184,140 9,282,497
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) INSURANCE (CONT.) Cincinnati Financial 28,900 $1,132,880 Genworth Financial Cl A 348,663 10,641,195 Lincoln Natl 86,117 5,194,577 Marsh & McLennan Companies 194,762 5,365,693 MBIA 75,996 4,263,376 MetLife 113,489 6,834,308 Progressive 452,728 9,498,233 Prudential Financial 137,775 12,210,998 Safeco 59,339 3,469,551 Torchmark 66,596 4,098,318 Travelers Companies 353,002 17,925,442 UnumProvident 313,431 7,616,373 --------------- Total 132,267,492 - ----------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.7%) Amazon.com 181,591(b) 14,262,157 IAC/InterActiveCorp 158,366(b) 4,551,439 --------------- Total 18,813,596 - ----------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.8%) eBay 635,338(b) 20,584,951 VeriSign 38,282(b) 1,136,593 --------------- Total 21,721,544 - ----------------------------------------------------------------------------------- IT SERVICES (0.9%) Affiliated Computer Services Cl A 19,858(b) 1,065,580 Automatic Data Processing 16,251 754,371 Cognizant Technology Solutions Cl A 104,056(b) 8,426,455 Fidelity Natl Information Services 51,382 2,550,089 First Data 181,735(f) 5,777,356 Paychex 98,702 4,084,289 Unisys 469,201(b) 3,795,836 --------------- Total 26,453,976 - ----------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.8%) Eastman Kodak 205,970(d) 5,200,743 Hasbro 149,979 4,202,412 Mattel 530,174 12,146,285 --------------- Total 21,549,440 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND - 2007 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) LIFE SCIENCES TOOLS & SERVICES (0.2%) PerkinElmer 74,591 $2,075,868 Thermo Fisher Scientific 60,622(b) 3,165,074 --------------- Total 5,240,942 - ----------------------------------------------------------------------------------- MACHINERY (2.7%) Caterpillar 98,844 7,788,907 Cummins 59,608 7,075,470 Deere & Co 69,770 8,401,702 Eaton 65,117 6,328,070 Illinois Tool Works 40,630 2,236,682 Ingersoll-Rand Cl A 119,334(c) 6,004,887 ITT 56,354 3,543,540 Navistar Intl 54,900(b) 3,465,563 PACCAR 268,025 21,929,805 Pall 57,228 2,376,107 Parker Hannifin 18,184 1,794,397 Terex 48,204(b) 4,157,595 --------------- Total 75,102,725 - ----------------------------------------------------------------------------------- MEDIA (3.2%) CBS Cl B 458,797 14,553,041 Comcast Cl A 497,126(b) 13,059,500 DIRECTV Group 195,319(b) 4,377,099 Gannett 308,497 15,394,000 Interpublic Group of Companies 341,187(b) 3,579,052 McGraw-Hill Companies 9,792 592,416 Meredith 12,130 685,224 New York Times Cl A 70,995(d) 1,622,946 Time Warner 1,786,378 34,405,639 Tribune 83,709 2,340,504 --------------- Total 90,609,421 - ----------------------------------------------------------------------------------- METALS & MINING (1.1%) Alcoa 264,112 10,089,078 Allegheny Technologies 62,632 6,571,976 Freeport-McMoRan Copper & Gold 128,319 12,059,420 United States Steel 36,690(f) 3,606,260 --------------- Total 32,326,734 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MULTILINE RETAIL (0.5%) Big Lots 83,306(b) $2,154,293 Family Dollar Stores 36,123 1,069,963 Kohl's 55,930(b) 3,400,544 Nordstrom 150,187 7,145,898 --------------- Total 13,770,698 - ----------------------------------------------------------------------------------- MULTI-UTILITIES (0.8%) CenterPoint Energy 303,481 5,001,367 CMS Energy 57,088 922,542 NiSource 121,389 2,314,888 PG&E 68,873 2,948,453 Sempra Energy 162,520 8,568,055 TECO Energy 40,396 651,991 Xcel Energy 98,866 2,006,980 --------------- Total 22,414,276 - ----------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (14.5%) Anadarko Petroleum 273,837 13,782,216 Apache 132,448 10,707,096 Chevron 1,561,283 133,114,989 ConocoPhillips 666,527 53,882,043 CONSOL Energy 28,588 1,190,690 Devon Energy 57,973 4,325,366 Exxon Mobil 1,648,955 140,375,540 Hess 62,794 3,842,993 Marathon Oil 375,756 20,741,731 Occidental Petroleum 401,348 22,764,459 Valero Energy 84,736 5,678,159 --------------- Total 410,405,282 - ----------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.4%) MeadWestvaco 57,197 1,861,190 Weyerhaeuser 134,478 9,580,213 --------------- Total 11,441,403 - ----------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.2%) Alberto-Culver 41,634 979,232 Avon Products 136,094 4,900,745 --------------- Total 5,879,977 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) PHARMACEUTICALS (8.4%) Abbott Laboratories 551,435 $27,952,240 Forest Laboratories 73,718(b) 2,963,464 Johnson & Johnson 1,173,043 70,969,102 King Pharmaceuticals 212,443(b) 3,613,655 Merck & Co 772,283 38,343,851 Pfizer 4,043,991 95,074,228 --------------- Total 238,916,540 - ----------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.4%) General Growth Properties 112,440 5,394,871 Simon Property Group 63,007(f) 5,451,996 --------------- Total 10,846,867 - ----------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.1%) CB Richard Ellis Group Cl A 70,910(b) 2,476,177 - ----------------------------------------------------------------------------------- ROAD & RAIL (0.5%) Avis Budget Group 13,026(b) 334,377 CSX 67,474 3,198,942 Union Pacific 81,844 9,750,895 --------------- Total 13,284,214 - ----------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.6%) Intel 301,534 7,122,233 KLA-Tencor 49,695 2,822,179 LSI 238,134(b) 1,714,565 MEMC Electronic Materials 35,228(b) 2,160,181 Teradyne 58,834(b) 923,105 Xilinx 45,631 1,140,775 --------------- Total 15,883,038 - ----------------------------------------------------------------------------------- SOFTWARE (4.0%) Adobe Systems 77,430(b) 3,119,655 Autodesk 51,339(b) 2,175,233 BMC Software 95,479(b) 2,742,157 CA 256,197 6,425,421 Compuware 234,183(b) 2,184,927 Microsoft 2,529,902 73,341,859 Oracle 1,128,747(b) 21,581,643 --------------- Total 111,570,895 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SPECIALTY RETAIL (3.7%) Abercrombie & Fitch Cl A 47,279 $3,304,802 AutoNation 126,049(b) 2,455,435 AutoZone 41,363(b) 5,245,242 Bed Bath & Beyond 106,045(b) 3,673,399 Best Buy 76,085 3,392,630 Gap 252,105 4,336,206 Home Depot 1,238,236 46,025,232 Lowe's Companies 831,569 23,292,248 RadioShack 133,706 3,360,032 Sherwin-Williams 53,160 3,704,720 Tiffany & Co 106,856 5,155,802 --------------- Total 103,945,748 - ----------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.7%) Coach 425,592(b) 19,347,413 Jones Apparel Group 82,114 2,049,565 Liz Claiborne 79,065 2,778,344 Nike Cl B 222,731 12,573,165 Polo Ralph Lauren 57,168 5,107,961 VF 69,819 5,989,772 --------------- Total 47,846,220 - ----------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (4.1%) Countrywide Financial 276,087 7,777,371 Fannie Mae 976,195 58,415,508 Freddie Mac 452,106 25,892,111 MGIC Investment 99,793(d) 3,857,997 Washington Mutual 524,984 19,702,650 --------------- Total 115,645,637 - ----------------------------------------------------------------------------------- TOBACCO (1.6%) Altria Group 650,584 43,244,319 UST 53,877 2,885,113 --------------- Total 46,129,432 - ----------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.1%) WW Grainger 26,000 2,271,360 - ----------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,630,769,004) $2,782,533,510 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND - 2007 ANNUAL REPORT 21
MONEY MARKET FUND (0.3%)(e) SHARES VALUE(A) RiverSource Short-Term Cash Fund 8,325,387(g) $8,325,387 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $8,325,387) $8,325,387 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,639,094,391)(h) $2,790,858,897 ===================================================================================
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by 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, 2007, the value of foreign securities represented 0.6% of net assets. (d) At July 31, 2007, 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 0.2% of net assets. See Note 5 to the financial statements. 0.1% of net assets is the Fund's cash equivalent position. (f) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 6 to the financial statements):
TYPE OF SECURITY CONTRACTS - ------------------------------------------------------------------------------ PURCHASE CONTRACTS S&P 500 Index, Sept. 2007 67
(g) Affiliated Money Market Fund - See Note 7 to the financial statements. (h) At July 31, 2007, the cost of securities for federal income tax purposes was $2,644,641,892 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $257,486,790 Unrealized depreciation (111,269,785) - ------------------------------------------------------------------------------ Net unrealized appreciation $146,217,005 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $2,630,769,004) $2,782,533,510 Affiliated money market fund (identified cost $8,325,387) (Note 7) 8,325,387 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $2,639,094,391) 2,790,858,897 Capital shares receivable 33,013,338 Dividends and accrued interest receivable 3,496,204 - ------------------------------------------------------------------------------ Total assets 2,827,368,439 - ------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash on demand deposit 266,725 Capital shares payable 1,458,642 Payable for investment securities purchased 56,232 Payable upon return of securities loaned (Note 5) 5,989,000 Variation margin payable 10,575 Accrued investment management services fee 44,996 Accrued distribution fee 16,723 Accrued transfer agency fee 6,321 Accrued administrative services fee 4,109 Accrued plan administration services fee 1,096 Other accrued expenses 134,609 - ------------------------------------------------------------------------------ Total liabilities 7,989,028 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $2,819,379,411 ==============================================================================
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2007 REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 3,901,041 Additional paid-in capital 2,510,493,651 Undistributed net investment income 15,309,316 Accumulated net realized gain (loss) 138,346,267 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 6) 151,329,136 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $2,819,379,411 ==============================================================================
Net assets applicable to outstanding shares: Class A $1,410,073,147 Class B $ 62,090,519 Class C $ 3,322,979 Class I $ 441,406,784 Class R2 $ 4,763 Class R3 $ 4,770 Class R4 $ 157,584,051 Class R5 $ 4,783 Class W $ 744,887,615 Net asset value per share of outstanding capital stock: Class A shares(1) 195,317,511 $ 7.22 Class B shares 8,724,783 $ 7.12 Class C shares 467,585 $ 7.11 Class I shares 60,689,061 $ 7.27 Class R2 shares 661 $ 7.21 Class R3 shares 661 $ 7.22 Class R4 shares 21,739,173 $ 7.25 Class R5 shares 661 $ 7.24 Class W shares 103,164,030 $ 7.22 - -------------------------------------------------------------------------------------------- * Including securities on loan, at value (Note 5) $ 5,528,300 - --------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.66. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 INVESTMENT INCOME Income: Dividends $ 46,250,747 Interest 556,791 Income distributions from affiliated money market fund (Note 7) 1,766,357 Fee income from securities lending (Note 5) 102,236 - ---------------------------------------------------------------------------- Total income 48,676,131 - ---------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 14,110,274 Distribution fee Class A 3,592,175 Class B 774,204 Class C 30,535 Class R2 15 Class R3 7 Class W 360,341 Transfer agency fee Class A 1,500,245 Class B 94,020 Class C 3,500 Class R2 2 Class R3 2 Class R4 149,207 Class R5 2 Class W 288,273 Service fee -- Class R4 93,450 Administrative services fees and expenses 1,224,572 Plan administration services fee Class R2 7 Class R3 7 Class R4 329,854 Compensation of board members 41,234 Custodian fees 197,205 Printing and postage 169,900 Registration fees 193,695 Professional fees 82,684 Other 80,945 - ---------------------------------------------------------------------------- Total expenses 23,316,355 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (791,059) - ---------------------------------------------------------------------------- 22,525,296 Earnings and bank fee credits on cash balances (Note 2) (177,524) - ---------------------------------------------------------------------------- Total net expenses 22,347,772 - ---------------------------------------------------------------------------- Investment income (loss) -- net 26,328,359 - ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 25 STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2007 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) $164,997,246 Futures contracts 10,332,154 - ---------------------------------------------------------------------------- Net realized gain (loss) on investments 175,329,400 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 99,972,248 - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 275,301,648 - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $301,630,007 ============================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2007 2006 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 26,328,359 $ 8,709,265 Net realized gain (loss) on investments 175,329,400 122,200,444 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 99,972,248 (121,608,827) - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 301,630,007 9,300,882 - --------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (11,770,748) (354,341) Class B (119,376) (19,051) Class C (7,167) (767) Class I (4,503,510) (1,329,352) Class R2 (53) N/A Class R3 (53) N/A Class R4 (2,093,617) (391) Class R5 (54) N/A Class W (4,357) N/A Net realized gain Class A (98,698,411) (1,913,998) Class B (5,457,193) (540,285) Class C (199,900) (14,293) Class I (28,282,528) (5,176,835) Class R2 (338) N/A Class R3 (338) N/A Class R4 (15,612,336) (1,940) Class R5 (338) N/A Class W (27,397) N/A - --------------------------------------------------------------------------------------- Total distributions (166,777,714) (9,351,253) - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2007 2006 CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales Class A shares (Note 2) $ 88,546,740 $ 57,119,187 Class B shares 11,644,836 8,354,913 Class C shares 962,793 459,648 Class I shares 268,920,269 127,309,091 Class R2 shares 5,000 N/A Class R3 shares 5,000 N/A Class R4 shares 96,913,115 1,874,060 Class R5 shares 5,000 N/A Class W shares 847,280,579 N/A Fund merger (Note 9) Class A shares N/A 1,396,617,869 Class B shares N/A 85,982,462 Class C shares N/A 2,432,014 Class I shares N/A 37,756,460 Class R4 shares N/A 274,057,962 Reinvestment of distributions at net asset value Class A shares 101,787,281 2,250,671 Class B shares 5,504,829 553,930 Class C shares 204,516 13,921 Class I shares 32,784,089 6,505,529 Class R4 shares 17,705,953 1,577 Class W shares 31,356 N/A Payments for redemptions Class A shares (248,119,981) (116,576,502) Class B shares (Note 2) (34,806,536) (29,916,465) Class C shares (Note 2) (749,148) (373,393) Class I shares (138,117,054) (1,598,499) Class R4 shares (203,796,200) (51,682,981) Class W shares (82,651,517) N/A - --------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 764,060,920 1,801,141,454 - --------------------------------------------------------------------------------------- Total increase (decrease) in net assets 898,913,213 1,801,091,083 Net assets at beginning of year 1,920,466,198 119,375,115 - --------------------------------------------------------------------------------------- Net assets at end of year $2,819,379,411 $1,920,466,198 ======================================================================================= Undistributed net investment income $ 15,309,316 $ 7,730,352 - ---------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares have no sales charge and are offered only to qualifying institutional investors. Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4, terminating the shareholder servicing agreement, revising the fee structure under the transfer agent agreement from account-based to asset-based, and adopting a plan administration services agreement. At July 31, 2007, Ameriprise Financial, Inc. (Ameriprise Financial), the parent company of RiverSource Investments, LLC (the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares. Effective Dec.11, 2006, the Fund offers additional classes of shares, Class R2, Class R3 and Class R5, to certain institutional investors. These shares are sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned 100% of Class R2, Class R3 and Class R5 shares. Effective Dec. 1, 2006, the Fund offers an additional class of shares, Class W, through qualifying discretionary accounts. Class W shares are sold without a front-end sales charge or CDSC. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 29 The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors of the funds generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign equities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial will fair value foreign equity securities pursuant to procedures adopted by the Board of Directors of the funds, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. 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 - -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 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, 2007, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. 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 - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 31 settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At July 31, 2007, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $250,460 and accumulated net realized gain been increased by $250,460. - -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2007 2006 - ---------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income.......................... $55,821,524 $1,705,386 Long-term capital gain................... 54,647,635 562,953 CLASS B Distributions paid from: Ordinary income.......................... 2,555,014 400,261 Long-term capital gain................... 3,021,555 159,075 CLASS C Distributions paid from: Ordinary income.......................... 96,386 10,856 Long-term capital gain................... 110,681 4,204 CLASS I Distributions paid from: Ordinary income.......................... 17,126,482 4,989,806 Long-term capital gain................... 15,659,556 1,516,381 CLASS R2(A) Distributions paid from: Ordinary income.......................... 204 N/A Long-term capital gain................... 187 N/A CLASS R3(A) Distributions paid from: Ordinary income.......................... 204 N/A Long-term capital gain................... 187 N/A CLASS R4(B) Distributions paid from: Ordinary income.......................... 9,061,667 1,765 Long-term capital gain................... 8,644,286 566 CLASS R5(A) Distributions paid from: Ordinary income.......................... 205 N/A Long-term capital gain................... 187 N/A CLASS W(C) Distributions paid from: Ordinary income.......................... 16,585 N/A Long-term capital gain................... 15,169 N/A
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 33 At July 31, 2007, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income............................. $ 59,944,450 Undistributed accumulated long-term gain.................. $ 98,799,366 Unrealized appreciation (depreciation).................... $146,240,903
RECENT ACCOUNTING PRONOUNCEMENTS On Sept. 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of SFAS 157 is required for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years. The impact of SFAS 157 on the Fund's financial statements is being evaluated. In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after Dec. 15, 2006. Tax positions of the Fund are being evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48 is not anticipated to have a material impact on the Fund. 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. On March 7, 2006, an additional dividend was paid before the merger (see Note 9) to ensure that current shareholders of RiverSource Disciplined Equity Fund would not experience a dilution in their share of the Fund's income or capital gains. 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 -- 2007 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to 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 increased the fee by $716,428 for the year ended July 31, 2007. The management fee for the year ended July 31, 2007, was 0.61% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive adjustment. 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. Other expenses in the amount of $26,786 are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Professional fees include fees paid by the Fund for legal services and independent registered public accounting firm services. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 35 - - Class C $20.00 Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as Class R4, the fee structure under the Transfer Agency Agreement was revised from an account-based fee for Class Y to an asset-based fee for Class R4. The Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares. Prior to Dec. 11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $17.50 per shareholder account. In addition, the Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted for the restructured Class R4 and the introduction of Class R2 and Class R3. The fee is calculated at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares. Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the Distributor a fee for service provided to shareholders by the Distributor and other servicing agents with respect to Class Y shares. The fee was calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Effective Dec. 11, 2006, this agreement was terminated. Sales charges received by the Distributor for distributing Fund shares were $616,732 for Class A, $44,715 for Class B and $304 for Class C for the year ended July 31, 2007. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it - -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. For the year ended July 31, 2007, the Investment Manager and its affiliates waived certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, were 1.03% for Class A, 1.79% for Class B, 1.79% for Class C, 0.67% for Class I, 1.48% for Class R2, 1.22% for Class R3, 0.87% for Class R4, 0.74% for Class R5 and 1.13% for Class W. Of these waived fees and expenses, the transfer agency fees waived for Class R4 were $121,727 and the management fees waived at the Fund level were $669,332. Under an agreement, which was effective until July 31, 2007, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fee and expenses of acquired funds), before giving effect to any performance incentive adjustment, would not exceed 1.00% for Class A, 1.78% for Class B, 1.77% for Class C, 0.64% for Class I, 1.46% for Class R2, 1.21% for Class R3, 0.84% for Class R4, 0.71% for Class R5 and 1.11% for Class W of the Fund's average daily net assets. Effective Aug. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.09% for Class A, 1.85% for Class B, 1.85% for Class C, 0.78% for Class I, 1.58% for Class R2, 1.33% for Class R3, 0.88% for Class R4, 0.83% for Class R5 and 1.23% for Class W of the Fund's average daily net assets, until July 31, 2008, unless sooner terminated at the discretion of the Board. During the year ended July 31, 2007, the Fund's custodian and transfer agency fees were reduced by $177,524 as a result of earnings and bank fee credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,996,518,039 and $1,391,070,515, respectively, for the year ended July 31, 2007. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 37 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
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(b) 13,970,887 2,529,422 (27,927,795) (11,427,486) Class R5(a) 661 -- -- 661 Class W(c) 114,252,036 4,492 (11,092,498) 103,164,030 - -----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2006 ISSUED FOR REINVESTED NET SOLD FUND MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - --------------------------------------------------------------------------------------------------------- Class A 8,536,165 207,275,407 337,195 (17,270,329) 198,878,438 Class B 1,250,216 12,879,602 83,745 (4,576,044) 9,637,519 Class C 68,880 364,574 2,104 (55,973) 379,585 Class I 18,763,732 5,576,952 969,971 (237,632) 25,073,023 Class R4(b) 276,369 40,564,166 235 (7,679,229) 33,161,541 - ---------------------------------------------------------------------------------------------------------
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. 5. 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, 2007, securities valued at $5,528,300 were on loan to brokers. For collateral, the Fund received $5,989,000 in cash. Cash collateral received is invested in an affiliated money - -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the "Investments in securities." Income from securities lending amounted to $102,236 for the year ended July 31, 2007. Expenses paid to the Investment Manager were $4,189 for the year ended July 31, 2007, which are included in other expenses on the statement of operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 6. STOCK INDEX FUTURES CONTRACTS At July 31, 2007, investments in securities included securities valued at $2,083,960 that were pledged as collateral to cover initial margin deposits on 67 open purchase contracts. The notional market value of the open purchase contracts at July 31, 2007 was $24,486,825 with a net unrealized loss of $459,268. See "Summary of significant accounting policies" and "Notes to investments in securities." 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. Cost of purchases and proceeds from sales of securities aggregated $878,276,983 and $869,951,596, respectively, for the year ended July 31, 2007. 8. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 19, 2006. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to this agreement, the Fund paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. The Fund had no borrowings under the facility outstanding during the year ended July 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 39 9. FUND MERGER At the close of business on March 10, 2006, RiverSource Disciplined Equity Fund acquired the assets and assumed the identified liabilities of RiverSource Stock Fund. The reorganization was completed after shareholders approved the plan on Feb. 15, 2006. The aggregate net assets of RiverSource Disciplined Equity Fund immediately before the acquisition were $207,410,855 and the combined net assets immediately after the acquisition were $2,004,257,622. The merger was accomplished by a tax-free exchange of 87,585,087 shares of RiverSource Stock Fund valued at $1,796,846,767. In exchange for the RiverSource Stock Fund shares and net assets, RiverSource Disciplined Equity Fund issued the following number of shares:
SHARES - ------------------------------------------------------------------------- Class A 207,275,407 Class B 12,879,602 Class C 364,574 Class I 5,576,952 Class Y 40,564,166 - -------------------------------------------------------------------------
RiverSource Stock 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 appreciation, accumulated net realized loss and undistributed net income.
ACCUMULATED TOTAL UNREALIZED NET REALIZED UNDISTRIBUTED NET ASSETS CAPITAL STOCK APPRECIATION LOSS NET INCOME - --------------------------------------------------------------------------------------------------------- RiverSource Stock Fund $1,796,846,767 $1,638,521,442 $166,822,042 $(8,526,929) $30,212
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 - -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs may file a notice of appeal with the Eighth Circuit Court of Appeals within 30 days from the date of judgment. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 41 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. - -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 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, 2007 2006 2005 2004 2003(B) Net asset value, beginning of period $6.74 $6.70 $5.95 $5.44 $5.00 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(c) .06 .04 .02 .01 Net gains (losses) (both realized and unrealized) .97 .35 .90 .63 .43 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.05 .41 .94 .65 .44 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.03) (.02) -- Distributions from realized gains (.51) (.31) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.57) (.37) (.19) (.14) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.22 $6.74 $6.70 $5.95 $5.44 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $1,410 $1,368 $28 $13 $8 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.03% 1.02% 1.25% 1.13% 1.22%(g) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.13% .95% .84% .65% .81%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% 137% 64% 64% 17% - ----------------------------------------------------------------------------------------------------------- Total return(h) 15.92% 6.25% 15.95% 11.99% 8.80%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from April 24, 2003 (when shares became publicly available) to July 31, 2003. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class A would have been 1.05%, 1.05%, 1.35%, 1.91% and 7.39% for the periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 43 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B) Net asset value, beginning of period $6.65 $6.62 $5.90 $5.43 $5.00 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) .01 .02 (.02) -- Net gains (losses) (both realized and unrealized) .96 .34 .86 .61 .43 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .99 .35 .88 .59 .43 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.01) -- -- -- Distributions from realized gains (.51) (.31) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.52) (.32) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.12 $6.65 $6.62 $5.90 $5.43 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $62 $73 $9 $3 $1 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.79% 1.82% 2.04% 1.95% 2.01%(g) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .37% .20% .06% (.16%) (.08%)(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% 137% 64% 64% 17% - ----------------------------------------------------------------------------------------------------------- Total return(h) 15.18% 5.42% 15.03% 10.95% 8.60%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from April 24, 2003 (when shares became publicly available) to July 31, 2003. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class B would have been 1.82%, 1.85%, 2.13%, 2.73% and 8.18% for the periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B) Net asset value, beginning of period $6.65 $6.62 $5.90 $5.43 $5.00 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) .01 .01 (.02) -- Net gains (losses) (both realized and unrealized) .96 .35 .87 .61 .43 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .99 .36 .88 .59 .43 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) -- -- -- Distributions from realized gains (.51) (.31) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.53) (.33) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.11 $6.65 $6.62 $5.90 $5.43 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.79% 1.81% 2.06% 1.95% 2.01%(g) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .36% .20% .02% (.17%) (.05%)(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% 137% 64% 64% 17% - ----------------------------------------------------------------------------------------------------------- Total return(h) 15.14% 5.51% 15.03% 10.96% 8.60%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from April 24, 2003 (when shares became publicly available) to July 31, 2003. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class C would have been 1.81%, 1.84%, 2.13%, 2.73% and 8.20% for the periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 45 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004(B) Net asset value, beginning of period $6.78 $6.73 $5.96 $5.99 - ---------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(c) .08 .04 .02 Net gains (losses) (both realized and unrealized) .97 .36 .92 (.05) - ---------------------------------------------------------------------------------------------------- Total from investment operations 1.08 .44 .96 (.03) - ---------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) (.03) -- Distributions from realized gains (.51) (.31) (.16) -- - ---------------------------------------------------------------------------------------------------- Total distributions (.59) (.39) (.19) -- - ---------------------------------------------------------------------------------------------------- Net asset value, end of period $7.27 $6.78 $6.73 $5.96 - ---------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $441 $252 $82 $9 - ---------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .67%(f) .70%(f) .91% .93%(f),(g) - ---------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.47% 1.41% 1.19% 5.35%(g) - ---------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% 137% 64% 64% - ---------------------------------------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class I would have been 0.70%, 0.72% and 1.27% for the periods ended July 31, 2007, 2006 and 2004, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $7.57 - ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) Net gains (losses) (both realized and unrealized) .20 - ---------------------------------------------------------------------- Total from investment operations .23 - ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.51) - ---------------------------------------------------------------------- Total distributions (.59) - ---------------------------------------------------------------------- Net asset value, end of period $7.21 - ---------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ---------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.48%(g) - ---------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .55%(g) - ---------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% - ---------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class R2 would have been 1.49% for the period ended July 31, 2007. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 47 CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $7.57 - ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(c) Net gains (losses) (both realized and unrealized) .20 - ---------------------------------------------------------------------- Total from investment operations .24 - ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.51) - ---------------------------------------------------------------------- Total distributions (.59) - ---------------------------------------------------------------------- Net asset value, end of period $7.22 - ---------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ---------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.22%(g) - ---------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .81%(g) - ---------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% - ---------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class R3 would have been 1.24% for the period ended July 31, 2007. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT CLASS R4*
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003(B) Net asset value, beginning of period $6.76 $6.71 $5.95 $5.45 $5.00 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(c) .07 .05 .03 .01 Net gains (losses) (both realized and unrealized) .98 .36 .91 .61 .44 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.07 .43 .96 .64 .45 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.04) (.02) -- Distributions from realized gains (.51) (.31) (.16) (.12) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.58) (.38) (.20) (.14) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.25 $6.76 $6.71 $5.95 $5.45 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $158 $224 $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) .87% .84% 1.06% .98% 1.01%(g) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.29% 1.10% 1.03% .78% .90%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% 137% 64% 64% 17% - ----------------------------------------------------------------------------------------------------------- Total return(h) 16.15% 6.48% 16.25% 11.87% 9.00%(i) - -----------------------------------------------------------------------------------------------------------
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from April 24, 2003 (when shares became publicly available) to July 31, 2003. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class R4 would have been 0.95%, 0.87%, 1.18%, 1.76% and 7.20% for the periods ended July 31, 2007, 2006, 2005, 2004 and 2003, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 49 CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $7.57 - ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(c) Net gains (losses) (both realized and unrealized) .20 - ---------------------------------------------------------------------- Total from investment operations .26 - ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.51) - ---------------------------------------------------------------------- Total distributions (.59) - ---------------------------------------------------------------------- Net asset value, end of period $7.24 - ---------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ---------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) .74%(g) - ---------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.28%(g) - ---------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% - ---------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class R5 would have been 0.75% for the period ended July 31, 2007. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 50 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $7.46 - ---------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) Net gains (losses) (both realized and unrealized) .32 - ---------------------------------------------------------------------- Total from investment operations .35 - ---------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.51) - ---------------------------------------------------------------------- Total distributions (.59) - ---------------------------------------------------------------------- Net asset value, end of period $7.22 - ---------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $745 - ---------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.13%(g) - ---------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .59%(g) - ---------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 62% - ---------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class W would have been 1.18% for the period ended July 31, 2007. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 51 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 schedule of investments in securities, of RiverSource Disciplined Equity Fund (the Fund), one of the portfolios constituting the RiverSource Large Cap Series, Inc., as of July 31, 2007, and the related statements of operations, changes in net assets, and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The financial statements and financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. - -------------------------------------------------------------------------------- 52 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT In our opinion, the 2007 financial statements and financial highlights 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, 2007, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Minneapolis, Minnesota September 20, 2007 - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 53 FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2007 CLASS A
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28963
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.57316
CLASS B
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.23975
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.52328
CLASS C
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.24691
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... 0.28353 Total distributions......................................... $0.53044
- -------------------------------------------------------------------------------- 54 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT CLASS I
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.31009
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.59362
CLASS R2
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.30875
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.59228
CLASS R3
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.30922
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.59275
CLASS R4*
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.29722
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.58075
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 55 CLASS R5
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.30998
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.59351
CLASS W
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 26.15% Dividends Received Deduction for corporations......... 25.90%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.30998
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.28353 Total distributions......................................... $0.59351
* Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- 56 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 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 102 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme 901 S. Marquette Ave. since 2006 Court, 1998-2005 Minneapolis, MN 55402 Age 53 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 52 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 56 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 71 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 68 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 57 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 Strategic 901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc. Minneapolis, MN 55402 estate and asset management (transportation, Age 55 company) distribution and logistics consultants) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc. 901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology); Minneapolis, MN 55402 former President, Forester Biotech American Healthways, Age 63 Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
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 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; President, Ameriprise Certificate Company since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* 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. - -------------------------------------------------------------------------------- 58 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 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 Senior Vice President -- Asset Management, 172 Ameriprise 2006 RiverSource Investments, LLC since 2006; Financial Center Managing Director and Global Head of Product, Minneapolis, MN 55474 Morgan Stanley Investment Management, Age 41 2004-2006; President, Touchstone Investments, 2002-2004; Director of Strategic Planning, Evergreen Investments, 1995-2002 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 43 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich Global Assets, 2001-2002 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 41 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Vice Financial Center President -- Finance, American Express Minneapolis, MN 55474 Company, 2000-2002 Age 52 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Vice President, General Counsel and Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company Age 47 since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, U.S. Bancorp Asset Management, 2002-2004; Second Vice President and Assistant General Counsel, Hartford Life, 2001-2002 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 46 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 59 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 43 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC ("RiverSource"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of Directors (the "Board") and the Board's Investment Review and Contracts Committees monitor these services throughout the year. On an annual basis, the Board, including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource prepares detailed reports for the Board and its Contracts Committee in March and April, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource addressing the services RiverSource provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. At the April 11-12, 2007 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource, including, in particular, the growing strength and capabilities of many RiverSource offices and the increased investment and resources dedicated to the Fund's operations, particularly in the areas of trading systems, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource, the Board considered the quality of the administrative, custody and transfer agency services provided by RiverSource affiliates to the Fund. The Board also reviewed the financial condition of RiverSource and the entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 61 Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board determined that RiverSource was in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2005. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource and its affiliates in connection with RiverSource providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the 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. - -------------------------------------------------------------------------------- 62 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 12, 2007, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2007 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended July 31, 2006 and the year ended July 31, 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through April 12, 2007 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2007 ANNUAL REPORT 63 RIVERSOURCE(R) 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. and Ameriprise Financial Services, Inc., Members FINRA, and managed by (RIVERSOURCE INVESTMENTS RiverSource Investments, LLC. These companies are part of LOGO) Ameriprise Financial, Inc. S-6263 G (9/07)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE(R) GROWTH FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2007 (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. TABLE OF CONTENTS Fund Snapshot....................... 3 Performance Summary................. 5 Questions & Answers with Portfolio Management........ 8 The Fund's Long-term Performance ... 12 Fund Expenses Example............... 14 Investments in Securities........... 16 Financial Statements................ 20 Notes to Financial Statements....... 26 Report of Independent Registered Public Accounting Firm........... 49 Federal Income Tax Information...... 50 Board Members and Officers.......... 52 Approval of Investment Management Services Agreement............... 56 Proxy Voting........................ 58 Change in Independent Registered Public Accounting Firm........... 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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT FUND SNAPSHOT AT JULY 31, 2007 FUND OBJECTIVE RiverSource Growth Fund seeks to provide shareholders with long-term capital growth. SECTOR BREAKDOWN* Percentage of portfolio assets (PIE CHART) Information Technology 21.0% Health Care 20.0% Consumer Discretionary 15.8% Telecommunication Services 14.5% Consumer Staples 8.6% Industrials 5.6% Other(1) 14.5%
* Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Financials 5.4%, Materials 3.4%, Energy 3.0%, Options Purchased 0.4% and Cash & Cash Equivalents(2) 2.3%. (2) Of the 2.3%, 1.2% is due to security lending activity, 0.2% is due to open options contracts and 0.9% is the Fund's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets Virgin Media 8.3% Harman Intl Inds 4.2% Vodafone Group 4.0% QUALCOMM 4.0% Cisco Systems 2.9% Merck & Co 2.4% Boston Scientific 2.3% Genentech 2.3% Microsoft 1.9% Altria Group 1.9%
For further detail about these holdings, please refer to the section entitled "Investments in Securities." The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 3 FUND SNAPSHOT AT JULY 31, 2007 STYLE MATRIX
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund generally invests. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and serves as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO MANAGER
YEARS IN INDUSTRY Nick Thakore 14
FUND FACTS
TICKER SYMBOL INCEPTION DATE Class A INIDX 03/01/72 Class B IGRBX 03/20/95 Class C AXGCX 06/26/00 Class I AGWIX 03/04/04 Class R2 -- 12/11/06 Class R3 RSCGX 12/11/06 Class R4(1) IGRYX 03/20/95 Class R5 RSWHX 12/11/06 Class W -- 12/01/06 (1) Effective Dec. 11, 2006, Class Y was renamed Class R4. Total net assets $3.227 billion Number of holdings 114
- -------------------------------------------------------------------------------- 4 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY PERFORMANCE COMPARISON For the year ended July 31, 2007 (BAR CHART) RiverSource Growth Fund Class A (excluding sales charge) +15.20 Russell 1000(R) Growth Index (unmanaged) +19.47 Lipper Large-Cap Growth Funds Index +17.67
(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 bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
TOTAL Class A 1.19% Class B 1.96% Class C 1.95% Class I 0.74% Class R2(a) 1.50% Class R3(a) 1.27% Class R4(b) 1.04%(c) Class R5(a) 0.76% Class W(d) 1.17%
(a) Inception date for Class R2, Class R3 and Class R5 was Dec. 11, 2006. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.09), will not exceed 0.97% for Class R4. (d) Inception date for Class W was Dec. 1, 2006. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 5 PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS
AT JULY 31, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION Class A (inception 3/1/72) +15.20% +11.58% +9.55% +0.77% +11.81% Class B (inception 3/20/95) +14.31% +10.72% +8.70% -0.01% +6.19% Class C (inception 6/26/00) +14.31% +10.73% +8.71% N/A -6.90% Class I (inception 3/4/04) +15.70% +12.11% N/A N/A +8.63% Class R2 (inception 12/11/06) N/A N/A N/A N/A +3.93%* Class R3 (inception 12/11/06) N/A N/A N/A N/A +4.09%* Class R4** (inception 3/20/95) +15.39% +11.79% +9.74% +0.92% +7.17% Class R5 (inception 12/11/06) N/A N/A N/A N/A +4.41%* Class W (inception 12/1/06) N/A N/A N/A N/A +5.29%* WITH SALES CHARGE Class A (inception 3/1/72) +8.58% +9.40% +8.26% +0.17% +11.63% Class B (inception 3/20/95) +9.31% +9.62% +8.41% -0.01% +6.19% Class C (inception 6/26/00) +13.31% +10.73% +8.71% N/A -6.90%
- -------------------------------------------------------------------------------- 6 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY
AT JUNE 30, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION Class A (inception 3/1/72) +18.55% +10.76% +8.49% +2.20% +11.92% Class B (inception 3/20/95) +17.63% +9.90% +7.65% +1.42% +6.45% Class C (inception 6/26/00) +17.64% +9.91% +7.65% N/A -6.65% Class I (inception 3/4/04) +19.06% +11.26% N/A N/A +9.65% Class R2 (inception 12/11/06) N/A N/A N/A N/A +6.56%* Class R3 (inception 12/11/06) N/A N/A N/A N/A +6.69%* Class R4** (inception 3/20/95) +18.72% +10.94% +8.68% +2.36% +7.43% Class R5 (inception 12/11/06) N/A N/A N/A N/A +6.99%* Class W (inception 12/1/06) N/A N/A N/A N/A +7.92%* WITH SALES CHARGE Class A (inception 3/1/72) +11.73% +8.60% +7.21% +1.60% +11.73% Class B (inception 3/20/95) +12.63% +8.79% +7.35% +1.42% +6.45% Class C (inception 6/26/00) +16.64% +9.91% +7.65% N/A -6.65%
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. * Not annualized. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 7 QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT Below, Portfolio Manager Nick Thakore discusses the Fund's positioning and results for the fiscal year ended July 31, 2007. Q: How did RiverSource Growth Fund perform for the 12 months ended July 31, 2007? A: RiverSource Growth Fund's Class A shares rose 15.20%, excluding sales charge, for the 12 months ended July 31, 2007. The Fund underperformed its benchmark, the Russell 1000(R) Growth Index (Russell Index), which advanced 19.47%, and its peer group as represented by the Lipper Large-Cap Growth Funds Index, which advanced 17.67% for the same period. Q: What factors influenced performance during the period? A: The stock market advanced strongly during the fiscal year, with a notable shift in market leadership. After lagging for a prolonged period, large-cap growth stocks outperformed large-cap value stocks, small-cap stocks and mid-cap stocks. Though the Fund benefited from the favorable environment, it did not fully keep pace with the sharp advance of the Russell Index. Positioning in the health care and materials sectors were key factors in the Fund's underperformance. AFTER LAGGING FOR A PROLONGED PERIOD, LARGE-CAP GROWTH STOCKS OUTPERFORMED LARGE-CAP VALUE STOCKS, SMALL-CAP STOCKS AND MID-CAP STOCKS. The Fund's health care holdings underperformed, largely due to company- specific issues. Medical device maker Boston Scientific saw some improvement in sales of implantable cardioverter defibrillators, but faced continued pressure in other areas, including sales of drug-coated coronary stents. Pharmaceutical company Pfizer struggled in the first half of the period due to disappointing study results for an add-on compound to its widely used cholesterol drug Lipitor. We reduced holdings of Boston Scientific and Pfizer during the period. Another pharmaceutical company, AstraZeneca, released disappointing clinical trial results for some new drugs and bought Medimmune, an acquisition that was poorly received due to its dilutive effect on earnings. The materials sector was incredibly strong during the period, and a number of small industries and individual stocks performed well. Within the sector, we - -------------------------------------------------------------------------------- 8 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS emphasized precious metals stocks, including gold and silver, which were not as strong as other groups. We remain optimistic about the prospects for precious metals, based on limited near-term supply growth and some demand growth. Given the recent underperformance of gold stocks and the use of gold as a hedge against inflation and the dollar's decline, we consider the outlook for these stocks to be quite promising. On the positive side, positioning in information technology and telecommunication services were the leading contributors to performance. Stock selection in the information technology sector was advantageous, driven by strong results from QUALCOMM, Nokia and Cisco Systems. QUALCOMM, a semiconductor company that makes chips for handheld wireless devices, is entering a major product cycle in which we believe they have a virtual monopoly. Going forward, as many as 90% of all cell phones may have QUALCOMM's third generation (3G) technology. Cell phone manufacturer Nokia benefited from a favorable market for wireless handsets. Cisco Systems benefited from strong results and increasing dominance in the enterprise and telecommunications networking areas. In the telecommunication services sector, the Fund emphasized the wireless segment, which has continued to experience growth. Vodafone Group, a European wireless telecommunications company, was the Fund's leading contributor to performance. Vodafone Group began the period at a relatively inexpensive valuation, and a combination of improving fundamentals and expectations that were initially quite low led to strong performance. Conversely, the Fund's holdings of Sprint Nextel detracted, largely due to results early in the period when the company struggled to execute its growth plans and experienced deteriorating fundamentals. During the first half of the fiscal year, we used a rally in the stock to significantly reduce the position due to our concerns about near-term fundamentals. Q: What changes did you make to the Fund's portfolio during the fiscal year? A: We decreased the energy weighting following the sector's strong performance due to our concern over near-term fundamentals. In our view, commodity prices seemed too high given the supply/demand scenario. We still have confidence in the growth potential of telecommunication services and maintain an emphasis on the sector. However, we adjusted individual - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 9 QUESTIONS & ANSWERS telecommunications positions, adding to several European telecommunications stocks, such as Deutsche Telekom due to attractive valuations, while reducing exposure to U.S. telecommunications stocks, including Sprint Nextel. Exposure to wireless companies in emerging markets declined, primarily because Fund holdings were acquired or performed well, leading us to take profits. The Fund's health care position increased slightly. Within the sector, we increased the Fund's holdings of pharmaceutical stock Merck & Co. Though the market was skeptical that Merck & Co could meet its own earnings growth forecast, we had confidence in its product development and cost management efforts. We reduced the industrials position despite the sector's continued strength, because we are concerned about the sustainability of growth and the fact that many industrial companies are already operating at record profit margins. Q: How are you positioning the Fund going forward? A: A major theme within the portfolio is our interest in "mega-cap" companies, that is, the very largest companies within our universe. We believe that these stocks are more attractively valued than ever before compared to the rest of the stock market. In addition, they may have faster growth rates and better earnings revision trends than the overall market. A MAJOR THEME WITHIN THE PORTFOLIO IS OUR INTEREST IN "MEGA-CAP" COMPANIES, THAT IS, THE VERY LARGEST COMPANIES WITHIN OUR UNIVERSE. We have been focusing more on stocks generating high free cash flow. In a decelerating economy, aggregate free cash flow is likely to decline, making companies that can maintain it even more attractive. This characteristic can also make companies more appealing for acquisitions and private equity buyouts, which have been drivers behind recent market performance. 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 -- 2007 ANNUAL REPORT 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 8/1/97 to 7/31/07) as compared to the performance of two widely cited performance indices, 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
SINCE Results at July 31, 2007 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(3) RIVERSOURCE GROWTH FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,858 $13,093 $14,871 $9,220 $492,300 Average annual total return +8.58% +9.40% +8.26% +0.17% +11.63% RUSSELL 1000 GROWTH INDEX(1) Cumulative value of $10,000 $11,947 $13,405 $16,237 $12,526 N/A Average annual total return +19.47% +10.26% +10.18% +3.35% N/A LIPPER LARGE-CAP GROWTH FUNDS INDEX(2) Cumulative value of $10,000 $11,767 $13,383 $15,478 $12,563 N/A Average annual total return +17.67% +10.20% +9.13% +2.80% N/A
Results for other share classes can be found on page 6. - -------------------------------------------------------------------------------- 12 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GROWTH FUND LINE GRAPH)
RIVERSOURCE GROWTH FUND CLASS A (INCLUDES SALES RUSSELL 1000(R) GROWTH LIPPER LARGE-CAP GROWTH CHARGE) ($9,220) INDEX(1) ($12,526) FUNDS INDEX(2) ($12,563) ----------------------- ---------------------- ------------------------ '97 9,425 10,000 10,000 '98 10,021 11,992 12,016 '99 12,074 14,875 14,771 '00 15,818 18,502 18,029 '01 9,152 12,015 11,827 '02 6,450 8,561 8,518 '03 7,033 9,558 9,282 '04 7,323 10,371 9,852 '05 8,746 11,723 11,417 '06 8,832 11,634 11,205 '07 9,220 12,526 12,563
(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. (3) Fund data is from March 1, 1972. The Fund began operating before the inception of the Russell 1000 Growth Index and Lipper peer group. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds expense ratio as of the most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2007. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class A Actual(b) $1,000 $1,004.00 $5.76 1.16% Hypothetical (5% return before expenses) $1,000 $1,019.04 $5.81 1.16% Class B Actual(b) $1,000 $1,000.00 $9.52 1.92% Hypothetical (5% return before expenses) $1,000 $1,015.27 $9.59 1.92% Class C Actual(b) $1,000 $1,000.00 $9.52 1.92% Hypothetical (5% return before expenses) $1,000 $1,015.27 $9.59 1.92% Class I Actual(b) $1,000 $1,006.00 $3.58 .72% Hypothetical (5% return before expenses) $1,000 $1,021.22 $3.61 .72% Class R2 Actual(b) $1,000 $1,002.10 $7.45 1.50% Hypothetical (5% return before expenses) $1,000 $1,017.36 $7.50 1.50% Class R3 Actual(b) $1,000 $1,003.30 $6.31 1.27% Hypothetical (5% return before expenses) $1,000 $1,018.50 $6.36 1.27% Class R4* Actual(b) $1,000 $1,004.80 $5.07 1.02% Hypothetical (5% return before expenses) $1,000 $1,019.74 $5.11 1.02% Class R5 Actual(b) $1,000 $1,005.80 $3.78 .76% Hypothetical (5% return before expenses) $1,000 $1,021.03 $3.81 .76% Class W Actual(b) $1,000 $1,003.90 $5.76 1.16% Hypothetical (5% return before expenses) $1,000 $1,019.04 $5.81 1.16%
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2007: +0.40% for Class A, +0.00% for Class B, +0.00% for Class C, +0.60% for Class I, +0.21% for Class R2, +0.33% for Class R3, +0.48% for Class R4, +0.58%. for Class R5 and +0.39% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 15 INVESTMENTS IN SECURITIES JULY 31, 2007 (Percentages represent value of investments compared to net assets)
COMMON STOCKS (97.4%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (2.4%) Boeing 517,321 $53,506,511 Honeywell Intl 269,205 15,481,980 Lockheed Martin 89,507 8,814,649 --------------- Total 77,803,140 - ----------------------------------------------------------------------------------- BEVERAGES (2.4%) Coca-Cola 347,444 18,105,307 PepsiCo 927,982 60,894,179 --------------- Total 78,999,486 - ----------------------------------------------------------------------------------- BIOTECHNOLOGY (4.6%) Amgen 718,446(b) 38,609,288 Biogen Idec 495,140(b) 27,995,216 Celgene 155,011(b) 9,387,466 Genentech 985,691(b) 73,315,696 --------------- Total 149,307,666 - ----------------------------------------------------------------------------------- CAPITAL MARKETS (2.3%) Blackstone Group LP 23,715(b) 569,397 Fortress Investment Group LLC Cl A 236,765(e) 4,491,432 Goldman Sachs Group 66,393 12,504,458 KKR Private Equity Investors LP Unit 2,440,935(g) 49,306,887 Oaktree Capital Group LLC Cl A Unit 230,000(b,d,g) 7,590,000 --------------- Total 74,462,174 - ----------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (10.3%) Alcatel-Lucent ADR 387,268(c) 4,492,309 Avaya 1,284,610(b) 21,247,449 Cisco Systems 3,296,939(b) 95,314,506 JDS Uniphase 1,359,682(b,e) 19,484,243 Nokia ADR 837,408(c) 23,983,365 QUALCOMM 3,139,483 130,759,468 Telefonaktiebolaget LM Ericsson ADR 745,871(c) 27,903,034 Tellabs 553,512(b) 6,282,361 --------------- Total 329,466,735 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) COMPUTERS & PERIPHERALS (2.5%) Apple 362,850(b) $47,809,116 Brocade Communications Systems 127,906(b) 900,458 Dell 294,049(b) 8,224,551 Hewlett-Packard 535,073 24,629,410 --------------- Total 81,563,535 - ----------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) KBR 187,152(b) 6,005,708 - ----------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.5%) AT&T 789,842 30,930,213 Chunghwa Telecom ADR 80,014(c) 1,326,632 COLT Telecom Group 816,308(b,c) 2,540,890 Deutsche Telekom 2,698,810(c) 46,379,814 Deutsche Telekom ADR 1,298,073(c) 22,300,894 Indosat 8,701,500(c) 6,842,286 Qwest Communications Intl 2,056,667(b) 17,543,370 Telefonica 931,652(c) 21,805,040 Telefonica ADR 147,367(c) 10,349,584 Telenor ADR 295,000(c) 16,301,346 --------------- Total 176,320,069 - ----------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.2%) Transocean 70,925(b) 7,620,891 - ----------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.1%) CVS Caremark 92,812 3,266,054 - ----------------------------------------------------------------------------------- FOOD PRODUCTS (1.3%) Dean Foods 219,304 6,309,376 Kraft Foods Cl A 1,135,834 37,198,564 --------------- Total 43,507,940 - ----------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.9%) Boston Scientific 5,750,917(b) 75,624,559 Medtronic 330,666 16,754,846 --------------- Total 92,379,405 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HEALTH CARE PROVIDERS & SERVICES (3.5%) Cardinal Health 747,493 $49,132,715 McKesson 554,004 31,999,271 UnitedHealth Group 650,718 31,514,273 --------------- Total 112,646,259 - ----------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (--%) Pinnacle Entertainment 11,527(b) 305,581 - ----------------------------------------------------------------------------------- HOUSEHOLD DURABLES (4.2%) Harman Intl Inds 1,163,171 134,927,836 Tele Atlas 75,879(b,c) 2,180,219 --------------- Total 137,108,055 - ----------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (2.7%) Colgate-Palmolive 601,212 39,679,992 Procter & Gamble 783,578 48,472,135 --------------- Total 88,152,127 - ----------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.8%) General Electric 1,526,011 59,148,186 - ----------------------------------------------------------------------------------- INSURANCE (2.9%) ACE 245,058(c) 14,144,748 AFLAC 206,615 10,768,774 American Intl Group 696,550 44,704,578 Hartford Financial Services Group 40,168 3,690,234 Prudential Financial 212,839 18,863,921 --------------- Total 92,172,255 - ----------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (3.2%) eBay 948,762(b) 30,739,889 Google Cl A 98,197(b) 50,080,469 VeriSign 407,075(b) 12,086,057 Yahoo! 480,135(b) 11,163,139 --------------- Total 104,069,554 - ----------------------------------------------------------------------------------- IT SERVICES (0.1%) HCL Technologies 240,310(c) 1,862,640 - ----------------------------------------------------------------------------------- MACHINERY (0.3%) Flowserve 113,498 8,202,500 - ----------------------------------------------------------------------------------- MEDIA (11.3%) Charter Communications Cl A 2,717,734(b) 11,034,000 Comcast Cl A 726,932(b) 19,096,504 Idearc 18,849 654,249
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEDIA (CONT.) News Corp Cl A 754,236 $15,929,464 Time Warner Cable Cl A 93,358(b) 3,568,143 Virgin Media 10,774,573(h) 267,640,393 Vivendi 93,060(c) 3,953,080 WorldSpace Cl A 419,274(b,e) 2,046,057 XM Satellite Radio Holdings Cl A 3,376,167(b,h) 38,657,112 --------------- Total 362,579,002 - ----------------------------------------------------------------------------------- METALS & MINING (3.4%) Barrick Gold 109,574(c) 3,604,985 Coeur d'Alene Mines 5,707,601(b,e) 22,316,720 Lihir Gold 21,587,339(b,c) 56,268,218 Newmont Mining 606,738 25,331,312 Stillwater Mining 256,952(b) 2,338,263 --------------- Total 109,859,498 - ----------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.8%) Chevron 108,490 9,249,857 Exxon Mobil 689,505 58,697,562 Kinder Morgan Management LLC --(b) 19 Total 281,264(c) 22,151,245 --------------- Total 90,098,683 - ----------------------------------------------------------------------------------- PHARMACEUTICALS (9.0%) AstraZeneca 1,158,953(c) 59,897,687 Bristol-Myers Squibb 621,282 17,650,622 Eli Lilly & Co 355,995 19,255,770 Johnson & Johnson 347,470 21,021,935 Merck & Co 1,550,309 76,972,841 Pfizer 2,152,041 50,594,484 Schering-Plough 799,724 22,824,123 Wyeth 449,988 21,833,418 --------------- Total 290,050,880 - ----------------------------------------------------------------------------------- ROAD & RAIL (0.9%) Hertz Global Holdings 1,344,437(b) 30,101,944 - ----------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.1%) Atmel 3,750,256(b) 20,213,880 Intel 1,881,906 44,450,619 LSI 1,301,808(b) 9,373,018 Spansion Cl A 2,441,983(b) 25,909,440 United Microelectronics ADR 232,402(c) 750,658 --------------- Total 100,697,615 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SOFTWARE (1.9%) Microsoft 2,155,236 $62,480,292 - ----------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Office Depot 46,627(b) 1,163,810 TJX Companies 327,663 9,092,648 --------------- Total 10,256,458 - ----------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.2%) Countrywide Financial 229,462 6,463,945 - ----------------------------------------------------------------------------------- TOBACCO (1.9%) Altria Group 939,104 62,422,243 - ----------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (9.1%) ALLTEL 358,358 23,633,710 America Movil ADR Series L 126,236(c) 7,559,012 Hutchison Telecommunications Intl 18,581,402(c) 23,268,898 Millicom Intl Cellular 170,734(b,c) 13,709,940 Orascom Telecom Holding GDR 125,593(c,e) 8,439,850 Sprint Nextel 2,670,852 54,832,592 Vivo Participacoes ADR 1,389,500(c) 6,238,855 Vodafone Group 43,513,834(c) 130,809,030 Vodafone Group ADR 823,585(c) 24,995,805 --------------- Total 293,487,692 - ----------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,963,166,182) $3,142,868,212 - -----------------------------------------------------------------------------------
OPTIONS PURCHASED (0.4%) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) CALLS QUALCOMM 1,163 $50.00 Jan. 2008 $174,450 Virgin Media 11,090 30.00 Jan. 2008 831,750 Virgin Media 11,090 27.50 Jan. 2008 1,608,050 - -------------------------------------------------------------------------------------------------------------------------- PUTS XM Satellite Radio Holdings Cl A 25,224 15.00 Jan. 2008 10,089,600 - -------------------------------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $11,652,813) $12,703,850 - --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (2.4%) SHARES VALUE(A) RiverSource Short-Term Cash Fund 75,870,781(i) $75,870,781 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $75,870,781) $75,870,781 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,050,689,776)(j) $3,231,442,843 ===================================================================================
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by 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, 2007, the value of foreign securities represented 17.5% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2007, the value of these securities amounted to $7,590,000 or 0.2% of net assets. (e) At July 31, 2007, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 1.2% of net assets. See Note 6 to the financial statements. Cash collateral received for open options contracts is invested in an affiliated money market fund and represents 0.2% of net assets. See Note 1 to the financial statements. 1.0% of net assets is the Fund's cash equivalent position. - -------------------------------------------------------------------------------- 18 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (g) 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, 2007, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- KKR Private Equity Investors LP Unit 05-01-06 thru 07-24-07 $53,952,761 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 07-20-07 9,765,100
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (h) At July 31, 2007, securities valued at $85,310,520 were held to cover open call options written as follows (see Note 7 to the financial statements):
EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) - ---------------------------------------------------------------------------------------- Virgin Media 11,090 $30.00 Jan. 2008 $831,750 XM Satellite Radio Holdings Cl A 25,224 20.00 Jan. 2008 504,480 - ---------------------------------------------------------------------------------------- Total value $1,336,230 - ----------------------------------------------------------------------------------------
At July 31, 2007, cash or short-term securities were designated to cover open put options written as follows (see Note 7 to the financial statements):
EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) - ---------------------------------------------------------------------------------------- XM Satellite Radio Holdings Cl A 25,224 $12.50 Jan. 2008 $5,549,280
(i) Affiliated Money Market Fund -- See Note 8 to the financial statements. (j) At July 31, 2007, the cost of securities for federal income tax purposes was $3,081,131,055 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $251,190,208 Unrealized depreciation (100,878,420) - ------------------------------------------------------------------------------ Net unrealized appreciation $150,311,788 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 19 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $2,974,818,995) $3,155,572,062 Affiliated money market fund (identified cost $75,870,781) (Note 8) 75,870,781 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $3,050,689,776) 3,231,442,843 Cash in bank on demand deposit 100,297 Foreign currency holdings (identified cost $279,190) (Note 1) 276,065 Capital shares receivable 1,451,776 Dividends and accrued interest receivable 5,952,417 Receivable for investment securities sold 65,440,809 Unrealized appreciation on forward foreign currency contracts held, at value (Note 5) 1,626,082 - ------------------------------------------------------------------------------ Total assets 3,306,290,289 - ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 2,444,581 Payable for investment securities purchased 26,710,978 Payable upon return of securities loaned (Note 6) 37,808,900 Payable for cash collateral held on open options contracts (Note 1) 5,317,020 Accrued investment management services fee 51,157 Accrued distribution fee 27,444 Accrued transfer agency fee 1,509 Accrued administrative services fee 4,612 Accrued plan administration services fee 1,011 Other accrued expenses 286,378 Options contracts written, at value (premiums received $8,319,762) (Note 7) 6,885,510 - ------------------------------------------------------------------------------ Total liabilities 79,539,100 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $3,226,751,189 ==============================================================================
- -------------------------------------------------------------------------------- 20 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2007 REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 994,514 Additional paid-in capital 3,334,999,400 Undistributed net investment income 21,380,472 Accumulated net realized gain (loss) (Note 10) (314,505,270) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 183,882,073 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $3,226,751,189 ==============================================================================
Net assets applicable to outstanding shares: Class A $2,392,774,288 Class B $ 369,487,313 Class C $ 20,332,352 Class I $ 298,304,650 Class R2 $ 5,135 Class R3 $ 5,143 Class R4 $ 145,831,935 Class R5 $ 5,159 Class W $ 5,214 Net asset value per share of outstanding capital stock: Class A shares(1) 73,100,079 $ 32.73 Class B shares 12,401,019 $ 29.79 Class C shares 682,923 $ 29.77 Class I shares 8,893,003 $ 33.54 Class R2 shares 155 $ 33.13 Class R3 shares 155 $ 33.18 Class R4 shares 4,373,779 $ 33.34 Class R5 shares 155 $ 33.28 Class W shares 157 $ 33.21 - ------------------------------------------------------------------------------------------- * Including securities on loan, at value (Note 6) $ 33,616,930 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $34.73. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 21 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 INVESTMENT INCOME Income: Dividends $ 59,682,896 Interest 1,270,908 Income distributions from affiliated money market fund (Note 8) 5,549,293 Fee income from securities lending (Note 6) 524,804 Less foreign taxes withheld (1,474,003) - -------------------------------------------------------------------------- Total income 65,553,898 - -------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 22,705,786 Distribution fee Class A 6,060,271 Class B 4,642,489 Class C 201,604 Class R2 16 Class R3 8 Class W 9 Transfer agency fee Class A 4,761,442 Class B 999,373 Class C 41,758 Class R2 2 Class R3 2 Class R4 221,474 Class R5 2 Class W 7 Service fee -- Class R4 93,050 Administrative services fees and expenses 1,763,087 Plan administration services fee Class R2 8 Class R3 8 Class R4 311,647 Compensation of board members 62,840 Custodian fees 303,550 Printing and postage 482,500 Registration fees 133,300 Professional fees 95,538 Other 147,342 - -------------------------------------------------------------------------- Total expenses 43,027,113 Earnings and bank fee credits on cash balances (Note 2) (270,712) - -------------------------------------------------------------------------- Total net expenses 42,756,401 - -------------------------------------------------------------------------- Investment income (loss) -- net 22,797,497 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2007 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) $247,504,400 Foreign currency transactions 31,204 Options contracts written (Note 7) (2,403,085) - -------------------------------------------------------------------------- Net realized gain (loss) on investments 245,132,519 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 227,422,901 - -------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 472,555,420 - -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $495,352,917 ==========================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2007 2006 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 22,797,497 $ 21,536,361 Net realized gain (loss) on investments 245,132,519 378,492,867 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 227,422,901 (369,575,760) - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 495,352,917 30,453,468 - --------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (17,087,134) (766,414) Class C (21,069) -- Class I (3,983,286) (240,149) Class R2 (55) N/A Class R3 (55) N/A Class R4 (1,999,289) (164,443) Class R5 (56) N/A Class W (55) N/A - --------------------------------------------------------------------------------------- Total distributions (23,090,999) (1,171,006) - --------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales Class A shares (Note 2) 279,305,597 723,627,727 Class B shares 40,223,465 155,729,842 Class C shares 3,730,834 8,410,448 Class I shares 102,896,983 109,795,697 Class R2 shares 5,000 N/A Class R3 shares 5,000 N/A Class R4 shares 28,815,906 54,128,249 Class R5 shares 5,000 N/A Class W shares 5,000 N/A Reinvestment of distributions at net asset value Class A shares 16,669,054 748,320 Class C shares 20,543 -- Class I shares 3,983,218 240,142 Class R4 shares 1,999,289 164,443
- -------------------------------------------------------------------------------- 24 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2007 2006 Payments for redemptions Class A shares (574,909,608) (500,308,297) Class B shares (Note 2) (201,026,288) (269,341,808) Class C shares (Note 2) (4,753,464) (4,706,122) Class I shares (110,663,694) (3,449,675) Class R2 shares -- N/A Class R3 shares -- N/A Class R4 shares (184,854,678) (96,349,570) Class R5 shares -- N/A Class W shares -- N/A - --------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (598,542,843) 178,689,396 - --------------------------------------------------------------------------------------- Total increase (decrease) in net assets (126,280,925) 207,971,858 Net assets at beginning of year 3,353,032,114 3,145,060,256 - --------------------------------------------------------------------------------------- Net assets at end of year $3,226,751,189 $3,353,032,114 ======================================================================================= Undistributed net investment income $ 21,380,472 $ 21,642,770 - ---------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares have no sales charge and are offered only to qualifying institutional investors. Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4, terminating the shareholder servicing agreement, revising the fee structure under the transfer agent agreement from account-based to asset-based, and adopting a plan administration services agreement. At July 31, 2007, Ameriprise Financial, Inc. (Ameriprise Financial), the parent company of RiverSource Investments, LLC (the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares. Effective Dec. 11, 2006, the Fund offers additional classes of shares, Class R2, Class R3 and Class R5, to certain institutional investors. These shares are sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned 100% of Class R2, Class R3 and Class R5 shares. Effective Dec. 1, 2006, the Fund offers an additional class of shares, Class W, through qualifying discretionary accounts. Class W shares are sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned 100% of Class W shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. - -------------------------------------------------------------------------------- 26 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors of the funds generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign equities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial will fair value foreign equity securities pursuant to procedures adopted by the Board of Directors of the funds, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2007, investments in securities included issues that are illiquid which, the Fund currently limits to 15% of net assets, at market value, at the time of purchase. Prior to July 12, 2007, the Fund limited the percent held in securities and other instruments that were illiquid to 10% of the Fund's net assets. The aggregate value of such securities as of July 31, 2007 was $56,896,887 representing 1.8% of net assets. These securities may be valued at fair value - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 27 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 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 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 - -------------------------------------------------------------------------------- 28 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT loss when the contract is closed or expires. At July 31, 2007, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At July 31, 2007, foreign currency holdings consisted of multiple denominations, primarily Malaysian Ringgits and Indonesian Rupiahs. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. 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 the shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 29 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 increased by $31,204 and accumulated net realized loss has been increased by $31,204. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2007 2006 - ---------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income............................ $17,087,134 $766,414 Long-term capital gain..................... -- -- CLASS B Distributions paid from: Ordinary income............................ -- -- Long-term capital gain..................... -- -- CLASS C Distributions paid from: Ordinary income............................ 21,069 -- Long-term capital gain..................... -- -- CLASS I Distributions paid from: Ordinary income............................ 3,983,286 240,149 Long-term capital gain..................... -- -- CLASS R2(A) Distributions paid from: Ordinary income............................ 55 N/A Long-term capital gain..................... -- N/A CLASS R3(A) Distributions paid from: Ordinary income............................ 55 N/A Long-term capital gain..................... -- N/A CLASS R4(B) Distributions paid from: Ordinary income............................ 1,999,289 164,443 Long-term capital gain..................... -- -- CLASS R5(A) Distributions paid from: Ordinary income............................ 56 N/A Long-term capital gain..................... -- N/A
- -------------------------------------------------------------------------------- 30 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT
YEAR ENDED JULY 31, 2007 2006 - ---------------------------------------------------------------------------- CLASS W(C) Distributions paid from: Ordinary income............................ $ 55 N/A Long-term capital gain..................... -- N/A
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. At July 31, 2007, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income............................ $ 23,220,406 Undistributed accumulated long-term gain................. $ -- Accumulated realized loss................................ $(284,278,656) Unrealized appreciation (depreciation)................... $ 151,815,525
RECENT ACCOUNTING PRONOUNCEMENTS On Sept. 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of SFAS 157 is required for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years. The impact of SFAS 157 on the Fund's financial statements is being evaluated. In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after Dec. 15, 2006. Tax positions of the Fund are being evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48 is not anticipated to have a material impact on the Fund. 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. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 31 OTHER Security transactions are accounted for on the date securities are purchased or sold. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to 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 increased the fee by $2,987,141 for the year ended July 31, 2007. The management fee for the year ended July 31, 2007, was 0.66% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive agreement. 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. Other expenses in the amount of $32,815 are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Professional fees include fees paid by the Fund for legal services and independent registered public accounting firm services. - -------------------------------------------------------------------------------- 32 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as Class R4, the fee structure under the Transfer Agency Agreement was revised from an account-based fee for Class Y to an asset-based fee for Class R4. The Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net asset attributable to Class R4 shares. Prior to Dec. 11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $17.50 per shareholder account. In addition, the Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted for the restructured Class R4 and the introduction of Class R2 and Class R3. The fee is calculated at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares. Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the Distributor a fee for service provided to shareholders by the Distributor and other servicing agents with respect to Class Y shares. The fee was calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Effective Dec. 11, 2006, this agreement was terminated. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 33 Sales charges received by the Distributor for distributing Fund shares were $2,629,101 for Class A, $396,657 for Class B and $2,421 for Class C for the year ended July 31, 2007. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. Effective Dec. 11, 2006, with the renaming of Class Y as Class R4, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2008, 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 0.97% for Class R4. During the year ended July 31, 2007, the Fund's custodian and transfer agency fees were reduced by $270,712 as a result of earnings and bank fee credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $3,263,138,796 and $3,915,171,059, respectively, for the year ended July 31, 2007. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- 34 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - -------------------------------------------------------------------------------------------- Class A 8,592,129 525,999 (18,184,913) (9,066,785) Class B 1,395,545 -- (6,731,640) (5,336,095) Class C 129,341 709 (165,607) (35,557) Class I 3,255,973 123,015 (3,216,500) 162,488 Class R2(a) 155 -- -- 155 Class R3(a) 155 -- -- 155 Class R4(b) 887,179 62,013 (5,678,782) (4,729,590) Class R5(a) 155 -- -- 155 Class W(c) 157 -- -- 157 - --------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2006 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - -------------------------------------------------------------------------------------------- Class A 25,321,178 25,727 (17,311,509) 8,035,396 Class B 5,918,299 -- (10,403,829) (4,485,530) Class C 320,095 -- (178,061) 142,034 Class I 3,763,917 8,083 (113,992) 3,658,008 Class R4(b) 1,827,502 5,559 (3,287,393) (1,454,332) - --------------------------------------------------------------------------------------------
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. 5. FORWARD FOREIGN CURRENCY CONTRACTS At July 31, 2007, the Fund had forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation on these contracts is included in the accompanying financial - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 35 statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------- Aug. 2, 2007 6,981,334 9,552,887 $ 813 $-- European Monetary Unit U.S. Dollar Aug. 17, 2007 50,696,127 103,626,432 677,588 -- British Pound U.S. Dollar Aug. 17, 2007 57,500,000 117,557,025 791,526 -- British Pound U.S. Dollar Aug. 30, 2007 35,500,000 48,698,084 72,556 -- European Monetary Unit U.S. Dollar Aug. 30, 2007 36,083,023 49,507,712 83,599 -- European Monetary Unit U.S. Dollar - ------------------------------------------------------------------------------------------------- Total $1,626,082 $-- - -------------------------------------------------------------------------------------------------
6. 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, 2007, securities valued at $33,616,930 were on loan to brokers. For collateral, the Fund received $37,808,900 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 "Investments in securities." Income from securities lending amounted to $524,804 for the year ended July 31, 2007. Expenses paid to the Investment Manager were $7,621 for the year ended July 31, 2007, which are included in other expenses on the statement of operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. - -------------------------------------------------------------------------------- 36 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 7. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows:
CALLS PUTS CONTRACTS PREMIUMS CONTRACTS PREMIUMS - ---------------------------------------------------------------------------------- Balance July 31, 2006 2,515 $ 5,531,700 -- $ -- Opened 91,990 10,349,937 42,040 5,339,080 Closed (24,901) (8,220,882) (16,816) (2,135,632) Expired (33,290) (2,544,441) -- -- - ---------------------------------------------------------------------------------- Balance July 31, 2007 36,314 $ 5,116,314 25,224 $ 3,203,448 - ----------------------------------------------------------------------------------
See "Summary of significant accounting policies." 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. Cost of purchases and proceeds from sales aggregated $1,512,404,501 and $1,436,533,720, respectively, for the year ended July 31, 2007. 9. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 19, 2006. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to this agreement, the Fund paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. The Fund had no borrowings under the facility outstanding during the year ended July 31, 2007. 10. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $284,278,656 at July 31, 2007, that if not offset by capital gains will expire in 2011. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 37 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 may file a notice of appeal with the Eight Circuit Court of Appeals within 30 days from the date of judgment. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and - -------------------------------------------------------------------------------- 38 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, 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 -- 2007 ANNUAL REPORT 39 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, 2007 2006 2005 2004 2003 Net asset value, beginning of period $28.61 $28.34 $23.73 $22.80 $20.88 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .23(b) .18 .04 .02 -- Net gains (losses) (both realized and unrealized) 4.11 .10 4.57 .91 1.92 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 4.34 .28 4.61 .93 1.92 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.01) -- -- -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $32.73 $28.61 $28.34 $23.73 $22.80 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2,393 $2,351 $2,101 $2,117 $2,263 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.19% 1.14% 1.19% 1.03% 1.21% - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .71% .72% .16% .07% --% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% 134% 136% 171% 205% - ----------------------------------------------------------------------------------------------------------- Total return(e) 15.20% .98% 19.43% 4.08% 9.20% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 40 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $26.06 $26.01 $21.95 $21.25 $19.61 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02)(b) (.05) (.16) (.16) (.17) Net gains (losses) (both realized and unrealized) 3.75 .10 4.22 .86 1.81 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 3.73 .05 4.06 .70 1.64 - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $29.79 $26.06 $26.01 $21.95 $21.25 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $369 $462 $578 $598 $775 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.96% 1.91% 1.97% 1.81% 1.99% - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.06%) (.06%) (.62%) (.71%) (.77%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% 134% 136% 171% 205% - ----------------------------------------------------------------------------------------------------------- Total return(e) 14.31% .19% 18.50% 3.29% 8.36% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 41 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $26.07 $26.01 $21.95 $21.25 $19.62 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(b) (.04) (.16) (.16) (.17) Net gains (losses) (both realized and unrealized) 3.74 .10 4.22 .86 1.80 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 3.73 .06 4.06 .70 1.63 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) -- -- -- -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $29.77 $26.07 $26.01 $21.95 $21.25 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $20 $19 $15 $13 $12 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.95% 1.91% 1.97% 1.81% 2.01% - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.03%) (.03%) (.62%) (.71%) (.81%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% 134% 136% 171% 205% - ----------------------------------------------------------------------------------------------------------- Total return(e) 14.31% .23% 18.50% 3.29% 8.31% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 42 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004(B) Net asset value, beginning of period $29.31 $28.93 $24.10 $25.61 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .40(c) .32 .12 .09 Net gains (losses) (both realized and unrealized) 4.19 .10 4.71 (1.60) - ----------------------------------------------------------------------------------------------------------- Total from investment operations 4.59 .42 4.83 (1.51) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) (.04) -- -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.54 $29.31 $28.93 $24.10 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $298 $256 $147 $18 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .74% .68% .75% .57%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.21% 1.22% .55% .43%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% 134% 136% 171% - ----------------------------------------------------------------------------------------------------------- Total return(g) 15.70% 1.44% 20.04% (5.90%)(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 43 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $32.23 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13(c) Net gains (losses) (both realized and unrealized) 1.12 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.25 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.35) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.13 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.50%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .63%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% - ----------------------------------------------------------------------------------------------------------- Total return(g) 3.93%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 44 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $32.23 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .18(c) Net gains (losses) (both realized and unrealized) 1.13 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.31 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.18 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.27%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .87%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% - ----------------------------------------------------------------------------------------------------------- Total return(g) 4.09%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 45 CLASS R4*
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $29.13 $28.81 $24.07 $23.09 $21.11 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .25(b) .24 .09 .07 .04 Net gains (losses) (both realized and unrealized) 4.22 .10 4.65 .91 1.94 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 4.47 .34 4.74 .98 1.98 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) (.02) -- -- -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.34 $29.13 $28.81 $24.07 $23.09 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $146 $265 $304 $350 $398 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.03% .95% 1.02% .86% 1.03% - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .79% .89% .34% .25% .18% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% 134% 136% 171% 205% - ----------------------------------------------------------------------------------------------------------- Total return(e) 15.39% 1.17% 19.69% 4.24% 9.38% - -----------------------------------------------------------------------------------------------------------
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 46 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $32.23 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .29(c) Net gains (losses) (both realized and unrealized) 1.12 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.41 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.28 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .76%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.38%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% - ----------------------------------------------------------------------------------------------------------- Total return(g) 4.41%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 47 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $31.89 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .24(c) Net gains (losses) (both realized and unrealized) 1.43 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.67 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.35) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.21 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.17%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.09%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 98% - ----------------------------------------------------------------------------------------------------------- Total return(g) 5.29%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 48 RIVERSOURCE GROWTH FUND -- 2007 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 schedule of investments in securities, of RiverSource Growth Fund (the Fund), one of the portfolios constituting the RiverSource Large Cap Series, Inc. as of July 31, 2007, and the related statement of operations, statement of changes in net assets and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The financial statements and financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights 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, 2007, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Minneapolis, Minnesota September 20, 2007 - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 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, 2007 CLASS A
INCOME DISTRIBUTION - taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.22210
CLASS C
INCOME DISTRIBUTION - taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.03029
CLASS I
INCOME DISTRIBUTION - taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.35985
CLASS R2
INCOME DISTRIBUTION - taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.35429
CLASS R3
INCOME DISTRIBUTION -- taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.35625
- -------------------------------------------------------------------------------- 50 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT CLASS R4*
INCOME DISTRIBUTION -- taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.26381
CLASS R5
INCOME DISTRIBUTION -- taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.35941
CLASS W
INCOME DISTRIBUTION -- taxable as dividend income: Qualified Dividend Income for individuals............. 100% Dividends Received Deduction for corporations......... 100%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.35385
* Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 51 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 102 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme 901 S. Marquette Ave. since 2006 Court, 1998-2005 Minneapolis, MN 55402 Age 53 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 52 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 56 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 71 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 68 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 52 RIVERSOURCE GROWTH FUND -- 2007 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 Strategic 901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc. Minneapolis, MN 55402 estate and asset management (transportation, Age 55 company) distribution and logistics consultants) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc. 901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology); Minneapolis, MN 55402 former President, Forester Biotech American Healthways, Age 63 Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
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 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; President, Ameriprise Certificate Company since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* 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 -- 2007 ANNUAL REPORT 53 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 Senior Vice President -- Asset Management, 172 Ameriprise 2006 RiverSource Investments, LLC since 2006; Financial Center Managing Director and Global Head of Product, Minneapolis, MN 55474 Morgan Stanley Investment Management, Age 41 2004-2006; President, Touchstone Investments, 2002-2004; Director of Strategic Planning, Evergreen Investments, 1995-2002 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 43 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich Global Assets, 2001-2002 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 41 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Vice Financial Center President -- Finance, American Express Minneapolis, MN 55474 Company, 2000-2002 Age 52 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Vice President, General Counsel and Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company Age 47 since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, U.S. Bancorp Asset Management, 2002-2004; Second Vice President and Assistant General Counsel, Hartford Life, 2001-2002 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 46 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 54 RIVERSOURCE GROWTH FUND -- 2007 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 43 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 55 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC ("RiverSource"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of Directors (the "Board") and the Board's Investment Review and Contracts Committees monitor these services throughout the year. On an annual basis, the Board, including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource prepares detailed reports for the Board and its Contracts Committee in March and April, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource addressing the services RiverSource provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. At the April 11-12, 2007 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource, including, in particular, the growing strength and capabilities of many RiverSource offices and the increased investment and resources dedicated to the Fund's operations, particularly in the areas of trading systems, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource, the Board considered the quality of the administrative, custody and transfer agency services provided by RiverSource affiliates to the Fund. The Board also reviewed the financial condition of RiverSource and the entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. - -------------------------------------------------------------------------------- 56 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board determined that RiverSource was in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2005. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource and its affiliates in connection with RiverSource providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 57 necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 12, 2007, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2007 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended July 31, 2006 and the year ended July 31, 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through April 12, 2007 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope - -------------------------------------------------------------------------------- 58 RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. - -------------------------------------------------------------------------------- RIVERSOURCE GROWTH FUND -- 2007 ANNUAL REPORT 59 RIVERSOURCE(R) 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. and Ameriprise Financial Services, Inc., Members FINRA, and managed by RiverSource Investments, LLC. These companies (RIVERSOURCE INVESTMENTS LOGO) are part of Ameriprise Financial, Inc. S-6455 AC (9/07)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE(R) LARGE CAP EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2007 (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. TABLE OF CONTENTS Fund Snapshot....................... 3 Performance Summary................. 5 Questions & Answers with Portfolio Management........ 8 The Fund's Long-term Performance ... 12 Fund Expenses Example............... 14 Investments in Securities........... 17 Financial Statements................ 28 Notes to Financial Statements....... 34 Report of Independent Registered Public Accounting Firm........... 59 Federal Income Tax Information...... 61 Board Members and Officers.......... 64 Approval of Investment Management Services Agreement............... 68 Proxy Voting........................ 70 Change in Independent Registered Public Accounting Firm........... 71
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT FUND SNAPSHOT AT JULY 31, 2007 FUND OBJECTIVE RiverSource Large Cap Equity Fund seeks to provide shareholders with long-term growth of capital. SECTOR BREAKDOWN* Percentage of portfolio assets (PIE CHART) Financials 17.3% Consumer Discretionary 11.9% Energy 8.5% Information Technology 15.6% Health Care 13.0% Industrials 9.0% Other(1) 24.7%
* Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Telecommunication Services 7.7%, Consumer Staples 7.5%, Materials 3.1%, Utilities 2.5%, Options Purchased 0.2%, and Cash & Cash Equivalents(2) 3.7%. (2) Of the 3.7%, 0.6% is due to security lending activity, 0.1% is due to open options contracts and 3.0% is the Fund's cash equivalent position. TOP TEN HOLDINGS Percentage of portfolio assets Exxon Mobil 3.6% Virgin Media 3.2% General Electric 2.1% Pfizer 1.9% Cisco Systems 1.7% QUALCOMM 1.7% Bank of America 1.7% Citigroup 1.7% American Intl Group 1.5% Merck & Co 1.5%
For further detail about these holdings, please refer to the section entitled "Investments in Securities." The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 3 FUND SNAPSHOT AT JULY 31, 2007 STYLE MATRIX
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund generally invests. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and serves as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO MANAGERS
YEARS IN INDUSTRY Robert Ewing, CFA 19 Nick Thakore 14
FUND FACTS
TICKER SYMBOL INCEPTION DATE Class A ALEAX 03/28/02 Class B ALEBX 03/28/02 Class C ARQCX 03/28/02 Class I ALRIX 03/04/04 Class R2 -- 12/11/06 Class R3 -- 12/11/06 Class R4(1) ALEYX 03/28/02 Class R5 -- 12/11/06
(1) Effective Dec. 11, 2006, Class Y was renamed Class R4. Total net assets $6.327 billion Number of holdings 461
- -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY PERFORMANCE COMPARISON For the year ended July 31, 2007 (BAR CHART) RiverSource Large Cap Equity Fund Class A (excluding sales charge) +15.79 Russell 1000(R) Index (unmanaged) +16.45 Standard & Poor's 500 Index (unmanaged) +16.13 Lipper Large-Cap Core Funds Index +16.16
(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 bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
TOTAL NET EXPENSES(A) Class A 1.09% 1.06% Class B 1.86% 1.82% Class C 1.86% 1.82% Class I 0.63% 0.63% Class R2(b) 1.44% 1.44% Class R3(b) 1.19% 1.19% Class R4(c) 0.92% 0.91% Class R5(b) 0.70% 0.70%
(a) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that increased the management fee by 0.01), will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.67% for Class I, 1.47% for Class R2, 1.22% for Class R3, 0.90% for Class R4 and 0.72% for Class R5. (b) Inception date for Class R2, Class R3 and Class R5 was Dec. 11, 2006. (c) Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 5 PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS
AT JULY 31, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) +15.79% +10.90% +9.98% +5.42% Class B (inception 3/28/02) +14.71% +10.04% +9.17% +4.60% Class C (inception 3/28/02) +14.80% +10.06% +9.17% +4.64% Class I (inception 3/4/04) +16.13% +11.48% N/A +8.18% Class R2 (inception 12/11/06) N/A N/A N/A +3.71%* Class R3 (inception 12/11/06) N/A N/A N/A +3.88%* Class R4** (inception 3/28/02) +15.80% +11.18% +10.24% +5.66% Class R5 (inception 12/11/06) N/A N/A N/A +4.24%* WITH SALES CHARGE Class A (inception 3/28/02) +9.15% +8.73% +8.69% +4.26% Class B (inception 3/28/02) +9.71% +8.93% +8.88% +4.44% Class C (inception 3/28/02) +13.80% +10.06% +9.17% +4.64%
- -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY
AT JUNE 30, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) +20.32% +10.32% +9.35% +6.17% Class B (inception 3/28/02) +19.30% +9.40% +8.52% +5.30% Class C (inception 3/28/02) +19.38% +9.42% +8.52% +5.35% Class I (inception 3/4/04) +20.87% +10.84% N/A +9.40% Class R2 (inception 12/11/06) N/A N/A N/A +7.12%* Class R3 (inception 12/11/06) N/A N/A N/A +7.12%* Class R4** (inception 3/28/02) +20.71% +10.52% +9.57% +6.37% Class R5 (inception 12/11/06) N/A N/A N/A +7.48%* WITH SALES CHARGE Class A (inception 3/28/02) +13.40% +8.16% +8.07% +4.98% Class B (inception 3/28/02) +14.30% +8.27% +8.23% +5.15% Class C (inception 3/28/02) +18.38% +9.42% +8.52% +5.35%
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. * Not annualized. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 7 QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT Below, Bob Ewing and Nick Thakore, RiverSource Large Cap Equity Fund's portfolio managers, discuss the Fund's results and positioning for the annual period ended July 31, 2007. Q: How did RiverSource Large Cap Equity Fund perform for the 12-month period ended July 31, 2007? A: RiverSource Large Cap Equity Fund's Class A shares advanced 15.79%, excluding sales charge, for the fiscal year ended July 31, 2007. The Fund underperformed its benchmarks, the Russell 1000(R) Index (Russell Index) and the Standard & Poor's 500 Index (S&P 500 Index), which increased 16.45% and 16.13%, respectively. The Fund's peer group, the Lipper Large-Cap Core Funds Index, gained 16.16% during the same time frame. Q: What factors most significantly affected performance for the period? A: U.S. stocks advanced sharply during the past year, as economic growth continued and the Federal Reserve Board held the Fed Funds rate, a benchmark for short-term interest rates, steady. Stock market volatility increased in the latter half of the year, amid concerns that weakness in the subprime lending market would affect other areas of the economy. This past year brought a shift in market leadership as large-cap growth stocks outperformed large-cap value as well as small- and mid-cap stocks. The Fund lagged the Russell Index, primarily due to sector allocations. Stock selection had a positive effect on return. Stock selection in the information technology sector had a favorable impact, as did selection in industrials and consumer staples. Selection in the health care, materials and financials sectors detracted from performance. A larger technology position than the Russell Index was advantageous as the technology sector advanced almost twice as much as the overall Russell Index. Having a smaller financials position than the Russell Index was also beneficial, as financial companies faced a challenging interest rate environment and deteriorating lending market. Smaller positions in industrials and energy compared to the Russell Index hampered results. - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS Individual contributors to performance included Vodafone Group, Nokia, QUALCOMM, Honeywell Intl and Freescale. The Fund's holdings in each of these stocks were larger than the respective Russell Index weightings. Vodafone Group, a European wireless telecommunications company, began the period at a relatively inexpensive valuation. A combination of improving fundamentals and expectations that were initially quite low led to strong performance. Cell phone manufacturer Nokia benefited from a favorable market for wireless handsets, particularly lower cost products in the emerging markets, an area where Nokia has a strong presence. QUALCOMM, a semiconductor company that makes chips for handheld wireless devices, is beginning a major product cycle in which the company has a virtual monopoly on technology for the next generation of cell phone handsets. In addition to its broad industrial exposure, Honeywell Intl operates in aerospace and defense, areas that have been particularly strong. Semiconductor company Freescale was acquired during the year and is an example of how portfolio results have benefited from the very active private equity marketplace. A LARGER TECHNOLOGY POSITION THAN THE RUSSELL INDEX WAS ADVANTAGEOUS AS THE TECHNOLOGY SECTOR ADVANCED ALMOST TWICE AS MUCH AS THE OVERALL RUSSELL INDEX. The largest detractors to performance during the period were Boston Scientific, Sprint Nextel, Countrywide Financial and Genentech. Each of these positions is larger than the respective Russell Index weighting. Medical device company Boston Scientific has seen some improvement in sales of implantable cardioverter defibrillators, but faced continued pressure in other areas, including sales of drug-coated coronary stents. Telecommunications firm Sprint Nextel showed improved performance toward the end of the period, but earlier in the year, the company struggled with customer turnover and an inability to capitalize on consolidation savings expected from the merger of the two companies. Though we thought the valuation of mortgage lender Countrywide Financial adequately discounted the challenging lending environment, mortgage volume decelerated more than anticipated, and the company indicated that credit problems in the subprime mortgage segment may spread to other areas, such as home equity loans. Biotechnology firm Genentech suffered - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 9 QUESTIONS & ANSWERS from concerns about decelerating growth, competition from new entrants into its markets and a trend toward lower doses on a leading product, which would reduce revenue. Despite some deceleration, the stock has remained a great growth opportunity, and recent earnings exceeded expectations. Having a smaller-than-Russell Index position in oil services company Schlumberger also detracted from performance. As high commodity prices have motivated oil and gas producers to search for more oil and gas reserves, demand for Schlumberger's services has grown, driving the stock price higher. Q: What changes did you make to the portfolio and how is it currently positioned? A: The most significant change to the portfolio during the last year was increased exposure to industrials. Powerful earnings growth and lower price-to-earnings multiples made selected industrials stocks more appealing from a valuation perspective. Within the industrials sector, machinery stocks were an attractive segment. We decreased telecommunications services exposure. Several telecommunications holdings in the Fund, such as Verizon Communications and AT&T, performed quite well, and as valuations crept up, we took some profits. As other stocks in the telecommunications sector struggled, we reduced exposure to selected holdings. We also decreased the consumer staples position based on our valuation assessment. These stocks, particularly some food and household products companies, have become more expensive as the market has become concerned about overall earnings in the equity universe. IN THE CURRENT ENVIRONMENT, WE CONTINUED TO FOCUS ON COMPANIES THAT EXHIBIT MORE GROWTH CHARACTERISTICS AND ARE LESS DEPENDENT ON THE EXTERNAL ECONOMIC CYCLE. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS Q: How do you plan to manage the Fund in coming months? A: With an economy that has been resilient, but is in the late stages of its cycle, the door is open to either a strong or weak equity market. In the current environment, we continue to focus on companies that exhibit more growth characteristics and are less dependent on the external economic cycle. These are stocks that, in our view, control their own destiny when it comes to earnings growth. Another major portfolio theme is a preference for larger companies within our universe. Larger companies are delivering attractive growth rates and still appear inexpensive relative to mid- and small-cap stocks based on the historical relationships between these groups. Finally, by most valuation measures, the portfolio compares favorably with the Russell Index, demonstrating that we are finding more attractive opportunities on a valuation basis. 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 -- 2007 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Large Cap Equity Fund Class A shares (from 4/1/02 to 7/31/07)* 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
Results at July 31, 2007 SINCE 1 YEAR 3 YEARS INCEPTION(4) RIVERSOURCE LARGE CAP EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,896 $12,840 $12,493 Average annual total return +9.15% +8.69% +4.26% RUSSELL 1000 INDEX(1) Cumulative value of $10,000 $11,645 $14,238 $14,342 Average annual total return +16.45% +12.50% +7.00% S&P 500 INDEX(2) Cumulative value of $10,000 $11,613 $13,959 $13,957 Average annual total return +16.13% +11.76% +6.45% LIPPER LARGE-CAP CORE FUNDS INDEX(3) Cumulative value of $10,000 $11,616 $13,728 $13,303 Average annual total return +16.16% +11.14% +5.49%
Results for other share classes can be found on page 6. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DIVERSIFIED BOND FUND LINE GRAPH)
RIVERSOURCE LARGE CAP EQUITY FUND LIPPER LARGE-CAP CLASS A (INCLUDES SALES RUSSELL 1000(R) S&P 500 INDEX(2) CORE FUNDS INDEX(3) CHARGE) ($12,493) INDEX(1) ($14,342) ($13,957) ($13,303) ----------------------- ------------------ ---------------- ------------------- 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
(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 90% 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 -- 2007 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds expense ratio as of the most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2007. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class A Actual(b) $1,000 $1,010.00 $5.48(c) 1.10% Hypothetical (5% return before expenses) $1,000 $1,019.34 $5.51(c) 1.10% Class B Actual(b) $1,000 $1,005.10 $9.25(c) 1.86% Hypothetical (5% return before expenses) $1,000 $1,015.57 $9.30(c) 1.86% Class C Actual(b) $1,000 $1,006.80 $9.21(c) 1.85% Hypothetical (5% return before expenses) $1,000 $1,015.62 $9.25(c) 1.85% Class I Actual(b) $1,000 $1,013.30 $3.24(c) .65% Hypothetical (5% return before expenses) $1,000 $1,021.57 $3.26(c) .65% Class R2 Actual(b) $1,000 $1,008.30 $7.17(c) 1.44% Hypothetical (5% return before expenses) $1,000 $1,017.65 $7.20(c) 1.44% Class R3 Actual(b) $1,000 $1,008.30 $5.93(c) 1.19% Hypothetical (5% return before expenses) $1,000 $1,018.89 $5.96(c) 1.19% Class R4* Actual(b) $1,000 $1,011.60 $4.64(c) .93% Hypothetical (5% return before expenses) $1,000 $1,020.18 $4.66(c) .93%
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 15
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class R5 Actual(b) $1,000 $1,011.60 $3.49(c) .70% Hypothetical (5% return before expenses) $1,000 $1,021.32 $3.51(c) .70%
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2007: +1.00% for Class A, +0.51% for Class B, +0.68% for Class C, +1.33% for Class I, +0.83% for Class R2, +0.83% for Class R3, +1.16% for Class R4 and +1.16%. for Class R5. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board, such that net expenses, (excluding fees and expenses of acquired funds) before giving effect to any performance incentive adjustment, will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.67% for Class I, 1.47% for Class R2, 1.22% for Class R3, 0.90% for Class R4 and 0.72% for Class R5. Any amounts waived will not be reimbursed by the Fund. This change was effective Aug. 1, 2007. If this change had been in place for the entire six month period ended July 31, 2007, the actual expenses paid would have been $5.34 for Class A, $9.11 for Class B and $9.12 for Class C; the hypothetical expenses paid would have been $5.37 for Class A, $9.16 for Class B and $9.16 for Class C; the actual and hypothetical expenses for Class I, Class R2, Class R3, Class R4 and Class R5 would have been the same as those expenses presented in the table above. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT INVESTMENTS IN SECURITIES JULY 31, 2007 (Percentages represent value of investments compared to net assets)
COMMON STOCKS (96.7%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (3.8%) Boeing 828,474 $85,689,067 DRS Technologies 58,740 3,075,626 General Dynamics 54,831 4,307,523 Goodrich 336,373 21,161,225 Honeywell Intl 987,939 56,816,372 L-3 Communications Holdings 153,663 14,991,362 Lockheed Martin 239,432 23,579,263 Northrop Grumman 99,490 7,571,189 United Technologies 348,577 25,435,664 --------------- Total 242,627,291 - ----------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.1%) United Parcel Service Cl B 44,884 3,398,616 - ----------------------------------------------------------------------------------- AIRLINES (0.1%) UAL 113,258(b) 4,999,208 - ----------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Goodyear Tire & Rubber 33,598(b) 964,935 Johnson Controls 31,795 3,597,604 --------------- Total 4,562,539 - ----------------------------------------------------------------------------------- AUTOMOBILES (0.1%) Ford Motor 306,233 2,606,043 General Motors 91,522 2,965,312 Harley-Davidson 41,771 2,394,314 --------------- Total 7,965,669 - ----------------------------------------------------------------------------------- BEVERAGES (1.8%) Anheuser-Busch Companies 123,843 6,039,823 Brown-Forman Cl B 12,762 847,907 Coca-Cola 738,428 38,479,483 Coca-Cola Enterprises 45,074 1,021,377 Constellation Brands Cl A 131,608(b) 2,886,163 Molson Coors Brewing Cl B 7,601 676,033
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) BEVERAGES (CONT.) Pepsi Bottling Group 21,292 $712,430 PepsiCo 1,005,768 65,998,497 --------------- Total 116,661,713 - ----------------------------------------------------------------------------------- BIOTECHNOLOGY (2.0%) Amgen 710,354(b) 38,174,424 Biogen Idec 424,515(b) 24,002,078 Celgene 154,340(b) 9,346,830 Genentech 671,936(b) 49,978,600 Gilead Sciences 161,682(b) 6,019,421 --------------- Total 127,521,353 - ----------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) Masco 214,382(f) 5,833,334 - ----------------------------------------------------------------------------------- CAPITAL MARKETS (3.3%) Bank of New York Mellon 255,657 10,878,205 Bear Stearns Companies 19,227 2,330,697 Blackstone Group LP 81,592(b,f) 1,959,024 Charles Schwab 123,838 2,492,859 Fortress Investment Group LLC Cl A 170,277(f) 3,230,155 Franklin Resources 66,551 8,476,601 Goldman Sachs Group 140,145 26,394,909 KKR Private Equity Investors LP Unit 1,729,320(h) 34,932,264 Lehman Brothers Holdings 416,768 25,839,616 Merrill Lynch & Co 399,217 29,621,901 Morgan Stanley 473,657 30,252,473 Oaktree Capital Group LLC Cl A Unit 247,000(b,d,h) 8,151,000 State Street 143,173 9,596,886 T Rowe Price Group 294,629 15,359,010 --------------- Total 209,515,600 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CHEMICALS (1.0%) Air Products & Chemicals 35,023 $3,024,937 Ashland 41,898 2,558,292 Dow Chemical 505,790 21,991,749 Eastman Chemical 76,363 5,255,302 Ecolab 28,539 1,201,777 EI du Pont de Nemours & Co 315,694 14,752,381 Hercules 20,171(b) 418,750 Intl Flavors & Fragrances 12,526 627,678 Monsanto 87,945 5,668,055 PPG Inds 26,535 2,023,824 Praxair 51,839 3,971,904 Rohm & Haas 23,908 1,351,280 Sigma-Aldrich 21,370 968,488 --------------- Total 63,814,417 - ----------------------------------------------------------------------------------- COMMERCIAL BANKS (2.1%) BB&T 87,853 3,287,459 Comerica 25,555 1,345,726 Commerce Bancorp 30,398 1,016,813 Compass Bancshares 20,925 1,449,684 Fifth Third Bancorp 144,175(f) 5,318,616 First Horizon Natl 20,314 644,360 Huntington Bancshares 59,191 1,136,467 M&T Bank 12,453 1,323,629 Natl City 96,037 2,822,527 PNC Financial Services Group 158,450 10,560,693 Regions Financial 118,610 3,566,603 SunTrust Banks 57,586 4,508,984 Synovus Financial 52,437 1,466,139 US Bancorp 615,065 18,421,197 Wachovia 739,868 34,929,168 Wells Fargo & Co 1,148,223 38,775,490 Zions Bancorporation 18,001 1,341,975 --------------- Total 131,915,530 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) COMMERCIAL SERVICES & SUPPLIES (0.2%) Allied Waste Inds 45,104(b) $580,488 Avery Dennison 31,967 1,960,856 Cintas 21,965 803,040 Equifax 40,534 1,640,006 Monster Worldwide 20,791(b) 808,562 Robert Half Intl 27,179 923,814 Waste Management 86,256 3,280,316 --------------- Total 9,997,082 - ----------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (5.4%) Alcatel-Lucent 43,541(c) 518,295 Alcatel-Lucent ADR 252,867(c) 2,933,257 Avaya 1,352,083(b) 22,363,453 Cisco Systems 3,736,825(b) 108,031,610 Corning 73,231(b) 1,745,827 JDS Uniphase 1,094,103(b) 15,678,496 Motorola 722,411 12,273,763 Nokia ADR 1,150,518(c) 32,950,836 QUALCOMM 2,592,395 107,973,252 Telefonaktiebolaget LM Ericsson ADR 777,090(c) 29,070,937 Tellabs 606,563(b) 6,884,490 --------------- Total 340,424,216 - ----------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.1%) Apple 410,222(b) 54,050,850 Brocade Communications Systems 81,763(b) 575,612 Dell 787,539(b) 22,027,466 EMC 148,504(b) 2,748,809 Hewlett-Packard 1,354,987 62,370,051 Intl Business Machines 452,632 50,083,731 SanDisk 129,817(b) 6,962,086 --------------- Total 198,818,605 - ----------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) Fluor 31,489 3,637,294 KBR 417,199(b) 13,387,916 --------------- Total 17,025,210 - ----------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (--%) Vulcan Materials 15,374 1,471,599 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CONSUMER FINANCE (0.8%) American Express 357,634 $20,935,894 Capital One Financial 370,999 26,251,890 Discover Financial Services 236,615(b) 5,453,964 SLM 48 2,360 --------------- Total 52,644,108 - ----------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.1%) Ball 16,680 855,184 Bemis 18,623 548,820 Pactiv 21,503(b) 679,710 Sealed Air 26,109 711,470 Temple-Inland 83,873 4,875,537 --------------- Total 7,670,721 - ----------------------------------------------------------------------------------- DISTRIBUTORS (--%) Genuine Parts 27,343 1,300,980 - ----------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (--%) Apollo Group Cl A 22,644(b) 1,338,487 - ----------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.6%) Bank of America 2,249,449 106,668,871 CIT Group 27,250 1,122,155 Citigroup 2,288,403 106,570,927 CME Group 9,067 5,009,518 Financial Select Sector SPDR Fund 116,106(f) 3,822,210 iShares Dow Jones US Healthcare Sector Index Fund 1 67 JPMorgan Chase & Co 1,453,691 63,976,941 Materials Select Sector SPDR Trust 48,279 1,902,193 Moody's 11,954 643,125 Utilities Select Sector SPDR Fund 63,980 2,412,046 --------------- Total 292,128,053 - ----------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (3.7%) AT&T 1,936,058 75,816,032 Chunghwa Telecom ADR 51,679(c) 856,839 Citizens Communications 187,230 2,701,729
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) DIVERSIFIED TELECOMMUNICATION SERVICES (CONT.) COLT Telecom Group 523,770(b,c) $1,630,318 Deutsche Telekom 2,183,211(c) 37,519,099 Deutsche Telekom ADR 844,053(c) 14,500,831 Embarq 34,013 2,101,663 Indosat 6,582,958(c) 5,176,404 Qwest Communications Intl 1,345,696(b) 11,478,787 Telecom Italia 235,047(c) 629,243 Telefonica 872,212(c) 20,413,864 Telefonica ADR 96,187(c) 6,755,213 Telenor ADR 192,349(c) 10,628,975 Verizon Communications 1,040,002 44,324,885 Windstream 184,667 2,541,018 --------------- Total 237,074,900 - ----------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.6%) Allegheny Energy 26,617(b) 1,390,206 American Electric Power 64,208 2,792,406 Duke Energy 203,483 3,465,315 Edison Intl 52,738 2,789,313 Entergy 157,579 15,751,597 Exelon 346,848 24,331,387 FirstEnergy 52,040 3,161,430 FPL Group 133,055 7,681,265 Hawaiian Electric Inds 123,479 2,816,556 Pinnacle West Capital 59,622 2,234,633 PPL 211,509 9,970,534 Progress Energy 83,351 3,639,105 Southern 567,071 19,076,268 --------------- Total 99,100,015 - ----------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.5%) Cooper Inds Cl A 27,957 1,479,484 Emerson Electric 538,480 25,346,254 Rockwell Automation 25,516 1,785,865 --------------- Total 28,611,603 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Agilent Technologies 4,658(b) $177,703 Tyco Electronics 163,662(b) 5,862,373 --------------- Total 6,040,076 - ----------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.7%) Halliburton 121,972 4,393,431 Natl Oilwell Varco 68,445(b) 8,220,929 Pride Intl 320,145(b) 11,221,082 Transocean 143,164(b) 15,382,972 Weatherford Intl 75,884(b) 4,198,662 --------------- Total 43,417,076 - ----------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.9%) CVS Caremark 652,181 22,950,249 Kroger 115,259 2,992,124 Safeway 102,218 3,257,688 SUPERVALU 33,464 1,394,445 SYSCO 99,917 3,185,354 Wal-Mart Stores 416,813 19,152,557 Whole Foods Market 24,087 892,182 --------------- Total 53,824,599 - ----------------------------------------------------------------------------------- FOOD PRODUCTS (1.3%) Archer-Daniels-Midland 106,597 3,581,659 Campbell Soup 151,064 5,563,687 ConAgra Foods 81,807 2,073,807 Dean Foods 163,648 4,708,153 General Mills 134,988 7,508,033 Groupe Danone 20,540(c) 1,493,215 HJ Heinz 52,609 2,302,170 Kellogg 219,371 11,365,612 Kraft Foods Cl A 1,231,571 40,333,950 McCormick & Co 21,081 720,127 Sara Lee 118,782 1,882,695 Tyson Foods Cl A 42,307 901,139 WM Wrigley Jr 35,328 2,037,719 --------------- Total 84,471,966 - ----------------------------------------------------------------------------------- GAS UTILITIES (0.1%) Nicor 8,082 318,512 ONEOK 123,021 6,243,315 Questar 27,822 1,432,555 --------------- Total 7,994,382 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HEALTH CARE EQUIPMENT & SUPPLIES (1.9%) Bausch & Lomb 85,589 $5,471,705 Boston Scientific 5,636,336(b) 74,117,818 China Medical Technologies ADR 60,149(c,f) 1,968,075 Covidien 146,069(b,c) 5,981,526 CR Bard 24,622 1,932,088 Medtronic 413,189 20,936,287 St. Jude Medical 35,756(b) 1,542,514 Stryker 120,598 7,528,933 --------------- Total 119,478,946 - ----------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.1%) Aetna 256,025 12,307,122 Cardinal Health 640,182 42,079,163 CIGNA 161,369 8,333,095 Coventry Health Care 25,158(b) 1,404,068 Express Scripts 44,451(b) 2,228,329 Humana 27,444(b) 1,758,886 Laboratory Corp of America Holdings 19,798(b) 1,462,082 Manor Care 11,676 739,675 McKesson 454,112 26,229,509 Patterson Companies 21,937(b) 786,880 Quest Diagnostics 25,252 1,400,728 Tenet Healthcare 74,404(b) 385,413 UnitedHealth Group 718,677 34,805,527 --------------- Total 133,920,477 - ----------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) IMS Health 31,298 880,413 - ----------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.0%) Chipotle Mexican Grill Cl A 3,193(b) 282,070 Chipotle Mexican Grill Cl B 1(b) 81 Darden Restaurants 24,632 1,048,584 Intl Game Technology 278,586 9,839,658 Marriott Intl Cl A 454,170 18,870,764 McDonald's 495,221 23,706,229 Pinnacle Entertainment 129,730(b) 3,439,142 Starwood Hotels & Resorts Worldwide 18,112 1,140,332
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HOTELS, RESTAURANTS & LEISURE (CONT.) Wyndham Worldwide 15,333(b) $515,955 Yum! Brands 43,401 1,390,568 --------------- Total 60,233,383 - ----------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.8%) Black & Decker 11,112 961,966 DR Horton 412,218 6,727,397 Fortune Brands 24,670 2,005,671 Harman Intl Inds 764,932 88,732,111 Hovnanian Enterprises Cl A 215,952(b,f) 2,859,204 Leggett & Platt 28,702 594,992 Lennar Cl A 129,480 3,969,857 Meritage Homes 52,169(b,f) 1,017,296 Newell Rubbermaid 44,630 1,180,464 Snap-On 10,370 542,662 Standard-Pacific 226,507 3,354,569 Stanley Works 13,690 757,468 Tele Atlas 73,436(b,c) 2,110,025 Whirlpool 12,734 1,300,269 --------------- Total 116,113,951 - ----------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.9%) Clorox 24,496 1,481,028 Colgate-Palmolive 607,431 40,090,446 Kimberly-Clark 73,918 4,972,464 Procter & Gamble 1,185,442 73,331,443 Spectrum Brands 354,637(b,f) 1,556,856 --------------- Total 121,432,237 - ----------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%) AES 107,510(b) 2,112,572 Constellation Energy Group 29,246 2,450,815 Dynegy Cl A 68,036(b) 606,201 TXU 74,337 4,850,488 --------------- Total 10,020,076 - ----------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.2%) 3M 38,249 3,401,101 General Electric 3,402,238 131,870,745 Tyco Intl 125,960(c) 5,956,648 --------------- Total 141,228,494 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) INSURANCE (4.7%) ACE 606,443(c) $35,003,890 AFLAC 594,788 31,000,351 Allstate 14,192 754,305 American Intl Group 1,530,882 98,252,007 Aon 77,113 3,087,605 Arch Capital Group 46,830(b,c) 3,262,178 Assurant 21,677 1,099,457 Chubb 169,267 8,532,749 Endurance Specialty Holdings 63,275(c) 2,366,485 Genworth Financial Cl A 27,589 842,016 Hartford Financial Services Group 457,553 42,035,394 Lincoln Natl 8,254 497,881 MetLife 167,959 10,114,491 Principal Financial Group 23,834 1,343,999 Prudential Financial 565,678 50,136,041 Validus Holdings 28,915(b,c) 650,588 XL Capital Cl A 68,852(c) 5,360,817 --------------- Total 294,340,254 - ----------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.1%) IAC/InterActiveCorp 36,085(b) 1,037,083 Liberty Media -- Interactive Cl A 142,596(b,e) 2,987,386 --------------- Total 4,024,469 - ----------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.7%) eBay 928,269(b) 30,075,916 Google Cl A 100,088(b) 51,044,879 VeriSign 399,144(b) 11,850,585 Yahoo! 531,978(b) 12,368,489 --------------- Total 105,339,869 - ----------------------------------------------------------------------------------- IT SERVICES (0.8%) Accenture Cl A 54,564(c) 2,298,781 Affiliated Computer Services Cl A 150,895(b) 8,097,026 Automatic Data Processing 229,538 10,655,153 Broadridge Financial Solutions 1 18 Cognizant Technology Solutions Cl A 49,114(b) 3,977,252 Computer Sciences 4,516(b) 251,451
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 21
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) IT SERVICES (CONT.) Convergys 15,667(b) $298,456 Electronic Data Systems 158,583 4,280,155 Fidelity Natl Information Services 21,617 1,072,852 First Data 281,342 8,943,862 HCL Technologies 531,725(c) 4,121,395 Ness Technologies 55,072(b,c) 647,647 Paychex 54,908 2,272,093 Satyam Computer Services ADR 46,906(c) 1,250,514 Unisys 53,629(b) 433,859 Western Union 70,212 1,400,729 --------------- Total 50,001,243 - ----------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Brunswick 14,714 411,403 Eastman Kodak 46,229 1,167,282 Hasbro 26,088 730,986 Mattel 63,768 1,460,925 --------------- Total 3,770,596 - ----------------------------------------------------------------------------------- MACHINERY (1.5%) Caterpillar 395,878 31,195,186 Deere & Co 125,388 15,099,223 Flowserve 308,191 22,272,964 Illinois Tool Works 52,005 2,862,875 Ingersoll-Rand Cl A 60,081(c) 3,023,276 ITT 62,663 3,940,249 Navistar Intl 9,998(b) 631,124 Parker Hannifin 137,422 13,560,803 --------------- Total 92,585,700 - ----------------------------------------------------------------------------------- MEDIA (6.7%) Charter Communications Cl A 1,762,625(b) 7,156,258 Comcast Cl A 1,157,980(b) 30,420,135 Comcast Special Cl A 288,867(b) 7,559,649 EchoStar Communications Cl A 81,393(b) 3,442,110 Idearc 12,741 442,240 McGraw-Hill Companies 11,472 694,056
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEDIA (CONT.) News Corp Cl A 2,658,620 $56,150,054 Time Warner 1,673,001 32,221,999 Time Warner Cable Cl A 60,128(b,i) 2,298,092 Viacom Cl B 274,006(b) 10,494,430 Virgin Media 8,100,992(j) 201,228,642 Vivendi 731,373(c) 31,067,866 Walt Disney 332,380 10,968,540 WorldSpace Cl A 276,554(b,f) 1,349,584 XM Satellite Radio Holdings Cl A 2,560,293(b,j) 29,315,355 --------------- Total 424,809,010 - ----------------------------------------------------------------------------------- METALS & MINING (1.6%) Alcan 36,315(c) 3,537,081 Alcoa 329,277 12,578,381 Allegheny Technologies 16,357 1,716,340 Barrick Gold 71,747(c) 2,360,476 Coeur d'Alene Mines 3,701,745(b,f) 14,473,823 Freeport-McMoRan Copper & Gold 60,114 5,649,514 Lihir Gold 14,134,965(b,c) 36,843,324 Newmont Mining 466,080 19,458,840 Nucor 48,726 2,446,045 Stillwater Mining 166,411(b) 1,514,340 --------------- Total 100,578,164 - ----------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) Dillard's Cl A 20,634 616,750 JC Penney 248,839 16,931,005 Kohl's 151,541(b) 9,213,693 Macy's 167,012 6,024,123 Nordstrom 136,298 6,485,059 Target 209,438 12,685,660 --------------- Total 51,956,290 - ----------------------------------------------------------------------------------- MULTI-UTILITIES (0.7%) Ameren 33,443 1,604,595 CenterPoint Energy 51,807 853,779 CMS Energy 36,137 583,974 Consolidated Edison 41,704 1,821,631 Dominion Resources 229,630 19,339,438 DTE Energy 28,672 1,329,807 Integrys Energy Group 12,897 638,273 KeySpan 28,422 1,180,934
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MULTI-UTILITIES (CONT.) NiSource 44,329 $845,354 PG&E 56,785 2,430,966 Public Service Enterprise Group 40,915 3,524,827 TECO Energy 37,193 600,295 Xcel Energy 330,462 6,708,379 --------------- Total 41,462,252 - ----------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (7.8%) Anadarko Petroleum 40,583 2,042,542 Apache 14,337 1,159,003 BP ADR 284,884(c) 19,770,950 Canadian Natural Resources 13,103(c) 896,376 Chesapeake Energy 60,200 2,049,208 Chevron 1,086,777 92,658,607 ConocoPhillips 553,551 44,749,063 CONSOL Energy 29,870 1,244,086 Devon Energy 98,358 7,338,490 El Paso 105,003 1,748,300 Exxon Mobil 2,719,946 231,549,004 Occidental Petroleum 202,345 11,477,008 Peabody Energy 41,749 1,764,313 Petroleo Brasileiro ADR 14,313(c) 928,914 Range Resources 2,634 97,827 Royal Dutch Shell ADR 51,442(c) 3,991,385 Ship Finance Intl 128,536(c) 3,592,581 Spectra Energy 96,471 2,457,116 Sunoco 11,864 791,566 Total 712,083(c) 56,080,853 Valero Energy 48,764 3,267,676 Williams Companies 92,197 2,973,353 XTO Energy 51,271 2,795,808 --------------- Total 495,424,029 - ----------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.4%) Bowater 203,128(f) 3,985,371 Intl Paper 262,856 9,744,072 MeadWestvaco 29,525 960,744 Weyerhaeuser 152,609 10,871,865 --------------- Total 25,562,052 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) PERSONAL PRODUCTS (0.1%) Avon Products 100,554 $3,620,950 Estee Lauder Companies Cl A 19,422 874,378 Herbalife 28,413(c) 1,164,365 --------------- Total 5,659,693 - ----------------------------------------------------------------------------------- PHARMACEUTICALS (7.0%) AstraZeneca 826,407(c) 42,710,851 Bristol-Myers Squibb 1,557,210 44,240,336 Eli Lilly & Co 505,725 27,354,665 Johnson & Johnson 526,541 31,855,731 Merck & Co 1,977,928 98,204,125 Novartis ADR 73,673(c) 3,974,658 Pfizer 5,085,050 119,549,526 Schering-Plough 1,198,822(i) 34,214,380 Teva Pharmaceutical Inds ADR 104,431(c) 4,388,191 Wyeth 794,585 38,553,264 --------------- Total 445,045,727 - ----------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) Annaly Capital Management 351,343 5,076,906 Apartment Investment & Management Cl A 95,422 4,031,580 Archstone-Smith Trust 35,341 2,028,927 AvalonBay Communities 12,839(i) 1,386,227 Boston Properties 19,247 1,818,649 Developers Diversified Realty 21,405 1,027,440 Equity Residential 47,575 1,893,961 General Growth Properties 40,028 1,920,543 Host Hotels & Resorts 84,269 1,779,761 Kimco Realty 36,575 1,365,345 Plum Creek Timber 29,811 1,158,455 ProLogis 41,461 2,359,131 Public Storage 19,851 1,391,357 Simon Property Group 6,985 604,412 Vornado Realty Trust 21,096 2,257,905 --------------- Total 30,100,599 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 23
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) REAL ESTATE MANAGEMENT & DEVELOPMENT (--%) CB Richard Ellis Group Cl A 30,224(b) $1,055,422 - ----------------------------------------------------------------------------------- ROAD & RAIL (0.4%) CSX 82,975 3,933,845 Hertz Global Holdings 869,066(b) 19,458,387 Norfolk Southern 61,960 3,332,209 --------------- Total 26,724,441 - ----------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.6%) Advanced Micro Devices 86,276(b) 1,168,177 Applied Materials 91,807 2,023,426 Atmel 4,353,879(b) 23,467,408 Broadcom Cl A 118,120(b) 3,875,517 Cypress Semiconductor 213,798(b) 5,357,778 Intel 2,889,056 68,239,502 KLA-Tencor 32,363 1,837,895 LSI 1,694,066(b) 12,197,275 Maxim Integrated Products 96,901 3,071,762 Natl Semiconductor 44,492 1,156,347 NVIDIA 24,426(b) 1,117,734 Spansion Cl A 2,722,041(b) 28,880,855 Texas Instruments 271,277 9,546,238 United Microelectronics ADR 434,477(c) 1,403,361 Xilinx 50,086 1,252,150 --------------- Total 164,595,425 - ----------------------------------------------------------------------------------- SOFTWARE (2.0%) ACI Worldwide 67,663(b) 2,065,751 Adobe Systems 185,308(b) 7,466,059 BEA Systems 186,904(b) 2,313,872 Citrix Systems 46,184(b) 1,670,475 Electronic Arts 22,525(b) 1,095,616 Microsoft 3,216,951 93,259,410 Oracle 737,642(b) 14,103,715 Quest Software 69,259(b) 1,025,033 Red Hat 164,084(b) 3,416,229 Salesforce.com 16,703(b) 649,079 --------------- Total 127,065,239 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SPECIALTY RETAIL (1.2%) Abercrombie & Fitch Cl A 14,240 $995,376 AutoNation 26,569(b) 517,564 AutoZone 8,038(b) 1,019,299 Gap 247,189 4,251,651 Home Depot 583,806 21,700,069 Limited Brands 103,148 2,491,024 Lowe's Companies 625,290(f) 17,514,373 Office Depot 73,355(b) 1,830,941 OfficeMax 12,026 395,415 Penske Automotive Group 192,109 3,742,283 RadioShack 21,844 548,940 Sherwin-Williams 17,897 1,247,242 Staples 116,020 2,670,780 TJX Companies 666,160 18,485,940 --------------- Total 77,410,897 - ----------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.1%) Jones Apparel Group 17,555 438,173 Liz Claiborne 18,203 639,653 Nike Cl B 61,163 3,452,651 Polo Ralph Lauren 1,722 153,861 VF 14,572 1,250,132 --------------- Total 5,934,470 - ----------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.4%) Countrywide Financial 1,435,058 40,425,584 Fannie Mae 430,519 25,762,257 Freddie Mac 380,168 21,772,221 --------------- Total 87,960,062 - ----------------------------------------------------------------------------------- TOBACCO (1.5%) Altria Group 1,354,687 90,046,045 Reynolds American 27,768 1,698,569 UST 26,011 1,392,889 --------------- Total 93,137,503 - ----------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (4.0%) ALLTEL 470,188 31,008,899 America Movil ADR Series L 82,100(c) 4,916,148 Hutchison Telecommunications Intl 12,406,800(c) 15,536,640
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) WIRELESS TELECOMMUNICATION SERVICES (CONT.) Millicom Intl Cellular 110,859(b,c) $8,901,978 Orascom Telecom Holding GDR 81,233(c,f) 5,458,858 Sprint Nextel 3,314,085 68,038,165 Vivo Participacoes ADR 1,143,032(c) 5,132,214 Vodafone Group 30,804,233(c) 92,602,087 Vodafone Group ADR 799,620(c) 24,268,467 --------------- Total 255,863,456 - ----------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $5,592,182,260) $6,115,883,787 - -----------------------------------------------------------------------------------
OPTIONS PURCHASED (0.2%) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) CALLS QUALCOMM 683 $50.00 Jan. 2008 $102,450 Virgin Media 7,244 30.00 Jan. 2008 543,300 Virgin Media 7,244 27.50 Jan. 2008 1,050,380
OPTIONS PURCHASED (CONTINUED) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) PUTS Oil Service Sector Index 404 $215.00 Sept. 2007 $37,370 XM Satellite Radio Holdings Cl A 20,639 15.00 Jan. 2008 8,255,600 - -------------------------------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $9,226,291) $9,989,100 - --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (3.7%) SHARES VALUE(A) RiverSource Short-Term Cash Fund 233,390,132(k) $233,390,132 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $233,390,132) $233,390,132 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $5,834,798,683)(l) $6,359,263,019 ===================================================================================
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by 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, 2007, the value of foreign securities represented 9.6% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2007, the value of these securities amounted to $8,151,000 or 0.1% 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, 2007, security was partially or fully on loan. See Note 7 to the financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 25 NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (g) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.6% of net assets. See Note 7 to the financial statements. Cash collateral received for open options contracts is invested in an affiliated money market fund and represents 0.1% of net assets. See Note 1 to the financial statements. 3.0% of net assets is the Fund's cash equivalent position. (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, 2007, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- KKR Private Equity Investors LP Unit 05-01-06 thru 07-24-07 $38,592,087 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 07-20-07 10,584,080
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (i) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 6 to the financial statements):
TYPE OF SECURITY CONTRACTS - ------------------------------------------------------------------------------ PURCHASE CONTRACTS S&P 500 Index, Sept. 2007 50
(j) At July 31, 2007, securities valued at $41,625,751 were held to cover open call options written as follows (see Note 8 to the financial statements):
EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) - --------------------------------------------------------------------------------------- Virgin Media 7,244 $30.00 Jan. 2008 $543,300 XM Satellite Radio Holdings Cl A 20,639 20.00 Jan. 2008 412,780 - --------------------------------------------------------------------------------------- Total value $956,080 - ---------------------------------------------------------------------------------------
At July 31, 2007, cash or short-term securities were designated to cover open put options written as follows (see Note 8 to the financial statements):
EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) - ---------------------------------------------------------------------------------------- XM Satellite Radio Holdings Cl A 20,639 $12.50 Jan. 2008 $4,540,580
(k) Affiliated Money Market Fund -- See Note 10 to the financial statements. (l) At July 31, 2007, the cost of securities for federal income tax purposes was $5,945,740,806 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $567,613,960 Unrealized depreciation (154,091,747) - ------------------------------------------------------------------------------ Net unrealized appreciation $413,522,213 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 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 -- 2007 ANNUAL REPORT 27 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $5,601,408,551) $6,125,872,887 Affiliated money market fund (identified cost $233,390,132) (Note 10) 233,390,132 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $5,834,798,683) 6,359,263,019 Foreign currency holdings (identified cost $3,841,017) (Note 1) 3,811,693 Capital shares receivable 770,326 Dividends and accrued interest receivable 7,948,987 Receivable for investment securities sold 66,853,312 Unrealized appreciation on forward foreign currency contracts held, at value (Note 5) 1,048,437 - ------------------------------------------------------------------------------ Total assets 6,439,695,774 - ------------------------------------------------------------------------------ LIABILITIES Bank overdraft 4,708,888 Capital shares payable 5,864,010 Payable for investment securities purchased 51,664,905 Payable upon return of securities loaned (Note 7) 38,203,000 Payable for cash collateral held on open options contracts (Note 1) 4,222,922 Variation margin payable 324,300 Unrealized depreciation on swap transactions, at value (Note 9) 1,510,345 Accrued investment management services fee 96,111 Accrued distribution fee 59,030 Accrued transfer agency fee 27,110 Accrued administrative services fee 8,059 Accrued plan administration services fee 2,290 Other accrued expenses 257,362 Options contracts written, at value (premiums received $6,575,045) (Note 8) 5,496,660 - ------------------------------------------------------------------------------ Total liabilities 112,444,992 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $6,327,250,782 ==============================================================================
- -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2007 REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 10,489,543 Additional paid-in capital 5,525,281,893 Undistributed net investment income 40,157,282 Accumulated net realized gain (loss) (Note 13) 227,325,033 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 5, 6 and 9) 523,997,031 - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $6,327,250,782 ==============================================================================
Net assets applicable to outstanding Class A $5,038,950,020 shares: Class B $ 833,234,754 Class C $ 31,622,901 Class I $ 67,937,053 Class R2 $ 5,001 Class R3 $ 5,009 Class R4 $ 330,120,266 Class R5 $ 25,375,778 Net asset value per share of outstanding Class A 833,522,641 $ 6.05 capital stock: shares(1) Class B shares 140,889,101 $ 5.91 Class C shares 5,341,167 $ 5.92 Class I shares 11,159,673 $ 6.09 Class R2 shares 822 $ 6.08 Class R3 shares 822 $ 6.09 Class R4 shares 53,887,010 $ 6.13 Class R5 shares 4,153,053 $ 6.11 - ------------------------------------------------------------------------------------------- * Including securities on loan, at value $ 35,122,521 (Note 7) - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.42. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 29 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 INVESTMENT INCOME Income: Dividends $ 134,925,432 Interest 2,709,661 Income distributions from affiliated money market fund (Note 10) 11,473,863 Fee income from securities lending (Note 7) 782,450 Less foreign taxes withheld (1,506,828) - ------------------------------------------------------------------------------ Total income 148,384,578 - ------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 39,667,264 Distribution fee Class A 13,273,226 Class B 11,344,113 Class C 344,990 Class R2 16 Class R3 8 Transfer agency fee Class A 11,382,925 Class B 2,650,360 Class C 79,009 Class R2 2 Class R3 2 Class R4 670,055 Class R5 8,271 Service fee -- Class R4 314,706 Administrative services fees and expenses 3,245,953 Plan administration services fee Class R2 8 Class R3 8 Class R4 670,949 Compensation of board members 137,876 Custodian fees 829,088 Printing and postage 726,238 Registration fees 84,687 Professional fees 142,870 Other 205,056 - ------------------------------------------------------------------------------ Total expenses 85,777,680 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (48,166) - ------------------------------------------------------------------------------ 85,729,514 Earnings and bank fee credits on cash balances (Note 2) (909,145) - ------------------------------------------------------------------------------ Total net expenses 84,820,369 - ------------------------------------------------------------------------------ Investment income (loss) -- net 63,564,209 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2007 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) $ 689,178,998 Foreign currency transactions 168,743 Futures contracts 13,216,258 Options contracts written (Note 8) (2,309,225) Swap transactions 3,095,064 - ------------------------------------------------------------------------------ Net realized gain (loss) on investments 703,349,838 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 323,820,329 - ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 1,027,170,167 - ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $1,090,734,376 ============================================================================== See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 31 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2007 2006 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 63,564,209 $ 40,904,787 Net realized gain (loss) on investments 703,349,838 275,180,804 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 323,820,329 (370,550,095) - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,090,734,376 (54,464,504) - ---------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (51,279,745) (8,339,131) Class B (2,969,618) -- Class C (121,537) -- Class I (1,522,653) (656,302) Class R2 (65) N/A Class R3 (66) N/A Class R4 (5,679,767) (1,124) Class R5 (322,641) N/A Net realized gain Class A (125,265,857) -- Class B (27,693,216) -- Class C (831,229) -- Class I (2,640,713) -- Class R2 (115) N/A Class R3 (115) N/A Class R4 (13,607,896) -- Class R5 (560,037) N/A - ---------------------------------------------------------------------------------------- Total distributions (232,495,270) (8,996,557) - ----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2007 2006 CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales Class A shares (Note 2) $ 370,676,879 $ 429,909,019 Class B shares 57,068,487 50,136,037 Class C shares 2,755,399 2,589,055 Class I shares 15,570,677 27,683,397 Class R2 shares 5,000 N/A Class R3 shares 5,000 N/A Class R4 shares 28,329,694 19,415,795 Class R5 shares 26,931,801 N/A Fund Merger (Note 12) Class A shares N/A 5,066,390,993 Class B shares N/A 1,262,273,829 Class C shares N/A 31,569,946 Class I shares N/A 97,113,086 Class R4 shares N/A 1,287,966,195 Reinvestment of distributions at net asset value Class A shares 171,429,375 8,175,459 Class B shares 30,416,192 -- Class C shares 939,571 -- Class I shares 4,163,008 656,222 Class R4 shares 19,287,529 1,072 Class R5 shares 882,497 N/A Payments for redemptions Class A shares (1,564,111,579) (1,045,511,081) Class B shares (Note 2) (569,109,428) (597,123,506) Class C shares (Note 2) (10,923,150) (8,250,000) Class I shares (69,035,113) (62,694,425) Class R4 shares (882,819,499) (221,738,132) Class R5 shares (2,629,011) N/A - ---------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (2,370,166,671) 6,348,562,961 - ---------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,511,927,565) 6,285,101,900 Net assets at beginning of year 7,839,178,347 1,554,076,447 - ---------------------------------------------------------------------------------------- Net assets at end of year $ 6,327,250,782 $ 7,839,178,347 ======================================================================================== Undistributed net investment income $ 40,157,282 $ 35,811,841 - ----------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares have no sales charge and are offered only to qualifying institutional investors. Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4, terminating the shareholder servicing agreement, revising the fee structure under the transfer agent agreement from account-based to asset-based, and adopting a plan administration services agreement. At July 31, 2007, Ameriprise Financial, Inc. (Ameriprise Financial), the parent company of RiverSource Investments, LLC (the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares. Effective Dec. 11, 2006, the Fund offers additional classes of shares, Class R2, Class R3 and Class R5, to certain institutional investors. These shares are sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned 100% of Class R2 and Class R3 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 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. - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors of the funds generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign equities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial will fair value foreign equity securities pursuant to procedures adopted by the Board of Directors of the funds, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2007, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. Prior to July 12, 2007, the Fund limited the percent held in securities and other instruments that were illiquid to 10% of the Fund's net assets. The aggregate value of such securities at July 31, 2007 was $43,083,264 representing 0.68% of net assets. These securities may be valued at fair value according to - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 35 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 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 - -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At July 31, 2007, foreign currency holdings consisted of multiple denominations, primarily European monetary units. The Fund may enter into forward foreign currency exchange 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 earn 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 of the total return from other underlying assets. 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 - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 37 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. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $2,677,324 and accumulated net realized gain has been increased by $11,327,457 resulting in a net reclassification adjustment to decrease paid-in capital by $14,004,781. - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2007 2006 - ---------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income............................ $114,060,835 $8,339,131 Long-term capital gain..................... 62,484,767 -- CLASS B Distributions paid from: Ordinary income............................ 16,848,997 -- Long-term capital gain..................... 13,813,837 -- CLASS C Distributions paid from: Ordinary income............................ 538,139 -- Long-term capital gain..................... 414,627 -- CLASS I Distributions paid from: Ordinary income............................ 2,846,125 656,302 Long-term capital gain..................... 1,317,241 -- CLASS R2* Distributions paid from: Ordinary income............................ 123 N/A Long-term capital gain..................... 57 N/A CLASS R3* Distributions paid from: Ordinary income............................ 124 N/A Long-term capital gain..................... 57 N/A CLASS R4** Distributions paid from: Ordinary income............................ 12,499,767 1,124 Long-term capital gain..................... 6,787,896 -- CLASS R5* Distributions paid from: Ordinary income............................ 603,320 N/A Long-term capital gain..................... 279,358 N/A
* For the period from Dec. 11, 2006 (inception date) to July 31, 2007. ** Effective Dec. 11, 2006, Class Y was renamed R4. At July 31, 2007, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income............................ $ 231,790,951 Undistributed accumulated long-term gain................. $ 303,447,508 Accumulated realized loss................................ $(158,388,854) Unrealized appreciation (depreciation)................... $ 414,629,741
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 39 RECENT ACCOUNTING PRONOUNCEMENTS On Sept. 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of SFAS 157 is required for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years. The impact of SFAS 157 on the Fund's financial statements is being evaluated. In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after Dec. 15, 2006. Tax positions of the Fund are being evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48 is not anticipated to have a material impact on the Fund. 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. On March 7, 2006, an additional dividend was paid before the merger (see Note 12) to ensure that current shareholders of RiverSource Large Cap Equity Fund would not experience a dilution in their share of the Fund's income or capital gains. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper Large-Cap Core Funds - -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $788,515 for the year ended July 31, 2007. The management fee for the year ended July 31, 2007, was 0.55% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive arrangement. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. Other expenses in the amount of $54,037 are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Professional fees include fees paid by the Fund for legal services and independent registered public accounting firm services. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as R4, the fee structure under the Transfer Agency Agreement was revised from an account-based fee for Class Y to an asset-based fee for Class R4. The Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares. Prior to Dec. 11, 2006, the - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 41 Fund paid the Transfer Agent an annual account-based fee of $17.50 per shareholder account. In addition, the Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R5 shares. Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A 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. Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted for the restructured Class R4 and the introduction of Class R2 and Class R3. The fee is calculated at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares. Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the Distributor a fee for service provided to shareholders by the Distributor and other servicing agents with respect to Class Y shares. The fee was calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Effective Dec. 11, 2006, this agreement was terminated. Sales charges received by the Distributor for distributing Fund shares were $3,512,380 for Class A, $1,079,819 for Class B and $4,228 for Class C for the year ended July 31, 2007. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. For the year ended July 31, 2007, the Investment Manager and its affiliates waived certain fees and expenses such that net expenses (excluding fees and expenses of - -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT acquired funds), before giving effect to any performance incentive adjustment, were 0.89% for Class R4. Of these waived fees and expenses, the transfer agency fees waived for Class R4 were $48,166. Effective Dec. 11, 2006, with the renaming of Class Y as Class R4, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses until July 31, 2007, 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 0.90% for Class R4. Effective Aug. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.67% for Class I, 1.47% for Class R2, 1.22% for Class R3, 0.90% for Class R4 and 0.72% for Class R5 of the Fund's average daily net assets, until July 31, 2008, unless sooner terminated at the discretion of the Board. During the year ended July 31, 2007, the Fund's custodian and transfer agency fees were reduced by $909,145 as a result of earnings and bank fee credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $4,555,072,901 and $7,162,685,066, respectively, for the year ended July 31, 2007. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 43 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
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 - ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2006 ISSUED FOR REINVESTED NET SOLD FUND MERGER DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------------------- Class A 81,619,158 924,673,877 1,513,462 (193,098,401) 814,708,096 Class B 9,503,444 234,448,180 -- (114,705,720) 129,245,904 Class C 489,203 5,852,776 -- (1,551,449) 4,790,530 Class I 5,125,399 17,647,385 120,911 (11,535,888) 11,357,807 Class R4** 3,501,543 232,656,314 196 (40,622,509) 195,535,544 - ----------------------------------------------------------------------------------------------------------
* For the period from Dec. 11, 2006 (inception date) to July 31, 2007. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS At July 31, 2007, the Fund had forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ---------------------------------------------------------------------------------------------------- Aug. 17, 2007 32,215,655 65,851,054 $ 430,584 $-- British Pound U.S. Dollar Aug. 17, 2007 37,500,000 76,667,625 516,213 -- British Pound U.S. Dollar Aug. 2, 2007 4,568,557 6,251,371 532 -- European Monetary Unit U.S. Dollar Aug. 30, 2007 23,000,000 31,550,871 47,008 -- European Monetary Unit U.S. Dollar Aug. 30, 2007 23,198,018 31,828,841 53,746 -- European Monetary Unit U.S. Dollar Aug. 30, 2007 244,271 178,790 354 -- U.S. Dollar European Monetary Unit - ---------------------------------------------------------------------------------------------------- Total $1,048,437 $-- - ----------------------------------------------------------------------------------------------------
6. STOCK INDEX FUTURES CONTRACTS At July 31, 2007, investments in securities included securities valued at $4,681,241 that were pledged as collateral to cover initial margin deposits on 50 open purchase contracts. The notional market value of the open purchase contracts at July 31, 2007 was $18,273,750 with a net unrealized loss of $1,112,039. See "Summary of significant accounting policies" and "Notes to investments in securities." 7. 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 - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 45 adopted by and under the oversight of the Board. At July 31, 2007, securities valued at $35,122,521 were on loan to brokers. For collateral, the Fund received $38,203,000 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 "Investments in securities." Income from securities lending amounted to $782,450 for the year ended July 31, 2007. Expenses paid to the Investment Manager were $18,712 for the year ended July 31, 2007, which are included in other expenses on the statement of operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 8. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written are as follows:
YEAR ENDED JULY 31, 2007 CALLS CONTRACTS PREMIUMS - ----------------------------------------------------------------------------- Balance July 31, 2006 1,954 $4,297,846 Opened 68,074 7,829,903 Closed (20,401) (6,508,617) Expired (21,744) (1,665,240) - ----------------------------------------------------------------------------- Balance July 31, 2007 27,883 $3,953,892 - -----------------------------------------------------------------------------
YEAR ENDED JULY 31, 2007 PUTS CONTRACTS PREMIUMS - ----------------------------------------------------------------------------- Balance July 31, 2006 -- $ -- Opened 33,750 4,286,250 Closed (13,111) (1,665,097) - ----------------------------------------------------------------------------- Balance July 31, 2007 20,639 $2,621,153 - -----------------------------------------------------------------------------
See "Summary of significant accounting policies." - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 9. SWAP CONTRACTS At July 31, 2007, the Fund had the following open total return equity swap contracts:
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (DEPRECIATION) - ---------------------------------------------------------------------------------- Receive total return on a basket of large cap industrial securities and pay a floating rate based on 1-month LIBOR plus 0.20%. Counterparty: Citigroup May 7, 2008 $11,720,000 $ (741,804) Receive total return on a basket of large cap health care securities and pay a floating rate based on 1-month LIBOR plus 0.20%. Counterparty: Merrill Lynch Oct. 12, 2007 13,210,000 (768,541) - ---------------------------------------------------------------------------------- Total $(1,510,345) - ----------------------------------------------------------------------------------
10. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. Cost of purchases and proceeds from sales aggregated $4,414,608,149 and $4,181,218,017, respectively, for the year ended July 31, 2007. 11. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 19, 2006. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to this agreement, the Fund paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. The Fund had no borrowings under the facility outstanding during the year ended July 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 47 12. FUND MERGER At the close of business on March 10, 2006, RiverSource Large Cap Equity Fund acquired the assets and assumed the identified liabilities of RiverSource New Dimensions Fund. The reorganization was completed after shareholders approved the plan on Feb. 15, 2006. The aggregate net assets of RiverSource Large Cap Equity Fund immediately before the acquisition were $1,392,594,683 and the combined net assets immediately after the acquisition were $9,137,908,732. The merger was accomplished by a tax-free exchange of 400,881,844 shares of RiverSource New Dimensions Fund valued at $7,745,314,049. In exchange for the RiverSource New Dimensions Fund shares and net assets, RiverSource Large Cap Equity Fund issued the following number of shares:
SHARES - -------------------------------------------------------------------------- Class A 924,673,877 Class B 234,448,180 Class C 5,852,776 Class I 17,647,385 Class Y 232,656,314 - --------------------------------------------------------------------------
RiverSource New Dimensions 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 appreciation, accumulated net realized loss and undistributed net income.
ACCUMULATED TOTAL NET CAPITAL UNREALIZED NET REALIZED UNDISTRIBUTED ASSETS STOCK APPRECIATION LOSS NET INCOME - ---------------------------------------------------------------------------------------------------------------- RiverSource New Dimensions Fund $7,745,314,049 $7,385,408,991 $472,802,551 $(112,899,579) $2,086 - ----------------------------------------------------------------------------------------------------------------
13. CAPITAL LOSS CARRY-OVER For federal income tax purposes, the Fund had a capital loss carry-over of $158,388,854 at July 31, 2007, that if not offset by capital gains will expire as follows:
2008 2009 2010 2011 $51,243,861 $70,190,395 $24,231,893 $12,722,705
RiverSource Large Cap Equity Fund acquired $33,183,702 of capital loss carry- overs in connection with the RiverSource New Dimensions Fund merger (Note 12) as well as capital loss carry-overs acquired as a result of prior mergers. In addition to the acquired capital loss carry-overs, the Fund also acquired unrealized capital gains as a result of the mergers. The yearly utilization of the acquired capital - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT losses as well as the utilization of the acquired unrealized gains is limited by the Internal Revenue Code. 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. 14. 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 may file a notice of appeal with the Eighth Circuit Court of Appeals within 30 days from the date of judgment. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 49 Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 15. 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, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.40 $5.26 $4.64 $4.53 $4.11 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(b) .06 .04 .01 .01 Net gains (losses) (both realized and unrealized) .79 .12 .61 .32 .41 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .85 .18 .65 .33 .42 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.04) (.02) -- -- Distributions from realized gains (.14) -- (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.20) (.04) (.03) (.22) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.05 $5.40 $5.26 $4.64 $4.53 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $5,039 $5,461 $1,030 $1,248 $83 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.09% 1.06% 1.11%(e) 1.20%(e) 1.25%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .99% 1.08% .79% .36% .24% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% 116% 128% 99% 135% - ----------------------------------------------------------------------------------------------------------- Total return(f) 15.79% 3.51% 13.99% 7.19% 10.22% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class A would have been 1.16%, 1.23% and 1.84% for the years ended July 31, 2005, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 51 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.29 $5.15 $4.56 $4.48 $4.10 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) .02 -- (.01) (.01) Net gains (losses) (both realized and unrealized) .76 .12 .60 .31 .39 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .77 .14 .60 .30 .38 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- -- -- Distributions from realized gains (.14) -- (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.15) (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.91 $5.29 $5.15 $4.56 $4.48 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $833 $1,169 $472 $572 $36 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.86% 1.84% 1.88%(e) 1.95%(e) 2.01%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .23% .28% .02% (.46%) (.52%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% 116% 128% 99% 135% - ----------------------------------------------------------------------------------------------------------- Total return(f) 14.71% 2.72% 13.09% 6.48% 9.27% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class B would have been 1.93%, 1.98% and 2.60% for the years ended July 31, 2005, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.30 $5.16 $4.57 $4.49 $4.10 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) .02 -- (.01) (.01) Net gains (losses) (both realized and unrealized) .77 .12 .60 .31 .40 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .78 .14 .60 .30 .39 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) -- -- -- -- Distributions from realized gains (.14) -- (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.16) -- (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.92 $5.30 $5.16 $4.57 $4.49 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $32 $35 $9 $11 $2 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.86% 1.84% 1.88%(e) 1.98%(e) 2.01%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .23% .28% .02% (.43%) (.53%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% 116% 128% 99% 135% - ----------------------------------------------------------------------------------------------------------- Total return(f) 14.80% 2.71% 13.06% 6.46% 9.51% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class C would have been 1.93%, 2.01% and 2.60% for the years ended July 31, 2005, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 53 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004(B) Net asset value, beginning of period $5.44 $5.31 $4.67 $5.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(c) .10 .05 -- Net gains (losses) (both realized and unrealized) .78 .12 .63 (.28) - ----------------------------------------------------------------------------------------------------------- Total from investment operations .87 .22 .68 (.28) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.09) (.03) -- Distributions from realized gains (.14) -- (.01) (.13) - ----------------------------------------------------------------------------------------------------------- Total distributions (.22) (.09) (.04) (.13) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.09 $5.44 $5.31 $4.67 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $68 $105 $43 $14 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .63% .59% .65%(f) .71%(f),(g) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.44% 1.53% 1.24% .74%(g) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class I would have been 0.70% and 0.72% for the periods ended July 31, 2005 and 2004, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) Net gains (losses) (both realized and unrealized) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .22 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.08 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .67%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% - ----------------------------------------------------------------------------------------------------------- Total return(g) 3.71%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 55 CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(c) Net gains (losses) (both realized and unrealized) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .23 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.09 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .92%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% - ----------------------------------------------------------------------------------------------------------- Total return(g) 3.88%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT CLASS R4*
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.47 $5.28 $4.66 $4.54 $4.11 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .09 .04 .01 .01 Net gains (losses) (both realized and unrealized) .79 .12 .61 .34 .42 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .86 .21 .65 .35 .43 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.02) (.02) (.01) -- Distributions from realized gains (.14) -- (.01) (.22) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.20) (.02) (.03) (.23) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.13 $5.47 $5.28 $4.66 $4.54 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $330 $1,069 $-- $8 $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) .89%(e) .81% .90%(e) 1.00%(e) 1.07%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.14% 1.41% 1.08% .50% .45% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% 116% 128% 99% 135% - ----------------------------------------------------------------------------------------------------------- Total return(f) 15.80% 4.03% 14.06% 7.44% 10.46% - -----------------------------------------------------------------------------------------------------------
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class R4 would have been 0.90%, 0.95%, 1.03% and 1.66% for the years ended July 31, 2007, 2005, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 57 CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(c) Net gains (losses) (both realized and unrealized) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .25 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) Distributions from realized gains (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.11 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $25 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .70%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 66% - ----------------------------------------------------------------------------------------------------------- Total return(g) 4.24%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expenses ratios. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 58 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 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 schedule of investments in securities, of RiverSource Large Cap Equity Fund (the Fund), one of the portfolios constituting the RiverSource Large Cap Series, Inc. as of July 31, 2007, and the related statement of operations, statement of changes in net assets and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The financial statements and financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 59 In our opinion, the financial statements and financial highlights 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, 2007, the results of its operations, changes in its net assets, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Minneapolis, Minnesota September 20, 2007 - -------------------------------------------------------------------------------- 60 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2007 CLASS A
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.12736
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.19713
CLASS B
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.08510
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.15487
CLASS C
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.09056 Total distributions.........................................
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.16033
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 61 CLASS I
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.15075
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.22052
CLASS R2
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.14968
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.21945
CLASS R3
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.15005
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.21982
CLASS R4*
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.12848
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.19825
- -------------------------------------------------------------------------------- 62 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT CLASS R5
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 51.53% Dividends Received Deduction for corporations......... 48.37%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.15068
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.06977 Total distributions......................................... $0.22045
* Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 63 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 102 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme 901 S. Marquette Ave. since 2006 Court, 1998-2005 Minneapolis, MN 55402 Age 53 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 52 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 56 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 71 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 68 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 64 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 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 Strategic 901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc. Minneapolis, MN 55402 estate and asset management (transportation, Age 55 company) distribution and logistics consultants) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc. 901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology); Minneapolis, MN 55402 former President, Forester Biotech American Healthways, Age 63 Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
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 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; President, Ameriprise Certificate Company since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* 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 -- 2007 ANNUAL REPORT 65 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 Senior Vice President -- Asset Management, 172 Ameriprise 2006 RiverSource Investments, LLC since 2006; Financial Center Managing Director and Global Head of Product, Minneapolis, MN 55474 Morgan Stanley Investment Management, Age 41 2004-2006; President, Touchstone Investments, 2002-2004; Director of Strategic Planning, Evergreen Investments, 1995-2002 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 43 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich Global Assets, 2001-2002 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 41 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Vice Financial Center President -- Finance, American Express Minneapolis, MN 55474 Company, 2000-2002 Age 52 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Vice President, General Counsel and Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company Age 47 since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, U.S. Bancorp Asset Management, 2002-2004; Second Vice President and Assistant General Counsel, Hartford Life, 2001-2002 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 46 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 66 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 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 43 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 67 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC ("RiverSource"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of Directors (the "Board") and the Board's Investment Review and Contracts Committees monitor these services throughout the year. On an annual basis, the Board, including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource prepares detailed reports for the Board and its Contracts Committee in March and April, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource addressing the services RiverSource provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. At the April 11-12, 2007 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource, including, in particular, the growing strength and capabilities of many RiverSource offices and the increased investment and resources dedicated to the Fund's operations, particularly in the areas of trading systems, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource, the Board considered the quality of the administrative, custody and transfer agency services provided by RiverSource affiliates to the Fund. The Board also reviewed the financial condition of RiverSource and the entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. - -------------------------------------------------------------------------------- 68 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board determined that RiverSource was in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2005. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). Although the Fund's expense ratio was higher than the median ratio, the Board was satisfied with the consistent and rational fee schedule applicable to all Funds, including the Fund. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource and its affiliates in connection with RiverSource providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 69 necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 12, 2007, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 70 RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2007 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended July 31, 2006 and the year ended July 31, 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through April 12, 2007 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2007 ANNUAL REPORT 71 RIVERSOURCE(R) 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. and Ameriprise Financial Services, Inc., Members FINRA, and managed by (RIVERSOURCE INVESTMENTS RiverSource Investments, LLC. These companies are part of LOGO) Ameriprise Financial, Inc. S-6244 H (9/07)
Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE(R) LARGE CAP VALUE FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2007 (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. TABLE OF CONTENTS Fund Snapshot....................... 3 Performance Summary................. 5 Questions & Answers with Portfolio Management........ 7 The Fund's Long-term Performance ... 10 Fund Expenses Example............... 12 Investments in Securities........... 15 Financial Statements................ 21 Notes to Financial Statements....... 27 Report of Independent Registered Public Accounting Firm........... 47 Federal Income Tax Information...... 49 Board Members and Officers.......... 52 Approval of Investment Management Services Agreement............... 56 Proxy Voting........................ 58 Change in Independent Registered Public Accounting Firm........... 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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT FUND SNAPSHOT AT JULY 31, 2007 FUND OBJECTIVE RiverSource Large Cap Value Fund seeks to provide shareholders with long-term growth of capital. SECTOR BREAKDOWN* Percentage of portfolio assets (PIE CHART) Financials 27.8% Energy 12.5% Industrials 10.5% Consumer Discretionary 9.1% Health Care 8.6% Information Technology 8.3% Other(1) 23.2%
* Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Telecommunication Services 6.5%, Consumer Staples 5.7%, Utilities 4.4%, Materials 3.1% and Cash & Cash Equivalents 3.5%. TOP TEN HOLDINGS Percentage of portfolio assets Exxon Mobil 4.8% Bank of America 3.5% Citigroup 3.4% Chevron 2.5% Pfizer 2.4% AT&T 2.3% General Electric 2.2% Verizon Communications 2.0% JPMorgan Chase & Co 1.9% ConocoPhillips 1.9%
For further detail about these holdings, please refer to the section entitled "Investments in Securities." The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 3 FUND SNAPSHOT AT JULY 31, 2007 STYLE MATRIX
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund generally invests. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and serves as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO MANAGER
YEARS IN INDUSTRY Robert Ewing, CFA 19
FUND FACTS
TICKER SYMBOL INCEPTION DATE Class A ALVAX 06/27/02 Class B ALVBX 06/27/02 Class C RLVCX 06/27/02 Class I ALCIX 03/04/04 Class R2 -- 12/11/06 Class R3 -- 12/11/06 Class R4(1) RSLVX 06/27/02 Class R5 -- 12/11/06 (1) Effective Dec. 11, 2006, Class Y was renamed Class R4. Total net assets $95.5 million Number of holdings 200
- -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT PERFORMANCE SUMMARY PERFORMANCE COMPARISON For the year ended July 31, 2007 (BAR CHART) RiverSource Large Cap Value Fund Class A (excluding sales charge) +14.47 Russell 1000(R) Value Index (unmanaged) +13.47 Lipper Large-Cap Value Funds Index +14.83
(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 bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
TOTAL NET EXPENSES Class A 1.28% 1.28% Class B 2.05% 2.05% Class C 2.04% 2.04% Class I 0.85% 0.85% Class R2(a) 1.63% 1.63% Class R3(a) 1.38% 1.38% Class R4(b) 1.15% 1.13%(c) Class R5(a) 0.83% 0.83%
(a) Inception date for Class R2, Class R3 and Class R5 was Dec. 11, 2006. (b) Effective Dec. 11, 2006, Class Y was renamed Class R4. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board. 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 0.003), will not exceed 1.13% for Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 5 PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS
AT JULY 31, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 6/27/02) +14.47% +12.07% +11.92% +9.93% Class B (inception 6/27/02) +13.75% +11.25% +11.08% +9.12% Class C (inception 6/27/02) +13.50% +11.18% +11.04% +9.09% Class I (inception 3/4/04) +15.10% +12.59% N/A +9.76% Class R2 (inception 12/11/06) N/A N/A N/A +2.84%* Class R3 (inception 12/11/06) N/A N/A N/A +3.03%* Class R4** (inception 6/27/02) +14.67% +12.25% +12.13% +10.13% Class R5 (inception 12/11/06) N/A N/A N/A +3.40%* WITH SALES CHARGE Class A (inception 6/27/02) +7.88% +9.88% +10.60% +8.66% Class B (inception 6/27/02) +8.89% +10.17% +10.82% +8.99% Class C (inception 6/27/02) +12.53% +11.18% +11.04% +9.09%
AT JUNE 30, 2007 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 6/27/02) +21.14% +12.65% +10.91% +10.98% Class B (inception 6/27/02) +20.23% +11.83% +10.09% +10.16% Class C (inception 6/27/02) +20.20% +11.83% +10.05% +10.12% Class I (inception 3/4/04) +21.56% +13.17% N/A +11.27% Class R2 (inception 12/11/06) N/A N/A N/A +7.00%* Class R3 (inception 12/11/06) N/A N/A N/A +7.18%* Class R4** (inception 6/27/02) +21.32% +12.89% +11.11% +11.18% Class R5 (inception 12/11/06) N/A N/A N/A +7.38%* WITH SALES CHARGE Class A (inception 6/27/02) +14.17% +10.45% +9.60% +9.67% Class B (inception 6/27/02) +15.23% +10.76% +9.81% +10.02% Class C (inception 6/27/02) +19.20% +11.83% +10.05% +10.12%
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. * Not annualized. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT Below, Portfolio Manager Bob Ewing discusses the Fund's results and positioning for the fiscal year ended July 31, 2007. Q: How did RiverSource Large Cap Value Fund perform for the 12-month period ended July 31, 2007? A: RiverSource Large Cap Value Fund's Class A shares advanced 14.47%, excluding sales charge, for the fiscal year ended July 31, 2007. The Fund's benchmark, the Russell 1000(R) Value Index (Russell Index), rose 13.47% during the period. The Fund's peer group, the Lipper Large-Cap Value Funds Index, gained 14.83% during the same time frame. Q: What factors most significantly affected performance for the period? A: The past fiscal year has seen double-digit gains in the U.S. stock market, fueled by continued economic growth, solid corporate earnings and the Federal Reserve's decision to keep short-term interest rates steady. Results for the year were marked by a reversal of leadership, as large-cap growth stocks outperformed their large-cap value peers as well as small- and mid-cap stocks. Volatility increased during the second half of the year amid concerns about the potential broader impact of weakness in the subprime lending market. Both stock selection and sector allocations had a positive impact on performance relative to the Russell Index, with stock selection having a greater effect. Stock selection in financials, information technology and health care added to performance. Within financials, our de-emphasis of mid-size banks was advantageous. Stock selection in the consumer discretionary sector detracted from return, largely due to the Fund's holdings of homebuilders, a group that has suffered in the weak housing market. Having a smaller financials position than the Russell Index was a positive factor, as financial stocks were flat during the period. The Fund held a larger position in information technology and a modest overweight in industrials compared to the Russell Index, which added to performance. Though the Fund's materials position was only slightly smaller than that of the Russell Index, the underweight was disadvantageous, as the materials sector gained more than 30% during the period. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 7 QUESTIONS & ANSWERS BOTH STOCK SELECTION AND SECTOR ALLOCATIONS HAD A POSITIVE IMPACT ON PERFORMANCE RELATIVE TO THE RUSSELL INDEX, WITH STOCK SELECTION HAVING A GREATER EFFECT. Contributors to performance included Honeywell Intl, IBM, Goodrich and Cisco Systems. In addition to its broad industrial exposure, Honeywell Intl operates in aerospace and defense, areas that have been particularly strong. Technology company IBM had an attractive valuation and delivered fundamental performance that was similar to or slightly better than the market's expectations. Like Honeywell, Goodrich benefited from its exposure to commercial aerospace, as well as some defense exposure. The Fund had a relatively small position in Cisco Systems, but this stock is not in the Russell Index and performed well due to its strong earnings growth. The largest detractors to performance during the period were Countrywide Financial and Hovnanian Enterprises. Positions in both stocks were larger than those of the Russell Index. Though we believed the valuation of mortgage lender Countrywide Financial adequately discounted the challenging lending environment, mortgage volume decelerated more than anticipated, and the company indicated that credit problems in the subprime mortgage segment may spread to other areas, such as home equity loans. The Fund held several homebuilders, including Hovnanian Enterprises, which was purchased at what appeared to be the valuation low point for the cycle. However, the housing slowdown has been surprisingly severe and homebuilder stocks have remained weak. Q: What changes did you make to the Fund during this period? A: We decreased the Fund's financials exposure because we expect more challenges for these stocks given the deteriorating credit environment and a flat yield curve with little difference between short-term and long-term interest rates. Based on our belief that valuations in the financials sector seemed a bit high in light of these negative issues, we sold some positions. Within the financials sector, we also decreased insurance holdings because the current insurance pricing cycle seems to be in its later stages and declining prices on insurance products could be problematic. - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT QUESTIONS & ANSWERS We increased the Fund's position in the industrials sector as powerful earnings growth and lower price-to-earnings multiples made selected industrials stocks more appealing from a valuation perspective. We decreased the Fund's consumer staples position based on our valuation assessment. These stocks, particularly some food and household products companies, became more expensive as the market became concerned about overall earnings in the equity universe. We believe there are companies with better valuations and better secular growth characteristics in other areas. WE INCREASED THE FUND'S POSITION IN THE INDUSTRIALS SECTOR AS POWERFUL EARNINGS GROWTH AND LOWER PRICE-TO-EARNINGS MULTIPLES MADE SELECTED INDUSTRIALS STOCKS MORE APPEALING FROM A VALUATION PERSPECTIVE. Q: How do you plan to manage the Fund in the coming months? A: At this point, we expect economic growth to be stable at relatively modest growth rates. We are in the late stages of this economic cycle and, in our view, valuations on economically-sensitive companies are high by historical standards. This scenario supports continued implementation of our current themes: a preference for larger companies over smaller companies, capitalizing on opportunities to invest in companies with traditional growth characteristics that are trading at attractive valuations and focusing on higher quality companies. Currently there is very little difference in valuations among stocks. We believe that this creates an opportunity to buy higher quality companies that usually trade at a premium over lower quality companies. Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource Fund. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 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 Value Fund Class A shares (from 7/1/02 to 7/31/07)* 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
SINCE Results at July 31, 2007 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE LARGE CAP VALUE FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $10,788 $13,266 $16,549 $15,268 Average annual total return +7.88% +9.88% +10.60% +8.66% RUSSELL 1000 VALUE INDEX(1) Cumulative value of $10,000 $11,347 $15,074 $19,646 $17,818 Average annual total return +13.47% +14.66% +14.46% +12.03% LIPPER LARGE-CAP VALUE FUNDS INDEX(2) Cumulative value of $10,000 $11,483 $14,349 $17,940 $16,393 Average annual total return +14.83% +12.79% +12.40% +10.21%
Results for other share classes can be found on page 6. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP VALUE FUND CLASS A LINE GRAPH)
RIVERSOURCE LARGE CAP VALUE FUND CLASS A (INCLUDES SALES CHARGE) RUSSELL 1000 VALUE INDEX(1) LIPPER LARGE-CAP VALUE ($15,268) ($17,818) FUNDS INDEX(2) ($16,393) ----------------------- --------------------------- ------------------------ 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
(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 -- 2007 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 acquired funds expense ratio as of the most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2007. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class A Actual(b) $1,000 $1,003.50 $ 6.36 1.28% Hypothetical (5% return before expenses) $1,000 $1,018.45 $ 6.41 1.28% Class B Actual(b) $1,000 $1,001.80 $10.17 2.05% Hypothetical (5% return before expenses) $1,000 $1,014.63 $10.24 2.05% Class C Actual(b) $1,000 $1,000.00 $10.12 2.04% Hypothetical (5% return before expenses) $1,000 $1,014.68 $10.19 2.04% Class I Actual(b) $1,000 $1,007.00 $ 3.98 .80% Hypothetical (5% return before expenses) $1,000 $1,020.83 $ 4.01 .80% Class R2 Actual(b) $1,000 $1,001.80 $ 7.99 1.61% Hypothetical (5% return before expenses) $1,000 $1,016.81 $ 8.05 1.61% Class R3 Actual(b) $1,000 $1,003.50 $ 6.76 1.36% Hypothetical (5% return before expenses) $1,000 $1,018.05 $ 6.80 1.36% Class R4* Actual(b) $1,000 $1,005.30 $ 5.57(c) 1.12% Hypothetical (5% return before expenses) $1,000 $1,019.24 $ 5.61(c) 1.12%
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 13
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO Class R5 Actual(b) $1,000 $1,007.00 $ 4.08 .82% Hypothetical (5% return before expenses) $1,000 $1,020.73 $ 4.11 .82%
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2007: +0.35% for Class A, +0.18% for Class B, +0.00% for Class C, +0.70% for Class I, +0.18% for Class R2, +0.35% for Class R3, +0.53% for Class R4 and +0.70% for Class R5. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2008, unless sooner terminated at the discretion of the Fund's Board, such that net expenses, (excluding fees and expenses of acquired funds) before giving effect to any performance incentive adjustment, will not exceed 1.13% for Class R4. Any amounts waived will not be reimbursed by the Fund. This change was effective Aug. 1, 2007. If this change had been in place for the entire six month period ended July 31, 2007, the actual expenses paid would have been $5.62 for Class R4; the hypothetical expenses paid would have been $5.66 for Class R4. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT INVESTMENTS IN SECURITIES JULY 31, 2007 (Percentages represent value of investments compared to net assets)
COMMON STOCKS (96.2%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (4.5%) Boeing 6,447 $666,813 DRS Technologies 2,789 146,032 General Dynamics 2,582 202,842 Goodrich 9,589 603,244 Honeywell Intl 17,597 1,012,004 L-3 Communications Holdings 3,064 298,924 Lockheed Martin 5,964 587,335 Northrop Grumman 4,684 356,452 United Technologies 5,568 406,297 --------------- Total 4,279,943 - ----------------------------------------------------------------------------------- BEVERAGES (1.0%) Coca-Cola 8,595 447,885 Constellation Brands Cl A 4,720(b) 103,510 PepsiCo 6,385 418,984 --------------- Total 970,379 - ----------------------------------------------------------------------------------- BIOTECHNOLOGY (0.2%) Amgen 1,838(b) 98,775 Biogen Idec 1,547(b) 87,467 --------------- Total 186,242 - ----------------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) Masco 10,324 280,916 - ----------------------------------------------------------------------------------- CAPITAL MARKETS (4.5%) Bank of New York Mellon 11,455 487,410 Blackstone Group LP 3,109(b) 74,647 Franklin Resources 769 97,948 Goldman Sachs Group 1,473 277,425 KKR Private Equity Investors LP Unit 6,910(f) 139,582 Lehman Brothers Holdings 15,639 969,617 Merrill Lynch & Co 12,083 896,559 Morgan Stanley 14,248 910,020 Oaktree Capital Group LLC Cl A Unit 5,000(b,d,f) 165,000
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CAPITAL MARKETS (CONT.) State Street 2,245 $150,482 T Rowe Price Group 3,050 158,997 --------------- Total 4,327,687 - ----------------------------------------------------------------------------------- CHEMICALS (1.4%) Ashland 1,544 94,277 Dow Chemical 16,564 720,202 Eastman Chemical 2,941 202,400 EI du Pont de Nemours & Co 7,718 360,662 --------------- Total 1,377,541 - ----------------------------------------------------------------------------------- COMMERCIAL BANKS (2.9%) Fifth Third Bancorp 2,535 93,516 PNC Financial Services Group 4,848 323,119 US Bancorp 15,502 464,285 Wachovia 20,008 944,578 Wells Fargo & Co 28,487 962,006 --------------- Total 2,787,504 - ----------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.1%) Avery Dennison 1,476 90,538 - ----------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.8%) Alcatel-Lucent 1,757(c) 20,915 Avaya 7,369(b) 121,883 Cisco Systems 16,245(b) 469,642 Motorola 16,946 287,913 Nokia ADR 10,661(c) 305,331 QUALCOMM 3,666 152,689 Telefonaktiebolaget LM Ericsson ADR 8,533(c) 319,220 --------------- Total 1,677,593 - ----------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.4%) Dell 4,296(b) 120,159 Hewlett-Packard 20,636 949,875 Intl Business Machines 9,297 1,028,713 SanDisk 3,587(b) 192,371 --------------- Total 2,291,118 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 15
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CONSTRUCTION & ENGINEERING (0.3%) Fluor 1,043 $120,477 KBR 4,350(b) 139,591 --------------- Total 260,068 - ----------------------------------------------------------------------------------- CONSUMER FINANCE (1.7%) American Express 7,325 428,806 Capital One Financial 14,068 995,451 Discover Financial Services 7,124(b) 164,208 --------------- Total 1,588,465 - ----------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.2%) Temple-Inland 3,231 187,818 - ----------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (8.8%) Bank of America 69,616 3,301,190 Citigroup 69,372 3,230,654 JPMorgan Chase & Co 42,155 1,855,242 --------------- Total 8,387,086 - ----------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (4.8%) AT&T 56,056 2,195,152 Citizens Communications 8,884 128,196 Deutsche Telekom 11,032(c) 189,588 Embarq 1,607 99,297 Verizon Communications 43,990 1,874,854 Windstream 8,592 118,226 --------------- Total 4,605,313 - ----------------------------------------------------------------------------------- ELECTRIC UTILITIES (3.1%) Entergy 5,925 592,263 Exelon 11,283 791,503 FPL Group 3,269 188,719 Hawaiian Electric Inds 5,919 135,012 Pinnacle West Capital 2,105 78,895 PPL 7,033 331,536 Progress Energy 2,032 88,717 Southern 21,027 707,349 --------------- Total 2,913,994 - ----------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.4%) Emerson Electric 7,384 347,565 - ----------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Tyco Electronics 3,890(b) 139,331 - -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ENERGY EQUIPMENT & SERVICES (1.0%) GlobalSantaFe 1,358 $97,382 Halliburton 5,850 210,717 Natl Oilwell Varco 1,659(b) 199,262 Pride Intl 3,717(b) 130,281 Transocean 1,455(b) 156,340 Weatherford Intl 3,548(b) 196,311 --------------- Total 990,293 - ----------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.0%) CVS Caremark 10,659 375,090 Safeway 1,461 46,562 Wal-Mart Stores 12,621 579,935 --------------- Total 1,001,587 - ----------------------------------------------------------------------------------- FOOD PRODUCTS (1.3%) Campbell Soup 5,584 205,659 General Mills 3,828 212,913 Kellogg 8,415 435,981 Kraft Foods Cl A 10,881 356,353 --------------- Total 1,210,906 - ----------------------------------------------------------------------------------- GAS UTILITIES (0.3%) ONEOK 5,805 294,604 - ----------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.7%) Bausch & Lomb 2,258 144,354 Boston Scientific 30,890(b) 406,204 Covidien 3,890(b,c) 159,285 --------------- Total 709,843 - ----------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.3%) Aetna 8,045 386,722 Cardinal Health 3,560 233,999 CIGNA 5,451 281,490 McKesson 2,185 126,206 UnitedHealth Group 3,676 178,029 --------------- Total 1,206,446 - ----------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.1%) Intl Game Technology 4,041 142,728 Marriott Intl Cl A 8,558 355,585 McDonald's 8,975 429,633 Pinnacle Entertainment 4,309(b) 114,232 --------------- Total 1,042,178 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HOUSEHOLD DURABLES (0.6%) DR Horton 14,080 $229,786 Hovnanian Enterprises Cl A 10,209(b) 135,167 Lennar Cl A 3,184 97,621 Standard-Pacific 7,196 106,573 --------------- Total 569,147 - ----------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.9%) Colgate-Palmolive 6,350 419,100 Procter & Gamble 6,308 390,213 Spectrum Brands 16,774(b) 73,638 --------------- Total 882,951 - ----------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.6%) 3M 1,789 159,078 General Electric 53,969 2,091,838 Tyco Intl 5,165(c) 244,241 --------------- Total 2,495,157 - ----------------------------------------------------------------------------------- INSURANCE (6.8%) ACE 13,215(c) 762,770 AFLAC 9,940 518,073 American Intl Group 27,837 1,786,578 Aon 2,672 106,987 Arch Capital Group 1,821(b,c) 126,851 Chubb 5,971 300,998 Endurance Specialty Holdings 2,929(c) 109,545 Hartford Financial Services Group 13,895 1,276,533 MetLife 4,829 290,802 Prudential Financial 10,549 934,958 XL Capital Cl A 3,316(c) 258,184 --------------- Total 6,472,279 - ----------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Liberty Media -- Interactive Cl A 6,882(b,e) 144,178 - ----------------------------------------------------------------------------------- IT SERVICES (1.1%) Affiliated Computer Services Cl A 6,808(b) 365,318 Automatic Data Processing 5,213 241,987 Electronic Data Systems 5,402 145,800
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) IT SERVICES (CONT.) First Data 7,941 $252,444 HCL Technologies 6,629(c) 51,381 --------------- Total 1,056,930 - ----------------------------------------------------------------------------------- MACHINERY (2.3%) Caterpillar 7,500 590,999 Deere & Co 3,556 428,214 Flowserve 4,814 347,908 Illinois Tool Works 2,504 137,845 Ingersoll-Rand Cl A 2,893(c) 145,576 ITT 3,018 189,772 Parker Hannifin 3,790 373,997 --------------- Total 2,214,311 - ----------------------------------------------------------------------------------- MEDIA (5.2%) Comcast Cl A 21,089(b) 554,008 Comcast Special Cl A 13,594(b) 355,755 EchoStar Communications Cl A 3,920(b) 165,777 News Corp Cl A 40,207 849,172 Time Warner 46,479 895,185 Viacom Cl B 7,452(b) 285,412 Virgin Media 32,436 805,710 Vivendi 13,364(c) 567,687 Walt Disney 15,642 516,186 --------------- Total 4,994,892 - ----------------------------------------------------------------------------------- METALS & MINING (0.5%) Alcan 1,749(c) 170,353 Alcoa 8,938 341,431 --------------- Total 511,784 - ----------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) JC Penney 5,545 377,282 Macy's 3,918 141,322 Target 3,739 226,471 --------------- Total 745,075 - ----------------------------------------------------------------------------------- MULTI-UTILITIES (1.0%) Dominion Resources 8,191 689,846 Xcel Energy 12,779 259,414 --------------- Total 949,260 - ----------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (11.4%) Anadarko Petroleum 1,933 97,288 BP ADR 7,277(c) 505,024 Chesapeake Energy 2,901 98,750
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) OIL, GAS & CONSUMABLE FUELS (CONT.) Chevron 27,425 $2,338,256 ConocoPhillips 22,732 1,837,655 Devon Energy 4,635 345,817 Exxon Mobil 53,775 4,577,865 Royal Dutch Shell ADR 2,477(c) 192,190 Total 10,373(c) 816,937 Valero Energy 701 46,974 XTO Energy 1,700 92,701 --------------- Total 10,949,457 - ----------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.0%) Bowater 9,811 192,492 Intl Paper 8,971 332,555 Weyerhaeuser 5,601 399,015 --------------- Total 924,062 - ----------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Avon Products 1,361 49,010 Herbalife 1,309(c) 53,642 --------------- Total 102,652 - ----------------------------------------------------------------------------------- PHARMACEUTICALS (6.4%) Bristol-Myers Squibb 28,822 818,833 Eli Lilly & Co 6,171 333,789 Johnson & Johnson 6,415 388,108 Merck & Co 21,135 1,049,353 Novartis ADR 3,548(c) 191,415 Pfizer 98,713 2,320,742 Schering-Plough 17,472 498,651 Wyeth 9,998 485,103 --------------- Total 6,085,994 - ----------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.3%) Annaly Capital Management 9,799 141,596 Apartment Investment & Management Cl A 3,842 162,324 --------------- Total 303,920 - ----------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.9%) Atmel 45,684(b) 246,237 Cypress Semiconductor 10,042(b) 251,653 Intel 28,173 665,445
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.) LSI 20,035(b) $144,252 Spansion Cl A 36,533(b) 387,615 Texas Instruments 1,766 62,146 United Microelectronics ADR 6,552(c) 21,163 --------------- Total 1,778,511 - ----------------------------------------------------------------------------------- SOFTWARE (1.0%) ACI Worldwide 1,666(b) 50,863 BEA Systems 8,614(b) 106,641 Microsoft 19,380 561,827 Oracle 9,350(b) 178,772 Quest Software 3,295(b) 48,766 --------------- Total 946,869 - ----------------------------------------------------------------------------------- SPECIALTY RETAIL (1.3%) Gap 5,438 93,534 Home Depot 9,475 352,186 Limited Brands 3,784 91,384 Lowe's Companies 13,136 367,938 Penske Automotive Group 2,387 46,499 TJX Companies 9,228 256,077 --------------- Total 1,207,618 - ----------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (2.7%) Countrywide Financial 37,597 1,059,107 Fannie Mae 12,995 777,621 Freddie Mac 12,410 710,721 --------------- Total 2,547,449 - ----------------------------------------------------------------------------------- TOBACCO (1.3%) Altria Group 18,802 1,249,769 - ----------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.6%) ALLTEL 7,240 477,478 Sprint Nextel 34,909 716,681 Vodafone Group ADR 12,256(c) 371,970 --------------- Total 1,566,129 - ----------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $80,262,638) $91,853,352 - -----------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT
MONEY MARKET FUND (3.5%) SHARES VALUE(A) RiverSource Short-Term Cash Fund 3,317,297(g) $3,317,297 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $3,317,297) $3,317,297 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $83,579,935)(h) $95,170,649 ===================================================================================
NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by 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, 2007, the value of foreign securities represented 5.8% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2007, the value of these securities amounted to $165,000 or 0.2% 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) 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, 2007, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- KKR Private Equity Investors LP Unit 05-01-06 $171,437 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 07-19-07 214,540
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (g) Affiliated Money Market Fund -- See Note 5 to the financial statements. (h) At July 31, 2007, the cost of securities for federal income tax purposes was $84,408,500 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $12,780,631 Unrealized depreciation (2,018,482) - ------------------------------------------------------------------------------ Net unrealized appreciation $10,762,149 - ------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 19 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. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers (identified cost $80,262,638) $91,853,352 Affiliated money market fund (identified cost $3,317,297) (Note 5) 3,317,297 - --------------------------------------------------------------------------- Total investments in securities (identified cost $83,579,935) 95,170,649 Capital shares receivable 26,347 Dividends and accrued interest receivable 104,859 Receivable for investment securities sold 617,082 - --------------------------------------------------------------------------- Total assets 95,918,937 - --------------------------------------------------------------------------- LIABILITIES Capital shares payable 42,734 Payable for investment securities purchased 328,397 Accrued investment management services fee 1,589 Accrued distribution fee 882 Accrued transfer agency fee 400 Accrued administrative services fee 159 Other accrued expenses 49,277 - --------------------------------------------------------------------------- Total liabilities 423,438 - --------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $95,495,499 ===========================================================================
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 21 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2007 REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 167,288 Additional paid-in capital 77,976,295 Undistributed net investment income 496,785 Accumulated net realized gain (loss) 5,264,417 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 11,590,714 - --------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $95,495,499 ===========================================================================
Net assets applicable to outstanding shares: Class A $62,421,177 Class B $15,116,287 Class C $ 1,041,705 Class I $16,865,439 Class R2 $ 4,345 Class R3 $ 4,352 Class R4 $ 37,830 Class R5 $ 4,364 Net asset value per share of outstanding Class A capital stock: shares(1) 10,928,420 $ 5.71 Class B shares 2,672,256 $ 5.66 Class C shares 184,547 $ 5.64 Class I shares 2,934,662 $ 5.75 Class R2 shares 763 $ 5.69 Class R3 shares 763 $ 5.70 Class R4 shares 6,589 $ 5.74 Class R5 shares 763 $ 5.72 - ------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.06. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 INVESTMENT INCOME Income: Dividends $ 2,091,091 Interest 19,596 Income distributions from affiliated money market fund (Note 5) 183,566 Less foreign taxes withheld (10,021) - --------------------------------------------------------------------------- Total income 2,284,232 - --------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 602,406 Distribution fee Class A 160,778 Class B 188,820 Class C 11,437 Class R2 14 Class R3 7 Transfer agency fee Class A 118,243 Class B 37,163 Class C 2,230 Class R2 2 Class R3 2 Class R4 33 Class R5 306 Service fee -- Class R4 13 Administrative services fees and expenses 60,574 Plan administration services fee Class R2 7 Class R3 7 Class R4 60 Compensation of board members 1,892 Custodian fees 31,970 Printing and postage 29,010 Registration fees 95,700 Professional fees 28,149 Other 6,319 - --------------------------------------------------------------------------- Total expenses 1,375,142 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (5) - --------------------------------------------------------------------------- 1,375,137 Earnings and bank fee credits on cash balances (Note 2) (8,325) - --------------------------------------------------------------------------- Total net expenses 1,366,812 - --------------------------------------------------------------------------- Investment income (loss) -- net 917,420 - ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 23 STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2007 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) $ 7,967,043 Foreign currency transactions (1,176) - ----------------------------------------------------------------------------------- Net realized gain (loss) on investments 7,965,867 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 4,751,162 - ----------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 12,717,029 - ----------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $13,634,449 ===================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2007 2006 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 917,420 $ 1,745,900 Net realized gain (loss) on investments 7,965,867 12,601,161 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 4,751,162 (5,201,720) - --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 13,634,449 9,145,341 - --------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (754,607) (878,948) Class B (58,266) (101,985) Class C (4,777) (5,946) Class I (250,586) (815,837) Class R2 (78) N/A Class R3 (78) N/A Class R4 (453) (1,721) Class R5 (79) N/A Net realized gain Class A (9,225,989) (3,373,386) Class B (2,795,600) (1,215,159) Class C (166,141) (63,394) Class I (2,248,825) (2,287,588) Class R2 (708) N/A Class R3 (708) N/A Class R4 (5,335) (5,789) Class R5 (708) N/A - --------------------------------------------------------------------------------------- Total distributions (15,512,938) (8,749,753) - ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 25 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2007 2006 CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales Class A shares (Note 2) $ 10,152,788 $ 11,203,132 Class B shares 1,711,166 1,923,861 Class C shares 211,888 172,850 Class I shares 2,650,378 13,890,983 Class R2 shares 5,000 N/A Class R3 shares 5,000 N/A Class R4 shares 1,000 1,022 Class R5 shares 2,488,893 N/A Reinvestment of distributions at net asset value Class A shares 9,755,373 4,161,490 Class B shares 2,826,941 1,301,183 Class C shares 162,715 67,763 Class I shares 2,498,502 3,103,080 Class R4 shares 3,775 6,764 Payments for redemptions Class A shares (19,024,336) (27,249,234) Class B shares (Note 2) (8,203,518) (12,824,832) Class C shares (Note 2) (420,058) (534,833) Class I shares (1,080,983) (41,255,992) Class R4 shares -- (114,743) Class R5 shares (2,561,087) N/A - --------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,183,437 (46,147,506) - --------------------------------------------------------------------------------------- Total increase (decrease) in net assets (695,052) (45,751,918) Net assets at beginning of year 96,190,551 141,942,469 - --------------------------------------------------------------------------------------- Net assets at end of year $ 95,495,499 $ 96,190,551 ======================================================================================= Undistributed net investment income $ 496,785 $ 662,124 - ---------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 and Class R4 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I and Class R4 shares have no sales charge and are offered only to qualifying institutional investors. Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4, terminating the shareholder servicing agreement, revising the fee structure under the transfer agent agreement from account-based to asset-based, and adopting a plan administration services agreement. At July 31, 2007, Ameriprise Financial, Inc. (Ameriprise Financial), the parent company of RiverSource Investments, LLC (the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares. Effective Dec. 11, 2006, the Fund offers additional classes of shares, Class R2, Class R3 and Class R5, to certain institutional investors. These shares are sold without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 27 VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors of the funds generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign equities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial will fair value foreign equity securities pursuant to procedures adopted by the Board of Directors of the funds, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2007, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. Prior to July 12, 2007, the Fund limited the percent held in securities and other instruments that were illiquid to 10% of the Fund's net assets. The aggregate value of such securities at July 31, 2007 was $304,582 representing 0.32% 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. - -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 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. At July 31, 2007, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund 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, 2007, the Fund had no outstanding futures contracts. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 29 FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At July 31, 2007, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of - -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 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 $13,835 and accumulated net realized gain has been increased by $13,835. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2007 2006 - ---------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income........................... $2,470,246 $1,836,908 Long-term capital gain.................... 7,510,350 2,415,525 CLASS B Distributions paid from: Ordinary income........................... 578,128 447,025 Long-term capital gain.................... 2,275,738 870,119 CLASS C Distributions paid from: Ordinary income........................... 35,672 23,946 Long-term capital gain.................... 135,246 45,394 CLASS I Distributions paid from: Ordinary income........................... 668,771 1,465,389 Long-term capital gain.................... 1,830,640 1,638,036 CLASS R2* Distributions paid from: Ordinary income........................... 210 N/A Long-term capital gain.................... 576 N/A CLASS R3* Distributions paid from: Ordinary income........................... 210 N/A Long-term capital gain.................... 576 N/A CLASS R4** Distributions paid from: Ordinary income........................... 1,445 3,365 Long-term capital gain.................... 4,343 4,145 CLASS R5* Distributions paid from: Ordinary income........................... 211 N/A Long-term capital gain.................... 576 N/A
* For the period from Dec. 11, 2006 (inception date) to July 31, 2007. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 31 At July 31, 2007, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.............................. $ 1,322,432 Undistributed accumulated long-term gain................... $ 5,268,531 Unrealized appreciation (depreciation)..................... $10,760,953
RECENT ACCOUNTING PRONOUNCEMENTS On Sept. 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of SFAS 157 is required for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years. The impact of SFAS 157 on the Fund's financial statements is being evaluated. In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after Dec. 15, 2006. Tax positions of the Fund are being evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48 is not anticipated to have a material impact on the Fund. 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 Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee - -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 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 based on a comparison of the performance of Class A shares of the Fund to 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 fee by $3,332 for the year ended July 31, 2007. The management fee for the year ended July 31, 2007 was 0.60% of the Fund's average daily net assets, including an adjustment under the terms of the performance incentive arrangement. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. Other expenses in the amount of $2,810 are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. Compensation of Board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. Professional fees include fees paid by the Fund for legal services and independent registered public accounting firm services. Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: - - Class A $19.50 - - Class B $20.50 - - Class C $20.00 Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as Class R4, the fee structure under the Transfer Agency Agreement was revised from an account-based fee for Class Y to an asset-based fee for Class R4. The Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 33 Fund's average daily net assets, attributable to Class R4 shares. Prior to Dec. 11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $17.50 per shareholder account. In addition, the Fund pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Funds average daily net assets attributable to Class R2, Class R3 and Class R5 shares. Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource Distributor, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A 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. Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted for the restructured Class R4 and the introduction of Class R2 and Class R3. The fee is calculated at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares. Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the Distributor a fee for service provided to shareholders by the Distributor and other servicing agents with respect to Class Y shares. The fee was calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Effective Dec. 11, 2006, this agreement was terminated. Sales charges received by the Distributor for distributing Fund shares were $82,042 for Class A, $20,398 for Class B and $32 for Class C for the year ended July 31, 2007. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT For the year ended July 31, 2007, the Investment Manager and its affiliates waived certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, were 1.12% for Class R4. Of these waived fees and expenses, the transfer agency fees waived for Class R4 were $5. Under an agreement, which was effective until July 31, 2007, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, would not exceed 1.29% for Class A, 2.05% for Class B, 2.06% for Class C, 0.94% for Class I, 1.69% for Class R2, 1.44% for Class R3, 1.12% for Class R4 and 0.94% for Class R5 of the Fund's average daily net assets. Effective Aug. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.13% for Class R4 of the Fund's average daily net assets, until July 31, 2008, unless sooner terminated at the discretion of the Board. During the year ended July 31, 2007, the Fund's custodian and transfer agency fees were reduced by $8,325 as a result of earnings and bank fee credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $33,960,989 and $50,345,720, respectively, for the year ended July 31, 2007. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 35 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
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 - ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2006 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 1,942,339 743,124 (4,706,798) (2,021,335) Class B 336,668 233,606 (2,243,828) (1,673,554) Class C 30,218 12,166 (93,245) (50,861) Class I 2,383,522 552,149 (7,154,110) (4,218,439) Class R4** 175 1,204 (19,573) (18,194) - ----------------------------------------------------------------------------------------------
* For the period from Dec. 11, 2006 (inception date) to July 31, 2007. ** Effective Dec. 11, 2006, Class Y was renamed Class R4. 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. Cost of purchases and proceeds from sales aggregated $40,454,168 and $37,136,871, respectively, for the year ended July 31, 2007. 6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 19, 2006. The Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables the Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective - -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to this agreement, the Fund paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. The Fund had no borrowings under the facility outstanding during the year ended July 31, 2007. 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 may file a notice of appeal with the Eighth Circuit Court of Appeals within 30 days from the date of judgment. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 37 As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT on the consolidated financial condition or results of operations of Ameriprise Financial. 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, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.88 $5.83 $5.34 $4.98 $4.52 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06(b) .09 .06 .04 .03 Net gains (losses) (both realized and unrealized) .77 .32 .70 .59 .44 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .83 .41 .76 .63 .47 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.04) (.03) (.01) Distributions from realized gains (.93) (.29) (.23) (.24) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (1.00) (.36) (.27) (.27) (.01) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.71 $5.88 $5.83 $5.34 $4.98 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $62 $63 $74 $67 $31 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.28% 1.21% 1.29% 1.24%(e) 1.25%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .99% 1.35% 1.07% .95% 1.01% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% 46% 57% 59% 77% - ----------------------------------------------------------------------------------------------------------- Total return(f) 14.47% 7.39% 14.52% 12.85% 10.52% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class A would have been 1.54% and 2.64% for the years ended July 31, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 39 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.82 $5.77 $5.29 $4.95 $4.52 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) .04 .01 -- .01 Net gains (losses) (both realized and unrealized) .78 .32 .70 .59 .43 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .79 .36 .71 .59 .44 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) -- (.01) (.01) Distributions from realized gains (.93) (.29) (.23) (.24) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.95) (.31) (.23) (.25) (.01) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.66 $5.82 $5.77 $5.29 $4.95 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $15 $19 $28 $25 $13 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 2.05% 1.97% 2.05% 2.00%(e) 2.00%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .23% .59% .30% .16% .25% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% 46% 57% 59% 77% - ----------------------------------------------------------------------------------------------------------- Total return(f) 13.75% 6.51% 13.66% 12.00% 9.66% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class B would have been 2.30% and 3.40% for the years ended July 31, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.82 $5.77 $5.29 $4.94 $4.52 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(b) .04 .01 -- .01 Net gains (losses) (both realized and unrealized) .76 .32 .70 .60 .42 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .77 .36 .71 .60 .43 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) -- (.01) (.01) Distributions from realized gains (.93) (.29) (.23) (.24) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.95) (.31) (.23) (.25) (.01) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.64 $5.82 $5.77 $5.29 $4.94 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $1 $1 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 2.04% 1.98% 2.06% 2.00%(e) 2.00%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .23% .58% .30% .19% .26% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% 46% 57% 59% 77% - ----------------------------------------------------------------------------------------------------------- Total return(f) 13.50% 6.56% 13.62% 12.19% 9.50% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class C would have been 2.30% and 3.40% for the years ended July 31, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 41 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004(B) Net asset value, beginning of period $5.91 $5.86 $5.36 $5.57 - ------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(c) .12 .07 .03 Net gains (losses) (both realized and unrealized) .79 .32 .72 (.24) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations .87 .44 .79 (.21) - ------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.10) (.06) -- Distributions from realized gains (.93) (.29) (.23) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions (1.03) (.39) (.29) -- - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.75 $5.91 $5.86 $5.36 - ------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $17 $13 $38 $16 - ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .85% .75% .86% .93%(f),(g) - ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.41% 1.85% 1.50% 1.33%(f) - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% 46% 57% 59% - ------------------------------------------------------------------------------------------------------------------- Total return(h) 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 average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class I would have been 1.02% for the period ended July 31, 2004. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. - -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.55 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(c) Net gains (losses) (both realized and unrealized) .15 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .17 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) Distributions from realized gains (.93) - ----------------------------------------------------------------------------------------------------------- Total distributions (1.03) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.69 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.63%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .55%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% - ----------------------------------------------------------------------------------------------------------- Total return(g) 2.84%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratio. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 43 CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.55 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) Net gains (losses) (both realized and unrealized) .15 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .18 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) Distributions from realized gains (.93) - ----------------------------------------------------------------------------------------------------------- Total distributions (1.03) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.70 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.38%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .80%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% - ----------------------------------------------------------------------------------------------------------- Total return(g) 3.03%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratio. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT CLASS R4*
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007 2006 2005 2004 2003 Net asset value, beginning of period $5.90 $5.85 $5.36 $4.99 $4.52 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .10 .07 .04 .03 Net gains (losses) (both realized and unrealized) .78 .32 .70 .61 .45 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .85 .42 .77 .65 .48 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) (.05) (.04) (.01) Distributions from realized gains (.93) (.29) (.23) (.24) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (1.01) (.37) (.28) (.28) (.01) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.74 $5.90 $5.85 $5.36 $4.99 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.12%(e) 1.00% 1.11% 1.06%(e) .95%(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.14% 1.69% 1.25% 1.12% 1.30% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% 46% 57% 59% 77% - ----------------------------------------------------------------------------------------------------------- Total return(f) 14.67% 7.55% 14.67% 13.14% 10.76% - -----------------------------------------------------------------------------------------------------------
* Effective Dec. 11, 2006, Class Y was renamed Class R4. (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using average shares outstanding method. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class R4 would have been 1.13%, 1.36%, and 2.46% for the years ended July 31, 2007, 2004 and 2003, respectively. (f) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 45 CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2007(B) Net asset value, beginning of period $6.55 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05(c) Net gains (losses) (both realized and unrealized) .15 - ----------------------------------------------------------------------------------------------------------- Total from investment operations .20 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) Distributions from realized gains (.93) - ----------------------------------------------------------------------------------------------------------- Total distributions (1.03) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.72 - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .83%(f) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.45%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 35% - ----------------------------------------------------------------------------------------------------------- Total return(g) 3.40%(h) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using average shares outstanding method. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratio. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of a sales charge. (h) Not annualized. - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE RIVERSOURCE LARGE CAP VALUE FUND: We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of RiverSource Large Cap Value Fund (the Fund), one of the portfolios constituting the RiverSource Large Cap Series, Inc., as of July 31, 2007, and the related statements of operations, changes in net assets, and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The financial statements and financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 47 In our opinion, the 2007 financial statements and financial highlights 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, 2007, the results of its operations, changes in its net assets, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Minneapolis, Minnesota September 20, 2007 - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2007 CLASS A
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.24819
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.00306
CLASS B
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.19176
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $0.94663
CLASS C
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.19910
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $0.95397
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 49 CLASS I
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.27577
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.03064
CLASS R2
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.27462
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.02949
CLASS R3
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.27505
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.02992
CLASS R4*
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.25120
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.00607
- -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT CLASS R5
INCOME DISTRIBUTIONS - taxable as dividend income: Qualified Dividend Income for individuals............. 85.37% Dividends Received Deduction for corporations......... 79.11%
PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.27570
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain. PAYABLE DATE PER SHARE Dec. 20, 2006............................................... $0.75487 Total distributions......................................... $1.03057
* Effective Dec. 11, 2006, Class Y was renamed Class R4. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 51 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 102 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme 901 S. Marquette Ave. since 2006 Court, 1998-2005 Minneapolis, MN 55402 Age 53 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 52 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 56 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 71 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 68 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 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 Strategic 901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc. Minneapolis, MN 55402 estate and asset management (transportation, Age 55 company) distribution and logistics consultants) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc. 901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology); Minneapolis, MN 55402 former President, Forester Biotech American Healthways, Age 63 Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
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 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; President, Ameriprise Certificate Company since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* 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 VALUE FUND -- 2007 ANNUAL REPORT 53 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 Senior Vice President -- Asset Management, 172 Ameriprise 2006 RiverSource Investments, LLC since 2006; Financial Center Managing Director and Global Head of Product, Minneapolis, MN 55474 Morgan Stanley Investment Management, Age 41 2004-2006; President, Touchstone Investments, 2002-2004; Director of Strategic Planning, Evergreen Investments, 1995-2002 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 43 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich Global Assets, 2001-2002 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 41 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Vice Financial Center President -- Finance, American Express Minneapolis, MN 55474 Company, 2000-2002 Age 52 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Vice President, General Counsel and Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company Age 47 since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, U.S. Bancorp Asset Management, 2002-2004; Second Vice President and Assistant General Counsel, Hartford Life, 2001-2002 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 46 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 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 43 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 55 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, LLC ("RiverSource"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of Directors (the "Board") and the Board's Investment Review and Contracts Committees monitor these services throughout the year. On an annual basis, the Board, including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource prepares detailed reports for the Board and its Contracts Committee in March and April, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource addressing the services RiverSource provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the IMS Agreement. At the April 11-12, 2007 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource, including, in particular, the growing strength and capabilities of many RiverSource offices and the increased investment and resources dedicated to the Fund's operations, particularly in the areas of trading systems, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource, the Board considered the quality of the administrative, custody and transfer agency services provided by RiverSource affiliates to the Fund. The Board also reviewed the financial condition of RiverSource and the entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource). The Board concluded - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board determined that RiverSource was in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2005. The Board observed that the Fund's investment performance met expectations. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource and its affiliates in connection with RiverSource providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource and Ameriprise Financial from managing and operating the Fund, including data showing comparative - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 57 profitability. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 12, 2007, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2007 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended July 31, 2006 and the year ended July 31, 2005 contained no - -------------------------------------------------------------------------------- 58 RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through April 12, 2007 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP VALUE FUND -- 2007 ANNUAL REPORT 59 RIVERSOURCE(R) 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. and Ameriprise Financial Services, Inc., Members FINRA, and managed by RiverSource Investments, LLC. These (RIVERSOURCE INVESTMENTS LOGO) companies are part of Ameriprise Financial, Inc. S-6246 H (9/07)
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 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: 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: 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: 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: 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 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: 2007 - $246,660 (h) 100% of the services performed in item (g) above during 2007 were pre-approved by the 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, 2007 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, 2007 By /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date October 3, 2007 EX-99.CODE 2 c18115exv99wcode.txt CODE OF ETHICS Exhibit (a)(1) Ex. 99.CODE ETH. 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: - 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; - annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; - 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 - 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; - will take all appropriate action to investigate such reported violations; - 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 Paula R. Meyer* William F. Truscott** * Until August 5, 2006. ** Until November 9, 2006. EX-99.CERT 3 c18115exv99wcert.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 25, 2007 /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 25, 2007 /s/ Jeffrey P. Fox - ------------------------------------------------ Name: Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 4 c18115exv99w906cert.txt 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 25, 2007 /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date: September 25, 2007 /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-----