EX-99.(17)(G) 9 c18637e1exv99wx17yxgy.txt ANNUAL REPORT 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. LETTER TO SHAREHOLDERS Dear Fellow RiverSource Funds Shareholder: At RiverSource Funds, we are focused on delivering consistent and competitive investment results. Yet our commitment to shareholders extends beyond investment performance to include providing Insightful Solutions for Today's Investor(R). What this means is that we remain dedicated to offering innovative products such as our Advice-Built Solutions(SM) that are designed to help you achieve your financial goals. Our Advice-Built Solutions embed investment advice such as asset allocation and rebalancing into the investment management process. Advice-embedded solutions are among the fastest growing investment products in the financial industry in part because investors find them easy to understand and use in a portfolio. At RiverSource Funds, we have been at the forefront of this movement with innovative products such as our Income Builder, Portfolio Builder and Retirement Plus(SM) Series of funds in addition to RiverSource(R) Strategic Allocation Fund. Your financial professional provides a wide range of investment and planning services in addition to helping you select mutual funds for your portfolio. We encourage you to talk with your financial professional about our Advice-Built Solutions and how they may help you reach your specific goals whether you are saving for retirement or paying for future college expenses or health care expenses. Thank you for investing with RiverSource Funds and for your continued support. Sincerely, /s/ STEPHEN R. LEWIS, JR. /s/ PATRICK T. BANNIGAN Stephen R. Lewis, Jr. Patrick T. Bannigan Chairman of the Boards President, RiverSource Funds
YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. FOR A FREE PROSPECTUS, WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUNDS, CALL (888) 791-3380. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TABLE OF CONTENTS 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 THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS. GROWTH FUNDS RiverSource Growth Fund RiverSource Fundamental Growth Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Mid Cap Growth Fund RiverSource Aggressive Growth Fund RiverSource Small Cap Growth Fund Sector: RiverSource Global Technology Fund BLEND FUNDS RiverSource Disciplined Equity Fund RiverSource Large Cap Equity Fund RiverSource S&P 500 Index Fund* RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Small Cap Advantage Fund RiverSource Small Company Index Fund RiverSource Small Cap Equity Fund Sector: RiverSource Precious Metals and Mining Fund VALUE FUNDS RiverSource Dividend Opportunity Fund RiverSource Value Fund RiverSource Fundamental Value Fund RiverSource Equity Value Fund RiverSource Large Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Select Value Fund RiverSource Mid Cap Value Fund RiverSource Disciplined Small Cap Value Fund RiverSource Small Cap Value Fund Sector: RiverSource Real Estate Fund ASSET ALLOCATION FUNDS RiverSource Portfolio Builder Conservative Fund RiverSource Income Builder Basic Income Fund RiverSource Income Builder Moderate Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Retirement Plus(SM) 2010 Fund RiverSource Balanced Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Retirement Plus(SM) 2015 Fund RiverSource Strategic Allocation Fund RiverSource Retirement Plus(SM) 2020 Fund RiverSource Portfolio Builder Aggressive Fund RiverSource Retirement Plus(SM) 2025 Fund RiverSource Retirement Plus(SM) 2030 Fund RiverSource Retirement Plus(SM) 2035 Fund RiverSource Retirement Plus(SM) 2040 Fund RiverSource Retirement Plus(SM) 2045 Fund RiverSource Portfolio Builder Total Equity Fund
-------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TAXABLE INCOME FUNDS RiverSource Cash Management Fund** RiverSource Short Duration U.S. Government Fund RiverSource U.S. Government Mortgage Fund RiverSource Inflation Protected Securities Fund RiverSource Floating Rate Fund RiverSource Limited Duration Bond Fund RiverSource Core Bond Fund RiverSource Diversified Bond Fund RiverSource Strategic Income Allocation Fund RiverSource Income Opportunities Fund RiverSource High Yield Bond Fund RiverSource Global Bond Fund RiverSource Emerging Markets Bond Fund TAX-EXEMPT FUNDS RiverSource Tax-Exempt Money Market Fund** RiverSource Intermediate Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund RiverSource State Tax-Exempt Funds RiverSource Tax-Exempt High Income Fund GLOBAL/INTERNATIONAL FUNDS RiverSource Global Equity Fund RiverSource International Select Value Fund RiverSource International Equity Fund RiverSource Disciplined International Equity Fund RiverSource International Opportunity Fund RiverSource International Small Cap Fund RiverSource International Aggressive Growth Fund RiverSource European Equity Fund RiverSource Emerging Markets Fund
You should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus of any of the funds listed above, which contains this and other important information about the funds, contact your financial institution or visit riversource.com/funds. Read the prospectus carefully before investing. Investment products, including shares of mutual funds, involve risks including possible loss of principal and fluctuation in value. Investing in certain funds involves special risks, such as those related to investments in foreign securities, small- and mid-capitalization stocks, fixed income securities (especially high-yield securities), and funds which focus their investments in a particular sector, such as real estate, technology and precious metals. See each fund's prospectus for specific risks associated with the fund. * "Standard & Poor's(R)," "S&P," "S&P 500(R)," and "Standard & Poor's 500(R)" are trademarks of the McGraw-Hill Companies, Inc. These trademarks have been licensed for use by Ameriprise Financial, Inc. The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's or any of their subsidiaries or affiliates (the "Licensors") and the Licensors make no representation regarding the advisability of investing in the fund. ** AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH A MONEY MARKET FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN A MONEY MARKET FUND. -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT RIVERSOURCE(R) 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)