-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QqB/UnjQLle2ZOZk1Q/xK4LgQ1Zrtik4OJARlwADzMCuF1nUpuQKJAE5R3p4lGVe zPvp6kg6vHNZr7OvWgIXJA== 0000950137-09-002917.txt : 20090414 0000950137-09-002917.hdr.sgml : 20090414 20090414165525 ACCESSION NUMBER: 0000950137-09-002917 CONFORMED SUBMISSION TYPE: N-14/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 20090414 DATE AS OF CHANGE: 20090414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE LARGE CAP SERIES, INC. CENTRAL INDEX KEY: 0000049702 IRS NUMBER: 410962638 STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-14/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-157525 FILM NUMBER: 09749173 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH SERIES INC/MN DATE OF NAME CHANGE: 20001011 FORMER COMPANY: FORMER CONFORMED NAME: AXP GROWTH FUND INC DATE OF NAME CHANGE: 20000829 FORMER COMPANY: FORMER CONFORMED NAME: IDS GROWTH FUND INC DATE OF NAME CHANGE: 19920703 CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000008741 RiverSource Disciplined Equity Fund Class B AQEBX CENTRAL INDEX KEY: 0000014358 S000009548 SELIGMAN COMMON STOCK FUND INC C000026087 SELIGMAN COMMON STOCK FUND, INC., CLASS B SBCSX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000008753 RiverSource Large Cap Equity Fund Class B ALEBX CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000008742 RiverSource Disciplined Equity Fund Class C RDCEX CENTRAL INDEX KEY: 0000014358 S000009548 SELIGMAN COMMON STOCK FUND INC C000026088 SELIGMAN COMMON STOCK FUND, INC., CLASS C SCNCX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000008754 RiverSource Large Cap Equity Fund Class C ARQCX CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000008744 RiverSource Disciplined Equity Fund Class A AQEAX CENTRAL INDEX KEY: 0000014358 S000009548 SELIGMAN COMMON STOCK FUND INC C000026086 SELIGMAN COMMON STOCK FUND, INC., CLASS A SCSFX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000008752 RiverSource Large Cap Equity Fund Class A ALEAX CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000008745 RiverSource Disciplined Equity Fund Class I ALEIX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000008751 RiverSource Large Cap Equity Fund Class I ALRIX CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000042888 RiverSource Disciplined Equity Fund Class R2 CENTRAL INDEX KEY: 0000014358 S000009548 SELIGMAN COMMON STOCK FUND INC C000026091 SELIGMAN COMMON STOCK FUND, INC., CLASS R SCSRX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000042898 RiverSource Large Cap Equity Fund Class R2 CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000042889 RiverSource Disciplined Equity Fund Class R3 RSDEX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000042899 RiverSource Large Cap Equity Fund Class R3 CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000042890 RiverSource Disciplined Equity Fund Class R4 RQEYX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000042900 RiverSource Large Cap Equity Fund Class R4 ALEYX CENTRAL INDEX KEY: 0000049702 S000003287 RiverSource Disciplined Equity Fund C000042891 RiverSource Disciplined Equity Fund Class R5 RSIPX CENTRAL INDEX KEY: 0000014358 S000009548 SELIGMAN COMMON STOCK FUND INC C000026090 SELIGMAN COMMON STOCK FUND, INC., CLASS I SCSIX CENTRAL INDEX KEY: 0000049702 S000003289 RiverSource Large Cap Equity Fund C000042901 RiverSource Large Cap Equity Fund Class R5 N-14/A 1 c49443a1nv14za.txt N-14/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. 1 (File No. 333-157525) [ ] Post-Effective Amendment No. [ ] (Check Appropriate Box or Boxes) RiverSource Large Cap Series, Inc. (Exact Name of Registrant as Specified in Charter) (612) 671-1947 (Area Code and Telephone Number) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) Scott R. Plummer (Name and Address of Agent for Service) 5228 Ameriprise Financial Center Minneapolis MN 55474 (Number and Street) (City) (State) (Zip Code) Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of the Registration Statement. Title of Securities Being Registered: Common Stock No filing fee is due because of reliance on Section 24(f) of the Investment Company Act of 1940. This Registration Statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933. It is proposed that this filing will become effective on April 17, 2009.
RIVERSOURCE FUNDS SELIGMAN FUNDS 734 Ameriprise Financial Center 734 Ameriprise Financial Center Minneapolis, Minnesota 55474 Minneapolis, Minnesota 55474
NOTICE OF A JOINT SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 2, 2009 RIVERSOURCE LARGE CAP EQUITY FUND SELIGMAN COMMON STOCK FUND, INC. A Joint Special Meeting of Shareholders (the "Meeting") of each of the Selling Funds listed above will be held at 10:00 a.m. CDT on June 2, 2009, at The Marquette Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402 in the Minnesota River Room, on the Third floor. At the Meeting, shareholders will consider the following proposals with respect to their Selling Fund: To approve an Agreement and Plan of Reorganization by and among the Selling Fund, the Buying Fund and RiverSource Investments, LLC (the "Agreement and Plan of Reorganization"). The shareholders of each Selling Fund will vote separately on the relevant proposal, as shown below.
- ------------------------------------------------------------------------------------------------- PROPOSAL SELLING FUND BUYING FUND - ------------------------------------------------------------------------------------------------- 1(a) RiverSource Large Cap Equity Fund - ----------------------------------------------------- RiverSource Disciplined Equity Fund 1(b) Seligman Common Stock Fund, Inc. - -------------------------------------------------------------------------------------------------
Pursuant to the Agreement and Plan of Reorganization, each Selling Fund will transfer all of its assets attributable to each class of its shares to the Buying Fund in exchange for shares of the corresponding class of the Buying Fund and the assumption by the Buying Fund of all of the liabilities of the Selling Fund. The Buying Fund shares will be distributed proportionately to shareholders of the relevant class of the Selling Fund. Please take some time to read the combined proxy statement/prospectus. It discusses these proposals in more detail. If you were a shareholder on April 3, 2009, you may vote at the Meeting or at any adjournment or postponement of the Meeting. We hope you can attend the Meeting. Even if you plan to attend the Meeting, please vote by telephone, internet or mail. Just follow the instructions on the enclosed proxy card. If you have questions, please call toll free at (866) 438-8932. It is important that you vote. The Board of Directors of each Selling Fund recommends that you vote FOR the proposal applicable to it. The combined proxy statement/prospectus is expected to be mailed to shareholders on or about April 17, 2009. By order of the Boards of Directors -s- Scott R. Plummer Scott R. Plummer, Secretary April 17, 2009 RIVERSOURCE LARGE CAP EQUITY FUND SELIGMAN COMMON STOCK FUND, INC. COMBINED PROXY STATEMENT/PROSPECTUS DATED APRIL 17, 2009 This document is a proxy statement for each Selling Fund (as defined below) and a prospectus for the Buying Fund (as defined below). The address and telephone number of each Selling Fund and the Buying Fund is 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 and (888) 791-3380. The combined proxy statement/prospectus and the enclosed proxy card are expected to be mailed to shareholders ("shareholders" or "stockholders") on or about April 17, 2009. This combined proxy statement/prospectus contains information you should know before voting on the following proposals with respect to your Selling Fund (as indicated below):
TO BE VOTED ON PROPOSAL BY SHAREHOLDERS OF: - --------------------------------------------------------------------------------------------------------------------- 1(a). To approve the Agreement and Plan of Reorganization (the "Agreement") by RiverSource Large Cap Equity Fund and among RiverSource Large Cap Equity Fund ("Large Cap Equity" or the "Selling Fund") and Disciplined Equity Fund ("Disciplined Equity" or the "Buying Fund"), each a series of RiverSource Large Cap Series, Inc., and RiverSource Investments, LLC. Under this Agreement, the Selling Fund will transfer all of its assets attributable to each class of its shares to the Buying Fund, as indicated below, in exchange for shares of the corresponding class of the Buying Fund and the assumption by the Buying Fund of all of the liabilities of the Selling Fund. The Buying Fund shares will be distributed proportionately to shareholders of the relevant class of the Selling Fund. SELLING FUND BUYING FUND Class A Class A Class B Class B Class C Class C Class I Class I Class R2 Class R2 Class R3 Class R3 Class R4 Class R4 Class R5 Class R5 - --------------------------------------------------------------------------------------------------------------------- 1(b). To approve the Agreement and Plan of Reorganization (the "Agreement") by Seligman Common Stock Fund, Inc. and among Seligman Common Stock Fund, Inc. ("Seligman Common Stock Fund" or the "Selling Fund"), RiverSource Disciplined Equity Fund ("Disciplined Equity" or the "Buying Fund"), a series of RiverSource Large Cap Series, Inc., and RiverSource Investments, LLC. Under this Agreement, the Selling Fund will transfer all of its assets attributable to each class of its shares to the Buying Fund, as indicated below, in exchange for shares of the corresponding class of the Buying Fund and the assumption by the Buying Fund of all of the liabilities of the Selling Fund. The Buying Fund shares will be distributed proportionately to shareholders of the relevant class of the Selling Fund. SELLING FUND BUYING FUND Class A Class A Class B Class B Class C Class C Class R* Class R2 Class I* Class R5 - ---------------------------------------------------------------------------------------------------------------------
* Effective on or about June 13, 2009, the Class R and Class I shares of the Seligman Fund will be redesignated as Class R2 and Class R5 shares, respectively. However, for convenience of reference, this combined proxy statement/prospectus refers to each class of shares by its designation as of the date of this proxy statement/prospectus. These proposals will be considered by shareholders of the Selling Funds at a joint special meeting of such shareholders (the "Meeting") that will be held at 10:00 a.m. CDT on June 2, 2009, at The Marquette Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402 in the Minnesota River Room, on the Third floor. Each of the Selling Funds and the Buying Fund (collectively, the "Funds") is a registered open-end management investment company (or a series thereof). The Selling Funds and the Buying Fund are part of the RiverSource Family of Funds, which includes funds branded "RiverSource" as well as funds branded "Seligman." Please read this combined proxy statement/prospectus and keep it for future reference. Although the Board of Directors of each Selling Fund (the "Board" or the "Board of Directors") recommends that shareholders approve the reorganization of each Selling Fund with the Buying Fund (each a "Reorganization"), the Reorganization of each Selling Fund is not conditioned upon the Reorganization of the other Selling Fund. Accordingly, if shareholders of one RiverSource Large Cap Equity Fund approve its Reorganization, but shareholders of Seligman Common Stock Fund do not approve that Selling Fund's Reorganization, it is expected that the Reorganization of RiverSource Large Cap Equity Fund will take place as described in this proxy statement/prospectus. 1 HOW EACH REORGANIZATION WILL WORK - - Each Selling Fund will transfer all of its assets to the Buying Fund in exchange for shares of the Buying Fund ("Reorganization Shares") and the assumption by the Buying Fund of all of the Selling Fund's liabilities. - - The Buying Fund will issue Reorganization Shares in an amount equal to the value of the assets that it receives from the Selling Fund, less the liabilities it assumes. The Reorganization Shares of each class will be distributed to the Selling Fund's shareholders of the corresponding class in proportion to their holdings in such class of the Selling Fund. For example, holders of Class A shares of a Selling Fund will receive Class A shares of the Buying Fund with the same aggregate net asset value as their Selling Fund Class A shares at the time of the Reorganization. You will not pay any sales charge in connection with this distribution of Reorganization Shares. If you already have a Buying Fund account with the exact registration as the Selling Fund account, shares distributed in the Reorganization are typically added to that account. As a result, when average cost is calculated for federal income tax purposes, the cost of the shares in the two accounts you owned will be combined. WHERE TO GET MORE INFORMATION The following documents have been filed with the Securities and Exchange Commission (the "SEC") and are incorporated into this proxy statement/prospectus by reference: - - the prospectus of RiverSource Large Cap Equity Fund, dated Sept. 29, 2008, as supplemented to date; - - the prospectus of Seligman Common Stock Fund, Inc., dated May 1, 2008, as supplemented to date; - - the Statement of Additional Information of RiverSource Large Cap Equity Fund, dated April 1, 2009, as supplemented to date; - - the Statement of Additional Information of Seligman Common Stock Fund, Inc., dated May 1, 2008, as supplemented to date; - - the Statement of Additional Information relating to the Reorganizations, dated April 17, 2009 (the "Reorganization SAI"); - - the Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of RiverSource Disciplined Equity Fund, for the period ended July 31, 2008, and the unaudited financial statements included in the Semiannual Report to Shareholders of RiverSource Disciplined Equity Fund, for the period ended Jan. 31, 2009; - - the Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of RiverSource Large Cap Equity Fund, for the period ended July 31, 2008, and the unaudited financial statements included in the Semiannual Report to Shareholders of RiverSource Large Cap Equity Fund, for the period ended Jan. 31, 2009; and - - the Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of Seligman Common Stock Fund, Inc., for the period ended Dec. 31, 2008. If the Reorganization is approved by shareholders at the meeting scheduled to be held on June 2, 2009 and occurs prior to the required mailing date of the shareholder report, any shareholder may request a copy free of charge of the annual report for RiverSource Large Cap Equity Fund for the period ended July 31, 2009 by calling toll free at (888) 791-3380. For a copy at no charge of any of the documents listed above and/or to ask questions about this combined proxy statement/prospectus, please call your Fund's solicitor toll free at (866) 438-8932. Each of the Funds is subject to the information requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 (the "1940 Act") and files reports, proxy materials and other information with the SEC. These reports, proxy materials and other information can be inspected and copied at the Public Reference Room maintained by the SEC. Copies may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing to the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549-0102. In addition, copies of these documents may be viewed on-line or downloaded from the SEC's website at www.sec.gov. Please note that the Funds are not bank deposits, are not federally insured, are not endorsed by any bank or government agency and are not guaranteed to achieve their investment objectives. As with all mutual funds, the SEC has not approved or disapproved these securities or passed on the adequacy of this combined proxy statement/prospectus. Any representation to the contrary is a criminal offense. 2 TABLE OF CONTENTS
PAGE ---- SECTION A -- REORGANIZATION PROPOSALS............................................ 4 SUMMARY........................................................................ 4 How Each Reorganization Will Work............................................ 4 Tax Consequences............................................................. 4 Fees and Expenses............................................................ 5 Proposals 1(a) and (b). Reorganizations of Each of RiverSource Large Cap Equity Fund and Seligman Common Stock Fund, Inc. into RiverSource Disciplined Equity Fund.................................................. 5 PROPOSALS 1(A) AND 1(B). REORGANIZATIONS OF EACH OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND, INC. INTO RIVERSOURCE DISCIPLINED EQUITY FUND.................................................................. 10 Comparison of Each Selling Fund and the Buying Fund.......................... 10 Comparison of Investment Objectives........................................ 10 Comparison of Principal Investment Strategies.............................. 10 Comparison of Fundamental Policies......................................... 11 Comparison of Nonfundamental Policies and Related Investment Strategies.... 13 Comparison of Principal Risk Factors....................................... 14 Performance................................................................ 15 ADDITIONAL INFORMATION ABOUT EACH REORGANIZATION............................... 20 Terms of the Reorganizations................................................. 20 Conditions to Closing Each Reorganization.................................... 20 Termination of the Agreement................................................. 20 Tax Status of the Reorganizations............................................ 20 Reasons for the Proposed Reorganizations and Board Deliberations............. 23 Board Determinations......................................................... 24 Board Recommendation and Required Vote....................................... 24 SECTION B -- PROXY VOTING AND SHAREHOLDER MEETING INFORMATION.................... 26 SECTION C -- CAPITALIZATION, OWNERSHIP OF FUND SHARES AND FINANCIAL HIGHLIGHTS... 28 Capitalization of Selling Funds and Buying Fund.............................. 28 Ownership of Selling Fund and Buying Fund Shares............................. 29 Financial Highlights......................................................... 32 EXHIBITS A. Form of Agreement and Plan of Reorganization.................................. A.1 B. Minnesota Business Corporation Act Sections 302A.471 and 302A.473............. B.1 C. Additional Information Applicable to the Buying Fund.......................... C.1 D. Summary of Integration Related Changes........................................ D.1 E. Comparison of Organizational Documents........................................ E.1 F. RiverSource Family of Funds Privacy Notice................................... F.1
3 SECTION A -- REORGANIZATION PROPOSALS The following information describes each proposed Reorganization. SUMMARY This combined proxy statement/prospectus is being used by each Selling Fund to solicit proxies to vote at a joint special meeting of shareholders. Shareholders of each Selling Fund will consider a proposal to approve the Agreement and Plan of Reorganization (the "Agreement") providing for the Reorganization of their Selling Fund into the Buying Fund. The form of the Agreement is included as Exhibit A. The following is a summary. More complete information appears later in this proxy statement/prospectus. You should read the entire proxy statement/prospectus and the exhibits because they contain details that are not included in the summary. HOW EACH REORGANIZATION WILL WORK - - Each Selling Fund will transfer all of its assets to the Buying Fund in exchange for shares of the Buying Fund ("Reorganization Shares") and the assumption by the Buying Fund of all of the Selling Fund's liabilities. - - The Buying Fund will issue Reorganization Shares with an aggregate net asset value equal to the aggregate value of the assets that it receives from the corresponding Selling Fund, less the liabilities it assumes from the corresponding Selling Fund. Reorganization Shares of each class of the Buying Fund will be distributed to the shareholders of the corresponding class of the corresponding Selling Fund in proportion to their holdings of such class of such Selling Fund. For example, holders of Class A shares of a Selling Fund will receive Class A shares of the Buying Fund with the same aggregate net asset value as the aggregate net asset value of their Selling Fund Class A shares at the time of the Reorganization. If you already have a Buying Fund account with the exact registration as the Selling Fund account, shares distributed in the Reorganization are typically added to that account. As a result, when average cost is calculated for federal income tax purposes, the cost of the shares in the two accounts you owned will be combined. - - As part of the Reorganization of your Selling Fund, systematic transactions (such as bank authorizations and systematic payouts) currently set up for your Selling Fund account may be transferred to your new Buying Fund account. Please contact your financial institution for additional details. - - Neither the Selling Fund nor the shareholders of any Selling Fund will pay any sales charge in connection with its Reorganization. - - After a Reorganization is completed, Selling Fund shareholders will be shareholders of the Buying Fund, and the Selling Fund will be dissolved. TAX CONSEQUENCES Each Reorganization is expected to be tax-free for federal income tax purposes and will not take place unless the Selling Fund and the Buying Fund receive a satisfactory opinion of tax counsel substantially to that effect. Accordingly, no gain or loss is expected to be recognized by the Selling Fund or its shareholders as a direct result of a Reorganization. Some or all of the portfolio assets of a Selling Fund may be sold in connection with its Reorganization. The actual tax impact of such sales will depend on the difference between the price at which such portfolio assets are sold and the Selling Fund's tax basis in such assets. Any net capital gains recognized in these sales will be distributed to shareholders as capital-gain dividends (to the extent of net realized long-term capital gains over net realized short-term capital losses) and/or ordinary dividends (to the extent of net realized short- term capital gains over net realized long-term capital losses) during or with respect to the year of sale, and such distributions will be taxable to shareholders. Additionally, because each Reorganization will end the tax year of the applicable Selling Fund, it will accelerate distributions to shareholders from the Selling Fund for its short tax year ending on the date of the Reorganization. Those tax year-end distributions will be taxable, and will include any capital gains resulting from portfolio turnover prior to the Reorganization that were not previously distributed. At any time prior to a Reorganization, a shareholder may redeem shares of a Selling Fund. This would likely result in the recognition of gain or loss to the shareholder for federal income tax purposes if the shareholder holds the shares in a taxable account. The tax basis and holding period of the shareholders' Selling Fund shares are expected to carry over to the shareholders' Reorganization Shares in the Buying Fund. For more information about the federal income tax consequences of the Reorganizations, see the section entitled "Tax Status of the Reorganizations." 4 FEES AND EXPENSES PROPOSALS 1(A) AND 1(B). REORGANIZATION OF EACH OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND, INC. INTO RIVERSOURCE DISCIPLINED EQUITY FUND The following tables describe the fees and expenses that you pay if you buy and hold shares of a Selling Fund or shares of the Buying Fund. The tables also show pro forma fees and expenses of the Buying Fund assuming the proposed Reorganization relating to the Buying Fund had been effective at the beginning of the most recent fiscal year. The tables reflect adjustments to fees and expenses that were approved by the Board Jan. 8, 2009, a summary of which is included in Exhibit D. The expenses shown in the tables do not include any one time costs, including any expenses related to the Reorganizations that may be borne by the Funds. See "Reasons for the Proposed Reorganizations and Board Deliberations" for more information. The tables have not been adjusted based on current net assets of the Funds, which will vary throughout the year and from year to year. In general, the annual operating expenses of a Fund will increase as the Fund's assets decrease. Due to recent unprecedented market volatility, the current total annual fund operating expenses listed for the Funds in the tables may be higher than the expense information presented, which are as of the most recent fiscal year. To the extent the investment manager and its affiliates have agreed to waive fees or cap (reimburse) expenses, the impact of the market volatility on the total annual (net) operating expenses in the current fiscal year will be limited. ACTUAL AND PRO FORMA FUND EXPENSES FOR THE MOST RECENT FISCAL YEAR SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R2 CLASS R3 CLASS R4 RIVERSOURCE LARGE CAP EQUITY FUND (ACTUAL) (SELLING FUND) CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
CLASS R CLASS I (TO BE (TO BE KNOWN AS KNOWN AS SELIGMAN COMMON STOCK FUND (ACTUAL) (SELLING FUND) CLASS A CLASS B CLASS C CLASS R2) CLASS R5) Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None(c) None
CLASS I CLASS R2 CLASS R3 CLASS R4 RIVERSOURCE DISCIPLINED EQUITY FUND (ACTUAL) (BUYING FUND) CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
CLASS I CLASS R2 CLASS R3 CLASS R4 RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED) CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None(b) 5% 1% None
(a) This charge may be reduced depending on the total value of your investments in the RiverSource Family of Funds. See Exhibit C "Sales Charges." (b) A 1% contingent deferred sales charge ("CDSC") may be assessed on Class A shares purchased without an initial sales charge and sold within 18 months after purchase. See Exhibit C "Sales Charges." (c) Effective on or about June 13, 2009, the 1% CDSC will be eliminated on Class R (to be known as Class R2). 5 ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS:
RIVERSOURCE LARGE CAP EQUITY FUND (ACTUAL) (SELLING FUND) CLASS A CLASS B CLASS C CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(a)* 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(b) 0.31% 0.32% 0.32% 0.10% 0.42% 0.42% 0.40% 0.20% Total annual fund operating expenses 1.03% 1.79% 1.79% 0.57% 1.39% 1.14% 0.87% 0.67% Fee waiver/expense reimbursement 0.07% 0.06% 0.07% 0.03% 0.05% 0.05% 0.05% 0.08% Total annual (net) fund operating expenses(c) 0.96% 1.73% 1.72% 0.54% 1.34% 1.09% 0.82% 0.59% Acquired fund fees and expenses(d) 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% Total fund and acquired fund fees and expenses(d) 0.98% 1.75% 1.74% 0.56% 1.36% 1.11% 0.84% 0.61% CLASS R CLASS I (TO BE (TO BE SELIGMAN COMMON STOCK FUND (ACTUAL) KNOWN AS KNOWN AS (SELLING FUND) CLASS A CLASS B CLASS C CLASS R2) CLASS R5) Management fees 0.65% 0.65% 0.65% 0.65% 0.65% Distribution and/or service (12b-1) fees 0.24% 1.00% 1.00% 0.50% 0.00% Other expenses(e) 0.37% 0.39% 0.39% 0.49% 0.24% Total annual fund operating expenses 1.26% 2.04% 2.04% 1.64% 0.89% RIVERSOURCE DISCIPLINED EQUITY FUND (ACTUAL) (BUYING FUND) CLASS A CLASS B CLASS C CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(f)* 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(g) 0.18% 0.19% 0.19% 0.08% 0.38% 0.37% 0.38% 0.13% Total annual fund operating expenses 0.96% 1.72% 1.72% 0.61% 1.41% 1.15% 0.91% 0.66% Fee waiver/expense reimbursement 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.07% 0.00% Total annual (net) fund operating expenses(h) 0.96% 1.72% 1.72% 0.61% 1.41% 1.15% 0.84% 0.66% RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY RIVERSOURCE LARGE CAP EQUITY FUND IS CONSUMMATED) CLASS A CLASS B CLASS C CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(f)* 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(g) 0.25% 0.26% 0.25% 0.07% 0.37% 0.37% 0.37% 0.12% Total annual fund operating expenses 0.99% 1.75% 1.74% 0.56% 1.36% 1.11% 0.86% 0.61% Fee waiver/expense reimbursement 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.02% 0.00% Total annual (net) fund operating expenses(h) 0.99% 1.75% 1.74% 0.56% 1.36% 1.11% 0.84% 0.61% RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY SELIGMAN COMMON STOCK FUND IS CONSUMMATED) CLASS A CLASS B CLASS C CLASS R2 CLASS R5 Management fees(f)* 0.53% 0.53% 0.53% 0.53% 0.53% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.50% 0.00% Other expenses(g) 0.17% 0.18% 0.19% 0.38% 0.13% Total annual fund operating expenses(h) 0.95% 1.71% 1.72% 1.41% 0.66% RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATIONS OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND ARE CONSUMMATED) CLASS A CLASS B CLASS C CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(f)* 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% 0.49% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(g) 0.24% 0.26% 0.25% 0.07% 0.37% 0.37% 0.37% 0.12% Total annual fund operating expenses 0.98% 1.75% 1.74% 0.56% 1.36% 1.11% 0.86% 0.61% Fee waiver/expense reimbursement 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.02% 0.00% Total annual (net) fund operating expenses(h) 0.98% 1.75% 1.74% 0.56% 1.36% 1.11% 0.84% 0.61%
(a) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.08% for the most recent fiscal year. The index against which RiverSource Large Cap Equity Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. 6 (b) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4), and have been adjusted to reflect the impact of a new per account transfer agency fee (Class A, Class B, and Class C direct at fund accounts only), effective on or about June 13, 2009. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of RiverSource Large Cap Equity 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, will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. (d) In addition to the RiverSource Large Cap Equity Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, is as shown. (e) Effective on or about June 13, 2009, Class R will be redesignated Class R2, Class I will be redesignated Class R5, a new transfer agent agreement, and a new plan administration services agreement (Class R2 only), will be in effect with new fee structures. Other expenses include the transfer agency fee, custody fee, other nonadvisory expenses and a plan administrative services fee (Class R2 only). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses, if any, for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (f) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.04% for the most recent fiscal year. The index against which RiverSource Disciplined Equity Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. (g) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses, a plan administration services fee (for Class R2, Class R3 and Class R4), and have been adjusted to reflect the impact of a new per account transfer agency fee (Class A, Class B, and Class C direct at fund accounts only), effective on or about June 13, 2009. Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses, if any, for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. (h) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of RiverSource Disciplined Equity 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, will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.72% for Class I, 1.52% for Class R2, 1.27% for Class R3, 0.88% for Class R4 and 0.77% for Class R5. * The performance incentive adjustment for RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund are structured identically and are computed by comparing each Fund's performance to the performance of an index of comparable funds published by Lipper Inc., as noted above. The maximum adjustment (increase or decrease) is 0.12% of the average net assets on an annual basis. The adjustment is determined by measuring the percentage differences over a rolling 12-month period between the performance of the Fund and the change in the designated Lipper index. Additional information on the calculation methodology is set forth in the Reorganization SAI. EXPENSE EXAMPLES: These examples are intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the applicable Fund for the time periods indicated and then redeem all of your shares at the end of those periods, both under the current arrangements and, for the Buying Fund, assuming the proposed Reorganization or Reorganizations had been in effect. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
RIVERSOURCE LARGE CAP EQUITY FUND (ACTUAL) (SELLING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $669 $884 $1,116 $1,782 Class B $678(b) $864(b) $1,175(b)$1,926(c) Class C $277(b) $563 $ 975 $2,126 Class I $ 57 $186 $ 327 $ 738 Class R2 $138 $442 $ 767 $1,692 Class R3 $113 $364 $ 634 $1,409 Class R4 $ 86 $279 $ 489 $1,096 Class R5 $ 62 $213 $ 377 $ 855
SELIGMAN COMMON STOCK FUND (ACTUAL) (SELLING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $696 $952 $1,228 $2,015 Class B $707(b) $940(b) $1,299(b)$2,173(c) Class C $307(b) $640 $1,099 $2,374 Class R (to be known as Class R2) $167 $518 $ 893 $1,949 Class I (to be known as Class R5) $ 91 $284 $ 494 $1,100
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RIVERSOURCE DISCIPLINED EQUITY FUND (ACTUAL) (BUYING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $667 $863 $1,076 $1,690 Class B $675(b) $842(b) $1,134(b)$1,833(c) Class C $275(b) $542 $ 934 $2,035 Class I $ 62 $196 $ 341 $ 766 Class R2 $144 $447 $ 772 $1,696 Class R3 $117 $366 $ 634 $1,402 Class R4 $ 86 $283 $ 498 $1,118 Class R5 $ 67 $211 $ 368 $ 826
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY RIVERSOURCE LARGE CAP EQUITY FUND IS CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $670 $872 $1,091 $1,723 Class B $678(b) $851(b) $1,150(b)$1,866(c) Class C $277(b) $548 $ 945 $2,057 Class I $ 57 $180 $ 313 $ 705 Class R2 $138 $431 $ 746 $1,640 Class R3 $113 $353 $ 612 $1,356 Class R4 $ 86 $273 $ 476 $1,063 Class R5 $ 62 $196 $ 341 $ 766
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY SELIGMAN COMMON STOCK FUND IS CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $666 $861 $1,071 $1,679 Class B $674(b) $839(b) $1,129(b)$1,822(c) Class C $275(b) $542 $ 934 $2,035 Class R2 $144 $447 $ 772 $1,696 Class R5 $ 67 $211 $ 368 $ 826
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATIONS OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND ARE CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $669 $869 $1,086 $1,712 Class B $678(b) $851(b) $1,150(b)$1,863(c) Class C $277(b) $548 $ 945 $2,057 Class I $ 57 $180 $ 313 $ 705 Class R2 $138 $431 $ 746 $1,640 Class R3 $113 $353 $ 612 $1,356 Class R4 $ 86 $273 $ 476 $1,063 Class R5 $ 62 $196 $ 341 $ 766
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. If you owned or will own any class of shares other than Class B or Class C you would pay the same costs shown in the tables above if you did not redeem your shares at the end of the periods indicated. If you owned or will own Class B or Class C shares, you would pay the following costs if you did not redeem your shares at the end of the periods indicated, which may be different than the costs shown in the tables above.
RIVERSOURCE LARGE CAP EQUITY FUND (ACTUAL) (SELLING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $178 $564 $975 $1,926(a) Class C $177 $563 $975 $2,126
SELIGMAN COMMON STOCK FUND (ACTUAL) (SELLING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $207 $640 $1,099 $2,175(a) Class C $207 $640 $1,099 $2,374
RIVERSOURCE DISCIPLINED EQUITY FUND (ACTUAL) (BUYING FUND) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $175 $542 $934 $1,833(a) Class C $175 $542 $934 $2,035
8
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY RIVERSOURCE LARGE CAP EQUITY IS CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $178 $551 $950 $1,866(a) Class C $177 $548 $945 $2,057
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY SELIGMAN COMMON STOCK FUND IS CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $174 $539 $929 $1,822(a) Class C $175 $542 $934 $2,035
RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATIONS OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND ARE CONSUMMATED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class B $178 $551 $950 $1,863(a) Class C $177 $548 $945 $2,057
(a) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. 9 PROPOSALS 1(A) AND 1(B). REORGANIZATIONS OF EACH OF RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND, INC. INTO RIVERSOURCE DISCIPLINED EQUITY FUND COMPARISON OF EACH SELLING FUND AND THE BUYING FUND COMPARISON OF INVESTMENT OBJECTIVES Each Fund seeks capital appreciation, but Seligman Common Stock Fund, Inc. ("Seligman Common Stock Fund" or "Seligman Selling Fund") also seeks current income. Because any investment involves risk, there is no assurance these objectives can be achieved. Only shareholders can change the Fund's objective. The investment objectives for the Funds are as follows: SELLING FUND: RiverSource Large Cap Equity Fund (the "RiverSource Selling Fund") seeks to provide shareholders with long- term capital growth. SELLING FUND: The Seligman Selling Fund seeks total return through a combination of capital appreciation and current income. BUYING FUND: RiverSource Disciplined Equity Fund (the "Buying Fund") seeks to provide shareholders with long-term capital growth. COMPARISON OF PRINCIPAL INVESTMENT STRATEGIES Each Fund invests predominantly in equity securities of large cap companies; however, the RiverSource Selling Fund and the Buying Fund generally emphasize investments in large cap companies to a greater extent than does the Seligman Selling Fund. The Seligman Selling Fund seeks income consistent with the Standard and Poor's 500 Composite Stock Price Index ("S&P 500 Index"), while the Buying Fund and the RiverSource Selling Fund have no similar goal. The RiverSource Selling Fund and the Buying Fund both invest at least 80% of their respective net assets in companies with market capitalizations greater than $5 billion at the time of purchase. The Seligman Selling Fund may invest up to 10% of its assets in foreign securities; however, this restriction excludes American Depositary Receipts ("ADRs"), so the actual percentage the Seligman Selling Fund invests both directly in foreign securities and indirectly in ADRs may exceed 10%. The RiverSource Selling Fund and the Buying Fund each may invest up to 25% of assets in foreign investments, and count ADRs towards the 25% limit. Detailed strategies for the Selling Funds and the Buying Fund are set forth below. The RiverSource Selling Fund and the Buying Fund share identical principal investment strategies.
RIVERSOURCE LARGE CAP EQUITY FUND (RIVERSOURCE SELLING FUND) SELIGMAN COMMON STOCK FUND RIVERSOURCE DISCIPLINED EQUITY FUND (SELIGMAN SELLING FUND) (BUYING FUND) - ------------------------------------------------------------------------------------------------ Generally, the Fund invests at least 80% of Under normal market conditions, at least 80% its net assets in common stocks that are of each Fund's net assets are invested in broadly diversified among a number of equity securities of companies listed with industries. The Fund usually invests in the market capitalizations greater than $5 billion common stock of larger U.S. companies (e.g., at the time of purchase, except that the companies with market capitalizations over $3 Buying Fund further limits this strategy to billion at the time of initial investment); companies listed on U.S. exchanges. The Funds however, it may invest in companies of any will provide shareholders with at least 60 size. The Fund may also invest in fixed-income days' notice of any change in the 80% policy. securities and cash equivalents. The investment manager may use derivatives The Fund seeks to produce a level of current such as futures, options, swaps and forward income consistent with its primary benchmark, contracts to produce incremental earnings, to the S&P 500 Index. This allows for variations hedge existing positions, maintain investment over time in the level of current income efficiency or to increase flexibility. produced by the Fund. The Fund may purchase ADRs, which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may invest up to 15% of its net assets in illiquid securities (i.e., securities that cannot be readily sold) and may invest up to 10% of its total assets directly in foreign securities. The limit on foreign securities does not include ADRs, or commercial paper and certificates of deposit issued by foreign banks. The Fund may also invest up to 10% of its assets in exchange-traded funds (ETFs). ETFs are traded, like individual stocks, on an exchange, but they represent baskets of securities that seek to track the performance of certain indices. The indices include not only broad-market indices but more specific indices as well, including those relating to particular sectors, countries and regions. The Fund may invest in ETFs for short-term cash management purposes or as part of its overall investment strategy. - ------------------------------------------------------------------------------------------------
10 In addition to the principal investment strategies set forth above, each Fund also has the following principal investment strategies: The investment manager will choose equity investments by employing proprietary, disciplined quantitative methods. The investment manager's disciplined quantitative approach is designed to identify companies with: - - Attractive valuations, based on factors such as price-to-earnings ratios; - - Sound balance sheets; or - - Improving outlooks, based on an analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - - The security is overvalued relative to other potential investments. - - The company does not meet the investment manager's performance expectations. The universe of stocks from which the investment manager selects the Funds' investments primarily will be those included in the Funds' benchmark, the S&P 500 Index. In selecting stocks for the Funds to purchase or to sell, the investment manager employs a rigorous process to evaluate the relationship between the risk associated with each security and its potential for positive returns. This process includes factors such as: - - Limits on positions relative to weightings in the benchmark index. - - Limits on sector and industry allocations relative to the benchmark index. - - Limits on size of holdings relative to market liquidity. COMPARISON OF FUNDAMENTAL POLICIES If the Reorganizations occur, the combined Fund will be subject to the fundamental investment policies of the Buying Fund. RiverSource Investments does not believe that the differences between the fundamental investment policies of the Funds result in any material difference in the way the Funds have been managed or in the way the combined Fund will be managed. For purposes of this discussion, a "fundamental" investment policy is one that may not be changed without a shareholder vote. The RiverSource Selling Fund and the Buying Fund have identical fundamental investment policies. The Funds' fundamental investment policies are set forth below:
RIVERSOURCE LARGE CAP EQUITY FUND (RIVERSOURCE SELLING FUND) SELIGMAN COMMON STOCK FUND RIVERSOURCE DISCIPLINED EQUITY FUND POLICY (SELIGMAN SELLING FUND) (BUYING FUND) - --------------------------------------------------------------------------------------------------------- UNDERWRITING The Fund may not underwrite the Each Fund will not act as an underwriter securities of other issuers, except (sell securities for others). However, insofar as the Fund may be deemed an under the securities laws, the Funds may underwriter under the 1933 Act (the "1933 be deemed to be an underwriter when it Act"), as amended, in disposing of a purchases securities directly from the portfolio security or in connection with issuer and later resells them. investments in other investment companies. - --------------------------------------------------------------------------------------------------------- LENDING The Fund may not make loans, except as Each Fund will not lend securities or permitted by the 1940 Act or any rule participate in an interfund lending thereunder, any SEC or SEC staff program if the total of all such loans interpretations thereof or any exemptions would exceed 33 1/3% of the Fund's total therefrom which may be granted by the assets except this fundamental investment SEC. policy shall not prohibit the Fund from purchasing money market securities, loans, loan participation or other debt securities, or from entering into repurchase agreements. - --------------------------------------------------------------------------------------------------------- BORROWING The Fund may not borrow money, except as Each Fund will not borrow money, except MONEY permitted by the 1940 Act or any rule for temporary purposes (not for thereunder, any SEC or SEC staff leveraging or investment) in an amount interpretations thereof or any exemptions not exceeding 33 1/3% of its total assets therefrom which may be granted by the (including the amount borrowed) less SEC. liabilities (other than borrowings) immediately after the borrowings. - --------------------------------------------------------------------------------------------------------- ISSUING SENIOR The Fund may not issue senior securities Each Fund will not issue senior SECURITIES except as permitted by the 1940 Act or securities, except as permitted under the any rule thereunder, any SEC or SEC staff 1940 Act, the rules and regulations interpretations thereof or any exemptions thereunder and any applicable exemptive therefrom which may be granted by the relief. SEC. - ---------------------------------------------------------------------------------------------------------
11
RIVERSOURCE LARGE CAP EQUITY FUND (RIVERSOURCE SELLING FUND) SELIGMAN COMMON STOCK FUND RIVERSOURCE DISCIPLINED EQUITY FUND POLICY (SELIGMAN SELLING FUND) (BUYING FUND) - --------------------------------------------------------------------------------------------------------- REAL ESTATE The Fund may not purchase or hold any Each Fund will not buy or sell real real estate, except the Fund may invest estate, unless acquired as a result of in securities secured by real estate or ownership of securities or other interests therein or issued by persons instruments, except this shall not (including real estate investment trusts prevent a Fund from investing in ("REITs")) which deal in real estate or securities or other instruments backed by interests therein. real estate or securities of companies engaged in the real estate business or REITs. For purposes of this policy, real estate includes real estate limited partnerships. - --------------------------------------------------------------------------------------------------------- COMMODITIES The Fund may not purchase or sell Each Fund will not buy or sell physical commodities or commodity contracts, commodities unless acquired as a result except to the extent permissible under of ownership of securities or other applicable law and interpretations, as instruments, except this shall not they may be amended from time to time. prevent a Fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. - --------------------------------------------------------------------------------------------------------- INDUSTRY The Fund may not invest 25% or more of Each Fund will not concentrate in any one CONCENTRATION its total assets, at market value, in the industry. According to the present securities of issuers in any particular interpretation by the SEC, this means industry; however, this limitation that up to 25% of a Fund's total assets, excludes securities issued or guaranteed based on current market value at time of by the U.S. government or any of its purchase, can be invested in any one agencies or instrumentalities. industry. - --------------------------------------------------------------------------------------------------------- DIVERSIFICATION The Fund may not make any investment Each Fund will not invest more than 5% of inconsistent with the Fund's their total assets in securities of any classification as a diversified company company, government, or political under the 1940 Act. subdivision thereof, except the limitation will not apply to investments in securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, or other investment companies, and except that up to 25% of a Fund's total assets may be invested without regard to this 5% limitation. Each Fund will not purchase more than 10% of the outstanding voting securities of an issuer, except that up to 25% of a Fund's assets may be invested without regard to this 10% limitation. - --------------------------------------------------------------------------------------------------------- MARGIN The Fund may not purchase securities on No fundamental policy. margin except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC. - --------------------------------------------------------------------------------------------------------- REPURCHASE The Fund will not enter into repurchase No fundamental policy, see fundamental AGREEMENTS agreements of more than one week's policy with respect to lending above. duration if more than 10% of its net assets would be so invested. - --------------------------------------------------------------------------------------------------------- DEALINGS WITH The Fund may not purchase or retain the No fundamental policy. DIRECTORS AND securities of any issuer (other than the OFFICERS shares of the Fund), if to its knowledge, those directors and officers of the Fund individually owning beneficially more than 1/2 of 1% of the outstanding securities of such, together own beneficially more than 5% of such securities. The Fund also may not deal with its directors or officers, or firms they are associated with, in the purchase or sale of securities of other issuers, except as broker. - ---------------------------------------------------------------------------------------------------------
12 COMPARISON OF NONFUNDAMENTAL POLICIES AND RELATED INVESTMENT STRATEGIES If the Reorganization occurs, the combined Fund will be subject to the nonfundamental investment policies of the Buying Fund. RiverSource Investments does not believe that the differences between the nonfundamental policies of the Funds result in any material differences in the way the Funds have been managed or in the way the combined Fund will be managed. The following highlights the differences in the Funds' nonfundamental investment policies (policies that may be changed without a shareholder vote) and related investment strategies. The RiverSource Selling Fund and the Buying Fund have the same nonfundamental policies.
RIVERSOURCE LARGE CAP EQUITY FUND (RIVERSOURCE SELLING FUND) SELIGMAN COMMON STOCK FUND RIVERSOURCE DISCIPLINED EQUITY FUND POLICY (SELLING FUND) (BUYING FUND) - --------------------------------------------------------------------------------------------------------- FUND The Fund may not borrow more than 15% of Not applicable, see the fundamental BORROWING the value of its assets. investment policy above. RESTRICTIONS - --------------------------------------------------------------------------------------------------------- SECURITIES OF The Fund may not acquire any securities of Not applicable. OPEN-END a registered open-end investment company INVESTMENT or a registered unit investment trust in COMPANIES reliance on subparagraph (F) or subparagraph (G) of Section 12(d)(1) of the 1940 Act. - --------------------------------------------------------------------------------------------------------- FOREIGN The Fund may invest up to 10% of its total Up to 25% of each Fund's net assets may be INVESTMENTS assets directly in foreign securities. The invested in foreign investments (including limit on foreign securities does not ADRs). include ADRs, or commercial paper and certificates of deposit issued by foreign banks. - --------------------------------------------------------------------------------------------------------- INVESTMENTS The Fund may not invest for the purpose of Not applicable, other than as otherwise TO CONTROL OR controlling or managing any company. permitted by the 1940 Act. MANAGE - --------------------------------------------------------------------------------------------------------- EXCHANGE The Fund may invest up to 10% of its Investing in exchange-traded funds (ETFs) TRADED assets in ETFs. is an allowable investment strategy for FUNDS the Fund, however, the Fund does not have a stated policy limiting these types of investments, other than as otherwise permitted by the 1940 Act. - --------------------------------------------------------------------------------------------------------- COMMODITIES The Fund may purchase and sell commodities See fundamental policy above. and commodity contracts only to the extent that such activities do not result in the Fund being a "commodity pool" as defined in the Commodity Exchange Act and the Commodity Futures Trading Commission's regulations and interpretations thereunder. Approval of the Board of Directors must be granted for a Fund to invest in any new type of commodity if it is of a type the Fund has not previously utilized. - --------------------------------------------------------------------------------------------------------- DERIVATIVES The Fund will invest in derivatives only The Fund may invest in derivatives to the for hedging or investment purposes. The extent permitted by its investment Fund will not invest in derivatives for strategy. speculative purposes, which means where the derivative investment exposes the Fund to undue risk of loss, such as where the risk of loss is greater than the cost of the investment. - --------------------------------------------------------------------------------------------------------- WARRANTS No more than 2% of net assets of the Fund Investing in warrants is an allowable may be invested in warrants not listed on investment strategy for the Fund. the New York or American Stock Exchanges. - --------------------------------------------------------------------------------------------------------- SHORT SALES The Fund may sell securities short The Fund is not prohibited from engaging "against-the-box." A short sale "against- in short sales as an investment strategy, the-box" is a short sale in which the Fund however, the Fund will seek Board approval owns an equal amount of the securities prior to utilizing short sales as an sold short (or securities convertible into active part of its investment strategy. or exchangeable for the securities sold short) without payment of further consideration for securities of the same issuer as, and equal in amount to, the securities sold short. - ---------------------------------------------------------------------------------------------------------
13
RIVERSOURCE LARGE CAP EQUITY FUND (RIVERSOURCE SELLING FUND) SELIGMAN COMMON STOCK FUND RIVERSOURCE DISCIPLINED EQUITY FUND POLICY (SELLING FUND) (BUYING FUND) - --------------------------------------------------------------------------------------------------------- PREFERRED The Fund may invest up to 20% of its net The Fund may invest in preferred stock and STOCK AND assets in preferred stock and debt debt securities to the extent permitted by DEBT securities. The Fund will invest only in its investment strategy. SECURITIES "investment grade" debt securities or, in the case of unrated securities, debt securities that are deemed to be of equivalent quality to "investment-grade" securities. "Investment-grade" debt securities are rated within the four highest rating categories as determined by Moody's or S&P. - --------------------------------------------------------------------------------------------------------- ACCESS The Fund may participate in access trades, See derivatives above. TRADES but its exposure is limited to 5% of total assets of the Fund at the time of purchase and dealing with counterparties believed to be reputable. - ---------------------------------------------------------------------------------------------------------
COMPARISON OF PRINCIPAL RISK FACTORS Although the Funds describe them differently, the principal investment risks associated with the Buying Fund and the Selling Funds are substantially similar because the Funds have similar investment objectives, principal investment strategies and investment policies except that the Seligman Selling Fund's objective is capital appreciation and current income while the Buying Fund's objective is long-term capital growth. By becoming shareholders of the Buying Fund, shareholders of the Seligman Selling Fund will no longer be in a Fund that has providing "current income" as part of the Fund's objective, and therefore may have different exposure to market risk. The actual risks of investing in each Fund depend on the securities held in each Fund's portfolio and on market conditions, both of which change over time. The Funds are subject to the principal investment risks described below. - - ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. - - DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Gains or losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial gain or loss for the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. - - MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid- sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. 14 - - ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. - - QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. PERFORMANCE The following bar charts and tables provide some illustration of the risks of investing in the Funds by showing, respectively: - - how each Fund's performance has varied for each full calendar year shown in the bar chart; and - - how each Fund's average annual total returns compare to indexes shown in the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How a Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. Bar Charts. Class A share information is shown in the bar charts; the sales charge for Class A shares is not reflected in the bar charts. Tables. The first table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares of RiverSource Large Cap Equity Fund. The second table shows total returns from hypothetical investments in Class A, Class B, Class C, Class R (to be known as Class R2) and Class I (to be known as Class R5) shares of Seligman Common Stock Fund. The third table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares of RiverSource Disciplined Equity Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - - the maximum sales charge of 5.75% for Class A shares; - - sales at the end of the period and deduction of the applicable contingent deferred sales charge ("CDSC") for Class B, Class C and Seligman Common Stock Fund Class R (to be known as Class R2) shares ; - - no sales charge for Class R2, Class R3, Class R4, Class R5, RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund Class I and Seligman Common Stock Fund Class I (to be known as Class R5) shares; and - - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. 15 AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) +27.57% +5.52% +5.76% +14.95% +2.68% -42.40% 2003 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +16.15% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -24.38% (quarter ended Dec. 31, 2008). 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. SELIGMAN COMMON STOCK FUND (SELLING FUND) CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) +3.82% -8.67% -13.40% -26.10% +23.11% +11.82% +1.26% +16.23% -1.84% -44.56% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +13.04% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -25.05% (quarter ended Dec. 31, 2008). 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. 16 RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) +9.96% +6.20% +16.47% +5.26% -38.74% 2004 2005 2006 2007 2008
During the periods shown in the bar chart, the highest return for a calendar quarter was +9.77% (quarter ended Dec. 31, 2004) and the lowest return for a calendar quarter was -22.19% (quarter ended Dec. 31, 2008). 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. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2008)
SINCE SINCE INCEPTION SINCE INCEPTION (CLASSES A, B, INCEPTION (CLASSES R2, 1 YEAR 5 YEARS C & R4) (CLASS I) R3 & R5) RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND): Class A Return before taxes -45.76% -6.49% -4.77%(a) N/A N/A Return after taxes on distributions -46.56% -7.68% -5.75%(a) N/A N/A Return after taxes on distributions and sale of Fund shares -29.75% -5.66% -4.19%(a) N/A N/A Class B Return before taxes -45.49% -6.36% -4.65%(a) N/A N/A Class C Return before taxes -43.33% -6.07% -4.63%(a) N/A N/A Class I Return before taxes -42.03% N/A N/A -5.60%(b) N/A Class R2 Return before taxes -42.32% N/A N/A N/A -22.21%(c) Class R3 Return before taxes -42.11% N/A N/A N/A -21.97%(c) Class R4 Return before taxes -42.27% -5.19% -3.74%(a) N/A N/A Class R5 Return before taxes -42.21% N/A N/A N/A -21.99%(c) S&P 500 Index (reflects no deduction for fees, expenses or taxes) -37.00% -2.19% -1.63%(d) -3.09%(e) -17.83%(f) Russell 1000(R) Index (reflects no deduction for fees, expenses or taxes) -37.60% -2.04% -1.36%(d) -2.96%(e) -18.18%(f) Lipper Large-Cap Core Funds Index -37.07% -2.73% -2.28%(d) -3.51%(e) -17.58%(f)
17 AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2008) (CONTINUED)
SINCE SINCE INCEPTION INCEPTION (CLASS R (CLASS I SINCE TO BE TO BE INCEPTION KNOWN AS KNOWN AS 1 YEAR 5 YEARS 10 YEARS (CLASS C) CLASS R2) CLASS R5) SELIGMAN COMMON STOCK FUND (SELLING FUND): Class A* Return before taxes -47.76% -7.57% -6.62% N/A N/A N/A Return after taxes on distributions -48.42% -8.46% -7.35% N/A N/A N/A Return after taxes on distributions and sale of Fund shares -30.41% -6.16% -5.28% N/A N/A N/A Class B Return before taxes -47.65% -7.48% -6.63%** N/A N/A N/A Class C*** Return before taxes -45.51% -7.16% N/A -7.26%(g) N/A N/A Class R (to be known as Class R2) Return before taxes -45.20% -6.68% N/A N/A -2.77%(h) N/A Class I (to be known as Class R5) Return before taxes -44.30% -6.06% N/A N/A N/A -5.44%(i) S&P 500 Index (reflects no deductions for fees, expenses or taxes) -36.99% -2.19% -1.38% -1.92%(j) +1.67%(k) -1.40%(l) Lipper Large-Cap Core Funds Average -37.23% -2.88% -1.72% -2.18%(j) +0.88%(k) -2.12%(l)
*Effective Jan. 7, 2008, the maximum initial sales charge on investments in Class A shares of less than $50,000 is 5.75%. Although for all periods presented in the table the Fund's Class A share returns reflect a 5.75% initial sales charge, the actual returns for periods prior to Jan. 7, 2008 would have been higher if a 4.75% maximum initial sales charge then in effect was incurred. **The ten-year return for Class B shares reflects automatic conversion to Class A shares in the ninth year after their date of purchase. ***Effective June 4, 2007, there is no initial sales charge on purchases of Class C shares. Although for all periods presented in the table the Fund's Class C share returns do not reflect an initial sales charge, the actual returns for periods prior to June 4, 2007 would have been lower if a 1.00% maximum initial sales charge then in effect was incurred.
SINCE SINCE INCEPTION SINCE INCEPTION (CLASSES A, B, INCEPTION (CLASSES R2, 1 YEAR 5 YEARS C & R4) (CLASS I) R3 & R5) RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND): Class A Return before taxes -42.25% -3.74% +0.37%(m) N/A N/A Return after taxes on distributions -42.82% -5.01% -0.89%(m) N/A N/A Return after taxes on distributions and sale of Fund shares -27.07% -3.41% +0.03%(m) N/A N/A Class B Return before taxes -42.09% -3.61% +0.54%(m) N/A N/A Class C Return before taxes -39.79% -3.31% +0.67%(m) N/A N/A Class I Return before taxes -38.47% N/A N/A -2.30%(n) N/A Class R2 Return before taxes -38.77% N/A N/A N/A -19.29%(o) Class R3 Return before taxes -38.56% N/A N/A N/A -19.04%(o) Class R4 Return before taxes -38.72% -2.43% +1.60%(m) N/A N/A Class R5 Return before taxes -38.55% N/A N/A N/A -18.91%(o) S&P 500 Index (reflects no deduction for fees, expenses or taxes) -37.00% -2.19% +1.79%(p) -2.54%(q) -17.83%(r) Lipper Large-Cap Core Funds Index -37.07% -2.73% +0.87%(p) -2.89%(q) -17.58%(r)
18 (a) Inception date is March 28, 2002. (b) Inception date is March 4, 2004. (c) Inception date is Dec. 11, 2006. (d) Measurement period started March 28, 2002. (e) Measurement period started March 4, 2004. (f) Measurement period started Dec. 11, 2006. (g) Inception date is May 27, 1999. (h) Inception date is April 30, 2003. (i) Inception date is Nov. 30, 2001. (j) Measurement period started May 27, 1999. (k) Measurement period started April 30, 2003. (l) Measurement period started Nov. 30, 2001. (m) Inception date is April 24, 2003. (n) Inception date is July 15, 2004. (o) Inception date is Dec. 11, 2006. (p) Measurement period started April 24, 2003. (q) Measurement period started July 15, 2004. (r) Measurement period started Dec. 11, 2006. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The RiverSource Disciplined Equity Fund's and RiverSource Large Cap Equity Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. The Lipper Large-Cap Core Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper's U.S. Diversified Equity (USDE) large-cap floor. Large-cap core funds typically have an average price-to-earnings ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. For RiverSource Large Cap Equity Fund, effective Nov. 1, 2008, the Russell 1000 Index is replaced with the S&P 500 Index as the Fund's primary benchmark. The investment manager made this recommendation to the RiverSource Large Cap Equity Fund's Board because the new index more closely aligns to the Fund's investment strategy. Investors cannot invest directly in an index or an average. 19 ADDITIONAL INFORMATION ABOUT EACH REORGANIZATION TERMS OF THE REORGANIZATIONS The Board has approved the Agreement, the form of which is attached as Exhibit A. The Agreement provides for Reorganizations on the following terms: - - Each Reorganization is expected to occur before the end of the third quarter of 2009, pending shareholder approval, receipt of any necessary regulatory approvals and satisfaction of any other conditions to closing. However, following shareholder approval, each Reorganization may happen at any time agreed to by the applicable Selling Fund and the Buying Fund. - - Each Selling Fund will transfer all of its assets to the Buying Fund and, in exchange, the Buying Fund will assume all the Selling Fund's liabilities and will issue to the Selling Fund, as applicable, Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares with an aggregate net asset value on the business day immediately preceding the closing of the Reorganization equal to the value of the assets that it receives from the Selling Fund, less the liabilities assumed by the Buying Fund in the transaction. The Reorganization Shares will immediately be distributed to the Selling Fund shareholders in proportion to their holdings of shares of the Selling Fund. As a result, shareholders of the Selling Fund will become, as applicable, Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shareholders of the Buying Fund. - - No Selling Fund and no shareholders of any Selling Fund will pay any sales charge in connection with its Reorganization. - - The net asset value of each Selling Fund and the Buying Fund will be computed as of 3:00 p.m., Central time, on the business day immediately preceding the closing date of the applicable Reorganization. - - After its Reorganization, each Selling Fund will be dissolved. CONDITIONS TO CLOSING EACH REORGANIZATION The completion of each Reorganization is subject to certain conditions described in the Agreement, including: - - The Selling Fund will have declared and paid a dividend that will distribute all of the Selling Fund's net investment income and net capital gains, if any, to the shareholders of the Selling Fund for the taxable years ending on or prior to the closing date of the Reorganization. - - The Funds will have received any approvals, consents or exemptions from the SEC or any other regulatory body necessary to carry out the Reorganization. - - A registration statement on Form N-14 relating to the Reorganization will have been filed with the SEC and declared effective. - - The shareholders of the Selling Fund will have approved the Agreement. - - The Selling Fund will have received an opinion of tax counsel to the effect that, although not entirely free from doubt, the shareholders of the Selling Fund will not recognize gain or loss for federal income tax purposes upon the exchange of their Selling Fund shares for the Buying Fund shares in connection with the Reorganization. TERMINATION OF THE AGREEMENT The Agreement and the transactions contemplated by it may be terminated and abandoned with respect to any Reorganization by resolution of the Board at any time prior to closing date thereof. In the event of a termination, RiverSource Investments will bear all costs associated with the Reorganization. TAX STATUS OF THE REORGANIZATIONS Each Reorganization is intended to qualify for federal income tax purposes as a tax-free reorganization under section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). As a condition to the closing of each Reorganization, each Selling Fund and the Buying Fund will receive an opinion from Ropes & Gray LLP to the effect that, although not free from doubt, on the basis of existing provisions of the Code, U.S. Treasury regulations issued thereunder, current administrative rules, pronouncements and court decisions, for federal income tax purposes: - - The transfer of the Selling Fund's assets to the Buying Fund in exchange for Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, of the Buying Fund and the assumption by the Buying Fund of the Selling Fund's liabilities, followed by the distribution of those Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, to the Selling Fund's shareholders and the termination of the Selling Fund, will be a "reorganization" within the meaning of Section 368(a)(1) of the Code, and the Selling Fund and the Buying Fund will each be a "party to the reorganization" within the meaning of Section 368(b) of the Code. 20 - - Under Section 361 of the Code, no gain or loss will be recognized by the Selling Fund upon the transfer of all of its assets to the Buying Fund or on the distribution by the Selling Fund of Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, of the Buying Fund to Selling Fund shareholders in liquidation. - - Under Section 354 of the Code, the shareholders of the Selling Fund will not recognize gain or loss upon the exchange of their Class A, Class B, Class C, Class R, Class R2, Class R3, Class R4, Class R5 and/or Class I shares as applicable, of the Selling Fund solely for Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 shares and/or Class I shares, as applicable, of the Buying Fund as part of the Reorganization. - - Under Section 358 of the Code, the aggregate tax basis of the Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, of the Buying Fund that a Selling Fund shareholder receives in the Reorganization will be the same as the aggregate tax basis of the Class A, Class B, Class C, Class R, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, of the Selling Fund exchanged therefor. - - Under Section 1223(1) of the Code, the holding period for the Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, of the Buying Fund that a Selling Fund shareholder receives in the Reorganization will include the period for which he or she held the Class A, Class B, Class C, Class C2, Class R and/or Class I shares, as applicable, of the Selling Fund exchanged therefor, provided that on the date of the exchange he or she held such Selling Fund shares as capital assets. - - Under Section 1032 of the Code, no gain or loss will be recognized by the Buying Fund upon the receipt of the Selling Fund's assets solely in exchange for the issuance of the Buying Fund's Class A, Class B, Class C, Class R2, Class R3, Class R4, Class R5 and/or Class I shares, as applicable, to the Selling Fund and the assumption of all of the Selling Fund's liabilities by the Buying Fund. - - Under Section 362(b) of the Code, the Buying Fund's tax basis in the assets that the Buying Fund received from the Selling Fund will be the same as the Selling Fund's tax basis in those assets immediately prior to the transfer. - - Under Section 1223(2) of the Code, the Buying Fund's holding periods in the assets received from the Selling Fund will include the Selling Fund's holding periods in such assets. - - The Buying Fund will succeed to and take into account the items of the Selling Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder. Ropes & Gray LLP will express no view with respect to the effect of a Reorganization on any transferred asset as to which any unrealized gain or loss is required to be recognized under federal income tax principles (i) at the end of a taxable year or upon the termination thereof, or (ii) upon the transfer of such asset regardless of whether such a transfer would otherwise be a non- taxable transaction. The opinion will be based on certain factual certifications made by the officers of the Selling Fund and the Buying Fund and will also be based on customary assumptions. The opinion will note and distinguish certain published precedent, and it is possible that the Internal Revenue Service (the "IRS") could disagree with Ropes & Gray LLP's opinion. Opinions of counsel are not binding upon the IRS or the courts. If a Reorganization is consummated but does not qualify as a tax-free reorganization under the Code, a shareholder of the Selling Fund would recognize a taxable gain or loss equal to the difference between his or her tax basis in his or her Selling Fund shares and the fair market value of the shares of the Buying Fund he or she received. Shareholders of a Selling Fund should consult their tax advisors regarding the effect, if any, of the Reorganization in light of their individual circumstances. In the case of both of the Selling Funds, portfolio manager substitutions independent of the Reorganizations have occurred and resulted in substantial portfolio turnover. An additional portion of or all of the portfolio assets of each Selling Fund may also be sold in connection with its Reorganization. The actual tax impact of such sales depends on the difference between the price at which such portfolio assets are sold and the Selling Fund's tax basis in such assets. Any net capital gains recognized in these sales will be distributed to Selling Fund shareholders as capital gain dividends (to the extent of net realized long-term capital gains over net realized short-term capital losses) and/or ordinary dividends (to the extent of net realized short-term capital gains over net realized long-term capital losses) during or with respect to the year of sale, and such distributions will be taxable to shareholders. Because each Reorganization will end the tax year of the applicable Selling Fund, it will accelerate distributions to shareholders from the Selling Fund for its short tax year ending on the date of the Reorganization. Those tax year-end distributions will be taxable and will include any capital gains resulting from portfolio turnover prior to the Reorganization. Prior to the closing of each Reorganization, the Selling Fund will, and the Buying Fund may, declare a distribution to shareholders, which, together with all previous distributions, will have the effect of distributing to shareholders all of its investment company taxable income (computed without regard to the deduction for dividends paid), net tax-exempt income, if 21 any, and net realized capital gains, if any, through the closing of the Reorganization. These distributions will be taxable to shareholders. A Fund's ability to carry forward capital losses and to use them to offset future gains may be limited as a result of the Reorganization. First, a Fund's "pre-acquisition losses" (including capital loss carryforwards, net current-year capital losses, and unrealized losses that exceed certain thresholds) may become unavailable to offset gains of the combined Fund. Second, one Fund's pre- acquisition losses cannot be used to offset unrealized gains in another Fund that are "built in" at the time of the Reorganization and that exceed certain thresholds ("non-de minimis built-in gains") for five tax years. Third, a Selling Fund's loss carryforwards, as limited under the previous two rules, are permitted to offset only that portion of the income of the Buying Fund for the taxable year of the Reorganization that is equal to the portion of the Buying Fund's taxable year that follows the date of the Reorganization (prorated according to number of days). Therefore, in certain circumstances, shareholders of a Fund may pay taxes sooner, or pay more taxes, than they would have had a Reorganization not occurred. In addition, the combined Fund resulting from the Reorganizations will have tax attributes that reflect a blending of the tax attributes of the Funds at the time of the Reorganization (including as affected by the rules set forth above). Therefore, the shareholders of the Selling Fund will in each case receive a proportionate share of any "built-in" (unrealized) gains in another Fund's assets, as well as any taxable gains realized by the Buying Fund but not distributed to its shareholders prior to the Reorganization, when such gains are eventually distributed. As a result, shareholders of a Selling Fund may receive a greater amount of taxable distributions than they would have had the Reorganization not occurred. And any pre-acquisition losses of the Selling Fund (whether realized or unrealized) remaining after the operation of the limitation rules described above will become available to offset capital gains realized after the Reorganization and thus may reduce subsequent capital gain distributions to a broader group of shareholders than would have been the case absent such Reorganization, such that the benefit of those losses to Selling Fund shareholders may be further reduced relative to what the benefit would have been had the Reorganization not occurred. The impact of the rules described above will depend on the relative sizes of, and the losses and gains (both realized and unrealized) in, each Fund at the time of its Reorganization and thus cannot be calculated precisely prior to the Reorganization. The realized and unrealized gains and losses of each Fund at the time of its Reorganization will determine the extent to which the combining Funds' respective losses, both realized and unrealized, will be available to reduce gains realized by the combined Fund following the Reorganization, and consequently the extent to which the combined Fund may be required to distribute gains to its shareholders earlier than would have been the case absent the Reorganization. The following paragraph provides a brief summary of the tax impact of the Reorganizations had they both occurred on October 31, 2008. As noted above, the tax impact of a Reorganization depends on each Fund's relative tax situation at the time of the Reorganization, which situation will be different than the tax situation on October 31, 2008, and cannot be calculated precisely prior to the Reorganization. Due to the significant portfolio turnover of the Selling Funds resulting from RiverSource Investment's purchase of Seligman and portfolio manager substitutions made independent of the Reorganizations, and the substantial volatility in the marketplace, the actual tax impact of the Reorganizations could differ substantially from those described below. Proposals 1(a) and (b): Reorganizations of each of RiverSource Large Cap Equity Fund and Seligman Common Stock Fund into RiverSource Disciplined Equity Fund: As of October 31, 2008, RiverSource Large Cap Equity Fund (a Selling Fund) had no capital loss carryforwards but had net realized losses equal to approximately 16.1% of net assets and unrealized losses equal to approximately 65.8% of net assets. Seligman Common Stock Fund (a Selling Fund) had net realized losses including capital loss carryforwards equal to approximately 18.3% of net assets and unrealized losses equal to approximately 38.2% of net assets. RiverSource Disciplined Equity Fund (Buying Fund) had no capital loss carryforwards but had net realized losses equal to approximately 2.9% of net assets and unrealized losses equal to approximately 49.8% of net assets. If both of the Reorganizations had occurred on October 31, 2008, the loss limitation rules would not have affected the combined Fund's ability to use any of the Funds' realized losses to offset gains recognized by the combined Fund. The losses of each Selling Fund would thus have been available to reduce subsequent capital gain distributions to shareholders of the combined Fund, spreading the tax benefit of such losses over a larger group of shareholders than if the Reorganization had not occurred. Subsequent to October 31, 2008, both Selling Funds experienced significant portfolio turnover. The recognition of gain or loss resulting from such portfolio turnover could increase the potential tax costs of the Reorganizations to shareholders of the Selling Funds relative to the costs described above. Additionally, to the extent Seligman Common Stock Fund further realizes its unrealized and losses, and to the extent Buying Fund realizes its unrealized losses, the application of the loss limitation rules to such losses might cause a further increase in the potential tax cost to shareholders of the Selling Funds. The tax principles described above are not expected to change. However, their application and, at a minimum, the specific percentages noted above will change prior to each Reorganization because of market developments and the substantial volatility in the marketplace, any pre-Reorganization realignments or other sales of portfolio securities that might occur or that already have occurred, and shareholder activity in the Funds, among other changes. 22 Shareholders of a Selling Fund should consult their tax advisors regarding the effect, if any, of the Reorganization in light of their individual circumstances. Because the foregoing discussion relates only to the federal income tax consequences of the Reorganizations shareholders of a Selling Fund should also consult their tax advisors as to the state, local and foreign tax consequences, if any, of the Reorganizations. REASONS FOR THE PROPOSED REORGANIZATIONS AND BOARD DELIBERATIONS The Board believes that each proposed Reorganization will be advantageous to Selling Fund and Buying Fund shareholders based on its consideration of the following matters: - - TERMS AND CONDITIONS OF THE REORGANIZATION. The Board considered the terms and conditions of each Reorganization as described in the previous paragraphs. - - TAX CONSEQUENCES. The Board considered the tax-free nature of each Reorganization. The Board also considered the relative tax situations of each Fund and the resulting tax impact of the Reorganization to Selling Fund shareholders, and noted that the benefits of each Reorganization should outweigh any resulting tax cost to shareholders. - - CONTINUITY OF INVESTMENT. The Board took into account the fact that each Selling Fund and the Buying Fund have similar or identical investment objectives and, except as noted below and as discussed in more detail under each proposal, similar investment strategies: The Board considered that the Funds share similar investment objective of seeking capital appreciation, but considered that Seligman Common Stock Fund also seeks current income. The Board considered that each of the Funds invests at least 80% of its net assets in equity securities, but noted that RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund invest in equity securities of companies listed with market capitalizations greater than $5 billion at the time of purchase, while Seligman Common Stock Fund invests in equity securities with market capitalizations greater than $3 billion at the time of purchase. The Board considered that Seligman Common Stock Fund may invest up to 10% of assets in foreign securities (excluding American Depositary Receipts (ADRs), and that RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund may invest up to 25% of assets in foreign investments (including ADRs). - - EXPENSE RATIOS. The Board considered the relative expenses of the Funds. Specifically, the Board considered that, as of the end of each Fund's most recent fiscal year, the gross expense ratio for Seligman Common Stock Fund's Class A, Class B, Class C, Class R (to be known as Class R2), and Class I (to be known as Class R5) shares and RiverSource Large Cap Equity Fund's Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares (adjusted to reflect current fees, before giving effect to any applicable performance incentive adjustment and excluding certain other fees and expenses) were the same or higher than the gross expense ratio for RiverSource Disciplined Equity Fund's Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares (adjusted to reflect current fees and before giving effect to any applicable performance incentive adjustment). The Board considered that RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund (Class R4 shares only) are currently subject to a commitment by the investment manager and its affiliates to waive fees or cap expenses, and that the net expense ratio of RiverSource Large Cap Equity Fund's Class A, Class B, Class C, and Class R4 shares (adjusted to reflect current fees, before giving effect to any applicable performance incentive adjustment and excluding certain other fees and expenses) were higher than the applicable gross or net expense ratio of RiverSource Disciplined Equity Fund's Class A, Class B, Class C, and Class R4 shares (adjusted to reflect current fees and before giving effect to any applicable performance incentive adjustment), and that the net expense ratio of RiverSource Large Cap Equity Fund's Class I, Class R2, Class R3 and Class R5 shares (adjusted to reflect current fees, before giving effect to any applicable performance incentive adjustment and excluding certain other fees and expenses) were slightly higher than the gross expense ratio of RiverSource Disciplined Equity Fund's Class I, Class R2, Class R3 and Class R5 shares (adjusted to reflect current fees and before giving effect to any applicable performance incentive adjustment). The Board determined that there would be a decrease in expense ratio for each share class of each Selling Fund as a result of its respective Reorganization, but noted that the level of this reduction would vary by share class. In particular, expense impacts, with respect to a Fund's Class A shares are discussed below: The Board considered that as a result of the Reorganization, the expenses of RiverSource Large Cap Equity Fund would decline by approximately 0.09% on a gross expense basis and by 0.02% on a net expense basis (adjusted to reflect current fees, based on current commitments of the investment manager and its affiliates to waive fees and cap expenses, and before giving effect to any applicable performance incentive adjustment and excluding certain other fees and expenses), and that the expenses of Seligman Common Stock Fund would decline by approximately 0.24% on a net expense basis (adjusted to reflect current fees, based on current commitments of the investment manager and its affiliates to waive fees and cap expenses, and before giving effect to any applicable performance incentive adjustment and excluding certain other fees and expenses). 23 - - ECONOMIES OF SCALE. The Board observed that by combining the Funds, in addition to potential immediate economies of scale of a larger fund, the combined Fund would be able to take advantage of other economies of scale associated with a larger fund. For example, a larger fund may realize breakpoints more quickly, it should have an enhanced ability to effect portfolio transactions on more favorable terms and may have greater investment flexibility. Furthermore, the Board also considered that higher aggregate net assets resulting from each Reorganization and the opportunity for net cash inflows (or reduced outflows) may reduce the risk that, if net assets of Selling Funds fail to grow, or diminish, its total expense ratio could rise from current levels as fixed expenses, such as audit expenses and accounting expenses that are charged on a per Fund basis, become a larger percentage of net assets. - - COSTS. The Board considered the fact that a portion of the expenses of effecting each Reorganization (including professional fees and expenses related to printing and mailing proxy/prospectus materials and solicitation of shareholders) may be allocated to and borne by the Selling Fund, to the extent that such expenses are specifically allocable to the Selling Fund. Expenses of the Reorganization that are not allocated to and borne by the Selling Fund will be paid by RiverSource Investments. The investment manager has agreed to limit the expenses borne by a Selling Fund to its anticipated reductions in expenses over the first year following the Reorganization, less the expenses borne by the Selling Fund related to other integration-related activity. Any expenses not borne by a Selling Fund as a result of these limitations will be borne by the investment manager. - - DILUTION. The Board considered the fact that neither of the Reorganizations will dilute the interests of the current shareholders because each would be effected on the basis of the relative net asset value per share of the Selling Fund and Buying Fund, respectively. Thus, for example, a Class A shareholder of a Selling Fund will receive Class A shares of the Buying Fund equal in value to his or her Class A shares in the Selling Fund at the time of the Reorganization. - - PERFORMANCE AND OTHER FACTORS. The Board considered the relative performance records of each of the Funds, noting, however, that past performance is no guarantee of future results. The Board also considered the fact that the Reorganizations should allow for a more concentrated selling effort by the Funds' underwriter, thereby potentially benefiting each of the Funds, and that reduced outflows or increased inflows could help the Selling Fund shareholders achieve further economies of scale (see "Economies of Scale" above). The Board further took into account the investment manager's belief that each Selling Fund, as a stand-alone fund, was less likely to experience any growth in assets from investor inflows in the near term. In particular, the Board considered that the performance of RiverSource Disciplined Equity Fund was generally stronger than the performance of each of RiverSource Large Cap Equity Fund and Seligman Common Stock Fund (both on a relative basis and when compared with their respective peer groups). The Board noted the weak asset level of Seligman Common Stock Fund. The Board also noted the relatively weak prospects for asset growth for RiverSource Large Cap Equity Fund and Seligman Common Stock Fund, particularly compared to RiverSource Disciplined Equity Fund. The Board accorded particular weight to the fact that RiverSource Disciplined Equity Fund has substantially greater assets than Seligman Common Stock Fund, noting that RiverSource Disciplined Equity Fund was more than nineteen times the size of Seligman Common Stock Fund. - - POTENTIAL BENEFITS TO THE INVESTMENT MANAGER AND ITS AFFILIATES. The Board considered the potential benefits from the Reorganization that could be realized by the investment manager and its affiliates. The Board also considered, however, that shareholders of the Selling Fund are expected to benefit over time from any decrease in overall operating expense ratios resulting from the proposed Reorganization. BOARD DETERMINATIONS After considering the factors described above and other relevant information, at a meeting held on Jan. 8, 2009, each Selling Fund Board, including a majority of the independent Board members, found that participation in the relevant Reorganization is in the best interests of each Fund and that the interests of existing shareholders of the Fund will not be diluted as a result of the Reorganization. The Board of Directors of the Buying Fund approved the Agreement at a meeting held on Jan. 8, 2009. Among other factors, the Board members considered the terms of the Agreement, the provisions intended to avoid the dilution of shareholder interests and the anticipated tax consequences of the Reorganizations. The Board found that participation in each Reorganization is in the best interest of the Buying Fund and that the interest of the existing shareholders of the Buying Fund will not be diluted as a result of the Reorganization. BOARD RECOMMENDATION AND REQUIRED VOTE The Board recommends that shareholders of each Selling Fund approve the proposed Agreement. 24 For RiverSource Large Cap Equity Fund, the Agreement must be approved by a majority of the voting power of all shares entitled to vote. For Seligman Common Stock Fund, the Agreement must be approved by the affirmative vote of a majority of the outstanding voting securities of the Selling Fund. A vote of a majority of the outstanding voting securities of the Selling Fund is defined in 1940 Act as a vote of the lesser of (a) 67% or more of the shares of the Selling Fund that are present or represented by proxy at the Meeting, if more than 50% of the outstanding shares are present in person or by proxy at the Meeting; or (b) more than 50% of the outstanding shares of the Selling Fund. If the Agreement is not approved for any Selling Fund, the Board will consider what further action should be taken with respect to such Selling Fund. The approval of the Reorganization of one Selling Fund is not conditioned upon the approval of the Reorganization of any other Selling Fund. If shareholders approve the Reorganization of their Selling Fund, it is anticipated to occur before the end of the third quarter of 2009. 25 SECTION B -- PROXY VOTING AND SHAREHOLDER MEETING INFORMATION Reference to the "Fund" in this section is a reference to each Selling Fund. VOTING. Shareholders of record of the RiverSource Selling Fund on April 3, 2009 are entitled to vote based on their total dollar interest in the Fund irrespective of which class they own. Shareholders of record of the Seligman Selling Fund on April 3, 2009 are entitled to vote based on the number of shares they own in the Fund irrespective of which class they own. Unless otherwise restricted by the 1940 Act or by applicable state law, all share classes of a Selling Fund will vote together as a class on its proposed Reorganization. A quorum is required to take action at the Meeting. With respect to the RiverSource Selling Fund, the presence at the Meeting, in person or by proxy, of shareholders entitled to cast at least ten percent (10%) of the shares outstanding and entitled to vote at the Meeting shall constitute a quorum. With respect to the Seligman Selling Fund, the presence at the Meeting, in person or by proxy, of at least one-third of all shares outstanding and entitled to vote at the Meeting shall constitute a quorum. All votes count toward a quorum, regardless of how they are voted (For, Against or Abstain). Broker non-votes will be counted toward a quorum but not toward the approval of any proposal. (Broker non-votes are shares for which the underlying owner has not voted and the broker holding the shares does not have authority to vote.) If your shares are held in an IRA account with Ameriprise Trust Company as custodian, you have the right to instruct the IRA Custodian how to vote those shares. The IRA Custodian will vote any shares for which it has not received voting instructions in proportionately the same manner -- either For, Against, or Abstain -- as other Fund shareholders have voted. PROXY SOLICITATION. If you properly authorize your proxy by internet, telephone or facsimile, or by executing and returning the enclosed proxy card by mail, and your proxy is not subsequently revoked, your votes will be cast at the Meeting, and at any postponement or adjournment thereof. If you give instructions, your votes will be cast in accordance with your instructions. If you return your signed proxy card without instructions, your votes will be cast in favor of the Reorganization of your Fund. PROXY STATEMENT DELIVERY. "Householding" is the term used to describe the practice of delivering one copy of a document to a household of shareholders instead of delivering one copy of a document to each shareholder in the household. Certain shareholders of the Fund who share a common address and who have not opted out of the householding process may receive a single copy of the proxy statement along with the proxy card(s). If you received more than one copy of the proxy statement, you may elect to household in the future if permitted by your financial intermediary/financial institution. Contact the financial intermediary/financial institution through which you purchased the Fund to determine whether householding is an option for your account. If you received a single copy of the proxy statement, you may opt out of householding in the future by contacting your financial intermediary/financial institution. An additional copy of this proxy statement may be obtained by writing to the following address: Computershare Fund Services, c/o Operation Department, 280 Oser Ave., Hauppauge, NY 11788 or calling Computershare Fund Services, toll free at (866) 438-8932. REVOKING YOUR PROXY. If you execute, date and submit a proxy card with respect of your Selling Fund, you may revoke by providing written notice to that Selling Fund (Attention: Secretary) at 50606 Ameriprise Financial Center, Minneapolis, MN 55474 or change your instructions by submitting a subsequently executed and dated proxy card, by authorizing your proxy by internet, telephone or facsimile on a later date or by attending the Meeting and casting your vote in person. If you authorize your proxy by internet, telephone or facsimile, you may change your instructions by authorizing a subsequent proxy by internet, telephone or facsimile or by completing, signing and returning a proxy card dated as of a date that is later than your last internet, telephone or facsimile proxy authorization or by attending the Meeting and casting your vote in person. Merely attending the Meeting without voting will not revoke your prior proxy. SIMULTANEOUS MEETINGS. The meeting for each Selling Fund will be held simultaneously with the meeting for the other Selling Fund, with each Reorganization being voted on separately by the shareholders of the relevant Selling Fund. If any shareholder objects to the holding of simultaneous meetings, the shareholder may move for an adjournment of his or her Selling Fund's meeting to a time after the Meeting so that a meeting for that Selling Fund may be held separately. If a shareholder makes this motion, the persons named as proxies will take into consideration the reasons for the objection in deciding whether to vote in favor of the adjournment, and may vote for or against the adjournment in their discretion. SOLICITATION OF PROXIES. The Board is asking for your vote and for you to vote as promptly as possible. The expenses of the solicitation will be paid by RiverSource Investments and by certain Funds (see discussion of "Costs" under "Reasons for the Proposed Reorganization and Board Deliberations"). Supplementary solicitations may be made by internet, telephone or facsimile, or by personal contact. Computershare Fund Services has been engaged to assist in the solicitation of proxies, at an aggregate estimated cost of $217,611. 26 SHAREHOLDER PROPOSALS. No proposals were received from shareholders. The Funds do not hold annual meetings of shareholders. Shareholders who wish to make a proposal at a Fund's next special meeting, which may not be included in the Fund's proxy materials, must notify the relevant Fund a reasonable amount of time before the Fund begins to print and mail its proxy materials. The fact that a Fund receives a shareholder proposal in a timely manner does not ensure inclusion of the proposal in the proxy materials, as there are other requirements in the proxy rules relating to such inclusion. DISSENTERS' RIGHT OF APPRAISAL. Under Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, the RiverSource Selling Fund shareholders are entitled to assert dissenters' rights in connection with their Selling Fund's Reorganization and obtain payment of the "fair value" of their shares, provided that they comply with the requirements of Minnesota law. A copy of the relevant provisions is attached as Exhibit B. Notwithstanding the provision of Minnesota law, the SEC has taken the position that the use of state appraisal procedures by a mutual fund would be a violation of Rule 22c-1, the forward pricing rule, under the 1940 Act. This rule states that no mutual fund may redeem its shares other than at net asset value next computed after receipt of a request for redemption. It is the SEC's position that Rule 22c-1 supersedes appraisal provisions in state statutes. In the interest of ensuring equal valuation for all shareholders, dissenters' rights will be determined in accordance with the SEC's interpretation. As a result, if any shareholder elects to exercise dissenters' rights under Minnesota law, the RiverSource Selling Fund intends to submit this question to a court of competent jurisdiction. In that event, a dissenting shareholder would not receive any payment until the end of the court proceeding. OTHER BUSINESS. The Board does not know of any matters to be presented at the Meeting other than the Reorganizations. If other business should properly come before the Meeting, the persons named as proxies will vote thereon in their discretion. ADJOURNMENT. With respect to the RiverSource Selling Fund Reorganization, in the event that not enough votes are received by the time scheduled for the Meeting, the persons named as proxies may move for one or more adjournments of the meeting for a period of not more than 120 days of the original record date for the Meeting in the aggregate to allow further solicitation of shareholders on the proposals. Any adjournment requires the affirmative vote of a majority of the voting power of the shares present at the Meeting. With respect to the Seligman Selling Fund Reorganization, if not enough votes are received by the time scheduled for the meeting, or, even if a quorum is present, if sufficient votes in favor of any Reorganization are not received and tabulated prior to the time scheduled for the Meeting, the chairman of the Meeting may adjourn the Meeting, with no notice other than an announcement at the Meeting, to a date not later than the 120th day after the original record date for the Meeting to allow further solicitation of shareholders in connection with the proposed Reorganizations. If insufficient votes are received by the time of the Meeting, the persons named as proxies will vote in favor of adjournment those shares they are entitled to vote that have voted in favor of the proposal. They will vote against any adjournment those shares that have voted against the proposal. A shareholder vote may be taken on one or more of the items in this proxy statement prior to adjournment if sufficient votes have been received with respect to that particular proposal(s), and may adjourn with respect to those proposals for which sufficient votes have not yet been received. 27 SECTION C -- CAPITALIZATION, OWNERSHIP OF FUND SHARES AND FINANCIAL HIGHLIGHTS This section contains the following information about the Buying Funds and Selling Fund:
TABLE CONTENT (all information is shown for the last fiscal year unless noted otherwise) C-1 Actual and pro forma capitalization of each Selling Fund and the Buying Fund C-2 Actual and pro forma ownership of Fund shares C-3 Financial Highlights of the Buying Fund
THE FUNDS' INVESTMENT MANAGER AND DISTRIBUTORS. RiverSource Investments, LLC, 200 Ameriprise Financial Center, Minneapolis, MN 55474, a wholly-owned subsidiary of Ameriprise Financial, Inc., is the investment manager for each Fund. RiverSource Distributors, Inc., a wholly-owned subsidiary of Ameriprise Financial, Inc., and RiverSource Fund Distributors, Inc., an indirect wholly- owned subsidiary of RiverSource Investments, LLC, each at 50611 Ameriprise Financial Center, Minneapolis, MN 55474, are the distributors for each RiverSource Fund. RiverSource Fund Distributors, Inc. is also the distributor for the Seligman Selling Fund. CAPITALIZATION OF SELLING FUNDS AND BUYING FUND The following table shows the capitalization of the Funds as of April 3, 2009 and on a pro forma basis, assuming the proposed Reorganization had taken place. The pro forma combined table includes the impact of non-recurring estimated Reorganization costs expected to be borne by certain Selling Funds, based on the following factors. If the Reorganization is expected to result in reduction in the expense ratio for the Selling Fund, an amount of the proxy-related eligible expenses will be borne by the Selling Fund. This amount will not exceed the expected one-year benefit to the Selling Fund resulting from the reduced expense ratio, less the cost borne by the Selling Fund related to other integration- related activity. If the Reorganization is not expected to result in a reduction in the expense ratio for the Selling Fund, proxy-related eligible expenses will not be borne by the Selling Fund. Proxy-related eligible expenses not borne by the Selling Fund will be paid for by RiverSource Investments, LLC. Proxy-related eligible expenses include auditor fees and external legal fees ("Professional Fees"), and printing, postage, and solicitor expenses ("Proxy Vendor Expenses"). Professional Fees have been allocated among the Selling Funds on an equal weighted basis regardless of asset size or number of accounts. Proxy Vendor Expenses have been allocated among the Selling Funds based on number of accounts. The amount of proxy-related eligible expenses actually borne by the Selling Fund is limited, as described above.. The pro forma combined net assets are determined by adding the net assets, less any Reorganization costs, of the Selling Fund and the net assets of the Buying Fund. The pro forma combined shares outstanding are determined by dividing the net assets, less any Reorganization costs, of the Selling Fund by the net asset value per share of the Buying Fund and adding the actual shares outstanding of the Buying Fund. For the Reorganization of Seligman Common Stock Fund into RiverSource Disciplined Equity Fund, the Reorganization costs reduced pro forma combined net assets by $85,455 for Class A, $2,481 for Class B, $1,017 for Class C, $197 for Class R2, and $525 for Class R5. For the Reorganization of Seligman Common Stock Fund and RiverSource Large Cap Equity Fund into RiverSource Disciplined Equity Fund, the Reorganization costs reduced pro forma combined net assets by $80,055 for Class A, $8,143 for Class B, $640 for Class C, $53 for Class R2, and $784 for Class R5. TABLE C-1. ACTUAL AND PRO FORMA CAPITALIZATION OF EACH SELLING FUND AND THE BUYING FUND
NET ASSET VALUE FUND NET ASSETS PER SHARE SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND (ACTUAL) (SELLING FUND) Class A $ 1,732,413,517 $ 2.70 642,771,758 Class B 226,569,491 2.66 85,162,420 Class C 11,138,210 2.65 4,199,380 Class I 30,172,839 2.70 11,159,365 Class R2 2,235 2.72 822 Class R3 2,234 2.72 822 Class R4 57,696,440 2.74 21,093,883 Class R5 19,504,635 2.74 7,115,616 SELIGMAN COMMON STOCK FUND (ACTUAL) (SELLING FUND) Class A $76,952,114 $5.49 14,004,564 Class B 1,000,941 5.36 186,764 Class C 6,428,913 5.37 1,197,716 Class R (to be known as Class R2) 1,595,428 5.52 289,206 Class I (to be known as Class R5) 4,253,085 5.55 766,638
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NET ASSET VALUE FUND NET ASSETS PER SHARE SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND (ACTUAL) (BUYING FUND) Class A $615,617,050 $3.68 167,150,404 Class B 19,106,810 3.66 5,220,151 Class C 1,812,341 3.64 498,359 Class I 287,977,080 3.70 77,797,924 Class R2 2,433 3.68 661 Class R3 2,436 3.69 661 Class R4 79,068,178 3.70 21,392,896 Class R5 2,436 3.69 661 RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY RIVERSOURCE LARGE CAP EQUITY FUND IS CONSUMMATED) Class A $2,348,030,567 $3.68 637,914,947 Class B 245,676,301 3.66 67,124,384 Class C 12,950,551 3.64 3,558,307 Class I 318,149,919 3.70 85,952,745 Class R2 4,668 3.68 1,268 Class R3 4,670 3.69 1,266 Class R4 136,764,618 3.70 36,986,528 Class R5 19,507,071 3.69 5,286,470 RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATION OF ONLY SELIGMAN COMMON STOCK FUND IS CONSUMMATED) Class A $692,483,709 $3.68 188,038,083 Class B 20,105,270 3.66 5,492,954 Class C 8,240,237 3.64 2,264,265 Class R2 1,597,664 3.68 434,148 Class R5 4,254,996 3.69 1,153,116 RIVERSOURCE DISCIPLINED EQUITY FUND (PRO FORMA COMBINED, ASSUMING REORGANIZATIONS OF BOTH RIVERSOURCE LARGE CAP EQUITY FUND AND SELIGMAN COMMON STOCK FUND ARE CONSUMMATED) Class A $2,424,902,626 $3.68 658,804,093 Class B 246,669,099 3.66 67,395,640 Class C 19,378,824 3.64 5,324,316 Class I 318,149,919 3.70 85,952,745 Class R2 1,600,043 3.68 434,794 Class R3 4,670 3.69 1,266 Class R4 136,764,618 3.70 36,986,528 Class R5 23,759,372 3.69 6,438,855
OWNERSHIP OF SELLING FUND AND BUYING FUND SHARES The following table provides information on shareholders who owned more than 5% of any class of each Fund's outstanding shares as of Jan. 31, 2009. As of Jan. 31, 2009, officers and directors of each Fund, as a group, owned less than 1% of the outstanding shares of any class of such Fund. TABLE C-2. ACTUAL AND PRO FORMA OWNERSHIP OF FUND SHARES
PERCENT OF SHARES PERCENT OF SHARES PERCENT OF HELD -- RIVERSOURCE HELD -- RIVERSOURCE SHARES HELD LARGE CAP EQUITY DISCIPLINED EQUITY FOLLOWING THE FUND 5% OWNERS FUND (SELLING FUND) FUND (BUYING FUND) REORGANIZATION - -------------------------------------------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) AND RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) Class A None N/A N/A N/A Class B None N/A N/A N/A Class C None N/A N/A N/A Class I RiverSource Portfolio Builder Moderate Aggressive Fund 31.10% 16.47% 17.84% RiverSource Portfolio Builder Moderate Fund 24.32% 12.95% 14.02% RiverSource Portfolio Builder Total Equity Fund 18.11% 9.59% 10.39% RiverSource Portfolio Builder Aggressive Fund 17.76% 9.38% 10.17%
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PERCENT OF SHARES PERCENT OF SHARES PERCENT OF HELD -- RIVERSOURCE HELD -- RIVERSOURCE SHARES HELD LARGE CAP EQUITY DISCIPLINED EQUITY FOLLOWING THE FUND 5% OWNERS FUND (SELLING FUND) FUND (BUYING FUND) REORGANIZATION - -------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder Moderate Conservative Fund 6.55% N/A 0.61% RiverSource Income Builder Moderate Income Fund N/A 8.56% 7.76% RiverSource Income Builder Basic Income Fund N/A 5.89% 5.34% Class R2 RiverSource Investments LLC (RiverSource Investments), Minneapolis, MN 100.00% 100.00% 100.00% Class R3 RiverSource Investments 100.00% 100.00% 100.00% Class R4 Wachovia Bank NA (Wachovia Bank), Charlotte, NC 99.76% 99.96% 99.78% Class R5 Wachovia Bank 99.99% N/A 99.99% RiverSource Investments N/A 100.00% 0.01%
PERCENT OF SHARES PERCENT OF SHARES PERCENT OF HELD -- SELIGMAN HELD -- RIVERSOURCE SHARES HELD COMMON STOCK FUND DISCIPLINED EQUITY FOLLOWING THE FUND 5% OWNERS (SELLING FUND) FUND (BUYING FUND) REORGANIZATION - --------------------------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND (SELLING FUND) AND RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) Class A None N/A N/A N/A Class B Merrill Lynch, Pierce Fenner & Smith Inc. (MLPF&S), Jacksonville, FL 13.94% N/A 0.74% Class C MLPF&S 24.83% N/A 19.31% Class I RiverSource Portfolio Builder Moderate Aggressive Fund N/A 16.47% 16.47% RiverSource Portfolio Builder Moderate Fund N/A 12.95% 12.95% RiverSource Portfolio Builder Total Equity Fund N/A 9.59% 9.59% RiverSource Portfolio Builder Aggressive Fund N/A 9.38% 9.38% RiverSource Income Builder Moderate Income Fund N/A 8.56% 8.56% RiverSource Income Builder Basic Income Fund N/A 5.89% 5.89% Class R2(*) RiverSource Investments N/A 100.00% 0.15% Class R3 RiverSource Investments N/A 100.00% 99.86% Class R4 Wachovia Bank N/A 99.96% 99.88% Class R5(**) State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBG, Westwood, MA 38.85% N/A 38.86% Patterson & Co. FBO J. & W. Seligman Matched Accumulation Plan, Charlotte, NC 19.82% N/A 19.82% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBF, Westwood, MA 15.55% N/A 15.55% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBH, Westwood, MA 10.39% N/A 10.39% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBI, Westwood, MA 6.04% N/A 6.04% Patterson & Co. FBO Seligman Data Corp 401(K) Thrift Plan, Charlotte, NC 5.33% N/A 5.34%
*Represents Class R2 shares for RiverSource Disciplined Equity Fund and Class R shares for Seligman Common Stock Fund, which will be redesignated as Class R2 shares effective on or about June 13, 2009. **Represents Class R5 shares for RiverSource Disciplined Equity Fund and Class I shares for Seligman Common Stock Fund, which will be redesignated as Class R5 shares effective on or about June 13, 2009.
PERCENT OF SHARES HELD FOLLOWING THE FUND 5% OWNERS REORGANIZATION - ------------------------------------------------------------------------------------------------ RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND), SELIGMAN COMMON STOCK FUND (SELLING FUND) AND RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) Class A None N/A Class B MLPF&S 0.06% Class C MLPF&S 8.14% Class I RiverSource Portfolio Builder Moderate Aggressive Fund 17.88% RiverSource Portfolio Builder Moderate Fund 14.03% RiverSource Portfolio Builder Total Equity Fund 10.40% RiverSource Portfolio Builder Aggressive Fund 10.17% RiverSource Portfolio Builder Moderate Conservative Fund 0.61% RiverSource Income Builder Moderate Income Fund 7.76% RiverSource Income Builder Basic Income Fund 5.34% Class R2 RiverSource Investments 0.29%
30
PERCENT OF SHARES HELD FOLLOWING THE FUND 5% OWNERS REORGANIZATION - ------------------------------------------------------------------------------------------------ Class R3 RiverSource Investments 100.00% Class R4 Wachovia Bank 99.78% Class R5 RiverSource Investments 0.01% Wachovia Bank 82.08% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBG, Westwood, MA 7.00% Patterson & Co FBO J. & W. Seligman & Co Matched Accumulation Plan, Charlotte, NC 3.57% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBF, Westwood, MA 2.80% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBH, Westwood, MA 1.87% State Street Bank & Trust Co FBO North Carolina College Savings Program -- NCBI, Westwood, MA 1.09% Patterson & Co FBO Seligman Data Corp 401(K) Thrift Plan, Charlotte, NC 0.96%
31 FINANCIAL HIGHLIGHTS THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND THE BUYING FUND'S FINANCIAL PERFORMANCE. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE BUYING FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE BUYING FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THE INFORMATION FOR THE BUYING FUND'S FISCAL YEARS ENDING JULY 31, 2008 AND JULY 31, 2007 HAS BEEN AUDITED BY ERNST & YOUNG LLP, WHOSE REPORT, ALONG WITH THE BUYING FUND'S FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS, IS INCLUDED IN THE BUYING FUND'S MOST RECENT ANNUAL REPORT. THE INFORMATION FOR PRIOR PERIODS THROUGH THE FISCAL YEAR ENDED JULY 31, 2006 HAS BEEN AUDITED BY OTHER AUDITORS, AS INDICATED IN THE TABLES BELOW. THE AUDITORS' REPORT, FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS FOR THE BUYING FUND ARE AVAILABLE UPON REQUEST. TABLE C-3. FINANCIAL HIGHLIGHTS OF THE BUYING FUND Class A
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007 2006 2005 Net asset value, beginning of period $5.88 $7.22 $6.74 $6.70 $5.95 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .09(b) .08(b) .06 .04 Net gains (losses) (both realized and unrealized) (2.14) (1.00) .97 .35 .90 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.91) 1.05 .41 .94 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.06) (.06) (.06) (.03) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - -------------------------------------------------------------------------------------------------------------- Total distributions (.20) (.43) (.57) (.37) (.19) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.88 $7.22 $6.74 $6.70 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $620 $1,067 $1,410 $1,368 $28 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .98%(e) .96% 1.05% 1.05% 1.35% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .98%(e) .96% 1.03% 1.02% 1.25% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.88%(e) 1.35% 1.13% .95% .84% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% 137% 64% - -------------------------------------------------------------------------------------------------------------- Total return(h) (13.4- (36.05%)(i) 0%) 15.92% 6.25% 15.95% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 32 Class B
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007 2006 2005 Net asset value, beginning of period $5.80 $7.12 $6.65 $6.62 $5.90 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .04(b) .03(b) .01 .02 Net gains (losses) (both realized and unrealized) (2.12) (.99) .96 .34 .86 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (2.09) (.95) .99 .35 .88 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- (.01) (.01) -- Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - -------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.37) (.52) (.32) (.16) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.56 $5.80 $7.12 $6.65 $6.62 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $20 $35 $62 $73 $9 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.74%(e) 1.72% 1.82% 1.85% 2.13% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.74%(e) 1.72% 1.79% 1.82% 2.04% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.12%(e) .59% .37% .20% .06% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% 137% 64% - -------------------------------------------------------------------------------------------------------------- Total return(h) (14.0- (36.36%)(i) 7%) 15.18% 5.42% 15.03% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 33 Class C
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007 2006 2005 Net asset value, beginning of period $5.78 $7.11 $6.65 $6.62 $5.90 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .04(b) .03(b) .01 .01 Net gains (losses) (both realized and unrealized) (2.11) (.99) .96 .35 .87 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (2.08) (.95) .99 .36 .88 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.01) (.02) (.02) -- Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - -------------------------------------------------------------------------------------------------------------- Total distributions (.16) (.38) (.53) (.33) (.16) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.54 $5.78 $7.11 $6.65 $6.62 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $3 $3 $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.74%(e) 1.72% 1.81% 1.84% 2.13% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.74%(e) 1.72% 1.79% 1.81% 2.06% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.10%(e) .59% .36% .20% .02% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% 137% 64% - -------------------------------------------------------------------------------------------------------------- Total return(h) (14.1- (36.26%)(i) 1%) 15.14% 5.51% 15.03% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 34 Class I
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(I) 2008 2007 2006 2005 Net asset value, beginning of period $5.93 $7.27 $6.78 $6.73 $5.96 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05(b) .11(b) .11(b) .08 .04 Net gains (losses) (both realized and unrealized) (2.17) (.99) .97 .36 .92 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (2.12) (.88) 1.08 .44 .96 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.09) (.08) (.08) (.03) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - -------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.46) (.59) (.39) (.19) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.59 $5.93 $7.27 $6.78 $6.73 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $277 $391 $441 $252 $82 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .59%(e) .61% .70% .72% .91% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .59%(e) .61% .67% .70% .91% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.26%(e) 1.69% 1.47% 1.41% 1.19% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% 137% 64% - -------------------------------------------------------------------------------------------------------------- Total return (36.07%)(h) (12.98%) 16.29% 6.73% 16.29% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). 35 Class R2
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007(B) Net asset value, beginning of period $5.88 $7.21 $7.57 - ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .08 .03 Net gains (losses) (both realized and unrealized) (2.15) (1.00) .20 - ----------------------------------------------------------------------------------------------------------------- Total from investment operations (2.11) (.92) .23 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.04) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------------------------- Total distributions (.19) (.41) (.59) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.88 $7.21 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.37%(f) 1.41% 1.49%(f) - ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.11%(f) 1.16% 1.48%(f) - ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.78%(f) 1.15% .55%(f) - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------------------------- Total return (36.15%)(i) (13.51%) 3.31%(i) - -----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 36 Class R3
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007(B) Net asset value, beginning of period $5.89 $7.22 $7.57 - ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .09 .04 Net gains (losses) (both realized and unrealized) (2.15) (.99) .20 - ----------------------------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.90) .24 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------------------------- Total distributions (.21) (.43) (.59) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.89 $7.22 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.14%(f) 1.15% 1.24%(f) - ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .87%(f) .90% 1.22%(f) - ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.99%(f) 1.41% .81%(f) - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------------------------- Total return (36.03%)(i) (13.26%) 3.46%(i) - -----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 37 Class R4
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(I) 2008 2007 2006 2005 Net asset value, beginning of period $5.91 $7.25 $6.76 $6.71 $5.95 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05(b) .10(b) .09(b) .07 .05 Net gains (losses) (both realized and unrealized) (2.16) (1.00) .98 .36 .91 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (2.11) (.90) 1.07 .43 .96 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.07) (.07) (.07) (.04) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - -------------------------------------------------------------------------------------------------------------- Total distributions (.21) (.44) (.58) (.38) (.20) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.59 $5.91 $7.25 $6.76 $6.71 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $78 $126 $158 $224 $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .89%(e) .91% .95% .87% 1.18% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .81%(e) .84% .87% .84% 1.06% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.05%(e) 1.47% 1.29% 1.10% 1.03% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% 137% 64% - -------------------------------------------------------------------------------------------------------------- Total return (36.05%)(h) (13.26%) 16.15% 6.48% 16.25% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). 38 Class R5
PER SHARE INCOME AND CAPITAL CHANGES(A) Fiscal period ended July 31, 2009(J) 2008 2007(B) Net asset value, beginning of period $5.90 $7.24 $7.57 - ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .11 .06 Net gains (losses) (both realized and unrealized) (2.15) (1.00) .20 - ----------------------------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.89) .26 - ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.08) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------------------------- Total distributions (.22) (.45) (.59) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.90 $7.24 - ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .61%(f) .66% .75%(f) - ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .61%(f) .66% .74%(f) - ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.25%(f) 1.66% 1.28%(f) - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------------------------- Total return (35.97%)(i) (13.09%) 3.76%(i) - -----------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). 39 THIS PAGE LEFT BLANK INTENTIONALLY EXHIBIT A FORM OF AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization dated as of , 2009 (the "Agreement") is between each selling entity identified in Schedule A hereto (each a "Selling Corporation")(1), on behalf of each series thereof identified in Schedule A hereto as a Selling Fund (each a "Selling Fund"), buying entity identified in Schedule A hereto ("Buying Corporation")(2), on behalf of its series thereof identified in Schedule A hereto as the Buying Fund, and RiverSource Investments, LLC (solely for the purposes of Sections 3c and 11 of the Agreement). This Agreement shall be treated for all purposes as if each reorganization between a Selling Fund and the Buying Fund contemplated hereby had been the subject of a separate agreement. As context requires a Selling Corporation that is not organized as a series fund and that may not be considered or meet the definition of "Selling Fund" as set forth above, may be referred to as a "Selling Fund," for purposes of this Agreement. In consideration of their mutual promises, the parties agree as follows: 1. SHAREHOLDER APPROVAL. Each Selling Fund will call a meeting of its shareholders for the purpose of approving the Agreement and the transactions it contemplates (each a "Reorganization"). The Buying Fund agrees to furnish data and information, as reasonably requested, for the proxy statement to be furnished to shareholders of the corresponding Selling Fund. 2. REORGANIZATION. a. Plan of Reorganization. Each Reorganization will be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). At the Closing, each Selling Corporation will convey all of the assets of each Selling Fund to the Buying Fund. The Buying Fund will assume all liabilities of the corresponding Selling Fund. At the Closing, the Buying Corporation will deliver shares of the Buying Fund, including fractional shares, to the corresponding Selling Corporation on behalf of the corresponding Selling Fund. The number of shares will be determined by dividing the value of the net assets attributable to each class of shares of each Selling Fund, computed as described in paragraph 3(a), by the net asset value of one share of the corresponding class of the Buying Fund, computed as described in paragraph 3(b). Each Selling Fund will not pay a sales charge on the receipt of the Buying Fund's shares in exchange for the assets of such Selling Fund. In addition, the shareholders of each Selling Fund will not pay a sales charge on distribution to them of shares of the Buying Fund. b. Closing and Effective Time of the Reorganization. The Reorganization and all related acts necessary to complete the Reorganization (the "Closing") will occur on the first day on which the New York Stock Exchange (the "NYSE") is open for business following approval of shareholders of each Selling Fund and receipt of all necessary regulatory approvals, or such later date as the officers of the Selling Corporation and Buying Corporation may agree. 3. VALUATION OF NET ASSETS. a. The net asset value of each Selling Fund will be computed as of the close of regular trading on the NYSE on the business day immediately preceding the day of Closing (the "Valuation Date") using the valuation procedures set forth in the Buying Fund's then current prospectus. b. The net asset value per share of shares of the Buying Fund will be determined as of the close of regular trading on the NYSE on the Valuation Date, using the valuation procedures in the Buying Fund's then current prospectus. c. At the Closing, each Selling Fund will provide the Buying Fund with a copy of the computation showing the valuation of the net asset value per share of such Selling Fund on the Valuation Date, and the Buying Fund will provide the corresponding Selling Fund with a copy of the computation showing the determination of the net asset value per share of the Buying Fund on the Valuation Date. Both computations will be certified by an officer of RiverSource Investments, LLC, the investment manager. 4. LIQUIDATION AND DISSOLUTION OF THE SELLING FUND. a. On the date of the Closing, each Selling Corporation will liquidate each Selling Fund and distribute shares of each class of the Buying Fund to the shareholders of record of such Selling Fund's corresponding class. The Buying Fund will establish shareholder accounts in the names of each corresponding Selling Fund shareholder, representing the respective pro rata number of full and fractional shares of such class of the Buying Fund due to each such shareholder. All issued and outstanding shares of each Selling Fund will simultaneously be cancelled on the books of each Selling - ---------- (1) The Selling Corporation for the Reorganization of Seligman Common Stock Fund, Inc. is a Maryland corporation and the Selling Corporation for the Reorganization of RiverSource Large Cap Equity Fund is a Minnesota corporation. (2) The Buying Corporation for RiverSource Disciplined Equity Fund is a Minnesota corporation. A.1 Corporation. The Buying Fund or its transfer agent will establish shareholder accounts in accordance with instructions from the corresponding Selling Corporation. b. Immediately after the close of business on the Valuation Date, the share transfer books of each Selling Corporation relating to each Selling Fund will be closed and no further transfer of shares will be made. c. Promptly after the Closing, the Buying Fund or its transfer agent will notify each shareholder of the corresponding Selling Fund of the number of shares distributed to the shareholder and confirm the registration in the shareholder's name. d. As promptly as practicable after the Closing, and in no event later than twelve months from the date of the Closing, each Selling Fund will be dissolved. 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYING CORPORATION. With respect to each Reorganization, the Buying Corporation represents and warrants to the Selling Fund as follows: a. Organization, Existence, etc. The Buying Corporation is a corporation duly organized, validly existing and in good standing under the laws of the state of Minnesota and has the power to carry on its business as it is now being conducted. b. Registration as Investment Company. The Buying Corporation, or in the case of separate series funds, the Buying Corporation, of which the Buying Fund is a series, is registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end, management investment company. c. Capitalization. The Buying Corporation has authorized capital of 10,000,000,000 shares of common stock, par value $0.01 per share. All of the outstanding shares of the Buying Corporation have been duly authorized and are validly issued, fully paid and non-assessable. Since the Buying Fund is engaged in the continuous offering and redemption of its shares, the number of outstanding shares may vary daily. d. Financial Statements. The Buying Fund's audited financial statements as of the end of the last fiscal year, and the subsequent unaudited semi-annual financial statements, if any (the "Buying Fund Financial Statements"), fairly present the financial position of the Buying Fund and the results of its operations and changes in its net assets for the periods shown. e. Shares to be Issued Upon Reorganization. The shares to be issued in connection with the Reorganization will be duly authorized and, at the time of the Closing, will be validly issued, fully paid and non- assessable. f. Authority Relative to the Agreement. The Buying Corporation has the power to enter into and carry out the obligations described in this Agreement. The Agreement and the transactions contemplated by it have been duly authorized by the Board of Directors of the Buying Corporation and no other proceedings by the Buying Corporation or the Buying Fund are necessary. g. No Violation. The Buying Corporation is not in violation of its Articles of Incorporation or By-Laws (the "Articles") or in default in the performance of any material agreement to which it is a party. The execution of this Agreement and the completion of the transactions contemplated by it will not conflict with, or constitute a breach of, any material contract or other instrument to which the Buying Fund is subject. The transactions will not result in any violation of the provisions of the Articles or any law, administrative regulation or administrative or court decree applicable to the Buying Fund. h. Liabilities. The Buying Fund has no known liabilities of a material amount, contingent or otherwise, other than liabilities disclosed in the Buying Fund Financial Statements, liabilities incurred in the ordinary course of business subsequent to the date of the latest annual or semi- annual financial statements, or liabilities previously disclosed to the Selling Fund. i. Litigation. There is no litigation, administrative proceeding or investigation before any court or governmental body currently pending or, to the knowledge of the Buying Fund, threatened, that would materially and adversely affect the Buying Fund, its financial condition or the conduct of its business, or that would prevent or hinder completion of the transactions contemplated by this Agreement. The Buying Fund knows of no facts that might form the basis for the institution of any such litigation, proceeding or investigation and the Buying Fund is not a party to or subject to the provisions of any order, decree or judgment. j. Contracts. Except for contracts and agreements previously disclosed to the Selling Corporation, the Buying Fund is not a party to or subject to any material contract, debt instrument, plan, lease, franchise, license or permit. k. Regulated Investment Company Qualification. The Buying Fund has qualified and met the requirements for treatment as a "regulated investment company" within the meaning of Section 851 of the Code with respect to each taxable year A.2 since commencement of its operations and will continue to meet such requirements and to so qualify at all times through the Closing. l. Taxes. As of the Closing, the Buying Fund will (i) have filed all federal and other tax returns and reports that have been required to be filed, (ii) have paid or provided for payment of all federal and other taxes shown to be due on such returns or on any assessments received, (iii) have adequately provided for all tax liabilities on its books, (iv) except as disclosed to the Selling Fund, not have had any tax deficiency or liability asserted against it or question with respect thereto raised, and (v) except as disclosed to the Selling Fund, not be under audit by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. m. Registration Statement. The Buying Fund will file a registration statement on Form N-14 (the "Registration Statement") with the Securities and Exchange Commission under the Securities Act of 1933 (the "1933 Act") relating to the shares to be issued in the Reorganization. At the time the Registration Statement becomes effective, at the time of the shareholders' meeting described in paragraph 1 and at the Closing, the Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. However, none of the representations and warranties in this subsection apply to statements in, or omissions from, the Registration Statement made in reliance on information furnished by the Selling Fund for use in the Registration Statement. n. Business Activities. The Buying Fund will operate its business in the ordinary course between the date hereof and the date of the Closing, it being understood that such ordinary course of business will include regular and customary periodic dividends and distributions and any other distribution that may be advisable. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING CORPORATION. With respect to each Reorganization, the Selling Corporation represents and warrants to the Buying Fund as follows: a. Organization, Existence, etc. The Selling Corporation is a corporation duly organized, validly existing and in good standing under the laws of the state of Maryland and has the power to carry on its business as it is now being conducted. b. Registration as Investment Company. The Selling Corporation, or in the case of a separate series funds, the Selling Corporation, of which the Selling Fund is a series, is registered under the 1940 Act as an open-end, management investment company. c. Capitalization. The Selling Corporation has authorized capital of 4,000,000,000 shares of common stock, par value $0.001 per share. All of the outstanding shares have been duly authorized and are validly issued, fully paid and non-assessable. Since the Selling Fund is engaged in the continuous offering and redemption of its shares, the number of outstanding shares may vary daily. d. Financial Statements. The Selling Fund's audited financial statements as of the end of the last fiscal year, and the subsequent unaudited semi- annual financial statements, if any (the "Selling Fund Financial Statements"), fairly present the financial position of the Selling Fund, and the results of its operations and changes in its net assets for the periods shown. e. Authority Relative to the Agreement. The Selling Corporation has the power to enter into and to carry out its obligations under this Agreement. The Agreement and the transactions contemplated by it have been duly authorized by the Board of Directors of the Selling Corporation and no other proceedings by the Selling Corporation or the Selling Fund are necessary, other than the approval of shareholders contemplated in paragraph 1. f. No Violation. The Selling Corporation is not in violation of its Articles or in default in the performance of any material agreement to which it is a party or in default in the performance of any material agreement to which it is a party). The execution of this Agreement and the completion of the transactions contemplated by it will not conflict with or constitute a breach of, any material contract to which the Selling Fund is subject. The transactions will not result in any violation of the provisions of the Articles, as the case may be, or any law, administrative regulation or administrative or court decree applicable to the Selling Fund. g. Liabilities. The Selling Fund has no known liabilities of a material amount, contingent or otherwise, other than liabilities disclosed in the Selling Fund Financial Statements, liabilities incurred in the ordinary course of business subsequent to the date of the latest annual or semi- annual financial statements, or liabilities previously disclosed to the Buying Fund. h. Litigation. There is no litigation, administrative proceeding or investigation before any court or governmental body currently pending or, to the knowledge of the Selling Fund, threatened, that would materially and adversely affect the Selling Fund, its financial condition or the conduct of its business, or that would prevent or hinder completion of the transactions contemplated by this Agreement. The Selling Fund knows of no facts that might form the basis for the institution of any such litigation, proceeding or investigation and is not a party to or subject to the provisions of any order, decree or judgment. A.3 i. Contracts. Except for contracts and agreements previously disclosed to the Buying Corporation, the Selling Fund is not a party to or subject to any material contract, debt instrument, plan, lease, franchise, license or permit. j. Regulated Investment Company Qualification. The Selling Fund has qualified and met the requirements for treatment as a "regulated investment company" within the meaning of Section 851 of the Code with respect to each taxable year since commencement of its operations and will continue to meet such requirements and to so qualify at all times through the Closing. k. Taxes. As of the Closing, the Selling Fund will (i) have filed all federal and other tax returns and reports that have been required to be filed, (ii) have paid or provided for payment of all federal and other taxes shown to be due on such returns or on any assessments received, (iii) have adequately provided for all tax liabilities on its books, (iv) except as disclosed to the Buying Fund, not have had any tax deficiency or liability asserted against it or question with respect thereto raised, and (v) except as disclosed to the Buying Fund, not be under audit by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. l. Fund Securities. All securities listed in the schedule of investments of the Selling Fund as of the Closing will be owned by the Selling Fund free and clear of any encumbrances, except as indicated in the schedule. m. Registration Statement. The Selling Fund will cooperate with the Buying Fund and will furnish information relating to the Selling Corporation and the Selling Fund required in the Registration Statement. At the time the Registration Statement becomes effective, at the time of the shareholders' meeting described in paragraph 1 and at the Closing, the Registration Statement, as it relates to the Selling Corporation or the Selling Fund, will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. However, the representations and warranties in this subsection apply only to statements in or omissions from the Registration Statement made in reliance upon information furnished by the Selling Corporation or the Selling Fund for use in the Registration Statement. n. Provision of Books and Records. The Selling Fund will provide its books and records to the Buying Fund for purposes of preparing any tax returns required by law to be filed after the Closing date, including (1) the tax return for the period ending on the Closing date, and (2) the tax return for the period beginning the day after the Closing and ending the earlier of the current fiscal year-end of the Buying Fund and the taxable year end chosen by the corresponding Buying Fund following the Reorganization. o. Business Activities. The Selling Fund will operate its business in the ordinary course between the date hereof and the date of the Closing, it being understood that such ordinary course of business will include regular and customary periodic dividends and distributions and any other distribution that may be advisable. 7. CONDITIONS TO OBLIGATIONS OF THE BUYING CORPORATION. The obligations of the Buying Corporation with respect to each Reorganization are subject to the satisfaction of the following conditions: a. Shareholder Approval. For RiverSource Large Cap Equity Fund this Agreement will have been approved by the affirmative vote of the holders of the majority of the voting power of all Selling Fund shares entitled to vote and for Seligman Common Stock Fund this Agreement will have been approved by the affirmative vote of a majority of the outstanding voting securities of the Selling Fund. A vote of a majority of the outstanding voting securities of the Selling Fund is defined in 1940 Act as a vote of the lesser of (a) 67% or more of the shares of the Selling Fund that are present or represented by proxy at the Meeting, if more than 50% of the outstanding shares are present in person or by proxy at the Meeting; or (b) more than 50% of the outstanding shares of the Selling Fund. b. Representations, Warranties and Agreements. The Selling Corporation and the Selling Fund will have complied with this Agreement and each of the representations and warranties in this Agreement will be true in all material respects as of the date of the Closing. An officer of the Selling Corporation will provide a certificate to the Buying Fund confirming that, as of the Closing, the representations and warranties set forth in Section 6 are true and correct and that there have been no material adverse changes in the financial condition, results of operations, business, properties or assets of the corresponding Selling Fund since the date of its last financial statement, except as otherwise indicated in any financial statements, certified by an officer of the Selling Corporation, and delivered to the Buying Fund on the date of the Closing. c. Regulatory Approvals. - The Registration Statement referred to in Sections 5(m) and 6(m) will be effective and no stop orders under the 1933 Act will have been issued. - All necessary approvals, consents and exemptions from federal and state regulatory authorities will have been obtained. A.4 d. Opinion of Counsel. The Buying Corporation will have received an opinion of counsel for the Selling Corporation, dated as of the date of the Closing, to the effect that: (i) For Seligman Common Stock Fund, Inc., the Selling Corporation is a corporation duly organized and validly existing under the laws of the state of Maryland; for RiverSource Large Cap Equity Fund, the Selling Corporation is a corporation duly organized and validly existing under the laws of the state of Minnesota; (ii) each Selling Fund is a series of the Selling Corporation, an open-end management investment company registered under the 1940 Act, as applicable; (iii) this Agreement and the Reorganization has been duly authorized and approved by all requisite action of the Selling Corporation and each Selling Fund and this Agreement has been duly executed by, and is a valid and binding obligation of, the Selling Corporation. e. Declaration of Dividend. The Selling Fund will have declared, prior to the Closing, a dividend or dividends, which, together with all previous such dividends, shall have the effect of distributing to the Selling Fund shareholders (i) all of the excess of (x) the Selling Fund's investment income excludable from gross income under Section 103 of the Code over (y) the Selling Fund's deductions disallowed under Sections 265 and 171 of the Code, (ii) all of the Selling Fund's investment company taxable income as defined in Section 852 of the Code (in each case computed without regard to any deduction for dividends paid) and (iii) all of the Selling Fund's net capital gain realized (after reduction for any capital loss carryover), in each case for the current taxable year (which will end on the Closing date) and any preceding taxable years for which such a dividend is eligible to be made under Section 855 of the Code. 8. CONDITIONS TO OBLIGATIONS OF THE SELLING CORPORATION. The obligations of the Selling Corporation with respect to each Reorganization are subject to the satisfaction of the following conditions: a. Shareholder Approval. For RiverSource Large Cap Equity Fund this Agreement will have been approved by the affirmative vote of the holders of the majority of the voting power of all Selling Fund shares entitled to vote and for Seligman Common Stock Fund this Agreement will have been approved by the affirmative vote of a majority of the outstanding voting securities of the Selling Fund. A vote of a majority of the outstanding voting securities of the Selling Fund is defined in 1940 Act as a vote of the lesser of (a) 67% or more of the shares of the Selling Fund that are present or represented by proxy at the Meeting, if more than 50% of the outstanding shares are present in person or by proxy at the Meeting; or (b) more than 50% of the outstanding shares of the Selling Fund. b. Representations, Warranties and Agreements. The Buying Fund will have complied with this Agreement and each of the representations and warranties in this Agreement will be true in all material respects as of the date of the Closing. An officer of the Buying Corporation will provide a certificate to each Selling Fund confirming that, as of the Closing, the representations and warranties set forth in Section 5 are true and correct and that there have been no material adverse changes in the financial condition, results of operations, business, properties or assets of the Buying Fund since the date of its last financial statement, except as otherwise indicated in any financial statements, certified by an officer of the Buying Corporation, and delivered to such Selling Fund on or prior to the last business day before the Closing. c. Regulatory Approvals. - The Registration Statement referred to in Sections 5(m) and 6(m) will be effective and no stop orders under the 1933 Act will have been issued. - All necessary approvals, consents and exemptions from federal and state regulatory authorities will have been obtained. d. Opinion of Counsel. The Selling Corporation will have received the opinion of counsel for the Buying Corporation, dated as of the date of the Closing, to the effect that: (i) the Buying Corporation is a corporation duly organized and validly existing under the laws of the state of Minnesota; (ii) each Buying Fund is a series of the Buying Corporation, an open-end management investment company registered under the 1940 Act; (iii) this Agreement and the Reorganization has been authorized and approved by all requisite action of the Buying Corporation and the Buying Fund and this Agreement has been duly executed by, and is a valid and binding obligation of, the Buying Corporation; and (iv) the shares to be issued in the Reorganization are duly authorized and upon issuance in accordance with this Agreement will be validly issued, fully paid and non- assessable shares of the Buying Fund. 9. CONDITIONS TO OBLIGATIONS OF THE SELLING CORPORATION AND THE BUYING CORPORATION. The obligations of each of the Selling Corporation and the Buying Corporation with respect to each Reorganization are subject to the satisfaction of the following conditions: Tax Opinion. With respect to the Reorganization between a Selling Fund and the Buying Fund, the Selling Fund shall have received an opinion of Ropes & Gray LLP satisfactory to such Selling Fund, and the Buying Fund shall have received an opinion of Ropes & Gray LLP satisfactory to the Buying Fund, each substantially to the effect that, on the basis of existing provisions of the Code, Treasury regulations promulgated thereunder, current administrative rules, A.5 pronouncements and court decisions, although the matter is not free from doubt, generally for federal income tax purposes: a. The acquisition by the Buying Fund of the assets of the Selling Fund in exchange for the Buying Fund's assumption of all liabilities of the Selling Fund and delivery to the Selling Fund of the acquisition shares, followed by the distribution by the Selling Fund of the acquisition shares to the shareholders of the Selling Fund in exchange for their Selling Fund shares, all as provided in paragraph 2(a) and 4(a) hereof, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the Selling Fund and the Buying Fund will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code; b. No gain or loss will be recognized by the Selling Fund upon (i) the transfer of its assets to the Buying Fund in exchange for the acquisition shares and the assumption by the Buying Fund of all liabilities of the Selling Fund or (ii) the distribution of the acquisition shares by the Selling Fund to its shareholders in liquidation, as contemplated in paragraph 4(a) hereof; c. No gain or loss will be recognized by the Buying Fund upon receipt of the assets of the Selling Fund in exchange for acquisition shares and the assumption by the Buying Fund of all liabilities of the Selling Fund as contemplated in paragraph 2(a) hereof; d. The tax basis in the hands of the Buying Fund of the assets of the Selling Fund transferred to the Buying Fund in the Reorganization will be the same as the tax basis of such assets in the hands of the Selling Fund immediately prior to the transfer; e. The holding periods of the assets of the Selling Fund in the hands of the Buying Fund will include the periods during which such assets were held by the Selling Fund; f. No gain or loss will be recognized by the Selling Fund's shareholders upon the exchange of their shares of the Selling Fund for the acquisition shares; g. The aggregate tax basis of the acquisition shares the Selling Fund shareholder receives in the Reorganization will be the same as the aggregate tax basis of his or her Selling Fund's shares exchanged therefor; h. The Selling Fund shareholder's holding period for the acquisition shares will include the period for which he or she held the Selling Fund's shares exchanged therefor, provided that the shareholder held such Selling Fund's shares as capital assets on the date of the exchange; and i. The Buying Fund will succeed to and take into account the items of the Selling Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder. Ropes & Gray LLP will express no view with respect to the effect of the Reorganization on any transferred asset as to which any unrealized gain or loss is required to be recognized under federal income tax principles (i) at the end of a taxable year or upon the termination thereof or (ii) upon the transfer of such asset regardless of whether such a transfer would otherwise be a non-taxable transaction. Each opinion will be based on certain factual certifications made by officers of the Selling Fund and the Buying Fund, and will also be based on customary assumptions. The opinions are not guarantees that the tax consequences of the Reorganizations will be as described above. The opinions will note and distinguish certain published precedent. There is no assurance that the Internal Revenue Service or a court would agree with the opinions. 10. AMENDMENT; TERMINATION; NON-SURVIVAL OF COVENANTS, WARRANTIES AND REPRESENTATIONS. a. This Agreement may be amended in writing if authorized by the respective Boards of Directors. The Agreement may be so amended at any time before or after the shareholder approval contemplated by paragraph 1 is obtained. b. At any time prior to the Closing, any of the parties may waive in writing (i) any inaccuracies in the representations and warranties made to it and (ii) compliance with any of the covenants or conditions made for its benefit. c. Each party hereto may terminate this Agreement at any time prior to the Closing by notice to the other party if a material condition to its performance or a material covenant of the other party is not fulfilled on or before the date specified for its fulfillment or a material breach of this Agreement is made by the other party and is not cured. d. This Agreement may be terminated by any party at any time prior to the Closing, whether before or after approval by the shareholders of each Selling Fund, without any liability on the part of any party or its respective directors, officers, or shareholders, on written notice to the other party, and shall be terminated without liability as of the close of business on _____________, or a later date agreed upon by the officers of the Selling Corporation and the Buying Corporation, if the Closing is not effected on or prior to that date. A.6 e. The representations, warranties and covenants contained in this Agreement, or in any document delivered in connection with this Agreement, will survive the Reorganization. 11. EXPENSES. All fees paid to governmental authorities for the registration or qualification of the acquisition shares and all transfer agency costs related to the acquisition shares shall be borne by the Buying Fund. Certain non-recurring Reorganization costs and related Reorganization expenses may be borne by a Selling Fund to the extent the Reorganization is expected to result in a reduction to the expense ratio for such Selling Fund. Reorganization costs and related Reorganization expenses include (i) legal and auditor or accounting fees ("Professional Fees") associated with the preparation and filing of the proxy statement/prospectus and (ii) expenses associated with the printing and mailing of any shareholder communications, including the proxy statement/prospectus that forms a part of the Registration Statement, and fees and expenses of any proxy solicitation firm retained in connection with the Reorganization ("Proxy Vendor Expenses"). Professional Fees shall be allocated among each Selling Fund on an equal weighted basis regardless of asset size or number of accounts. Proxy Vendor Expenses shall be allocated among the Selling Funds based on number of shareholder accounts. Notwithstanding the foregoing, the fees and expenses borne by any Selling Fund will not exceed the excess of (i) the total anticipated reduction in fees and expenses expected to be borne by such Selling Fund over the first twelve months following its Reorganization over (ii) the cost expected to be borne by such Selling Fund related to the discontinuance of operations of Seligman Data Corp. Any fees and expenses that would have been eligible to be borne by a Selling Fund but for the preceding sentence and all other Reorganization related costs and expenses will be borne by RiverSource Investments, LLC. Each Selling Fund will bear the full cost of any brokerage or other transaction costs associated with the sale or purchase of portfolio securities in connection with its Reorganization. Should any Reorganization fail to occur, RiverSource Investments, LLC will bear all costs associated with the Reorganization. 12. GENERAL. a. Headings. The headings contained in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement. Nothing in this Agreement is intended to confer upon any other person any rights or remedies by reason of this Agreement. b. Governing Law. This Agreement will be governed by the laws of the state of Minnesota. IN WITNESS WHEREOF, each of the parties, individually and not jointly, has caused this Agreement to be signed. SELIGMAN COMMON STOCK FUND, INC. By: -------------------------- Name: -------------------------- Title: -------------------------- RIVERSOURCE LARGE CAP SERIES, INC., on behalf of RiverSource Large Cap Equity Fund By: -------------------------- Name: -------------------------- Title: -------------------------- RIVERSOURCE LARGE CAP SERIES, INC., on behalf of RiverSource Disciplined Equity Fund By: -------------------------- Name: -------------------------- Title: -------------------------- The undersigned is a party to this Agreement for the purposes of Section 3c and 11 only. RIVERSOURCE INVESTMENTS, LLC By: -------------------------- Name: -------------------------- Title: -------------------------- A.7 SCHEDULE A
- ---------------------------------------------------------------------------------------------------------- SELLING ENTITY SELLING FUND BUYING ENTITY BUYING FUND - ---------------------------------------------------------------------------------------------------------- RiverSource RiverSource Large Cap Fund Large Cap RiverSource Large Cap RiverSource Disciplined Series, Inc. Series, Inc. Equity Fund - ------------------------------------------------ Seligman Common Stock Fund, Inc. - ----------------------------------------------------------------------------------------------------------
A.8 EXHIBIT B MINNESOTA BUSINESS CORPORATION ACT SECTIONS 302A.471 AND 302A.473 Minnesota law requires that we provide you with a copy of the state law on dissenters' rights. Notwithstanding the provisions of the law set out below, the SEC has taken the position that use of state appraisal procedures by a registered mutual fund such as RiverSource Large Cap Equity Fund would be a violation of Rule 22c-1, the forward pricing rule, under the 1940 Act. As a result, if any shareholder elects to exercise dissenters' rights under Minnesota law, the Fund intends to submit this question to a court of competent jurisdiction. In that event, a dissenting shareholder would not receive any payment until the end of the court proceeding. 302A.471. RIGHTS OF DISSENTING SHAREHOLDERS SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may dissent from, and obtain payment for the fair value of the shareholder's shares in the event of, any of the following corporate actions: (a) unless otherwise provided in the articles, an amendment of the articles that materially and adversely affects the rights or preferences of the shares of the dissenting shareholder in that it: (1) alters or abolishes a preferential right of the shares; (2) creates, alters, or abolishes a right in respect of the redemption of the shares, including a provision respecting a sinking fund for the redemption or repurchase of the shares; (3) alters or abolishes a preemptive right of the holder of the shares to acquire shares, securities other than shares, or rights to purchase shares or securities other than shares; (4) excludes or limits the right of a shareholder to vote on a matter, or to cumulate votes, except as the right may be excluded or limited through the authorization or issuance of securities of an existing or new class or series with similar or different voting rights; except that an amendment to the articles of an issuing public corporation that provides that section 302A.671 does not apply to a control share acquisition does not give rise to the right to obtain payment under this section; (5) eliminates the right to obtain payment under this subdivision; (b) a sale, lease, transfer, or other disposition of property and assets of the corporation that requires shareholder approval under section 302A.661, subdivision 2, but not including a disposition in dissolution described in section 302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a disposition for cash on terms requiring that all or substantially all of the net proceeds of disposition be distributed to the shareholders in accordance with their respective interests within one year after the date of disposition; (c) a plan of merger, whether under this chapter or under chapter 322B, to which the corporation is a party, except as provided in subdivision 3, and except for a plan of merger adopted under section 302A.626; (d) a plan of exchange, whether under this chapter or under chapter 322B, to which the corporation is a party as the corporation whose shares will be acquired by the acquiring corporation, except as provided in subdivision 3; (e) a plan of conversion adopted by the corporation; or (f) Any other corporate action taken pursuant to a shareholder vote with respect to which the articles, the bylaws, or a resolution approved by the board directs that dissenting shareholders may obtain payment for their shares. SUBDIVISION 2. BENEFICIAL OWNERS. (a) A shareholder shall not assert dissenters' rights as to less than all of the shares registered in the name of the shareholder, unless the shareholder dissents with respect to all the shares that are beneficially owned by another person but registered in the name of the shareholder and discloses the name and address of each beneficial owner on whose behalf the shareholder dissents. In that event, the rights of the dissenter shall be determined as if the shares as to which the shareholder has dissented and the other shares were registered in the names of different shareholders. (b) A beneficial owner of shares who is not the shareholder may assert dissenters' rights with respect to shares held on behalf of the beneficial owner, and shall be treated as a dissenting shareholder under the terms of this section and section 302A.473, if the beneficial owner submits to the corporation at the time of or before the assertion of the rights a written consent of the shareholder. SUBDIVISION 3. RIGHTS NOT TO APPLY. (a) Unless the articles, the bylaws, or a resolution approved by the board otherwise provide, the right to obtain payment under this section does not apply to a shareholder of (1) the surviving corporation in a merger with respect to shares of the B.1 shareholder that are not entitled to be voted on the merger and are not canceled or exchanged in the merger or (2) the corporation whose shares will be acquired by the acquiring organization in a plan of exchange with respect to shares of the shareholder that are not entitled to be voted on the plan of exchange and are not exchanged in the plan of exchange. (b) If a date is fixed according to section 302A.445, subdivision 1, for the determination of shareholders entitled to receive notice of and to vote on an action described in subdivision 1, only shareholders as of the date fixed, and beneficial owners as of the date fixed who hold through shareholders, as provided in subdivision 2, may exercise dissenters' rights. (c) Notwithstanding subdivision 1, the right to obtain payment under this section, other than in connection with a plan of merger adopted under section 302A.621, is limited in accordance with the following provisions: (1) The right to obtain payment under this section is not available for the holders of shares of any class or series of shares that is listed on the New York Stock Exchange or the American Stock Exchange or designated as a national market security on the Nasdaq Stock Market. (2) The applicability of clause (1) is determined as of: (i) the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action described in subdivision 1; or (ii) the day before the effective date of corporate action described in subdivision 1 if there is no meeting of shareholders. (3) Clause (1) is not applicable, and the right to obtain payment under this section is available pursuant to subdivision 1, for the holders of any class or series of shares who are required by the terms of the corporate action described in subdivision 1 to accept for such shares anything other than shares, or cash in lieu of fractional shares, of any class or any series of shares of a domestic or foreign corporation, or any other ownership interest of any other organization, that satisfies the standards set forth in clause (1) at the time the corporate action becomes effective. SUBDIVISION 4. OTHER RIGHTS. The shareholders of a corporation who have a right under this section to obtain payment for their shares, or who would have the right to obtain payment for their shares absent the exception set forth in paragraph (c) of subdivision 3, do not have a right at law or in equity to have a corporate action described in subdivision 1 set aside or rescinded, except when the corporate action is fraudulent with regard to the complaining shareholder or the corporation. 302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS SUBDIVISION 1. DEFINITIONS. (a) For purposes of this section, the terms defined in this subdivision have the meanings given them. (b) "Corporation" means the issuer of the shares held by a dissenter before the corporate action referred to in section 302A.471, subdivision 1 or the successor by merger of that issuer. (c) "Fair value of the shares" means the value of the shares of a corporation immediately before the effective date of the corporate action referred to in section 302A.471, subdivision 1. (d) "Interest" means interest commencing five days after the effective date of the corporate action referred to in section 302A.471, subdivision 1, up to and including the date of payment, calculated at the rate provided in section 549.09 for interest on verdicts and judgments. SUBDIVISION 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting at which any action described in section 302A.471, subdivision 1 is to be voted upon, the notice of the meeting shall inform each shareholder of the right to dissent and shall include a copy of section 302A.471 and this section and a brief description of the procedure to be followed under these sections. SUBDIVISION 3. NOTICE OF DISSENT. If the proposed action must be approved by the shareholders and the corporation holds a shareholder meeting, a shareholder who is entitled to dissent under section 302A.471 and who wishes to exercise dissenters' rights must file with the corporation before the vote on the proposed action a written notice of intent to demand the fair value of the shares owned by the shareholder and must not vote the shares in favor of the proposed action. SUBDIVISION 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the proposed action has been approved by the board and, if necessary, the shareholders, the corporation shall send to (i) all shareholders who have complied with subdivision 3, (ii) all shareholders who did not sign or consent to a written action that gave effect to the action creating the right to obtain payment under section 302A.471, and (iii) all shareholders entitled to dissent if no shareholder vote was required, a notice that contains: (1) The address to which a demand for payment and certificates of certificated shares must be sent in order to obtain payment and the date by which they must be received; B.2 (2) Any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received; (3) A form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them and to demand payment; and (4) A copy of section 302A.471 and this section and a brief description of the procedures to be followed under these sections. (b) In order to receive the fair value of the shares, a dissenting shareholder must demand payment and deposit certificated shares or comply with any restrictions on transfer of uncertificated shares within 30 days after the notice required by paragraph (a) was given, but the dissenter retains all other rights of a shareholder until the proposed action takes effect. SUBDIVISION 5. PAYMENT; RETURN OF SHARES. (a) After the corporate action takes effect, or after the corporation receives a valid demand for payment, whichever is later, the corporation shall remit to each dissenting shareholder who has complied with subdivisions 3 and 4 the amount the corporation estimates to be the fair value of the shares, plus interest, accompanied by: (1) The corporation's closing balance sheet and statement of income for a fiscal year ending not more than 16 months before the effective date of the corporate action, together with the latest available interim financial statements; (2) An estimate by the corporation of the fair value of the shares and a brief description of the method used to reach the estimate; and (3) A copy of section 302A.471 and this section, and a brief description of the procedure to be followed in demanding supplemental payment. (b) The corporation may withhold the remittance described in paragraph (a) from a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with subdivisions 3 and 4, the corporation shall forward to the dissenter the materials described in paragraph (a), a statement of the reason for withholding the remittance, and an offer to pay to the dissenter the amount listed in the materials if the dissenter agrees to accept that amount in full satisfaction. The dissenter may decline the offer and demand payment under subdivision 6. Failure to do so entitles the dissenter only to the amount offered. If the dissenter makes demand, subdivision 7 and 8 apply. (c) If the corporation fails to remit payment within 60 days of the deposit of certificates or the imposition of transfer restrictions on uncertificated shares, it shall return all deposited certificates and cancel all transfer restrictions. However, the corporation may again give notice under subdivision 4 and require deposit or restrict transfer at a later time. SUBDIVISION 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the amount remitted under subdivision 5 is less than the fair value of the shares plus interest, the dissenter may give written notice to the corporation of the dissenter's own estimate of the fair value of the shares, plus interest, within 30 days after the corporation mails the remittance under subdivision 5, and demand payment of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the corporation. SUBDIVISION 7. PETITION; DETERMINATION. If the corporation receives a demand under subdivision 6, it shall, within 60 days after receiving the demand, either pay to the dissenter the amount demanded or agreed to by the dissenter after discussion with the corporation or file in a court a petition requesting that the court determine the fair value of the shares, plus interest. The petition shall be filed in the county in which the registered office of the corporation is located, except that a surviving foreign corporation that receives a demand relating to the shares of a constituent domestic corporation shall file the petition in the county in this state in which the last registered office of the constituent corporation was located. The petition shall name as parties all dissenters who have demanded payment under subdivision 6 and who have not reached agreement with the corporation. The corporation shall, after filing the petition, serve all parties with a summons and copy of the petition under the rules of civil procedure. Nonresidents of this state may be served by registered or certified mail or by publication as provided by law. Except as otherwise provided, the rules of civil procedures apply to this proceeding. The jurisdiction of the court is plenary and exclusive. The court may appoint appraisers, with powers and authorities the court deems proper, to receive evidence on and recommend the amount of the fair value of the shares. The court shall determine whether the shareholder or shareholders in question have fully complied with the requirements of this section, and shall determine the fair value of the shares, taking into account any and all factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use, whether or not used by the corporation or by a dissenter. The fair value of the shares as determined by the court is binding on all shareholders, wherever located. A dissenter is entitled to judgment in cash for the amount by which the fair value of the shares as determined by the court, plus interest, exceeds the amount, if any, remitted under subdivision 5, but shall not be liable to the corporation for the amount, if any, by which the amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair value of the shares as determined by the court, plus interest. B.3 SUBDIVISION 8. COSTS; FEES; EXPENSES. (a) The court shall determine the costs and expenses of a proceeding under subdivision 7, including the reasonable expenses and compensation of any appraisers appointed by the court, and shall assess those costs and expenses against the corporation, except that the court may assess part or all of those costs and expenses against a dissenter whose action in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or not in good faith. (b) If the court finds that the corporation has failed to comply substantially with this section, the court may assess all fees and expenses of any experts or attorneys as the court deems equitable. These fees and expenses may also be assessed against a person who has acted arbitrarily, vexatiously, or not in good faith in bringing the proceeding, and may be awarded to a party injured by those actions. (c) The court may award, in its discretion, fees and expenses to an attorney for the dissenters out of the amount awarded to the dissenters, if any. B.4 EXHIBIT C SUPPLEMENTAL INFORMATION The information in the service section in this Exhibit C includes revised shareholder service policy information as it pertains to your Fund effective on or about June 13, 2009. This information supersedes the "Shareholder Information" section of, and should be maintained with, your current Fund prospectus. Please retain this supplemental information as your record for future reference. Please contact (888) 791-3380 to confirm the final effective date of this supplemental information. ADDITIONAL INFORMATION APPLICABLE TO THE BUYING FUND Below is information regarding the Buying Fund. All references to a Fund or the Funds refer to the Buying Fund. OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses. Although ETFs are designed to replicate the price and yield of a specified market index, there is no guarantee that an ETF will track its specified market index, which may result in a loss. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Reorganization SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the Reorganization SAI. The brokerage commissions set forth in the Reorganization SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the Reorganization SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds (including the RiverSource Partners funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection C.1 needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the Reorganization SAI for more information. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement ("IMS Agreement"), the fee for the most recent fiscal year was 0.53% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. The index against which the Fund's performance is currently measured for purposes of the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. In certain circumstances, the Fund's Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the IMS Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. Portfolio Manager(s). The portfolio managers responsible for the Fund's day-to- day management are: Dimitris J. Bertsimas, Ph.D., Senior Portfolio Manager - - Managed the Fund since 2003. - - Joined RiverSource Investments as a portfolio manager and leader of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. - - Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. - - MS and Ph.D., MIT. Gina K. Mourtzinou, Ph.D., Portfolio Manager - - Managed the Fund since 2003. - - Joined RiverSource Investments as a portfolio manager and member of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where she served as Vice President of Research and Analytics, 1999 to 2002. - - Began investment career as a consultant to asset managers in 1996; became portfolio manager in 2002. - - Ph.D., MIT. The Reorganization SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. C.2 THIS SERVICE SECTION IS EFFECTIVE ON OR ABOUT JUNE 13, 2009. RIVERSOURCE FAMILY OF FUNDS THE RIVERSOURCE FAMILY OF FUNDS (EACH INDIVIDUALLY A "FUND" AND, COLLECTIVELY, THE "FUNDS") INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, "SELIGMAN" FUNDS AND "THREADNEEDLE" FUNDS. (THE RIVERSOURCE FUNDS, RIVERSOURCE PARTNERS FUNDS AND THREADNEEDLE FUNDS MAY BE COLLECTIVELY REFERRED TO AS THE "RIVERSOURCE FUNDS".) THE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD") AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THE SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL FUNDS IN THE RIVERSOURCE FAMILY OF FUNDS OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The funds are available directly and through broker-dealers, banks and other financial intermediaries or institutions (financial intermediaries), and through certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial intermediaries. NOT ALL FINANCIAL INTERMEDIARIES OFFER THE FUNDS. FINANCIAL INTERMEDIARIES THAT OFFER THE FUNDS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial intermediaries through which your shares of the fund are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial intermediary through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial intermediaries to carry out its obligations to its customers. DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial advisor can help you with this decision. The following table shows the key features of each share class. INVESTMENT OPTIONS SUMMARY
Contingent Deferred Plan Sales Distribution and/or Administration AVAILABILITY(a) Initial Sales Charge Charge (CDSC) Service Fee(b) Services Fee - --------------------------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at time No.(c) Yes. No. all investors. of purchase. Lower or 0.25% no sales charge for larger investments. - --------------------------------------------------------------------------------------------------------------------------------- Class Available to No. Entire purchase Maximum 5% CDSC during Yes. No. B(d)(e)(f) all investors. price is invested in the first year 1.00% shares of the fund. decreasing to 0% after six years. - --------------------------------------------------------------------------------------------------------------------------------- Class C(f) Available to No. Entire purchase 1% CDSC may apply if Yes. No. all investors. price is invested in you sell shares within 1.00% shares of the fund. one year after purchase. - --------------------------------------------------------------------------------------------------------------------------------- Class I Limited to qualifying No. No. No. No. institutional investors. - --------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to qualifying No. No. Yes. Yes. institutional 0.50% 0.25% investors. - --------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to qualifying No. No. Yes. Yes. institutional 0.25% 0.25% investors. - --------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to qualifying No. No. No. Yes. institutional 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------
C.3 INVESTMENT OPTIONS SUMMARY (CONTINUED)
Contingent Deferred Plan Sales Distribution and/or Administration AVAILABILITY(a) Initial Sales Charge Charge (CDSC) Service Fee(b) Services Fee - --------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to qualifying No. No. No. No. institutional investors. - --------------------------------------------------------------------------------------------------------------------------------- Class W Limited to qualifying No. No. Yes. No. discretionary managed 0.25% accounts. - --------------------------------------------------------------------------------------------------------------------------------- Class Y Limited to qualifying No. No. No. Yes. institutional 0.15% investors. - ---------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be assessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. For all funds except money market funds. (d) Class B shares automatically convert to Class A hares. See "Buying and Selling Shares, Sales Charges, Class B and Class C -- CDSC alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of RiverSource Short Duration U.S. Government Fund is closed to new investors and new purchases. Existing shareholders in this fund may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of this fund are maintained. (f) The money market funds may offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing the fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and/or shareholder servicing fees to financial intermediaries that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25% of the average daily net assets of Class A, Class B*, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial intermediaries also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial intermediaries, and to pay for other distribution related expenses. Financial intermediaries may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INTERMEDIARY OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES MAY BE RETAINED BY THE DISTRIBUTOR AS REIMBURSEMENT FOR INCURRING CERTAIN DISTRIBUTION AND SHAREHOLDER SERVICING RELATED EXPENSES. * For money market funds that offer Class B shares, the distributor has currently agreed not to be reimbursed by the fund for distribution (12b-1) fees equal to 0.10% of the stated amount for Class B shares. PLAN ADMINISTRATION FEE Class R2, Class R3, Class R4 and Class Y shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. The fee for Class Y shares is equal on an annual basis to 0.15% of average daily net assets attributable to the class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE Each of the fund's classes represent an interest in the same portfolio of investments. However, as set forth above, each class has its own sales charge schedule, and its ongoing distribution and shareholder service fees may differ from other classes. When deciding which class of shares to buy, you should consider, among other things: - - The amount you plan to invest. - - How long you intend to remain invested in the fund or another fund in the RiverSource Family of Funds. - - Whether you may be eligible for reduced or no sales charges when you buy or sell shares. C.4 Your authorized financial intermediary or financial advisor will be able to help you decide which class of shares best meets your needs. CLASS A, CLASS B AND CLASS C SHARES* New purchases of Class B shares will not be permitted if your rights of accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your rights of accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation" for information on rights of accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares. Class B shares purchased through reinvested dividends and distributions will convert to Class A shares in the same proportion as the other Class B shares. See "Class B and Class C -- CDSC alternative" for information on timing of Class B share conversion to Class A shares. Class C shares have a higher annual distribution fee than Class A shares and a CDSC for one year. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a share class with a CDSC (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial intermediary or financial advisor. * For money market funds, new investments must be made in Class A shares of the fund. The fund offers Class B and Class C shares only to facilitate exchanges between classes of these shares in other funds. CLASS I SHARES. The following eligible investors may purchase Class I shares: - - Any fund distributed by the distributor, if the fund seeks to achieve its investment objective by investing primarily in shares of funds in the RiverSource Family of Funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS R SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4 and Class R5 shares: - - Qualified employee benefit plans. - - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - - Health Savings Accounts created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all funds in the RiverSource Family of Funds). - - Bank trust departments. Class R shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. CLASS W SHARES. The following eligible investors may purchase Class W shares: - - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial intermediary. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. C.5 IN ADDITION, FOR CLASS I, CLASS R AND CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INTERMEDIARIES TO ACCEPT INVESTMENTS FROM OTHER PURCHASERS NOT LISTED ABOVE. Please consult your financial advisor for assistance in selecting the appropriate class of shares. For more information, see the SAI. SALES CHARGES CLASS A -- INITIAL SALES CHARGE ALTERNATIVE: Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re- allows a portion of the sales charge to the financial intermediary through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly from the fund (not through an authorized financial intermediary). Sales charges vary depending on the amount of your purchase. INITIAL SALES CHARGE(A) FOR CLASS A SHARES For equity funds and funds-of-funds (equity)
Maximum reallowance AS A % OF As a % of as a % of TOTAL MARKET VALUE PURCHASE PRICE(b) net amount invested purchase price - --------------------------------------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000--$99,999 4.75 4.99 4.00 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For fixed income funds except those listed below and funds-of-funds (fixed income)
Maximum reallowance AS A % OF As a % of as a % of TOTAL MARKET VALUE PURCHASE PRICE(b) net amount invested purchase price - --------------------------------------------------------------------------------------------------------------- Up to $49,999 4.75% 4.99% 4.00% $50,000--$99,999 4.25 4.44 3.50 $100,000--$249,999 3.50 3.63 3.00 $250,000--$499,999 2.50 2.56 2.15 $500,000--$999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00(c),(d)
For RiverSource Short Duration U.S. Government Fund
Maximum reallowance AS A % OF As a % of as a % of TOTAL MARKET VALUE PURCHASE PRICE(b) net amount invested purchase price - --------------------------------------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% 2.50% $50,000--$99,999 3.00 3.09 2.50 $100,000--$249,999 2.50 2.56 2.15 $250,000--$499,999 2.00 2.04 1.75 $500,000--$999,999 1.50 1.52 1.25 $1,000,000 or more 0.00 0.00 0.00(c),(d)
(a) Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. (b) Purchase price includes the sales charge. (c) Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial intermediary the following out of its own resources: a sales commission of up to 1.00% for a sale of $1,000,000 to $3,999,999; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. (d) For certain eligible employee benefit plans defined under section 401(a), 401(k), 457 and 403(b) which meet eligibility rules for the waiver of applicable sales charges, the distributor may pay the following out of its own resources: a sales commission of 1.00% for a sale of $1 to $3,999,999 received in eligible employee benefit plans; a sales commission up to 0.50% for a sale of $4,000,000 to $49,999,999; and a sales commission up to 0.25% for a sale of $50,000,000 or more. See "Initial Sales Charge -- Waivers of the sales charge for Class A shares" for employee benefit plan eligibility rules. C.6 There is no initial sales charge on reinvested dividends or capital gain distributions. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group. Your ROA group includes the current market values of the following investments which are eligible to be added together for purposes of determining the sales charge on your next purchase: - - Your current investment in a fund; and - - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other funds in the RiverSource Family of Funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21, all of whom share a mailing address. The following accounts are eligible to be included in your ROA group in order to determine the sales charge on your purchase: - - Individual or joint accounts; - - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in your ROA group in order to determine the sales charge on your purchase: - - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - - Investments in Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - - Charitable and irrevocable trust accounts. If you purchase fund shares through different financial intermediaries, and you want to include those assets toward a reduced sales charge, you must inform your financial intermediary in writing about the other accounts when placing your purchase order. Contact your financial intermediary to determine what information is required. Unless you provide your financial intermediary in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more information on ROA, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial intermediary. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining amount of the unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. Existing ROA Example. Shareholder currently has $60,000 ROA in the funds. Shareholder completes an LOI to invest $100,000 in the funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in the funds' Class A C.7 shares (any non-money market fund in the RiverSource Family of Funds) in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial intermediary provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial intermediary or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - registered representatives and other employees of affiliated or unaffiliated financial intermediaries having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource Family of Funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or that clear trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; or - through bank trust departments. - - separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11). - - purchases made through "employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; and - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charge for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional classes of investors. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website at riversource.com or seligman.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased without a sales charge where a commission was separately paid by the distributor to an authorized financial intermediary effecting the purchase, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. C.8 CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - - purchased through reinvestment of dividends and capital gain distributions. - - in the event of the shareholder's death. - - from a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - - in an account that has been closed because it falls below the minimum account balance. - - that result from required minimum distributions taken from retirement accounts upon the shareholders attainment of age 70 1/2. - - that result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - - of RiverSource funds purchased prior to Dec. 1, 2008. - - initially purchased by an employee benefit plan that is not connected with a plan level termination. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS B AND CLASS C -- CDSC ALTERNATIVE The money market funds (except RiverSource Tax-Exempt Money Market Fund) offer Class B and Class C shares, but only to facilitate exchanges with other funds offering Class B and Class C shares, respectively. For example, if you own Class B or Class C shares of another fund, but want to hold your money in a money market fund, you may exchange into Class B or Class C shares of a money market fund. Funds that offer Class B and Class C shares have limitations on the amount you may invest in those share classes. If you are considering purchasing Class B or Class C shares of a fund, please see the prospectus for that fund for any effective purchase limitations. Although you may not purchase Class B and Class C shares of the money market funds directly, if you exchange into Class B or Class C shares of a money market fund from another fund, you will be subject to the rules governing CDSC set forth in this section. To minimize the amount of CDSC you may pay when you sell your shares, the fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to CDSC) are sold first. Shares that have been in your account long enough so that they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline over time:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 3%** Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. ** For shares purchased in a RiverSource fund prior to June 12, 2009, the CDSC percentage for the third year is 4%. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial intermediaries that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Class B shares purchased in a RiverSource fund prior to May 21, 2005 age on a calendar year basis. Class B shares purchases made in a RiverSource fund beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. C.9 Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund on or prior to June 12, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Class B shares purchased in a RiverSource fund beginning May 21, 2005 and Class B shares purchased in a Seligman fund beginning June 13, 2009 will convert to Class A shares one month after the completion of the eighth year of ownership. FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial intermediaries that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C shares, the amount of any CDSC you pay will be based on the lower of the original purchase price of those shares or current net asset value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - - in the event of the shareholder's death. - - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - - sold under an approved substantially equal periodic payment arrangement. - - by certain other investors, including certain institutions as set forth in more detail in the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares: - - in the event of the shareholder's death. - - to which no sales commission or transaction fee was paid to an authorized financial intermediary at the time of purchase. - - that result from required minimum distributions taken from retirement accounts upon the shareholders' attainment of age 70 1/2. - - initially purchased by an eligible employee benefit plan that are not connected with a plan level termination. - - by certain other investors, including certain institutions as set forth in more detail in the SAI. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional classes of investors. Policies relating to waiving the CDSC may be modified or withdrawn at any time. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5 AND CLASS W -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W there is no initial sales charge or CDSC. The fund's Board believes that no conflict of interest currently exists between the fund's classes of shares. On an ongoing basis, the Board, in the exercise of its fiduciary duties, seeks to ensure that no such conflicts arise. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the fund or the financial intermediary through which you are investing in the fund may not be able to open an account for you. If the fund or the financial C.10 intermediary through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial intermediary. Any applicable sales charge will be added to the purchase price for Class A shares. You may establish and maintain your account with an authorized financial intermediary or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts established with the fund will be supported by the fund's transfer agent. METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. CLASS B SHARES OF RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND ARE CLOSED TO NEW INVESTORS AND NEW PURCHASES. EXISTING SHAREHOLDERS IN THIS FUND MAY CONTINUE TO OWN CLASS B SHARES AND MAKE EXCHANGES INTO AND OUT OF EXISTING ACCOUNTS WHERE CLASS B SHARES OF THIS FUND ARE MAINTAINED. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS The financial intermediary through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial intermediary through which you buy shares may establish an account with the fund. To establish an account in this fashion, complete a fund account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained at riversource.com or seligman.com or may be requested by calling (800) 221-2450. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. - -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (800) 221-2450 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial intermediary may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY EXCHANGE Call (800) 221-2450 or send signed written instructions to the address above. - -------------------------------------------------------------------------------- C.11 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) MINIMUM INVESTMENT AND ACCOUNT BALANCE
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT THOSE LISTED TO THE RIGHT (NONQUALIFIED) TAX QUALIFIED ACCOUNTS CLASS W - --------------------------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $500 - --------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 None - --------------------------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $1,000 None $500
*If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. ------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT THOSE LISTED TO THE RIGHT (NONQUALIFIED) TAX QUALIFIED ACCOUNTS CLASS W - --------------------------------------------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100(a) $100(b) $500 - --------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 None - --------------------------------------------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None(b) None $500
**If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. (a)Money Market Funds -- $2,000 (b)Money Market Funds -- $1,000 ------------------------------------------------------------------------------- These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial intermediary for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 14 days to clear. If you request a sale within 14 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial intermediary process your transaction. If you maintain your account directly with your financial intermediary, you must contact that financial intermediary to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INTERMEDIARY ALL REQUESTS You can exchange or sell shares by having your financial intermediary process your transaction. The financial intermediary through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL P.O. BOX 8041 BOSTON, MA 02266-8041 ------------------------------------------------------------------------------- C.12 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) EXPRESS MAIL RIVERSOURCE FAMILY OF FUNDS C/O BOSTON FINANCIAL 30 DAN ROAD CANTON, MA 02021-2809 Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than the registered account owner(s). - Your address of record has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial intermediary providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. - -------------------------------------------------------------------------------- BY TELEPHONE Call (800) 221-2450. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate, qualified retirement accounts and trust accounts which the current trustee is not listed. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $50,000 per day. - -------------------------------------------------------------------------------- BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (800) 221-2450 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. ------------------------------------------------------------------------------- C.13 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY WIRE OR ACH (CONT.) Minimum amount: by ACH: $100 by wire: $500 Your bank or financial intermediary may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY SCHEDULED You may elect to receive regular periodic payments through an PAYOUT PLAN automatic sale of shares. See the SAI for more information. - -------------------------------------------------------------------------------- CHECK REDEMPTION SERVICE Class A shares of the money market funds offer check writing privileges. If you have $2000 in a money market fund, you may request checks which may be drawn against your account. You can elect this service on your initial application, or, thereafter. Call (800) 221-2450 for the appropriate forms to establish this service. If you own Class A shares that were both in another fund at NAV because of the size of the purchase, and then exchanged into a money market fund, check redemptions may be subject to a CDSC. EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered fund in the RiverSource Family of Funds without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. IF YOU HOLD YOUR FUND SHARES IN AN ACCOUNT WITH AMERIPRISE FINANCIAL SERVICES, YOU MAY HAVE LIMITED EXCHANGEABILITY WITHIN THE RIVERSOURCE FAMILY OF FUNDS. MARKET TIMING SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. FOR A FUND ORGANIZED AS A FUND-OF-FUND, ITS ASSETS CONSIST PRIMARILY OF SHARES OF THE UNDERLYING FUNDS IN WHICH IT INVESTS. THE UNDERLYING FUNDS MAY BE MORE SUSCEPTIBLE TO THE RISKS OF MARKET TIMING. FUNDS THAT INVEST DIRECTLY IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS AND THE UNDERLYING FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND OR UNDERLYING FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS, FLOATING RATE LOANS, HIGH YIELD BONDS, TAX-EXEMPT SECURITIES OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "PRICING AND VALUING OF FUND SHARES" FOR A DISCUSSION OF THE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial intermediary for the benefit of its participants or C.14 clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial intermediaries in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - - The fund may rely on the monitoring policy of a financial intermediary, for example, a retirement plan administrator or similar financial intermediary authorized to distribute the funds, if it determines the policy and procedures of such financial intermediaries are sufficient to protect the fund and its shareholders. - - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial intermediary. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial intermediaries where market timing activity may not always be successfully detected. C.15 Other exchange policies: - - Exchanges must be made into the same class of shares of the share class being exchanged out of. - - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - - Once the fund receives your exchange request, you cannot cancel it after the market closes. - - Shares of the purchased fund may not be used on the same day for another exchange or sale. - - New investments in Class A shares of a money market fund may be exchanged for either Class A, Class B or Class C shares of any other publicly offered fund in the RiverSource Family of Funds. - - If you exchange shares from Class A shares of a money market fund to another fund in the RiverSource Family of Funds, any further exchanges must be between shares of the same class. For example, if you exchange from Class A shares of a money market fund into Class B shares of another fund in the RiverSource Family of Funds, you may not exchange from Class B shares of that fund back to Class A shares of a money market fund. Exchange rules for money market funds are illustrated in the following tables. - - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. - - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to.
TO OTHER FUNDS FROM A MONEY MARKET FUND ----------------------------- CLASS A CLASS B CLASS C - ------------------------------------------------------------------------------------------------ Class A Yes Yes Yes Class B No Yes No Class C No No Yes
TO A MONEY MARKET FUND FROM OTHER FUNDS ----------------------------- CLASS A CLASS B CLASS C - ------------------------------------------------------------------------------------------------ Class A Yes No No Class B No Yes No Class C No No Yes
If your initial investment was in a money market fund and you exchange into an equity or fixed income fund, you will pay an initial sales charge if you exchange into Class A and be subject to a CDSC if you exchange into Class B or Class C. If your initial investment was in Class A shares of an equity or fixed income fund and you exchange shares into a money market fund, you may exchange that amount to another fund, including dividends earned on that amount, without paying a sales charge. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of a fund in the RiverSource Family of Funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. For a Class A repurchase on shares that were originally charged a CDSC, the amount of the CDSC will be reinvested at the NAV on the date the repurchase is processed. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the C.16 shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial intermediary or the fund's transfer agent if your account is held at the fund within 90 days of the date your sale request was processed. Contact your financial intermediary for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. If you sold shares of a Seligman fund on or before February 3, 2009 and wish to repurchase shares, you have the option of taking advantage of the current repurchase policy (described above) within 90 days of the date your sale request was processed, or you may use all or part of your sale proceeds to purchase shares of the fund you sold or any other fund in the RiverSource Family of Funds without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC, within 120 days of the date your sale request was processed. Contact your financial intermediary or, if you opened an account directly with the fund, the transfer agent, for more information on the required documentation to complete a repurchase transaction. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. PRICING AND VALUING OF FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. For a fund organized as a fund-of-fund, the assets will consist primarily of shares of the underlying funds, which are valued at their NAVs. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund or underlying fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's or underlying fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund or an underlying fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's or an underlying fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's or underlying fund's shares may change on days when shareholders will not be able to purchase or sell the fund's or underlying fund's shares. For money markets funds -- The fund's investments are valued at amortized cost, which approximates market value, as explained in the SAI. Although the fund cannot guarantee it will always be able to maintain a constant net asset value of $1 per share, it will use its best efforts to do so. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Because of the types of C.17 income earned by fixed income funds, it is unlikely the funds will distribute qualified dividend income. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund unless you request distributions in cash. The financial intermediary through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91st day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91st day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. FOR TAXABLE FUNDS. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. FOR TAX-EXEMPT FUNDS. Dividends distributed from interest earned on tax-exempt securities (exempt-interest dividends) are exempt from federal income taxes but may be subject to state and local taxes and potentially the alternative minimum tax. Dividends distributed from net capital gains, if any, and other income earned are not exempt from federal income taxes. Any taxable distributions are taxable in the year the fund declares them regardless of whether you take them in cash or reinvest them. Interest on certain private activity bonds is a preference item for purposes of the individual and corporate alternative minimum tax. To the extent the fund earns such income, it will flow through to its shareholders and may affect those shareholders who are subject to the alternative minimum tax. See the SAI for more information. Because interest on municipal bonds and notes is tax-exempt for federal income tax purposes, any interest on money you borrow that is used directly or indirectly to purchase fund shares is not deductible on your federal income tax return. You should consult a tax advisor regarding its deductibility for state and local income tax purposes. C.18 For a fund organized as a fund-of-fund, because most of the fund's investments are shares of underlying funds, the tax treatment of the fund's gains, losses, and distributions may differ from the tax treatment that would apply if either the fund invested directly in the types of securities held by the underlying funds or the fund shareholders invested directly in the underlying funds. As a result, fund shareholders may recognize higher amounts of capital gain distributions or ordinary income dividends than they otherwise would. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial intermediary to determine the availability of the funds. The funds may only be purchased or sold directly or through financial intermediaries authorized by the distributor to offer the funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE RIVERSOURCE FAMILY OF FUNDS AND CERTAIN FINANCIAL INTERMEDIARIES THAT OFFER THE RIVERSOURCE FAMILY OF FUNDS MAY NOT OFFER ALL FUNDS ON ALL INVESTMENT PLATFORMS. If you set up an account at a financial intermediary that does not have, and is unable to obtain, a selling agreement with the distributor, you will not be able to transfer fund holdings to that account. In that event, you must either maintain your fund holdings with your current financial intermediary, find another financial intermediary with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor), provides underwriting and distribution services to the funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial intermediaries that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the funds. The funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial intermediaries that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. Plan Administration Services. Under a Plan Administration Services Agreement, the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." C.19 PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial intermediaries, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial intermediary may elevate the prominence or profile of the fund within the financial intermediary's organization, and may provide the distributor and its affiliates with preferred access to the financial intermediary's registered representatives or preferred access to the financial intermediary's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial intermediary's pecuniary interest and its duties to its customers, for example, if the financial intermediary receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial intermediary or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial intermediary, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial intermediary, and the access the distributor or other representatives of the fund may have within the financial intermediary for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial intermediary and its customers. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial intermediary (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial intermediaries and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of fund assets (from the RiverSource Family of Funds, in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker- dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. C.20 The financial intermediary through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial intermediary. The SAI contains additional detail regarding payments made by the distributor to financial intermediaries. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION AFFILIATED PRODUCTS. RiverSource Investments serves as investment manager to all funds in the RiverSource Family of Funds, including those that are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other funds (funds of funds) in the RiverSource Family of Funds (collectively referred to as underlying funds) and to discretionary managed accounts (collectively referred to as affiliated products) that invest exclusively in underlying funds. These affiliated products, individually or collectively, may own a significant percentage of the outstanding shares of the underlying funds, and RiverSource Investments seeks to balance potential conflicts between the affiliated products and the underlying funds in which they invest. The affiliated products investment in the underlying funds may also have the effect of creating economies of scale (including lower expense ratios) because the affiliated products may own substantial portions of the shares of underlying funds and, comparatively, a redemption of underlying fund shares by one or more affiliated products could cause the expense ratio of an underlying fund to increase as its fixed costs would be spread over a smaller asset base. Because of these large positions of the affiliated products, the underlying funds may experience relatively large purchases or redemptions. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, underlying funds may experience increased expenses as they buy and sell securities to manage these transactions. When RiverSource Investments structures transactions over a reasonable period of time in order to manage the potential impact of the buy and sell decisions for the affiliated products, these affiliated products, including funds of funds, may pay more or less for shares of the underlying funds than if the transactions were executed in one transaction. In addition, RiverSource Investments has an economic conflict of interest in determining the allocation of the affiliated products' assets among the underlying funds as it earns different fees from the underlying funds. RiverSource Investments monitors expense levels of the funds and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including but not limited to RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, Ameriprise Financial is required to make 10-Q, C.21 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. C.22 EXHIBIT D SUMMARY OF INTEGRATION RELATED CHANGES At its Jan. 8, 2009 meeting, the Board approved certain changes to the Seligman Funds' share class structure, service provider arrangements and shareholder service policies, including: SHARE CLASS STRUCTURE. Approval of the re-designation of each Seligman Fund's Class R shares as Class R2 shares and Class I shares as Class R5 shares, as applicable, with a shareholder servicing and pricing structure consistent with Class R2 and Class R5 shares offered by other funds in the RiverSource Family of Funds, discussed below. INVESTMENT MANAGEMENT AND ADMINISTRATION. Approval of changes to each Seligman Fund that is a Buying Fund's (i) Administrative Services Agreement to add a fee schedule consistent with the fee schedules for other, comparable funds in the RiverSource Family of Funds, and (ii) Investment Management Services ("IMS") Agreement to reduce the fee by an amount at least equal to the amount of the increase in the fee under the Administrative Services Agreement. (IMS and Administration Agreements for Seligman Funds that are Selling Funds were not considered at this time.) TRANSFER AGENCY AND SHAREHOLDER SERVICING, AND PLAN ADMINISTRATION. Approval of a transition to RiverSource Service Corporation (RSC) as the Seligman Funds' transfer and shareholder servicing agent, including adoption of the fee structure paid by other funds in the RiverSource Family of Funds. The Seligman Funds previous transfer and shareholder servicing agent allocated 100% of its expense to the Seligman Funds that benefited from the services it provided. Under the new pricing structure, fees are either asset based (Class R2 and Class R5) or account based (Class A, Class B and Class C). See the Reorganization SAI for more information. For Class R2 shares, approval of this pricing structure included adoption of a Plan Administration Agreement, which includes an asset based fee. CUSTODY AND SECURITIES LENDING. Approval of a transition from State Street Bank & Trust, Co. to JPMorgan Bank, N.A. ("JPMorgan") as custodian, and approval of JPMorgan as securities lending agent. (The Seligman Funds did not previously have securities lending arrangements.) SHAREHOLDER SERVICE POLICIES. Approval of changes to certain shareholder service policies establishing a consistent shareholder experience across the combined RiverSource Family of Funds. Certain of these changes are described below (newly applicable shareholder service policies are set forth in Exhibit C): Class A at Net Asset Value. Adopt a uniform set of investor classes eligible for waiver of Class A share front-end sales load across RiverSource Family of Funds. Class A Front-End Sales Load and Breakpoint Structure. Adopt (i) a uniform breakpoint schedule for fixed-income and equity funds, increasing the first and second breakpoint from fixed-income and equity funds, respectively, from 4.5% to 4.75%, and (ii) a uniform dealer reallowance structure, paying out to financial intermediaries a maximum of 2.15% instead of 2.25% at the fourth breakpoint (no impact to shareholders). Class B Contingent Deferred Sales Charge Waivers. Adopt a uniform set of investor class waivers of CDSC on Class B shares across RiverSource Family of Funds. Class B Conversion to Class A. Adopt a uniform time horizon for conversion from Class B shares to Class A shares in the month after the eighth year of ownership. For Class B shares sold prior to the change, previous conversion rules apply. Class C Contingent Deferred Sale Charge Waivers. Adopt a uniform set of investor class waivers of CDSC on Class C shares across RiverSource Family of Funds. Class R (Re-designated Class R2) Contingent Deferred Sales Charge. Eliminate the CDSC on Class R (re-designated Class R2) shares. Repurchase Policy. Adopt repurchase policy of 90 days and require that, for Class B shares sold, repurchases will be put into Class A shares at net asset value. D.1 THIS PAGE LEFT BLANK INTENTIONALLY EXHIBIT E COMPARISON OF ORGANIZATIONAL DOCUMENTS This chart highlights material differences between the terms of the Articles of Incorporation and By-Laws of Seligman Common Stock Fund, Inc. and RiverSource Large Cap Series, Inc., of which each of RiverSource Large Cap Equity Fund and RiverSource Disciplined Equity Fund is a series.
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- SHAREHOLDER Under the Maryland General Corporation Under Minnesota law, a shareholder's LIABILITY: Law ("MGCL"), a stockholder of a liability to the corporation or its corporation is not obligated to the creditors is limited to paying the corporation or its creditors with amount agreed to be paid for the shares respect to the stock, except to the which the shareholder holds or has extent that the subscription price or agreed to purchase. other agreed upon price for the stock has not been paid or liability is otherwise imposed under the MGCL. - -------------------------------------------------------------------------------------------------- SHAREHOLDER On each matter submitted to vote of the At all meetings of the shareholders, VOTING stockholders, each holder of a share of each shareholder of record entitled to RIGHTS: any series or class issued by the vote is entitled to one vote for each corporation ("Common Stock") is dollar of net asset value (number of entitled to one vote for each share shares owned time net asset value per standing held irrespective of the share) and each fractional dollar series of Common Stock ("Series") and amount is be entitled to a all shares of all Series will vote as a proportionate fractional vote. single class ("Single Class Voting"); except, that (a) as to any matter Shareholders have the power to vote (i) requiring a separate vote of any Series for the election of directors; (ii) on by the 1940 Act or would be required most amendments to the corporation's under the MGCL, the requirements as to Articles of Incorporation and on a separate vote by that Series apply in certain amendments to the corporation's lieu of Single Class Voting as By-Laws; (iii) on certain proposed described above; (b) in the event that mergers and exchanges to which the the separate vote requirements referred corporation is a party; (iv) on the to in (a) above apply with respect to proposed sale of all or substantially one or more Series, then, subject to all of the corporation's property and (c) below, the shares of all other assets not in the usual and regular Series will vote as a single class; and course of its business; and (v) on the (c) as to any matter which does not proposed dissolution of the affect the interest of a particular corporation. Series, only the holders of shares of the one or more affected Series will be At all elections of directors, each entitled to vote. Holders of shares of shareholder is entitled to as many Common Stock of the corporation are not votes equal to the number of dollars of be entitled to cumulative voting in the net asset value of shares owned election of Directors or on any other multiplied by the number of directors matter. to be elected and may cast all of such votes for a single director or may As to any matter with respect to which distribute them among the number to be a separate vote of any class is voted for, or any two or more of them. required by the 1940 Act or by MGCL (including, without limitation, The standard form of certifying approval of any plan, agreement or resolution creating rights and other arrangement relating to preferences for series of capital stock expenses), such requirement as to a provides that each share may be voted separate vote by the class applies in by series (i) as required by the lieu of single class voting, and, if provisions of the 1940 Act, as amended, permitted by the 1940 Act or any rules, and all rules and regulations regulations or orders thereunder and promulgated thereunder; (ii) when the MGCL, all classes of a particular Board determines that a matter affects Series vote together as a single class series in a materially different way; on any matter that has the same effect or (iii) when the Board determines a on each class of that Series. As to any matter affects only one or some of the matter that does not affect the series. In addition, under Minnesota interest of a particular class, only law, shareholders are entitled to vote the holders of shares of the affected as separate series or classes with class are entitled to vote. respect to certain amendments to the corporation's Articles of Incorporation and on certain mergers and exchanges to which the corporation is a party. - -------------------------------------------------------------------------------------------------- SHAREHOLDER Regular stockholder meetings are not Regular shareholder meetings are not MEETINGS: required, unless stockholders are required; however, a majority of required to meet for the purposes of directors present at a duly held electing directors pursuant to the 1940 meeting may call a regular meeting of Act. shareholders by fixing the date, time and place for a meeting. The chairman of the board, president, chief executive officer or Board of If a regular meeting of shareholders Directors may call a special meeting of has not been held during the the stockholders. In addition, a immediately preceding 15 months, a special meeting of stockholders shall shareholder or shareholders holding be called by the secretary of the three percent or more of the voting corporation on the written request of power of all shares entitled to vote stockholders holding at least a may demand a regular meeting of majority of the voting power of all shareholders by written notice of shares entitled to vote. The demand given to the chief executive stockholders must send written notice officer or chief financial officer. to the secretary and other procedural Within 30 days after receipt of the requirements must be met. demand by one of those officers, the Board must cause a regular meeting of The secretary of the Corporation will shareholders to be called and held on also call a special meeting of the notice no later than 90 days after stockholders on the written request of receipt of the demand, all at the stockholders entitled to cast not less expense of the Fund. than a majority of all the votes entitled to be cast at such meeting. Special meetings of the shareholders Any stockholder of record seeking to may be called at any time as provided have stockholders request a special for by the laws of the State of meeting must send written notice to the Minnesota. secretary (the "Record Date Request Notice") requesting the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the "Request Record Date"). The Record Date Request Notice must - --------------------------------------------------------------------------------------------------
E.1
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- state the purpose of the meeting and In addition, a special meeting of the matters proposed to be acted on it, shareholders may be called at any time signed by one or more stockholders of by a shareholder or shareholders record as of the date of signature, holding ten percent or more of the bear the date of signature of each such voting power of all shares entitled to stockholder (or their agent) and state vote, except that a special meeting for all information that must be disclosed the purpose of considering any action in solicitations of proxies for to directly or indirectly facilitate or election of directors in an election effect a business combination must be contest (even if an election contest is called by 25% or more of the voting not involved), or is otherwise power of all shares entitled to vote. required, pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date that may not precede and also not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the secretary. In order for any stockholder to request a special meeting, one or more written requests for a special meeting signed by stockholders of record (or their agents) as of the Request Record Date entitled to cast not less than a majority (the "Special Meeting Percentage") of all of the votes entitled to be cast at such meeting (the "Special Meeting Request") must be delivered to the secretary. Additionally, the Special Meeting Request (a) shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which is limited to the lawful matters set forth in the Record Date Request Notice received by the secretary), (b) shall bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) shall set forth the name and address, as they appear in the Corporation's books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed) and the class, series and number of all shares of stock of the Corporation which are owned by each such stockholder, and the nominee holder for, and number of, shares owned by such stockholder beneficially but not of record, (d) shall be sent to the secretary by registered mail, return receipt requested, and (e) shall be received by the secretary within 60 days after the Request Record Date. Any stockholder requesting a special stock holder meeting may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary. The secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Corporation's proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the aforementioned documents, the secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting. Any stockholder requested meeting may not be more than 90 days after the record date for the meeting. - -------------------------------------------------------------------------------------------------- SHAREHOLDER The presence in person or by proxy of The holders of at least ten percent QUORUM: the holders of record of one-third of (10%) of the shares outstanding and the shares of all Series and classes entitled to vote, present in person or issued and outstanding and entitled to by proxy, constitute a quorum, but the vote at a meeting constitute a quorum holders of a smaller amount may adjourn except as otherwise provided by law or without further notice, other than by the articles of incorporation. Where notice at the time, until a quorum is the holders of shares of any Series or secured at any such adjourned meeting. class are entitled to vote separately In case a quorum is not present, the as a class, the presence in person or meeting may be adjourned without notice by proxy of the holders of one-third of other than by notice at the meeting. At the shares of that separate class any adjourned meeting at which a quorum issued and outstanding and entitled to may be present, any business may be vote at the meeting constitutes a transacted which might have been quorum for that vote. transacted at the meeting as originally called. If a quorum is not present or represented at the meeting, the holders of a majority of the shares present in person or by proxy and entitled to vote have the power to adjourn the - --------------------------------------------------------------------------------------------------
E.2
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- meeting without notice other than announcement at the meeting, until a quorum is present. If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders or the chairman of the meeting shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At any adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. The absence from any meeting of stockholders of the number of shares in excess of one-third of the shares of all Series and classes, or of the affected Series, class or classes, as the case may be, which may be required by the laws of the State of Maryland, the 1940 Act or any other applicable law or the Articles of Incorporation, for action upon any given matter will not prevent action of such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat, in person or by proxy, holders of the number of shares required for action in respect of such other matter or matters. Notwithstanding any provision of law requiring any action to be taken or authorized by the holders of a greater proportion than a majority of the shares of all Series and classes or of the shares of a particular Series, class or classes, as the case may be, entitled to vote thereon, such action will be valid and effective if taken or authorized by the affirmative vote of the holders of a majority of the shares of all Series and classes or of such particular Series, Class or classes, as the case may be, outstanding and entitled to vote thereon. The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. - -------------------------------------------------------------------------------------------------- SHAREHOLDER Under the MGCL, if authorized by the An action required or permitted to be CONSENT: charter of the corporation, the holders taken at a shareholder meeting may be of common stock entitled to vote taken by written action signed, or generally in the election of directors consented to by authorized electronic may take action or consent to any communication, by all of the action by delivering a consent in shareholders entitled to vote on that writing or by electronic transmission action. Such a written action is not of the stockholders entitled to cast effective if it is signed or consented not less than the minimum number of to by fewer than all the shareholders votes that would be necessary to entitled to vote on the action. authorize or take the action at a stockholders meeting. The corporation's charter does not authorize such action; therefore, any action required or permitted of stockholders must be taken at a meeting. - -------------------------------------------------------------------------------------------------- NOTICE TO In general, stockholders entitled to In general, shareholders who are SHAREHOLDERS vote at or notice of a stockholder entitled to vote at a shareholder OF RECORD meeting must be given written notice of meeting must be given notice of the DATE: at least 10 days and not more than 90 meeting at least 10 and not more than days before the meeting. Unless 60 days before the meeting. In certain otherwise required by statute, any cases, the notice of meeting must business may be conducted at the annual include specified information required meeting without being designated in the by Minnesota law. The Board can notice. No business may be transacted establish a record date for determining at a special meeting of stockholders the shareholders who are entitled to except as specifically designated in vote at a shareholder meeting. The the notice. record date cannot be more than 60 days before the date of the meeting. The directors may set a record date for the purpose of determining the stockholders entitled to notice of or to vote at a stockholder meeting. The record date cannot be more than 90 days or less than 10 days before the date of the meeting. Instead of fixing a record date, the Board of Directors may close the stock transfer books for not more than 20 days. If the stock transfer books are closed for this purpose, they must be closed for at least 10 days before the date of the meeting. - -------------------------------------------------------------------------------------------------- SHAREHOLDER A stockholder may cast the votes by the At each shareholder meeting, the polls PROXIES: stockholder in person or by proxy may be opened and closed, the proxies executed by the stockholder or by the and ballots may be received and taken stockholder's duly authorized agent in in charge, and all questions touching any manner permitted or not prohibited the qualification of voters, the by law. The proxy or evidence of validity of proxies, and acceptances or authorization of the proxy must be rejections of votes may be decided by filed with the secretary of the two inspectors of election. corporation before or at the meeting. No proxy is valid more than eleven months after its date unless otherwise provided in the proxy. - --------------------------------------------------------------------------------------------------
E.3
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- Minnesota law provides that shareholders can submit proxies in writing or by telephonic transmission or authenticated electronic communication. It also provides that the Board can establish procedures whereby a record holder can certify in writing that another person is the beneficial owner of shares, and the beneficial owner then can vote the shares or appoint a proxy. - -------------------------------------------------------------------------------------------------- DIRECTORS' The corporation may amend the Articles The Articles of Incorporation, or any POWER TO of Incorporation if a majority of all provision hereof, may be amended, AMEND the shares at the time issued and altered, changed or repealed in a ARTICLES OF outstanding of all classes or the manner prescribed by the laws of the INCORPORATI- affected class or classes entitled to State of Minnesota. ON: vote in favor of the amendment, or consent in writing to such amendment. The Board, acting without shareholder approval, can amend the corporation's Articles of Incorporation to (i) change the name of the corporation; (ii) increase or decrease, but not below the number of then-outstanding shares, the aggregate number of shares the corporation has authority to issue, including shares of any class or series; and (iii) amend or cancel a certificate fixing the rights and preferences of a class or series of shares, but only when no shares of that class or series are outstanding. In all other cases, the corporation's Articles of Incorporation only can be amended with the approval of the requisite shareholders. - -------------------------------------------------------------------------------------------------- TERMINATION Under the MGCL, a majority of the In order to dissolve a Minnesota OF entire board of directors of the corporation, the affirmative vote of a CORPORATION: corporation proposing to dissolve the majority of the voting power of all corporation shall (1) adopt a shares entitled to vote is required. In resolution which declares that order to discontinue an individual dissolution of the corporation is class or series of shares without advisable; and (2) direct that the dissolving the corporation, an proposed dissolution be submitted for amendment to the corporation's Articles consideration at either an annual or a of Incorporation would be required. In special meeting of the stockholders. order to adopt such an amendment, Under the MGCL, unless the shareholders must approve the amendment corporation's charter provides a lesser by the affirmative vote of the greater proportion of votes, but in no case of (i) a majority of the voting power less than a majority of all votes of the shares of that class or series entitled to be cast on the proposal, present and entitled to vote or (ii) a the proposed dissolution shall be majority of the voting power of the approved by the stockholders of the minimum number of shares of such class corporation by the affirmative vote of or series entitled to vote that would two-thirds of all the votes entitled to constitute a quorum for the transaction be cast on the matter. The Seligmans of business at the meeting (a Fund's charter provides that "Minnesota Statutory Vote"). notwithstanding any provision of law requiring any action to be taken or The Board, acting without a shareholder authorized by the holders of a greater vote, does not have the power to proportion than a majority of the dissolve the corporation or to shares of all series and classes or of discontinue an individual class or the shares of a particular series, series of shares. class or classes, as the case may be, entitled to vote thereon, such action shall be valid and effective if taken or authorized by the affirmative vote of the holders of a majority of the shares of all series and classes or of such particular series, class or classes, as the case may be, outstanding and entitled to vote thereon. - -------------------------------------------------------------------------------------------------- MERGER OR Under the MGCL, unless the In most cases, any merger or exchange CONSOLIDATI- corporation's charter provides a lesser in which a Minnesota corporation is not ON OF proportion of votes, but in no case the continuing entity, and any sale of CORPORATION: less than a majority of all votes all or substantially all of the entitled to be cast on the proposal, corporation's property and assets not any consolidation, merger, share in the usual and regular course of its exchange, or transfer requires the business, requires the affirmative vote affirmative vote of two-thirds of all of a majority of the voting power of the votes entitled to be cast on the all shares entitled to vote. matter. The Seligmans Fund's charter provides that notwithstanding any Any sale of the assets belonging to an provision of law requiring any action individual series of shares of a to be taken or authorized by the Minnesota corporation in exchange for holders of a greater proportion than a shares of another corporation or trust majority of the shares of all series or shares of another series of the and classes or of the shares of a corporation, while leaving other series particular series, class or classes, as of the corporation outstanding, would the case may be, entitled to vote require an amendment to the thereon, such action shall be valid and corporation's Articles of effective if taken or authorized by the Incorporation. In order to adopt such affirmative vote of the holders of a an amendment, shareholders of that majority of the shares of all series series would have to approve the and classes or of such particular amendment by a Minnesota Statutory series, class or classes, as the case Vote. may be, outstanding and entitled to vote thereon. A stockholder who has not received payment for his stock in connection with a merger, consolidation, share exchange or transfer may petition a court of equity in the county where the principal office of the corporation is located or where the resident agent of the successor is located, for an appraisal to determine the fair value of the stock. - -------------------------------------------------------------------------------------------------- REMOVAL OF Under the MGCL, stockholders of the Under Minnesota law, the Board can DIRECTORS: corporation may remove any director, remove a director by a majority vote of with or without cause, by the the remaining directors, but only if affirmative vote of a majority of all the director was appointed by the Board the votes entitled to be cast generally to fill a vacancy and has not for the election of directors. subsequently been elected by shareholders. - --------------------------------------------------------------------------------------------------
E.4
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- In all other cases, a director can only be removed by shareholder vote. In general, such removal requires the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote at an election of directors. However, where a corporation has cumulative voting (as do the Funds), unless the entire Board is removed simultaneously, a director is not removed from the Board if there are cast against removal of the director the votes of a proportion of the voting power sufficient to elect the director at an election of the entire Board under cumulative voting. - -------------------------------------------------------------------------------------------------- DIRECTOR The Board of Directors may appoint from From time to time the Board may, by COMMITTEES: among its members an Executive resolution passed by a majority of the Committee, an Audit Committee, a Board whole Board, appoint any other Operations Committee, a Nominating committee or committees for any purpose Committee and other committees, or purposes, which committee or composed of one or more directors to committees will have such powers as serve at the pleasure of the Board of specified in the resolution of Directors. Any director may give notice appointment. to the Board of Directors at any time of his or her resignation from any The corporation's By-Laws provide that committee on which he or she serves. the Board may, by resolution passed by a majority of the whole Board, The Board of Directors may delegate to designate an Executive Committee of two committees appointed pursuant to the or more directors, which may meet at Articles of Incorporation any of the stated times or on notice to all by any powers of the Board of Directors, of their number during intervals except as prohibited by law. between meetings of the Board. The Executive Committee will advise with Any action required or permitted to be and aid the officers of the Fund in all taken at any meeting of a committee of matters concerning its interests and the Board of Directors may be taken the management of its business, and without a meeting, if a consent to such generally perform such duties and action in writing or by electronic exercise such powers as may be transmission is given by each member of delegated to it from time to time by the committee and filed with the the Board. minutes of proceedings of such committee. The Board also may, by resolution passed by a majority of the whole Subject to the previous sections, the Board, appoint any other committee or Board of Directors has the power at any committees for any purpose or purposes, time to change the membership of any which committee or committees will have committee, to fill all vacancies, to such powers as specified in the designate alternate members to replace resolution of appointment. The quorum any absent or disqualified member or to for such committee established by the dissolve any such committee. Subject to Board is two members regardless of the the power of the Board of Directors, number of members serving on the the members of a committee have the committee. Under Minnesota law, the power to fill any vacancies on such members of such other committees do not committee. need to be directors. - -------------------------------------------------------------------------------------------------- DIRECTOR The Fund's Articles of Incorporation To the full extent permitted by the LIABILITY: provide that a director or officer of laws of the State of Minnesota, as now the corporation will not be liable to existing or hereafter amended, no the corporation or its stockholders for director of the Fund will be liable to monetary damages for breach of the Fund or to its shareholders for fiduciary duty as a director or monetary damages for breach of officer, except to the extent such fiduciary duty as a director but such exemption from liability or limitation limit on liability will be permitted by thereof is not permitted by law only to the extent allowable under the (including the 1940 Act). provisions of the 1940 Act. Under the MGCL, the foregoing provision Under Minnesota law, the foregoing is not effective to eliminate a provision is not effective to eliminate director's personal liability to the a director's personal liability to the Funds or its shareholders for, among Funds or its shareholders for, among other things, any act or omission of other things, (i) any breach of the the director that was material to the director's duty of loyalty to the matter giving rise to a threatened, corporation or its shareholders; (ii) pending or completed action, suit or acts or omissions not in good faith or proceeding, whether civil, criminal, that involve intentional misconduct or administrative, or investigative knowing violation of law; or (iii) any ("Proceeding"), and (1) was committed transaction from which the director in bad faith; or (2) was the result of derived an improper personal benefit. active and deliberate dishonesty; or (ii) the director actually received an improper personal benefit in money, property, or services; or (iii) in the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. Under the MGCL, the charter of a Maryland corporation may include any provision expanding or limiting the liability of its directors to the corporation or its stockholders for money damages, but may not include any provision that restricts or limits the liability of its directors to the corporation or its stockholders: (A) to the extent that it is proved that the person actually received an improper benefit or profit in money, property, or services for the amount of the benefit or profit in money, property, or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. - --------------------------------------------------------------------------------------------------
E.5
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- DIRECTOR The corporation will indemnify to the The Fund will indemnify any person who INDEMNIFICA- fullest extent permitted by law any was or is a party and is threatened to TION: person made or threatened to be made a be made a party, by reason of the fact party to any action, suit or that she or he is or was a director, proceeding, whether criminal, civil, officer, employee or agent of the Fund, administrative or investigative, by or is or was serving at the request of reason of the fact that such person is the Fund as a director, officer, or was a director, officer or employee employee or agent of another company, of the corporation or serves or served partnership, joint venture, trust or at the request of the corporation any other enterprise, to any threatened, other enterprise as a director, officer pending or completed action, suit or or employee. To the fullest extent proceeding, wherever brought, and the permitted by law, expenses incurred by Fund may purchase liability insurance any such person in defending any such and advance legal expenses, all to the action, suit or proceeding will be paid fullest extent permitted by the laws of or reimbursed by the corporation the State of Minnesota. Any promptly, provided that such person indemnification hereunder will not be agrees to repay such expenses if it is exclusive of any other rights of ultimately determined that such person indemnification to which the directors, is not entitled to be indemnified by officers, employees or agents might the corporation. The articles of otherwise be entitled. No incorporation may not be amended to indemnification will be made in adversely affect this protection. These violation of the 1940 Act. provisions do not waive compliance with the Securities Act of 1933 or the 1940 Under Minnesota law, a corporation is Act or other valid rule, regulation or required to indemnify and advance order of the SEC. expenses to present and former directors against judgments, penalties, Under the MGCL, a corporation may fines, settlements and reasonable indemnify a director made a party to expenses, including attorneys' fees and any Proceeding by reason of service in disbursements, if they are made parties that capacity unless found liable under to a legal proceeding by virtue of provisions (1) and (2) under "Director/ their position as directors. However, Trustee Liability". Indemnification indemnification and advances are not may be against judgments, penalties, required or permitted if a director fines, settlements, and reasonable engaged in specified disabling conduct. expenses actually incurred by the director in connection with the The corporation's Articles of proceeding. However, if the proceeding Incorporation and By-Laws provide that was one by or in the right of the each person made or threatened to be corporation, indemnification may not be made a party to or who is involved made in respect of any proceeding in (including, without limitation, as a which the director shall have been witness) in any actual or threatened adjudged to be liable to the action, suit or proceeding whether corporation. civil, criminal, administrative, arbitration, or investigative, The Corporation's By-Laws provide to including a proceeding by or in the the maximum extent permitted by right of the Fund by reason of the Maryland law, as in effect from time to former or present capacity as a time, the Corporation shall indemnify director or officer of the Fund or who, and, without requiring a preliminary while a director or officer of the determination of the ultimate Fund, is or was serving at the request entitlement to indemnification, shall of the Fund or whose duties as a pay or reimburse reasonable expenses in director or officer involve or involved advance of final disposition of a service as a director, officer, proceeding to (a) any individual who is partner, trustee or agent of another a present or former director or officer organization or employee benefit plan, of the Corporation and who is made, or whether the basis of any proceeding is threatened to be made, a party to the alleged action in an official capacity proceeding by reason of his or her or in any capacity while serving as a service in any such capacity or (b) any director, officer, partner, trustee or individual who, while a director or agent, will be indemnified and held officer of the Corporation and at the harmless by the Fund to the full extent request of the Corporation, serves or authorized by laws of the State of has served as a director, officer, Minnesota, as the same or may hereafter partner or trustee of another be amended (but, in the case of any corporation, or a real estate such amendment, only to the extent that investment trust, partnership, joint such amendment permits the Fund to venture, trust, employee benefit plan provide broader indemnification rights or other enterprise and who is made, or than the law permitted the Fund to threatened to be made, a party to the provide prior to such amendment), or by proceeding by reason of his or her any other applicable law as then in service in any such capacity. The effect, against judgments, penalties, Corporation may, with the approval of fines including, without limitation, its Board of Directors or any duly excise taxes assessed against the authorized committee thereof, provide person with respect to an employee such indemnification and advance for benefit plan, settlements and expenses to a person who served a reasonable expenses, including predecessor of the Corporation in any attorneys' fees and disbursements, of the capacities described in (a) or incurred in connection therewith and (b) above and to any employee or agent the indemnification will continue as to of the Corporation or a predecessor of any person who has ceased to be a the Corporation. The termination of director or officer and will inure to any claim, action, suit or other the benefit of the person's heirs, proceeding involving any person, by executors and administrators provided, judgment, settlement (whether with or however, in an action brought against without court approval) or conviction the Fund to enforce rights to or upon a plea of guilty or nolo indemnification, the director or contendere, or its equivalent, shall officer will be indemnified only if the not create a presumption that such action was authorized by the Board of person did not meet the standards of the Fund. The right to indemnification conduct required for indemnification or conferred by these provisions is a payment of expenses to be required or contract right and includes the right permitted under Maryland law, the By- to be paid by the Fund in advance of laws or the charter of the Corporation. the final disposition of a proceeding Any indemnification or advance of for expenses incurred in connection expenses made pursuant to the By-laws therewith provided, however, such shall be subject to applicable payment of expenses will be made only requirements of the 1940 Act. The upon receipt of a written undertaking indemnification and payment of expenses by the director or officer to repay all provided in the Bylaws shall not be amounts so paid if it is ultimately deemed exclusive of or limit in any way determined that the director or officer other rights to which any person is not entitled to indemnification. seeking indemnification or payment of expenses may be or may become entitled Each person who upon written request to under any bylaw, regulation, insurance, the Funds has not received payment agreement or otherwise. within thirty days may at any time thereafter bring suit against the Funds to recover any unpaid amount and, to the extent successful, in whole or in part, will be entitled to be paid the expenses of prosecuting such suit. Each person will be presumed to be entitled to indemnification upon filing a written request for payment and the Fund will have the burden of proof to overcome the presumption that the director or officer is not so entitled. Neither the determination by the Fund, whether by the Board, special legal counsel or by shareholder, nor the failure of the Fund to have made any determination will be a defense or create the presumption that the - --------------------------------------------------------------------------------------------------
E.6
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- director or officer is not entitled to indemnification. The right to indemnification and to the payment of expenses prior to any final determination will not be exclusive of any other right which any person may have or hereinafter acquire under any statute, provision of the Articles of Incorporation, by-law, agreement, vote of shareholders or otherwise and notwithstanding any provisions in the Funds' By-Laws, the Funds are not obligated to make any payment with respect to any claim for which payment is required to be made to or on behalf of the director or officer under any insurance policy, except with respect to any excess beyond the amount of required payment under such insurance and no indemnification will be made in violation of the provisions of the 1940 Act. - -------------------------------------------------------------------------------------------------- DIVIDENDS: The Board of Directors may declare and The corporation's Articles of pay dividends and distributions from Incorporation provide that the income and capital gains, accrued or directors may declare and pay dividends unrealized, from the assets belonging in their discretion at any time and to a Series, at such times and in such from time to time to the extent and manner as they may determine in their from such sources as permitted by the discretion. laws of the State of Minnesota. Under Minnesota law, the Board can authorize Dividends and distributions on shares a dividend if it determines that the of a particular Series may be paid to corporation will be able to pay its the holders of shares of the Series at debts in the ordinary course of such times, in such manner and from business after paying the dividend. such of the income and capital gains, accrued or realized, from the assets belonging to that Series, after providing for actual and accrued liabilities belonging to that Series, as the Board of Directors may determine. Dividends and other distributions upon the stock of the corporation may be authorized by the Board of Directors, subject to the provisions of law and the charter of the corporation. Dividends and other distributions may be paid in cash, property or stock of the corporation, subject to the provisions of law and the charter. - -------------------------------------------------------------------------------------------------- CAPITALIZAT- The Board of Directors has the power The amount of total authorized capital ION: and authority to increase or decrease, stock of the Fund is $100,000,000, from time to time, the aggregate number consisting of 10,000,000,000 shares of of shares of stock, or of any Series or par value of one cent ($0.01) per class of stock, that the corporation share. Any or all of said shares of has the authority to issue. capital stock may be issued in such classes or series with such With respect to Seligman Common Stock designations, preferences and relative, Fund, Inc., the total number of shares participating, optional or other of capital stock which the corporation special rights, or qualifications, has authority to issue is 500,000,000 limitations or restrictions thereof, as shares (par value of $.50 per share), is stated and expressed in a resolution amounting to an aggregate par value of or resolutions providing for the issue $250,000,000. of such class or series of stock as may be adopted from time to time by the Fund's Board. - -------------------------------------------------------------------------------------------------- NUMBER OF The number of directors will never be There may be no less than two and not DIRECTORS; less than the greater of three and the more than fifteen directors, as VACANCIES: minimum number required by the MGCL, determined from time to time by the nor more than 20, and the tenure of a Board. If a vacancy occurs on the Board directorship will not be affected by by reason of death, resignation or any decrease in the number of otherwise, such vacancy may be filled directors. for the unexpired term by a majority vote of the remaining directors, even Any vacancy occurring in the Board of if the remaining number of directors is Directors for any cause other than by less than a quorum. reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors, even if such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of directors may be filled by a majority of the entire Board of Directors then in office. A director elected by the Board of Directors to fill a vacancy will be elected to hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies. - -------------------------------------------------------------------------------------------------- INDEPENDENT The Articles of Incorporation and By- The corporation's By-Laws require the CHAIR OF THE Laws do not require an independent Board to elect one independent member BOARD: chair of the Board of Directors. to serve as Chair of the Board whose duties include serving as the lead independent director. - -------------------------------------------------------------------------------------------------- INSPECTION Under the MGCL, any stockholder or his The Articles of Incorporation and By- OF BOOKS AND agent may inspect and copy during usual Laws do not give shareholders any right RECORDS: business hours the corporation's By- to inspect the books and records of the laws, minutes of the proceedings of the corporation. stockholders, annual statements of affairs, and voting trust agreements on file at the corporation's principal Minnesota law requires the corporation office. (each Fund) to keep (i) a share register containing the In addition, one or more persons who together are and for at least six months have been - --------------------------------------------------------------------------------------------------
E.7
- -------------------------------------------------------------------------------------------------- SELIGMAN COMMON STOCK FUND, INC. RIVERSOURCE LARGE CAP SERIES, INC. POLICY (MARYLAND CORPORATION) (MINNESOTA CORPORATION) - -------------------------------------------------------------------------------------------------- stockholders of record of a least 5 names and addresses of its shareholders percent of the outstanding stock of any and the number and classes of shares class of the corporation may, in person held by each; (ii) records of all or by agent, on written request, proceedings of shareholders for the inspect and copy during usual business last three years; (iii) records of all hours the corporation's books of proceedings of the Board for the last account and its stock ledger, present three years; (iv) its Articles of to any officer or resident agent of the Incorporation and By-Laws, as amended; corporation a written request for a (v) certain financial statements that statement of its affairs, and in the Minnesota law requires that the case of any corporation which does not corporation (each Fund) to prepare; maintain the original or a duplicate (vi) all reports to shareholders stock ledger at its principal office, generally within the last three years; present to any officer or resident and (vii) a statement of the names and agent of the corporation a written usual business addresses of its request for a list of its stockholders. directors and principal officers. The Fund's shareholders and beneficial A stockholder with the right, under owners have the right, upon written applicable law, to inspect the demand stating the purpose, at any corporation's books of account, stock reasonable time to examine and copy ledger, or other specified documents of those records which are reasonably the corporation has no right to make an related to the stated purpose, provided inspection if the Board of Directors that the stated purpose is reasonably determines that the stockholder has an related to the person's interest as a improper purpose for requesting the shareholder or beneficial owner. inspection. - --------------------------------------------------------------------------------------------------
E.8 EXHIBIT F RIVERSOURCE FAMILY OF FUNDS PRIVACY NOTICE The RiverSource Family of Funds, which includes RiverSource, Seligman, and Threadneedle, branded funds (collectively, the "funds"), are committed to respecting shareholders' rights of privacy and we have adopted the following policy to maintain the confidentiality of the information you share with us: INFORMATION WE COLLECT We know that you expect us to conduct and process your business in a manner that is both accurate and efficient. To do so, we may collect information about you such as your name, address, Social Security number and the names of your beneficiaries. This information is collected from applications or other forms that you provide to us or the financial intermediaries that distribute the funds. We also collect information about your transactions in the funds. In addition, we may obtain information about you from third parties in order to service your account. Financial intermediaries which distribute the funds and service your account, whether or not affiliated with us, may have a customer relationship with you and may independently collect information from you. This Privacy Notice does not apply to their independent collection or use of information about you. INFORMATION WE DISCLOSE We do not disclose any nonpublic personal information about our customers or former customers to anyone, except in two circumstances. We disclose information to companies, whether or not affiliated with us, that help us by providing services to you including companies that market funds on our behalf. We also disclose information when we are permitted or required by law to do so, such as when information is provided to the IRS for tax purposes. SECURITY We maintain physical, electronic, and procedural safeguards to protect your personal information. In addition, we insist that the distributors and other companies that perform services for us limit access to your personal information to authorized employees and agents, and maintain appropriate physical, electronic and procedural safeguards. This privacy notice applies to each fund in the RiverSource Family of Funds and to Tri-Continental Corporation. It also applies to RiverSource Investments, LLC, RiverSource Fund Distributors, Inc. and RiverSource Service Corporation with respect to the investment advisory, distribution and shareholder services each may provide to the funds. F.1 THIS PAGE LEFT BLANK INTENTIONALLY THIS PAGE LEFT BLANK INTENTIONALLY THIS PAGE LEFT BLANK INTENTIONALLY 19830 PROXY RIVERSOURCE FUNDS PROXY SELIGMAN FUNDS NOTICE OF A JOINT SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 2, 2009 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE FUND(S) LISTED BELOW. The undersigned hereby constitutes and appoints Stephen R. Lewis, Jr., Scott R. Plummer and Christopher O. Petersen, and each of them, as proxies for the undersigned, with full power of substitution and resubstitution, and hereby authorizes said proxies, and each of them, to represent and vote, as designated on the reverse side, all shares of the Fund(s) listed below held of record by the undersigned on April 3, 2009 at the Joint Special Meeting of Shareholders to be held on June 2, 2009 (the Meeting), and at any adjournment thereof. The undersigned hereby revokes any previous proxies with respect to such shares of the undersigned. THIS PROXY CARD, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S), AND, IN THE DISCRETION OF SUCH PROXIES, UPON ANY AND ALL OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF, INCLUDING, BUT NOT LIMITED TO, PROPOSING AND/OR VOTING ON ADJOURNMENT OF THE MEETING WITH RESPECT TO THE PROPOSAL(S), INCLUDING, BUT NOT LIMITED TO, IN THE EVENT THAT SUFFICIENT VOTES IN FAVOR OF ANY PROPOSAL ARE NOT RECEIVED. IF THIS PROXY CARD IS SIGNED, DATED AND RETURNED WITH NO VOTING INSTRUCTION AS TO THE PROPOSAL(S) ON WHICH SHARES REPRESENTED BY THE UNDERSIGNED ARE ENTITLED TO VOTE, SUCH SHARES SHALL BE VOTED FOR THE PROPOSAL(S). VOTE VIA TELEPHONE: 1-866-241-6192 VOTE VIA THE INTERNET: www.proxy-direct.com 999 9999 9999 999 [_________________________] NOTE: Please sign exactly as your name appears on this Proxy Card and date it. If signing for estates, trusts or corporations, title or capacity should be stated. If shares are held jointly, each holder must sign. ------------------------------------------- Signature ------------------------------------------- Additional Signature (if held jointly) ------------------------------------------- Date RSF_19830_040609 FUND FUND - ---- ---- RiverSource Large Cap Equity Fund Seligman Common Stock Fund, Inc. VOTING OPTIONS READ YOUR PROXY STATEMENT AND HAVE IT AT HAND WHEN VOTING. (GRAPHIC) (GRAPHIC) (GRAPHIC) (GRAPHIC) VOTE ON THE INTERNET VOTE BY PHONE VOTE BY MAIL VOTE IN PERSON LOG ON TO: CALL 1-866-241-6192 VOTE, SIGN AND DATE THIS PROXY ATTEND SHAREHOLDER MEETING www.proxy-direct.com FOLLOW THE RECORDED CARD AND RETURN IN THE MARQUETTE HOTEL FOLLOW THE ON-SCREEN INSTRUCTIONS POSTAGE-PAID ENVELOPE 710 MARQUETTE AVENUE INSTRUCTIONS AVAILABLE 24 HOURS MINNEAPOLIS, MN 55402 AVAILABLE 24 HOURS ON JUNE 2, 2009
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW. THIS PROXY CARD CONTAINS PROPOSALS RELATING TO MULTIPLE FUNDS. IF YOU DO NOT OWN SHARES OF A FUND, "NOT APPLICABLE" IS NOTED UNDER THAT PROPOSAL. YOU ARE ONLY PERMITTED TO VOTE ON PROPOSALS OF FUND(S) FOR WHICH YOU OWN SHARES. IF YOU DO NOT INDICATE YOUR VOTING INSTRUCTION FOR THE PROPOSALS THAT YOU ARE ENTITLED TO VOTE, YOUR PROXY WILL BE VOTED FOR EACH SUCH PROPOSAL THAT YOU ARE ENTITLED TO VOTE. PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE: [X] [ ] Mark this box to vote FOR ALL Proposals of fund(s) for which you own shares. (No other vote is necessary.) 1A. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN RIVERSOURCE LARGE CAP EQUITY FUND AND RIVERSOURCE DISCIPLINED EQUITY FUND. FOR AGAINST ABSTAIN RiverSource Large Cap Equity Fund [ ] [ ] [ ] 1B. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN SELIGMAN COMMON STOCK FUND, INC. AND RIVERSOURCE DISCIPLINED EQUITY FUND. FOR AGAINST ABSTAIN Seligman Common Stock Fund, Inc. [ ] [ ] [ ] IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR BOTH RIVERSOURCE AND SELIGMAN FUNDS SHAREHOLDER MEETING TO BE HELD ON JUNE 2, 2009. THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT HTTPS://WWW.PROXY-DIRECT.COM/RFS19830 EVERY VOTE IS IMPORTANT! PLEASE VOTE TODAY USING ONE OF THE FOUR AVAILABLE OPTIONS! RSF_19830_040609
RIVERSOURCE LARGE CAP EQUITY FUND SELIGMAN COMMON STOCK FUND, INC. (COMBINED PROXY STATEMENT/PROSPECTUS) April 17, 2009 HERE IS A BRIEF OVERVIEW OF THE CHANGES BEING RECOMMENDED FOR YOUR FUND. WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED COMBINED PROXY STATEMENT/PROSPECTUS. Q: WHY AM I BEING ASKED TO VOTE? Mutual funds are required to get shareholders' approval for certain kinds of changes, like the reorganizations proposed in this combined proxy statement/prospectus. Q: IS MY VOTE IMPORTANT? Absolutely! While the Board of Directors (the "Board") of each Fund listed above has reviewed these reorganizations and recommends that you approve them, you have the right to voice your opinion. Until a Fund is sure that a quorum has been reached, it will continue to contact shareholders asking them to vote. Q: WHAT AM I BEING ASKED TO VOTE ON? Shareholders are being asked to vote on: - - The reorganization (a "Reorganization") of RiverSource Large Cap Equity Fund or Seligman Common Stock Fund, Inc. (each a "Selling Fund" and together, the "Selling Funds"), as applicable, into RiverSource Disciplined Equity Fund (the "Buying Fund") as noted in the table below:
- ---------------------------------------------------------------------------------------------- SELLING FUND BUYING FUND - ---------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund - ----------------------------------------------- RiverSource Disciplined Equity Fund Seligman Common Stock Fund, Inc. - ----------------------------------------------------------------------------------------------
If the Reorganization of your Selling Fund is approved by shareholders and the other closing conditions are met, your shares of the Selling Fund will, in effect, be converted into shares of the Buying Fund with the same aggregate net asset value as your Selling Fund shares at the time of the Reorganization. (Selling Funds and the Buying Funds may be individually or collectively referred to as a "Fund" or the "Funds".) We encourage you to read the full text of the combined proxy statement/prospectus to obtain a more detailed understanding of the issues. Q: WHY ARE THE REORGANIZATIONS BEING PROPOSED? RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. and the investment manager of the Funds, recently purchased all of the outstanding capital stock of J. & W. Seligman & Co. Incorporated ("Seligman"), the former investment manager of the Seligman Funds, and became the investment manager of the Seligman Funds. In connection with the purchase of Seligman, the RiverSource Family of Funds now includes funds branded "Seligman" in addition to funds branded "RiverSource." RiverSource Investments has proposed that certain Seligman Funds and RiverSource Funds be reorganized into certain other Seligman Funds or RiverSource Funds. The Reorganization of each Selling Fund into the Buying Fund would result in a larger combined fund with similar investment objectives, principal investment strategies and fundamental investment policies, which will allow for more focused distribution, potentially increasing sales of and economies of scale in the combined fund. Additionally, following the Reorganization, expenses of the larger combined fund are expected to be lower than the expenses would have been for Seligman Common Stock Fund, Inc. and for RiverSource Large Cap Equity Fund. Q: IF APPROVED, WHEN WILL THE REORGANIZATIONS HAPPEN? The Reorganizations will take place as soon as practicable following shareholder approval, and are expected to close before the end of the third quarter of 2009. Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE? After careful consideration, the Board of each Selling Fund recommends that you vote FOR the Reorganization of your Selling Fund. Q: HOW DO I VOTE? You can vote in one of four ways: - - By telephone - - By internet - - By mail with the enclosed proxy card - - In person at the meeting Please refer to the enclosed proxy card for the telephone number and internet address. Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS? If you have questions about any of the proposals described in the combined proxy statement/prospectus or about voting procedures, please call the Funds' proxy solicitor, Computershare Fund Services, toll free at (866) 438-8932. STATEMENT OF ADDITIONAL INFORMATION RIVERSOURCE LARGE CAP SERIES, INC. RiverSource Disciplined Equity Fund APRIL 17, 2009 This Statement of Additional Information (the "SAI") is not a prospectus. It should be read in conjunction with the proxy statement/prospectus, dated the same date as this SAI, which may be obtained by contacting your Fund's proxy solicitor, Computershare Fund Services, toll free at (866) 438-8932. This SAI relates to the proposed reorganizations (each a "Reorganization") of RiverSource Large Cap Equity Fund or Seligman Common Stock Fund, Inc. (each a "Selling Fund" and together, the "Selling Funds") into RiverSource Disciplined Equity Fund (the "Buying Fund"), as noted in the table below:
SELLING FUND BUYING FUND - ---------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund RiverSource Disciplined Equity Fund Seligman Common Stock Fund, Inc. ("Seligman Common Stock Fund")
This SAI incorporates by reference the following described Buying and Selling Fund documents, each of which has been previously filed and accompanies this SAI. 1. The Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of RiverSource Disciplined Equity Fund, for the period ended July 31, 2008, and the unaudited financial statements included in the Semiannual Report to Shareholders of RiverSource Disciplined Equity Fund, for the period ended Jan. 31, 2009; 2. The Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of RiverSource Large Cap Equity Fund, for the period ended July 31, 2008, and the unaudited financial statements included in the Semiannual Report to Shareholders of RiverSource Large Cap Equity Fund, for the period ended Jan. 31, 2009; 3. The Report of the Independent Registered Public Accounting Firm and the audited financial statements included in the Annual Report to Shareholders of Seligman Common Stock Fund, Inc., for the period ended Dec. 31, 2008; and 4. The most recent Statement of Additional Information for RiverSource Disciplined Equity Fund, dated April 1, 2009. TABLE OF CONTENTS RIVERSOURCE DISCIPLINED EQUITY FUND PRO FORMA FINANCIALS Introduction to Proposed Fund Reorganization.................................. 3 Pro Forma Combining Statement of Assets and Liabilities....................... 4 Pro Forma Combining Statement of Operations................................... 5 Notes to Pro Forma Financial Statements....................................... 6 Combined Portfolio of Investments............................................. 8
2 RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) SELIGMAN COMMON STOCK FUND (SELLING FUND) INTRODUCTION TO PROPOSED FUND REORGANIZATION Jan. 31, 2009 The accompanying unaudited pro forma combining statement of assets and liabilities and the statement of operations reflect the accounts of the three funds at and for the 12-month period ending Jan. 31, 2009. These statements have been derived from financial statements prepared for RiverSource Disciplined Equity Fund, RiverSource Large Cap Equity Fund and Seligman Common Stock Fund as of Jan. 31, 2009. RiverSource Disciplined Equity Fund invests primarily in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. RiverSource Large Cap Equity Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase, which includes income-producing equity securities, such as dividend paying stocks, convertible securities and preferred stocks. Seligman Common Stock Fund invests primarily in common stocks of larger U.S. companies with market capitalizations over $3 billion at the time of purchase that are broadly diversified among a number of industries. Under the proposed Agreement and Plan of Reorganization, share classes of RiverSource Large Cap Equity Fund and Seligman Common Stock Fund would be exchanged for share classes of RiverSource Disciplined Equity Fund.
SELLING FUNDS BUYING FUND - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class A RiverSource Disciplined Equity Fund Class A - -------------------------------------------------------------------------------------------------------- Seligman Common Stock Fund Class A RiverSource Disciplined Equity Fund Class A - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class B RiverSource Disciplined Equity Fund Class B - -------------------------------------------------------------------------------------------------------- Seligman Common Stock Fund Class B RiverSource Disciplined Equity Fund Class B - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class C RiverSource Disciplined Equity Fund Class C - -------------------------------------------------------------------------------------------------------- Seligman Common Stock Fund Class C RiverSource Disciplined Equity Fund Class C - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class I RiverSource Disciplined Equity Fund Class I - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class R2 RiverSource Disciplined Equity Fund Class R2 - -------------------------------------------------------------------------------------------------------- Seligman Common Stock Fund Class R* RiverSource Disciplined Equity Fund Class R2 - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class R3 RiverSource Disciplined Equity Fund Class R3 - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class R4 RiverSource Disciplined Equity Fund Class R4 - -------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class R5 RiverSource Disciplined Equity Fund Class R5 - -------------------------------------------------------------------------------------------------------- Seligman Common Stock Fund Class I* RiverSource Disciplined Equity Fund Class R5 - --------------------------------------------------------------------------------------------------------
* Effective on or about June 13, 2009, the Class R and Class I shares of the Seligman Fund will be redesignated as Class R2 and Class R5 shares, respectively. Note: RiverSource Disciplined Equity Fund also offers Class W shares. The pro forma combining statements have been prepared to give effect to the proposed transaction on the historical operations of the accounting survivor, RiverSource Disciplined Equity Fund, as if the transaction had occurred at the beginning of the fiscal year ending Jan. 31, 2009. 3 RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) SELIGMAN COMMON STOCK FUND (SELLING FUND) PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
RIVERSOURCE RIVERSOURCE DISCIPLINED DISCIPLINED RIVERSOURCE RIVERSOURCE SELIGMAN EQUITY FUND EQUITY FUND DISCIPLINED LARGE CAP COMMON PRO FORMA PRO FORMA JAN. 31, 2009 (UNAUDITED) EQUITY FUND EQUITY FUND STOCK FUND ADJUSTMENTS COMBINED ASSETS Investments in securities, at cost Unaffiliated issuers $ 3,080,078,855 $ 2,692,173,898 $118,219,957 $ -- $ 5,890,472,710 Affiliated money market fund $ 38,574,554 $ 65,890,575 $ -- $ -- $ 104,465,129 Investments of cash collateral received for securities on loan $ 149,027,673 $ 203,391,339 $ -- $ -- $ 352,419,012 ------------------------------------------------------------------------------- Investments in securities, at value Unaffiliated issuers* $ 1,846,763,087 $ 2,059,825,946 $ 90,308,962 $ -- $ 3,996,897,995 Affiliated money market fund $ 38,574,554 $ 65,890,575 $ -- $ -- $ 104,465,129 Investments of cash collateral received for securities on loan $ 149,027,673 $ 203,391,339 $ -- $ -- $ 352,419,012 Cash (Note 2) -- 22,382 72,682 (89,675)(g) 5,389 Foreign currency holdings (identified cost $652 for RiverSource Large Cap Equity Fund) -- 637 -- -- 637 Capital shares receivable 66,185,449 437,979 701 -- 66,624,129 Dividends and accrued interest receivable 2,055,385 3,595,532 107,672 -- 5,758,589 Receivable for investment securities sold 93,236,508 130,663,058 705 -- 223,900,271 Administrative services fees receivable (Note 2) -- -- -- 248,157(c) 248,157 Other receivable (Note 2) -- -- -- 158,190(e) 158,190 Prepaid expenses -- -- 87,134 -- 87,134 Other assets -- -- 17,205 -- 17,205 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 2,195,842,656 2,463,827,448 90,595,061 316,672 4,750,581,837 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 3,547,314 2,380,003 33,688 -- 5,961,005 Payable for investment securities purchased 158,103,932 128,505,375 -- -- 286,609,307 Payable upon return of securities loaned 149,027,673 203,391,339 -- -- 352,419,012 Variation margin payable 2,517,200 1,729,515 -- -- 4,246,715 Payable to RiverSource Investments, LLC (Note 2) -- -- -- 2,260,925(f) 2,260,925 Accrued investment management services fees (Note 2) 31,159 34,994 52,026 1,485,874(a) 1,604,053 Accrued distribution fees (Note 2) 11,214 19,269 24,223 -- 54,706 Accrued transfer agency fees (Note 2) 8,253 23,709 44,593 94,638(b) 171,193 Accrued administrative services fees (Note 2) 2,855 3,200 -- (6,055)(c) -- Accrued plan administration services fees (Note 2) 546 495 -- 6,964(d) 8,005 Other accrued expenses (Note 2) 267,753 656,515 137,541 (1,061,809)(e) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 313,517,899 336,744,414 292,071 2,780,537 653,334,921 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 1,882,324,757 $ 2,127,083,034 $ 90,302,990 $ (2,463,865) $ 4,097,246,916 - ----------------------------------------------------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value for RiverSource Disciplined Equity Fund and RiverSource Large Cap Equity Fund and $.50 par value for Seligman Common Stock Fund (Notes 2 and 3) $ 5,262,532 $ 8,112,130 $ 8,433,721 $(10,355,492)(g)$ 11,452,891 Additional paid-in capital (Notes 2 and 3) 3,403,669,559 4,419,558,829 196,127,703 10,265,817(g) 8,029,621,908 Undistributed (excess of distributions over) net investment income (Note 2) 21,936,708 (11,741,239) 119,335 (2,374,190) 7,940,614 Accumulated net realized gain (loss) (313,048,070) (1,649,118,429) (86,466,774) -- (2,048,633,273) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,235,495,972) (639,728,257) (27,910,995) -- (1,903,135,224) - ----------------------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 1,882,324,757 $ 2,127,083,034 $ 90,302,990 $ (2,463,865) $ 4,097,246,916 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding shares: Class A $ 620,051,403 $ 1,767,428,770 $ 77,262,366 $ (2,047,265) $ 2,462,695,274 Class B $ 19,832,792 $ 231,221,979 $ 1,141,960 $ (267,831) $ 251,928,900 Class C $ 1,814,010 $ 11,202,974 $ 6,373,918 $ (12,977) $ 19,377,925 Class I $ 276,904,563 $ 28,634,991 N/A $ (33,169) $ 305,506,385 Class R2 $ 2,365 $ 2,177 $ 1,563,648 $ (3) $ 1,568,187 Class R3 $ 2,365 $ 2,175 N/A $ (3) $ 4,537 Class R4 $ 77,831,387 $ 70,551,113 N/A $ (81,722) $ 148,300,778 Class R5 $ 2,364 $ 18,038,855 $ 3,961,098 $ (20,895) $ 21,981,422 Class W $ 885,883,508 N/A N/A $ -- $ 885,883,508 Shares outstanding (Note 3):Class A shares 173,305,774 673,576,501 14,409,165 -- 688,010,766 Class B shares 5,570,594 89,152,064 218,484 -- 70,766,130 Class C shares 512,826 4,332,812 1,217,746 -- 5,474,384 Class I shares 77,058,471 10,885,950 N/A -- 85,025,552 Class R2 shares 661 822 290,580 -- 438,041 Class R3 shares 661 822 N/A -- 1,268 Class R4 shares 21,684,784 26,500,390 N/A -- 41,314,141 Class R5 shares 661 6,763,671 731,466 -- 6,140,063 Class W shares 248,118,779 N/A N/A -- 248,118,779 Net asset value per share of outstanding capital stock: Class A $ 3.58 $ 2.62 $ 5.36 $ -- $ 3.58 Class B $ 3.56 $ 2.59 $ 5.23 $ -- $ 3.56 Class C $ 3.54 $ 2.59 $ 5.23 $ -- $ 3.54 Class I $ 3.59 $ 2.63 N/A $ -- $ 3.59 Class R2 $ 3.58 $ 2.65 $ 5.38 $ -- $ 3.58 Class R3 $ 3.58 $ 2.65 N/A $ -- $ 3.58 Class R4 $ 3.59 $ 2.66 N/A $ -- $ 3.59 Class R5 $ 3.58 $ 2.67 $ 5.42 $ -- $ 3.58 Class W $ 3.57 N/A N/A $ -- $ 3.57 - ----------------------------------------------------------------------------------------------------------------------------------- * Including securities on loan, at value $ 140,468,510 $ 190,109,786 $ -- $ -- $ 341,860,902 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to pro forma financial statements. 4 RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) SELIGMAN COMMON STOCK FUND (SELLING FUND) PRO FORMA COMBINING STATEMENT OF OPERATIONS
RIVERSOURCE RIVERSOURCE DISCIPLINED DISCIPLINED RIVERSOURCE RIVERSOURCE SELIGMAN EQUITY FUND EQUITY FUND DISCIPLINED LARGE CAP COMMON PRO FORMA PRO FORMA YEAR ENDED JAN. 31, 2009 (UNAUDITED) EQUITY FUND EQUITY FUND STOCK FUND ADJUSTMENTS COMBINED INVESTMENT INCOME Income: Dividends $ 70,229,899 $ 95,813,703 $ 2,931,747 $ -- $ 168,975,349 Interest 27,854 -- 2,374,222 -- 2,402,076 Income distributions from affiliated money market fund 1,593,662 2,837,413 -- -- 4,431,075 Fee income from securities lending -- 611,735 -- -- 611,735 Less foreign taxes withheld -- (1,218,586) (6,209) -- (1,224,795) - ------------------------------------------------------------------------------------------------------------------------------ Total income 71,851,415 98,044,265 5,299,760 -- 175,195,440 - ------------------------------------------------------------------------------------------------------------------------------ Expenses: Investment management services fees (Note 2) 14,317,409 15,722,276 990,777 1,485,874(a) 32,516,336 Distribution fees Class A 2,494,694 7,830,633 322,677 -- 10,648,004 Class B 381,250 4,677,972 22,841 -- 5,082,063 Class C 26,075 195,762 104,591 -- 326,428 Class R2 18 17 10,149 -- 10,184 Class R3 10 9 -- -- 19 Class W 3,247,682 -- -- -- 3,247,682 Transfer agency fees (Note 2) Class A 1,182,638 8,214,557 521,751 187,181(b) 10,106,127 Class B 50,119 1,295,118 9,058 (66,042)(b) 1,288,253 Class C 3,297 53,451 41,352 (16,637)(b) 81,463 Class R2 2 2 7,947 (6,932)(b) 1,019 Class R3 2 2 -- -- 4 Class R4 58,140 86,220 -- -- 144,360 Class R5 2 738 5,767 (2,932)(b) 3,575 Class W 2,598,145 -- -- -- 2,598,145 Administrative services fees (Note 2) 1,470,070 1,892,136 -- (254,212)(c) 3,107,994 Plan administration services fees (Note 2) Class R2 9 9 -- 5,079(d) 5,097 Class R3 9 9 -- -- 18 Class R4 290,700 431,100 -- 1,885(d) 723,685 Compensation of board members (Note 2) 68,419 90,539 13,197 (7,238)(e) 164,917 Custodian fees (Note 2) 247,104 502,920 50,758 (205,164)(e) 595,618 Printing and postage (Note 2) 194,355 1,194,100 51,349 (971,332)(e) 468,472 Registration fees (Note 2) 126,270 54,560 81,524 42,006(e) 304,360 Professional fees (Note 2) 50,777 111,199 68,074 (107,657)(e) 122,393 Other (Note 2) 127,050 127,806 21,999 29,386(e) 306,241 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 26,934,246 42,481,135 2,323,811 113,265 71,852,457 Expenses waived/reimbursed by RiverSource Investments, LLC (Note 2) (91,197) (4,895,893) -- 2,260,925(f) (2,726,165) Earnings and bank fee credits on cash balances (27,810) (138,402) -- -- (166,212) - ------------------------------------------------------------------------------------------------------------------------------ Total net expenses 26,815,239 37,446,840 2,323,811 2,374,190 68,960,080 - ------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 45,036,176 60,597,425 2,975,949 (2,374,190) 106,235,360 - ------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (198,497,440) (1,398,750,527) (76,666,020) -- (1,673,913,987) Foreign currency transactions -- 28,771,365 -- -- 28,771,365 Futures contracts (20,013,885) (31,491,717) -- -- (51,505,602) Options contracts written -- (8,059,150) -- -- (8,059,150) Swap transactions -- (2,690,055) -- -- (2,690,055) - ------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments (218,511,325) (1,412,220,084) (76,666,020) -- (1,707,397,429) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,170,114,325) (641,022,494) (12,477,310) -- (1,823,614,129) - ------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies (1,388,625,650) (2,053,242,578) (89,143,330) -- (3,531,011,558) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(1,343,589,474) $(1,992,645,153) $(86,167,381) $(2,374,190) $(3,424,776,198) - ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to pro forma financial statements. 5 RIVERSOURCE DISCIPLINED EQUITY FUND (BUYING FUND) RIVERSOURCE LARGE CAP EQUITY FUND (SELLING FUND) SELIGMAN COMMON STOCK FUND (SELLING FUND) NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited as to Jan. 31, 2009) 1. BASIS OF COMBINATION The unaudited pro forma combining statement of assets and liabilities and the statement of operations reflect the accounts of the three funds at and for the 12-month period ending Jan. 31, 2009. These statements have been derived from financial statements prepared for the RiverSource Disciplined Equity Fund, RiverSource Large Cap Equity Fund and Seligman Common Stock Fund as of Jan. 31, 2009. Each Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The primary investments of each Fund are as follows: RiverSource Disciplined Equity Fund invests primarily in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. RiverSource Large Cap Equity Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase, which includes income-producing equity securities, such as dividend paying stocks, convertible securities and preferred stocks. Seligman Common Stock Fund invests primarily in common stocks of larger U.S. companies with market capitalizations over $3 billion at the time of purchase that are broadly diversified among a number of industries. The pro forma statements give effect to the proposed transfer of the assets and liabilities of RiverSource Large Cap Equity Fund and Seligman Common Stock Fund in exchange for Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares of RiverSource Disciplined Equity Fund under U.S. generally accepted accounting principles. The pro forma statements reflect estimates for the combined RiverSource Disciplined Equity Fund based on the increased asset level of the Reorganization and associated economies of scale, adjusted to reflect current fees. The pro forma combining statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. The pro forma statement of operations give effect to the proposed transaction on the historical operations of the accounting survivor, RiverSource Disciplined Equity Fund, as if the transaction had occurred at the beginning of the year presented. 2. PRO FORMA ADJUSTMENTS (a) To reflect the change in investment management services fee due to the Reorganization. In addition, the Performance Incentive Adjustment (PIA) for RiverSource Large Cap Equity Fund was removed and a new PIA adjustment was calculated based on the combined average net assets of the three funds and the RiverSource Disciplined Equity Fund PIA rate as of Jan. 31, 2009. (b) To reflect the change in transfer agent fees due to the Reorganization including adjusting for closed account fees for each RiverSource Large Cap Equity Fund and Seligman Common Stock Fund shareholder account that will be closed on the system as a result of the Reorganization. (c) To reflect the change in administrative services fees due to the Reorganization. (d) To reflect the change in plan administration services fees due to the Reorganization. (e) To reflect the change in other fees due to the Reorganization. (f) To adjust the expense reimbursement to reflect the change in fees resulting from the Reorganization per the agreement (through July 31, 2009) by RiverSource Investments, LLC and its affiliates to waive certain fees and absorb certain expenses of the combined fund. (g) Includes the impact of estimated Reorganization costs of $89,675, none of which are recurring expenses. 6 3. CAPITAL SHARES The pro forma net asset value per share assumes the issuance of additional Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares of RiverSource Disciplined Equity Fund as if the Reorganization were to have taken place on Jan. 31, 2009. The following table reflects the number of RiverSource Disciplined Equity Fund shares assumed to be issued to the shareholders of the RiverSource Large Cap Equity Fund and the Seligman Common Stock Fund.
RIVERSOURCE SELIGMAN RIVERSOURCE TOTAL LARGE CAP EQUITY FUND COMMON STOCK FUND DISCIPLINED EQUITY FUND PRO FORMA SHARES ISSUED SHARES ISSUED SHARES OUTSTANDING SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------------- Class A 493,147,344 21,557,648 173,305,774 688,010,766 - ------------------------------------------------------------------------------------------------------------------------------- Class B 64,875,137 320,399 5,570,594 70,766,130 - ------------------------------------------------------------------------------------------------------------------------------- Class C 3,162,347 1,799,211 512,826 5,474,384 - ------------------------------------------------------------------------------------------------------------------------------- Class I 7,967,081 N/A 77,058,471 85,025,552 - ------------------------------------------------------------------------------------------------------------------------------- Class R2* 608 436,772 661 438,041 - ------------------------------------------------------------------------------------------------------------------------------- Class R3 607 N/A 661 1,268 - ------------------------------------------------------------------------------------------------------------------------------- Class R4 19,629,357 N/A 21,684,784 41,314,141 - ------------------------------------------------------------------------------------------------------------------------------- Class R5* 5,034,001 1,105,401 661 6,140,063 - ------------------------------------------------------------------------------------------------------------------------------- Class W N/A N/A 248,118,779 248,118,779 - -------------------------------------------------------------------------------------------------------------------------------
* Effective on or about June 13, 2009, the Class R and Class I shares of the Seligman Fund will be redesignated as Class R2 and Class R5 shares, respectively. 7 COMBINED PORTFOLIO OF INVESTMENTS RiverSource Disciplined Equity Fund JAN. 31, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.5%) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED AEROSPACE & DEFENSE (0.7%) AeorViron- ment -- 8,500 -- 8,500(b,f) $ -- $ 315,010 $ -- $ 315,010 American Science & Engineering -- 3,213 -- 3,213 -- 250,614 -- 250,614 Ceradyne -- 25,331 -- 25,331(b,f) -- 578,053 -- 578,053 General Dynamics 144,205 172,255(f) 8,767 325,227 8,180,750 9,772,027 497,352 18,450,129 Rockwell Collins -- 33,368 -- 33,368 -- 1,257,306 -- 1,257,306 United Technolo- gies 64,197 99,020 4,466 167,683 3,080,814 4,751,970 214,323 8,047,107 ----------------------------------------------------------- Total 11,261,564 16,924,980 711,675 28,898,219 ----------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) CH Robinson Worldwide 92,540 95,986 6,071 194,597 4,254,989 4,413,437 279,144 8,947,570 Hub Group Cl A -- 16,373 -- 16,373(b) -- 371,667 -- 371,667 Pacer Intl -- 46,242 -- 46,242(f) -- 397,681 -- 397,681 ----------------------------------------------------------- Total 4,254,989 5,182,785 279,144 9,716,918 ----------------------------------------------------------- AIRLINES (0.2%) Alaska Air Group -- 31,558 -- 31,558(b) -- 831,869 -- 831,869 Allegiant Travel -- 8,541 -- 8,541(b,f) -- 305,426 -- 305,426 AMR -- 30,335 -- 30,335(b) -- 180,190 -- 180,190 Continental Airlines Cl B -- 14,891 -- 14,891(b) -- 200,582 -- 200,582 Delta Air Lines -- 59,755 -- 59,755(b) -- 412,310 -- 412,310 Hawaiian Holdings -- 65,225 -- 65,225(b) -- 265,466 -- 265,466 JetBlue Airways -- 37,430 -- 37,430(b) -- 210,731 -- 210,731 SkyWest -- 71,912 -- 71,912 -- 1,125,423 -- 1,125,423 Southwest Airlines 273,867(f) 502,569(f) 23,235 799,671 1,925,285 3,533,059 163,342 5,621,686 UAL -- 73,227 -- 73,227(b) -- 691,263 -- 691,263 US Airways Group -- 81,594 -- 81,594(b) -- 462,638 -- 462,638 ----------------------------------------------------------- Total 1,925,285 8,218,957 163,342 10,307,584 ----------------------------------------------------------- AUTO COMPONENTS (0.1%) Cooper Tire & Rubber -- 56,651 -- 56,651(f) -- 264,560 -- 264,560 Exide Technolo- gies -- 62,946 -- 62,946(b) -- 228,494 -- 228,494 Fuel Systems Solutions -- 7,302 -- 7,302(b,f) -- 190,874 -- 190,874 Goodyear Tire & Rubber -- 194,518 -- 194,518(b) -- 1,200,176 -- 1,200,176 Johnson Controls -- 65,605 -- 65,605 -- 820,719 -- 820,719 ----------------------------------------------------------- Total -- 2,704,823 -- 2,704,823 ----------------------------------------------------------- AUTOMOBILES (0.2%) Ford Motor 1,518,855 249,800 -- 1,768,655(b,f) 2,840,260 467,126 -- 3,307,386 General Motors 561,121 62,539 -- 623,660(f) 1,688,974 188,242 -- 1,877,216 Harley- Davidson 144,208(f) 164,139(f) 12,421 320,768 1,756,453 1,999,213 151,288 3,906,954 ----------------------------------------------------------- Total 6,285,687 2,654,581 151,288 9,091,556 ----------------------------------------------------------- BEVERAGES (3.1%) Brown- Forman Cl B 42,720 56,384 4,790 103,894 1,939,915 2,560,397 217,514 4,717,826 Coca-Cola 568,927 631,980 29,646 1,230,553 24,304,561 26,998,186 1,266,477 52,569,224 PepsiCo 690,410 653,531 30,203 1,374,144 34,679,295 32,826,862 1,517,097 69,023,254 ----------------------------------------------------------- Total 60,923,771 62,385,445 3,001,088 126,310,304 -----------------------------------------------------------
8
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED BIOTECHNOL- OGY (2.5%) Amgen 397,145 405,762 9,036 811,943(b) $ 21,783,403 $ 22,256,046 $ 495,625 $ 44,535,074 Celgene -- -- 4,510 4,510 -- -- 238,804 238,804 Cephalon 51,854(f) 45,699(f) 1,333 98,886(b) 4,002,092 3,527,049 102,881 7,632,022 CV Therapeu- tics -- 32,590 -- 32,590(b) -- 510,034 -- 510,034 Emergent BioSolu- tions -- 13,873 -- 13,873(b,f) -- 304,235 -- 304,235 Genentech -- 14,017 -- 14,017(b) -- 1,138,741 -- 1,138,741 Gilead Sciences 365,720 524,678 27,701 918,099(b) 18,567,604 26,637,901 1,406,380 46,611,885 Myriad Genetics -- 19,227 -- 19,227(b) -- 1,433,757 -- 1,433,757 NPS Pharmaceu- ticals -- 36,398 -- 36,398(b) -- 227,124 -- 227,124 Vertex Pharmaceu- ticals -- 8,688 -- 8,688(b,f) -- 287,138 -- 287,138 ----------------------------------------------------------- Total 44,353,099 56,322,025 2,243,690 102,918,814 ----------------------------------------------------------- BUILDING PRODUCTS (0.1%) American Woodmark -- 16,024 -- 16,024(f) -- 241,161 -- 241,161 Insteel Inds -- 27,417 -- 27,417(f) -- 211,111 -- 211,111 Masco 274,495 291,531 24,173 590,199 2,146,551 2,279,772 189,033 4,615,356 Owens Corning -- 7,565 -- 7,565(b) -- 100,917 -- 100,917 Trex -- 11,677 -- 11,677(b,f) -- 172,703 -- 172,703 ----------------------------------------------------------- Total 2,146,551 3,005,664 189,033 5,341,248 ----------------------------------------------------------- CAPITAL MARKETS (1.6%) E*TRADE Financial 256,004 -- -- 256,004(b,f) 291,845 -- -- 291,845 Goldman Sachs Group 74,459 133,369 2,751 210,579 6,011,075 10,766,879 222,088 17,000,042 Knight Capital Group Cl A -- 24,027 -- 24,027(b) -- 433,207 -- 433,207 Morgan Stanley 998,145(f) 1,011,014(f) 48,417 2,057,576 20,192,472 20,452,814 979,476 41,624,762 Stifel Financial -- 11,707 -- 11,707(b,f) -- 410,213 -- 410,213 SWS Group -- 45,991 -- 45,991(f) -- 673,768 -- 673,768 State Street 155,918 -- -- 155,918(f) 3,628,212 -- -- 3,628,212 T Rowe Price Group 28,175 -- -- 28,175 777,067 -- -- 777,067 ----------------------------------------------------------- Total 30,900,671 32,736,881 1,201,564 64,839,116 ----------------------------------------------------------- CHEMICALS (1.7%) Ashland -- 21,801 -- 21,801 -- 174,844 -- 174,844 Balchem -- 10,066 -- 10,066(f) -- 224,774 -- 224,774 CF Inds Holdings 31,771 28,881 4,055 64,707 1,493,237 1,357,407 190,585 3,041,229 Dow Chemical 1,666,654 1,772,219 71,320 3,510,193 19,316,519 20,540,017 826,599 40,683,135 Ecolab 34,297 19,484 -- 53,781 1,164,726 661,677 -- 1,826,403 EI du Pont de Nemours & Co 125,659 108,801 8,185 242,645 2,885,131 2,498,071 187,928 5,571,130 Innophos Holdings -- 15,945 -- 15,945 -- 241,248 -- 241,248 Monsanto -- -- 5,638 5,638 -- -- 428,826 428,826 OM Group -- 16,873 -- 16,873(b,f) -- 326,999 -- 326,999 PPG Inds 66,308(f) 77,165 4,644 148,117 2,491,855 2,899,861 174,522 5,566,238 Praxair 157,495 -- -- 157,495(f) 9,805,639 -- -- 9,805,639 Sigma- Aldrich -- 56,009 -- 56,009 -- 2,020,805 -- 2,020,805 Solutia -- 48,200 -- 48,200(b,f) -- 188,462 -- 188,462 Stepan -- 6,925 -- 6,925(f) -- 254,078 -- 254,078 Westlake Chemical -- 14,332 -- 14,332(f) -- 195,918 -- 195,918 WR Grace & Co -- 100,680 -- 100,680(b) -- 580,924 -- 580,924 ----------------------------------------------------------- Total 37,157,107 32,165,085 1,808,460 71,130,652 ----------------------------------------------------------- COMMERCIAL BANKS (1.4%) BancFirst -- 6,108 -- 6,108(f) -- 217,567 -- 217,567 Banco Santander ADR 83,264 -- -- 83,264(c) 652,792 -- -- 652,792 BB&T 289,577(f) 292,392(f) 12,006 593,975 5,730,729 5,786,437 237,599 11,754,765 Comerica 118,453 125,875 -- 244,328 1,973,427 2,097,078 -- 4,070,505 Community Trust Bancorp -- 6,575 -- 6,575 -- 183,903 -- 183,903 Fifth Third Bancorp 601,610 606,788 28,659 1,237,057 1,437,848 1,450,223 68,495 2,956,566
9
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED First BanCorp -- 15,522 -- 15,522(c,f) $ -- $ 110,361 $ -- $ 110,361 First Citizens BancShares Cl A -- 949 -- 949 -- 132,727 -- 132,727 First Financial -- 7,250 -- 7,250(f) -- 240,338 -- 240,338 First Financial Bankshares -- 9,490 -- 9,490(f) -- 421,261 -- 421,261 First Horizon Natl 181,074 -- -- 181,074(f) 1,723,826 -- -- 1,723,826 Home Bancshares -- 8,731 -- 8,731(f) -- 179,771 -- 179,771 Huntington Bancshares 363,386 -- -- 363,386(f) 1,046,552 -- -- 1,046,552 Intl Bancshares -- 20,109 -- 20,109(f) -- 366,386 -- 366,386 KeyCorp 328,985 343,879 24,547 697,411 2,395,011 2,503,439 178,702 5,077,152 MainSource Financial Group -- 17,647 -- 17,647(f) -- 172,411 -- 172,411 Marshall & Ilsley 169,248 204,955 -- 374,203(f) 966,406 1,170,293 -- 2,136,699 Popular -- 18,530 -- 18,530(c,f) -- 50,772 -- 50,772 PNC Financial Services Group 351,414 -- 21,834 373,248 11,427,982 -- 710,042 12,138,024 Republic Bancorp Cl A -- 11,372 -- 11,372(f) -- 204,696 -- 204,696 SunTrust Banks 164,950 146,867 12,105 323,922 2,022,287 1,800,589 148,407 3,971,283 Synovus Financial 135,983 -- -- 135,983(f) 538,493 -- -- 538,493 TowneBank -- 11,883 -- 11,883 -- 247,642 -- 247,642 Trico Bancshares -- 9,961 -- 9,961(f) -- 200,615 -- 200,615 Trustmark -- 13,543 -- 13,543 -- 274,923 -- 274,923 UMB Financial -- 10,116 -- 10,116 -- 391,894 -- 391,894 Wells Fargo & Co 56,909 268,910(f) 24,055 349,874 1,075,580 5,082,399 454,640 6,612,619 Wilshire Bancorp -- 33,656 -- 33,656(f) -- 230,880 -- 230,880 Zions Bancorpora- tion -- 9,592 -- 9,592(f) -- 143,113 -- 143,113 ----------------------------------------------------------- Total 30,990,933 23,659,718 1,797,885 56,448,536 ----------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.9%) ABM Inds -- 9,515 -- 9,515(f) -- 141,298 -- 141,298 Avery Dennison 38,795(f) 48,390(f) 6,850 94,035 940,003 1,172,490 165,975 2,278,468 Clean Harbors -- 5,723 -- 5,723(b,f) -- 306,238 -- 306,238 HNI -- 20,631 -- 20,631(f) -- 272,536 -- 272,536 Kimball Intl Cl B -- 44,536 -- 44,536 -- 306,853 -- 306,853 Republic Services 243,219 248,682 8,747 500,648 6,289,643 6,430,916 226,197 12,946,756 RR Donnelley & Sons 79,664 80,980 -- 160,644 777,521 790,365 -- 1,567,886 Sykes Enterprises -- 13,650 -- 13,650(b) -- 228,092 -- 228,092 Tetra Tech -- 6,789 -- 6,789(b) -- 157,708 -- 157,708 United Stationers -- 7,598 -- 7,598(b,f) -- 212,820 -- 212,820 Waste Management 264,866 282,337 14,185 561,388 8,261,170 8,806,090 442,430 17,509,690 ----------------------------------------------------------- Total 16,268,337 18,825,406 834,602 35,928,345 ----------------------------------------------------------- COMMUNICA- TIONS EQUIPMENT (1.2%) 3Comm -- 129,413 -- 129,413(b) -- 301,532 -- 301,532 Airvana -- 49,195 -- 49,195(b) -- 250,403 -- 250,403 ARRIS Group -- 40,980 -- 40,980(b) -- 291,778 -- 291,778 Cisco Systems -- 489,238 18,387 507,625(b) -- 7,323,893 275,253 7,599,146 Corning 734,439(f) 747,258(f) 21,751 1,503,448 7,425,178 7,554,778 219,903 15,199,859 InterDigi- tal -- 28,749 -- 28,749(b,f) -- 929,455 -- 929,455 Motorola 248,544 133,924 -- 382,468 1,101,050 593,283 -- 1,694,333 NETGEAR -- 21,473 -- 21,473(b,f) -- 238,780 -- 238,780 Nortel Networks -- -- 7,555 7,555 -- -- 718 718 QUALCOMM 297,886(f) 328,496 15,273 641,655 10,291,962 11,349,536 527,682 22,169,180 Tekelec -- 18,199 -- 18,199(b) -- 226,032 -- 226,032 ----------------------------------------------------------- Total 18,818,190 29,059,470 1,023,556 48,901,216 ----------------------------------------------------------- COMPUTERS & PERIPHERALS (3.7%) Adaptec -- 83,576 -- 83,576(b,f) -- 233,177 -- 233,177 Apple 155,131 120,797 -- 275,928(b) 13,981,957 10,887,434 -- 24,869,391 Dell 817,705(f) 831,979 18,954 1,668,638(b) 7,768,198 7,903,801 180,063 15,852,062
10
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Electronics for Imaging -- 26,387 -- 26,387(b,f) $ -- $ 234,580 $ -- $ 234,580 Hewlett- Packard -- 338,952 -- 338,952 -- 11,778,582 -- 11,778,582 IBM 494,262 414,283 26,574 935,119 45,299,111 37,969,036 2,435,507 85,703,654 Lexmark Intl Cl A 180,264 207,679 7,760 395,703(b) 4,268,652 4,917,839 183,757 9,370,248 NCR -- 18,658 -- 18,658(b,f) -- 234,158 -- 234,158 QLogic 139,178(f) -- 2,251 141,429(b) 1,575,495 -- 25,481 1,600,976 Western Digital -- 26,046 -- 26,046(b) -- 382,355 -- 382,355 ----------------------------------------------------------- Total 72,893,413 74,540,962 2,824,808 150,259,183 ----------------------------------------------------------- CONSTRUC- TION AND ENGINEERING (0.1%) EMCOR Group -- 21,413 -- 21,413(b,f) -- 440,894 -- 440,894 Fluor -- 66,753 -- 66,753 -- 2,596,691 -- 2,596,691 Foster Wheeler -- 2,749 -- 2,749(b) -- 54,898 -- 54,898 Granite Construc- tion -- 36,466 -- 36,466(f) -- 1,284,333 -- 1,284,333 Michael Baker -- 3,799 -- 3,799(b) -- 132,813 -- 132,813 Perini -- 48,557 -- 48,557(b,f) -- 1,012,413 -- 1,012,413 ----------------------------------------------------------- Total -- 5,522,042 -- 5,522,042 ----------------------------------------------------------- CONSTRUC- TION MATERIALS (--%) Vulcan Materials -- 3,181 -- 3,181(f) -- 157,332 -- 157,332 ----------------------------------------------------------- CONSUMER FINANCE (0.2%) Advanta Cl B -- 88,512 -- 88,512(f) -- 69,039 -- 69,039 American Express 68,310 60,682 -- 128,992 1,142,826 1,015,210 -- 2,158,036 Capital One Financial -- -- 7,378 7,378 -- -- 116,868 116,868 Discover Financial Services -- 80,265 -- 80,265(f) -- 573,895 -- 573,895 SLM 210,091 248,814 -- 458,905(b,f) 2,405,542 2,848,920 -- 5,254,462 ----------------------------------------------------------- Total 3,548,368 4,507,064 116,868 8,172,300 ----------------------------------------------------------- CONTAINERS & PACKAGING (--%) Rock-Tenn Cl A -- 25,329 -- 25,329(f) -- 789,505 -- 789,505 ----------------------------------------------------------- DISTRIBU- TORS (0.2%) Genuine Parts 104,179 106,374 5,043 215,596 3,335,812 3,406,095 161,477 6,903,384 ----------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.5%) Apollo Group Cl A -- 20,567 -- 20,567(b) -- 1,675,388 -- 1,675,388 Career Education -- 4,579 -- 4,579(b,f) -- 99,822 -- 99,822 Corinthian Colleges -- 37,035 -- 37,035(b,f) -- 691,814 -- 691,814 H&R Block 391,532 372,711 14,256 778,499 8,116,458 7,726,298 295,527 16,138,283 Regis -- 22,824 -- 22,824 -- 256,770 -- 256,770 Universal Technical Institute -- 12,637 -- 12,637(b,f) -- 221,527 -- 221,527 ----------------------------------------------------------- Total 8,116,458 10,671,619 295,527 19,083,604 ----------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.3%) Apollo Management LP -- 1,406,500 -- 1,406,500(d,e) -- 2,109,750 -- 2,109,750 Bank of America 3,198,568 3,728,404 160,819 7,087,791 21,046,577 24,532,898 1,058,189 46,637,664 CIT Group 293,875 -- 16,751 310,626 819,911 -- 46,735 866,646 Citigroup 5,968,599(f) 6,585,055(f) 319,648 12,873,302 21,188,526 23,376,945 1,134,750 45,700,221 JPMorgan Chase & Co 1,027,716 1,969,323 94,177 3,091,216 26,217,036 50,237,430 2,402,455 78,856,921 KKR Financial Holdings LLC -- 563,202 -- 563,202 -- 799,747 -- 799,747 Life Partners Holdings -- 6,727 -- 6,727(f) -- 255,626 -- 255,626 Moody's -- 6,357 -- 6,357(f) -- 136,167 -- 136,167 SPDR Trust Series 1 -- -- 5,600 5,600 -- -- 463,064 463,064 ----------------------------------------------------------- Total 69,272,050 101,448,563 5,105,193 175,825,806 ----------------------------------------------------------- DIVERSIFIED TELECOMMU- NICATION SERVICES (0.3%) CenturyTel -- 45,084(f) 7,509 52,593 -- 1,223,580 203,794 1,427,374 Embarq 97,099 106,239 6,262 209,600 3,468,376 3,794,856 223,679 7,486,911
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COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Frontier Communica- tions 173,926 134,518 6,197 314,641 $ 1,410,540 $ 1,090,941 $ 50,258 $ 2,551,739 Qwest Communica- tions Intl -- 87,185 -- 87,185 -- 280,736 -- 280,736 Shenandoah Telecommu- nications -- 8,904 -- 8,904(f) -- 217,080 -- 217,080 ----------------------------------------------------------- Total 4,878,916 6,607,193 477,731 11,963,840 ----------------------------------------------------------- ELECTRIC UTILITIES (0.9%) Entergy -- 43,933(f) 2,351 46,284 -- 3,354,724 179,522 3,534,246 Exelon -- 142,513(f) 13,106 155,619 -- 7,727,055 710,607 8,437,662 FirstEnergy 121,190 141,478(f) 12,058 274,726 6,058,289 7,072,485 602,779 13,733,553 Hawaiian Electric Inds -- 20,076 -- 20,076 -- 435,248 -- 435,248 Pinnacle West Capital -- 1,445 -- 1,445 -- 48,364 -- 48,364 Portland General Electric -- 20,589 -- 20,589 -- 400,456 -- 400,456 Southern 146,152 149,523 -- 295,675 4,888,784 5,001,544 -- 9,890,328 ----------------------------------------------------------- Total 10,947,073 24,039,876 1,492,908 36,479,857 ----------------------------------------------------------- ELECTRICAL EQUIPMENT (0.3%) American Semiconduc- tor -- 10,335 -- 10,335(b,f) -- 167,220 -- 167,220 Emerson Electric 155,014 138,702(f) 13,296 307,012 5,068,958 4,535,556 434,779 10,039,293 Encore Wire -- 14,462 -- 14,462 -- 238,768 -- 238,768 Energy Conversion Devices -- 10,231 -- 10,231(b,f) -- 257,514 -- 257,514 GrafTech Intl -- 25,000 -- 25,000(b) -- 200,250 -- 200,250 ----------------------------------------------------------- Total 5,068,958 5,399,308 434,779 10,903,045 ----------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.3%) Anixter Intl -- 14,075 -- 14,075(b) -- 379,744 -- 379,744 Arrow Electronics -- 34,712 -- 34,712(b,f) -- 661,958 -- 661,958 Avnet -- 35,573 -- 35,573(b) -- 705,057 -- 705,057 Benchmark Electronics -- 82,459 -- 82,459(b) -- 968,069 -- 968,069 FLIR Systems 132,734 -- 6,591 139,325(b) 3,314,368 -- 164,577 3,478,945 Ingram Micro Cl A -- 49,358 -- 49,358(b) -- 605,623 -- 605,623 Insight Enterprises -- 47,127 -- 47,127(b,f) -- 244,118 -- 244,118 Jabil Circuit -- 365,781 33,645 399,426 -- 2,128,844 195,814 2,324,658 L-1 Identity Solutions -- 16,308 -- 16,308(b) -- 118,233 -- 118,233 Methode Electronics -- 32,965 -- 32,965(f) -- 152,298 -- 152,298 SYNNEX -- 23,322 -- 23,322(b,f) -- 357,993 -- 357,993 Tyco Electronics 80,159 65,715(f) 12,908 158,782(c) 1,135,051 930,524 182,778 2,248,353 ----------------------------------------------------------- Total 4,449,419 7,252,461 543,169 12,245,049 ----------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.9%) Baker Hughes -- 96,051 2,990 99,041 -- 3,200,419 99,627 3,300,046 BASiC Energy Services -- 52,684 -- 52,684(b) -- 505,766 -- 505,766 BJ Services 200,667 228,552 19,063 448,282 2,207,337 2,514,072 209,693 4,931,102 Complete Production Services -- 30,311 -- 30,311(b) -- 194,294 -- 194,294 ENSCO Intl 84,641 149,498 6,653 240,792 2,315,778 4,090,265 182,026 6,588,069 GulfMark Offshore -- 12,678 -- 12,678(b) -- 303,511 -- 303,511 Halliburton 535,561 554,230 34,991 1,124,782 9,238,428 9,560,469 603,595 19,402,492 Helmerich & Payne -- 14,600 -- 14,600 -- 327,916 -- 327,916 Lufkin Inds -- 8,971 -- 8,971 -- 313,536 -- 313,536 Nabors Inds 236,334(f) 270,635(f) 15,458 522,427(b,c) 2,587,857 2,963,453 169,265 5,720,575 Natl Oilwell Varco 197,191 200,633 -- 397,824(b) 5,213,730 5,304,737 -- 10,518,467 Newpark Resources -- 39,801 -- 39,801(b) -- 167,562 -- 167,562 Noble 146,159(f) 139,883(f) 6,708 292,750 3,968,217 3,797,823 182,122 7,948,162 Oil States Intl -- 7,333 -- 7,333(b) -- 134,267 -- 134,267 Parker Drilling -- 149,991 -- 149,991(b,f) -- 317,981 -- 317,981 Patterson- UTI Energy -- 28,165 -- 28,165 -- 269,257 -- 269,257 Pioneer Drilling -- 40,209 -- 40,209(b,f) -- 199,839 -- 199,839 Rowan Companies -- 84,835 -- 84,835 -- 1,074,011 -- 1,074,011
12
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Smith Intl 50,852 45,574 7,419 103,845 $ 1,154,340 $ 1,034,530 $ 168,411 $ 2,357,281 Tidewater -- 6,622 -- 6,622 -- 275,541 -- 275,541 Unit -- 7,740 -- 7,740(b,f) -- 193,036 -- 193,036 Weatherford Intl 430,448 586,296 28,340 1,045,084(b) 4,747,841 6,466,845 312,590 11,527,276 ----------------------------------------------------------- Total 31,433,528 43,209,130 1,927,329 76,569,987 ----------------------------------------------------------- FOOD & STAPLES RETAILING (5.7%) Casey's General Stores -- 12,446 -- 12,446(f) -- 264,478 -- 264,478 Costco Wholesale 88,113 34,790(f) -- 122,903 3,967,728 1,566,594 -- 5,534,322 Ingles Markets Cl A -- 17,188 -- 17,188(f) -- 245,101 -- 245,101 Nash Finch -- 8,093 -- 8,093 -- 348,242 -- 348,242 Pantry -- 11,709 -- 11,709(b,f) -- 194,721 -- 194,721 Rite Aid -- -- 116,023 116,023 -- -- 32,486 32,486 Safeway 216,984 -- -- 216,984 4,649,967 -- -- 4,649,967 SUPERVALU 79,252 121,694 -- 200,946 1,390,080 2,134,513 -- 3,524,593 SYSCO 103,485 119,812 -- 223,297 2,306,681 2,670,609 -- 4,977,290 Walgreen 155,755(f) 242,493(f) 10,140 408,388 4,269,245 6,646,733 277,937 11,193,915 Wal-Mart Stores 1,914,179 2,280,221 109,422 4,303,822 90,196,115 107,444,013 5,155,965 202,796,093 Winn-Dixie Stores -- 44,499 -- 44,499(b,f) -- 611,416 -- 611,416 ----------------------------------------------------------- Total 106,779,816 122,126,420 5,466,388 234,372,624 ----------------------------------------------------------- FOOD PRODUCTS (2.3%) Archer- Daniels- Midland 133,678 -- -- 133,678 3,660,104 -- -- 3,660,104 Bunge -- 5,267 -- 5,267(f) -- 226,165 -- 226,165 Cal-Maine Foods -- 11,403 -- 11,403(f) -- 308,793 -- 308,793 Campbell Soup 74,438(f) 93,880(f) 6,365 174,683 2,260,682 2,851,136 193,305 5,305,123 Darling Intl -- 42,476 -- 42,476(b) -- 194,965 -- 194,965 Dean Foods 27,032(f) 78,795 -- 105,827(b) 522,799 1,523,895 -- 2,046,694 Diamond Foods -- 7,437 -- 7,437(f) -- 190,982 -- 190,982 Flowers Foods -- 33,535 -- 33,535(f) -- 720,667 -- 720,667 Fresh Del Monte Produce -- 16,371 -- 16,371(b,c,f) -- 394,541 -- 394,541 General Mills 388,802(f) 405,435 16,427 810,664 22,997,637 23,981,480 971,657 47,950,774 Hershey -- 14,498 -- 14,498(f) -- 540,485 -- 540,485 HJ Heinz 77,259 -- -- 77,259 2,819,954 -- -- 2,819,954 J&J Snack Foods -- 7,348 -- 7,348 -- 256,519 -- 256,519 JM Smucker 66,166 79,073(f) 4,530 149,769 2,987,395 3,570,146 204,530 6,762,071 Kellogg 91,146 100,341 4,655 196,142 3,982,169 4,383,898 203,377 8,569,444 Lance -- 11,712 -- 11,712(f) -- 220,537 -- 220,537 Ralcorp Holdings -- 17,045 -- 17,045(b) -- 1,009,405 -- 1,009,405 Sanderson Farms -- 8,480 -- 8,480 -- 306,806 -- 306,806 Sara Lee 351,117 505,990 30,873 887,980 3,521,704 5,075,080 309,656 8,906,440 TreeHouse Foods -- 17,104 -- 17,104(b,f) -- 451,375 -- 451,375 Tyson Foods Cl A 112,926(f) 189,641(f) 31,499 334,066 999,395 1,678,323 278,766 2,956,484 ----------------------------------------------------------- Total 43,751,839 47,885,198 2,161,291 93,798,328 ----------------------------------------------------------- GAS UTILITIES (0.2%) Atmos Energy -- 8,037 -- 8,037 -- 197,308 -- 197,308 Laclede Group -- 9,965 -- 9,965(f) -- 452,311 -- 452,311 New Jersey Resources -- 25,623 -- 25,623(f) -- 1,027,226 -- 1,027,226 Nicor -- 32,666 -- 32,666 -- 1,117,504 -- 1,117,504 Piedmont Natural Gas -- 25,754 -- 25,754 -- 667,286 -- 667,286 Questar 71,190(f) 73,004(f) 6,486 150,680 2,419,036 2,480,677 220,394 5,120,107 ----------------------------------------------------------- Total 2,419,036 5,942,312 220,394 8,581,742 ----------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.8%) Becton Dickinson & Co 52,477 94,068 3,160 149,705 3,813,504 6,835,922 229,637 10,879,063 Covidien 182,195 200,575(f) 5,295 388,065(c) 6,985,356 7,690,045 203,010 14,878,411 CryoLife -- 19,446 -- 19,446(b,f) -- 160,235 -- 160,235
13
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Cyberonics -- 11,792 -- 11,792(b) $ -- $ 181,479 $ -- $ 181,479 Greatbatch -- 9,720 -- 9,720(b,f) -- 226,476 -- 226,476 Immucor -- 7,503 -- 7,503(b) -- 207,908 -- 207,908 St. Jude Medical -- 32,370 -- 32,370(b) -- 1,177,297 -- 1,177,297 STERIS -- 35,623 -- 35,623(f) -- 947,572 -- 947,572 Thoratec -- 29,234 -- 29,234(b,f) -- 846,909 -- 846,909 Varian Medical Systems 52,680 -- -- 52,680(b,f) 1,956,008 -- -- 1,956,008 Volcano -- 28,992 -- 28,992(b) -- 378,925 -- 378,925 ----------------------------------------------------------- Total 12,754,868 18,652,768 432,647 31,840,283 ----------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.0%) Almost Family -- 4,966 -- 4,966(b,f) -- 153,151 -- 153,151 AMERIGROUP -- 31,195 -- 31,195(b) -- 872,524 -- 872,524 Cardinal Health 71,711 93,991(g) 6,312 172,014 2,699,919 3,538,761 237,647 6,476,327 CIGNA 399,133 460,711 21,897 881,741 6,928,948 7,997,943 380,132 15,307,023 Coventry Health Care -- 16,443 -- 16,443(b) -- 248,783 -- 248,783 DaVita -- 39,752 -- 39,752(b) -- 1,868,344 -- 1,868,344 Gentiva Health Services -- 12,919 -- 12,919(b) -- 326,592 -- 326,592 Health- Spring -- 60,412 -- 60,412(b) -- 1,052,377 -- 1,052,377 Humana -- 19,622 -- 19,622(b) -- 744,262 -- 744,262 Kindred Healthcare -- 60,238 -- 60,238(b) -- 817,430 -- 817,430 Landauer -- 5,797 -- 5,797(f) -- 397,558 -- 397,558 LHC Group -- 6,103 -- 6,103(b) -- 162,401 -- 162,401 Magellan Health Services -- 26,612 -- 26,612(b) -- 963,887 -- 963,887 Molina Healthcare -- 21,468 -- 21,468(b) -- 376,549 -- 376,549 Omnicare -- 9,838 -- 9,838(f) -- 275,070 -- 275,070 Quest Diagnostics 59,390 71,854 4,565 135,809 2,930,897 3,545,995 225,283 6,702,175 Tenet Healthcare 456,110(f) 606,612 -- 1,062,722(b) 488,038 649,075 -- 1,137,113 United- Health Group -- 48,487 2,116 50,603 -- 1,373,637 59,946 1,433,583 Universal American Financial -- 25,232 -- 25,232(b,f) -- 249,040 -- 249,040 Universal Health Services Cl B -- 3,693 -- 3,693 -- 139,780 -- 139,780 ----------------------------------------------------------- Total 13,047,802 25,753,159 903,008 39,703,969 ----------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.3%) Bob Evans Farms -- 6,334 -- 6,334(f) -- 111,225 -- 111,225 Darden Restaurants -- 28,115 -- 28,115(f) -- 737,175 -- 737,175 Intl Game Technology 117,047 86,368 -- 203,415(f) 1,240,698 915,501 -- 2,156,199 McDonald's 423,142 426,834 -- 849,976 24,550,699 24,764,910 -- 49,315,609 Panera Bread Cl A -- 2,788 -- 2,788(b,f) -- 130,980 -- 130,980 Starwood Hotels & Resorts Worldwide -- 23,901 -- 23,901(f) -- 361,383 -- 361,383 Wyndham Worldwide 46,479 168,588 -- 215,067 284,916 1,033,444 -- 1,318,360 ----------------------------------------------------------- Total 26,076,313 28,054,618 -- 54,130,931 ----------------------------------------------------------- HOUSEHOLD DURABLES (0.6%) Black & Decker 29,679(f) 39,371(f) 4,826 73,876 858,020 1,138,216 139,520 2,135,756 Centex 121,143 133,790 5,444 260,377 1,030,927 1,138,553 46,328 2,215,808 DR Horton 313,448 201,667 28,623 543,738 1,868,150 1,201,935 170,593 3,240,678 Garmin -- 15,642 -- 15,642(c,f) -- 274,204 -- 274,204 Harman Intl Inds -- 72,907 -- 72,907(f) -- 1,173,074 -- 1,173,074 KB Home 36,839 54,179 -- 91,018(f) 393,072 578,090 -- 971,162 Leggett & Platt 116,545 102,924(f) 14,280 233,749 1,455,647 1,285,521 178,357 2,919,525 Lennar Cl A 85,838 134,250 5,687 225,775 660,094 1,032,383 43,733 1,736,210 Natl Presto Inds -- 8,400 -- 8,400 -- 563,976 -- 563,976 Newell Rubbermaid -- 40,565 -- 40,565 -- 327,765 -- 327,765 NVR -- 401 -- 401(b) -- 170,862 -- 170,862 Pulte Homes 111,499 111,267 20,112 242,878 1,131,715 1,129,360 204,137 2,465,212 Ryland Group -- 16,765 -- 16,765(f) -- 261,534 -- 261,534
14
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Snap-On 47,778 32,903 6,135 86,816 $ 1,441,940 $ 993,013 $ 185,154 $ 2,620,107 Stanley Works 13,005 8,721 -- 21,726 406,536 272,618 -- 679,154 Toll Brothers -- 6,345 -- 6,345(b) -- 107,992 -- 107,992 Whirlpool -- 51,835(f) 5,246 57,081 -- 1,732,843 175,374 1,908,217 ----------------------------------------------------------- Total 9,246,101 13,381,939 1,143,196 23,771,236 ----------------------------------------------------------- HOUSEHOLD PRODUCTS (2.1%) Clorox -- 32,837 -- 32,837 -- 1,646,776 -- 1,646,776 Colgate- Palmolive 212,124 -- -- 212,124 13,796,545 -- -- 13,796,545 Kimberly- Clark 79,020 85,492 3,696 168,208 4,067,159 4,400,273 190,233 8,657,665 Procter & Gamble 563,360 576,352 -- 1,139,712 30,703,120 31,411,184 -- 62,114,304 ----------------------------------------------------------- Total 48,566,824 37,458,233 190,233 86,215,290 ----------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%) Calpine -- 8,553 -- 8,553(b) -- 63,378 -- 63,378 Constella- tion Energy Group 94,112 104,964(f) -- 199,076 2,475,145 2,760,553 -- 5,235,698 Dynegy Cl A 200,023 466,585 -- 666,608(b) 422,049 984,494 -- 1,406,543 ----------------------------------------------------------- Total 2,897,194 3,808,425 -- 6,705,619 ----------------------------------------------------------- INDUSTRIAL CONGLOMER- ATES (1.3%) 3M 233,882 217,362 9,400 460,644 12,580,512 11,691,902 505,626 24,778,040 Seaboard -- 471 -- 471 -- 473,355 -- 473,355 Textron 114,451 93,093 -- 207,544 1,033,493 840,630 -- 1,874,123 Tredegar -- 16,209 -- 16,209 -- 267,449 -- 267,449 Tyco Intl 577,631 654,427(g) 27,872 1,259,930(c) 12,141,804 13,756,055 585,870 26,483,729 ----------------------------------------------------------- Total 25,755,809 27,029,391 1,091,496 53,876,696 ----------------------------------------------------------- INSURANCE (5.3%) ACE 224,162 -- -- 224,162(c) 9,786,913 -- -- 9,786,913 AFLAC 239,320 147,289 6,122 392,731 5,554,617 3,418,578 142,092 9,115,287 Allied World Assurance Holdings -- 6,869 -- 6,869(c) -- 258,961 -- 258,961 Allstate 913,087 1,197,191(g) 56,683 2,166,961 19,786,594 25,943,129 1,228,321 46,958,044 Ambac Financial Group 288,197 -- -- 288,197(f) 328,545 -- -- 328,545 American Financial Group -- 11,304 -- 11,304 -- 191,942 -- 191,942 American Intl Group 1,536,860 -- -- 1,536,860 1,967,181 -- -- 1,967,181 Aon 101,123 103,317 -- 204,440 3,746,607 3,827,895 -- 7,574,502 Arch Capital Group -- 6,237 -- 6,237(b,c,f) -- 375,156 -- 375,156 Aspen Insurance Holdings -- 66,891 -- 66,891(c) -- 1,478,291 -- 1,478,291 Assurant 63,505 56,546 -- 120,051 1,676,532 1,492,814 -- 3,169,346 Axis Capital Holdings -- 20,174 -- 20,174(c) -- 489,421 -- 489,421 Chubb 186,118 140,797(f) 7,448 334,363 7,924,904 5,995,136 317,136 14,237,176 Cincinnati Financial 28,900 12,519 -- 41,419 633,777 274,542 -- 908,319 Employers Holdings -- 36,927 -- 36,927 -- 499,992 -- 499,992 Everest Re Group -- 5,516 -- 5,516(c) -- 347,508 -- 347,508 Genworth Financial Cl A 656,721 -- -- 656,721 1,523,593 -- -- 1,523,593 Hartford Financial Services Group 200,394 158,284 -- 358,678(f) 2,637,185 2,083,017 -- 4,720,202 HCC Insurance Holdings -- 14,014 -- 14,014 -- 328,068 -- 328,068 IPC Holdings -- 33,187 -- 33,187(c,f) -- 851,578 -- 851,578 Lincoln Natl 120,907 -- -- 120,907 1,829,323 -- -- 1,829,323 Marsh & McLennan Companies 383,572 440,703 15,548 839,823 7,414,447 8,518,789 300,543 16,233,779 Montpelier Re Holdings -- 71,187 -- 71,187(c) -- 1,006,584 -- 1,006,584 MBIA 209,475 -- -- 209,475(b,f) 808,574 -- -- 808,574 MetLife 374,982 -- 4,508 379,490 10,773,233 -- 129,515 10,902,748 Odyssey Re Holdings -- 25,577 -- 25,577(f) -- 1,203,398 -- 1,203,398 PartnerRe -- 6,873 -- 6,873(c) -- 450,388 -- 450,388 Platinum Underwrit- ers Holdings -- 45,109 -- 45,109(c,f) -- 1,254,481 -- 1,254,481 Progressive 1,189,984 1,242,638 54,485 2,487,107(b) 14,458,306 15,098,052 661,993 30,218,351
15
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Prudential Financial 200,346 -- 2,527 202,873 $ 5,158,910 $ -- $ 65,070 $ 5,223,980 Renaissan- ceRe Holdings -- 8,305 -- 8,305(c) -- 371,150 -- 371,150 RLI -- 12,392 -- 12,392 -- 700,024 -- 700,024 Torchmark 66,836 -- -- 66,836(f) 2,005,080 -- -- 2,005,080 Travelers Companies 454,944 434,027 27,036 916,007 17,579,036 16,770,803 1,044,671 35,394,510 Unum Group 120,100 -- -- 120,100 1,700,616 -- -- 1,700,616 Validus Holdings -- 48,236 -- 48,236(c,f) -- 1,100,746 -- 1,100,746 WR Berkley -- 19,445 -- 19,445 -- 514,904 -- 514,904 XL Capital Cl A 210,930 -- -- 210,930(c) 611,697 -- -- 611,697 Zenith Natl Insurance -- 29,120 -- 29,120 -- 816,525 -- 816,525 ----------------------------------------------------------- Total 117,905,670 95,661,872 3,889,341 217,456,883 ----------------------------------------------------------- INTERNET & CATALOG RETAIL (--%) NutriSystem -- 41,148 -- 41,148(f) -- 530,398 -- 530,398 PetMed Express -- 10,222 -- 10,222(b) -- 147,606 -- 147,606 Ticketmas- ter Entertain- ment -- 26,034 -- 26,034(b) -- 154,902 -- 154,902 ----------------------------------------------------------- Total -- 832,906 -- 832,906 ----------------------------------------------------------- INTERNET SOFTWARE & SERVICES (--%) Ariba -- 38,540 -- 38,540(b,f) -- 294,446 -- 294,446 EarthLink -- 70,156 -- 70,156(b,f) -- 528,274 -- 528,274 ModusLink Global Solutions -- 71,828 -- 71,828(b) -- 167,359 -- 167,359 RealNet- works -- 67,312 -- 67,312(b) -- 189,820 -- 189,820 ----------------------------------------------------------- Total -- 1,179,899 -- 1,179,899 ----------------------------------------------------------- IT SERVICES (1.2%) Affiliated Computer Services Cl A 57,245 103,970 4,949 166,164(b) 2,625,256 4,768,064 226,961 7,620,281 Automatic Data Processing 183,752(f) 202,289(f) 7,118 393,159 6,675,709 7,349,159 258,597 14,283,465 Ciber -- 52,635 -- 52,635(b,f) -- 229,489 -- 229,489 Computer Sciences -- 17,530 -- 17,530(b) -- 645,805 -- 645,805 Convergys -- 13,435 -- 13,435(b,f) -- 101,166 -- 101,166 CSG Systems Intl -- 22,398 -- 22,398(b) -- 324,771 -- 324,771 Integral Systems -- 17,756 -- 17,756(b) -- 194,073 -- 194,073 ManTech Intl Cl A -- 21,514 -- 21,514(b,f) -- 1,153,796 -- 1,153,796 MasterCard Cl A 28,772(f) 39,332 2,861 70,965 3,906,662 5,340,499 388,467 9,635,628 NCI Cl A -- 8,433 -- 8,433(b) -- 252,990 -- 252,990 Paychex 98,702(f) 127,898 7,169 233,769 2,397,472 3,106,642 174,135 5,678,249 Perot Systems Cl A -- 28,231 -- 28,231(b,f) -- 366,721 -- 366,721 SAIC -- 36,100 -- 36,100(b,f) -- 712,614 -- 712,614 Total System Services 17,806 21,811 -- 39,617 225,424 276,127 -- 501,551 Western Union 151,118 345,685(f) 22,056 518,859 2,064,272 4,722,057 301,285 7,087,614 ----------------------------------------------------------- Total 17,894,795 29,543,973 1,349,445 48,788,213 ----------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.4%) Brunswick 100,213 79,223 -- 179,436(f) 278,592 220,240 -- 498,832 Eastman Kodak 232,404(f) 257,081(f) 26,368 515,853 1,052,790 1,164,577 119,447 2,336,814 Hasbro 92,091(f) 117,369 7,547 217,007 2,222,156 2,832,114 182,109 5,236,379 JAKKS Pacific -- 40,483 -- 40,483(b,f) -- 742,458 -- 742,458 Mattel 221,386 253,773 15,146 490,305 3,141,467 3,601,039 214,922 6,957,428 ----------------------------------------------------------- Total 6,695,005 8,560,428 516,478 15,771,911 ----------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.1%) Luminex -- 15,394 -- 15,394(b) -- 313,576 -- 313,576 PerkinElmer -- 125,550 -- 125,550(f) -- 1,584,440 -- 1,584,440 Sequenom -- 19,260 -- 19,260(b,f) -- 426,802 -- 426,802 ----------------------------------------------------------- Total -- 2,324,818 -- 2,324,818 -----------------------------------------------------------
16
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED MACHINERY (1.2%) Cummins 95,151 100,950 -- 196,101 $ 2,281,721 $ 2,420,781 $ -- $ 4,702,502 Deere & Co 154,045 92,031 -- 246,076 5,351,523 3,197,157 -- 8,548,680 Dover 34,526 77,239(f) 7,205 118,970 976,395 2,184,319 203,757 3,364,471 Eaton 77,917 74,070 4,373 156,360 3,429,906 3,260,561 192,499 6,882,966 Flowserve 23,515 30,090 4,249 57,854 1,253,585 1,604,098 226,514 3,084,197 Force Protection -- 68,911 -- 68,911(b) -- 414,155 -- 414,155 FreightCar America -- 7,315 -- 7,315 -- 140,082 -- 140,082 Gardner Denver -- 8,822 -- 8,822(b) -- 192,055 -- 192,055 Illinois Tool Works 99,790 154,278 7,296 261,364 3,259,141 5,038,720 238,287 8,536,148 Ingersoll- Rand Cl A 250,754 183,012 14,249 448,015(c) 4,064,722 2,966,625 230,976 7,262,323 Joy Global -- 9,129 -- 9,129(f) -- 190,157 -- 190,157 Manitowoc 41,277(f) 146,341 -- 187,618 227,024 804,876 -- 1,031,900 Mueller Inds -- 51,804 -- 51,804 -- 1,042,296 -- 1,042,296 NACCO Inds Cl A -- 8,300 -- 8,300(f) -- 265,517 -- 265,517 Pall 21,838 49,291 7,791 78,920 569,317 1,285,016 203,111 2,057,444 Parker Hannifin 58,170 -- -- 58,170 2,222,676 -- -- 2,222,676 Terex -- 16,330 -- 16,330(b,f) -- 193,347 -- 193,347 Wabtec -- 28,621 -- 28,621(f) -- 856,627 -- 856,627 ----------------------------------------------------------- Total 23,636,010 26,056,389 1,295,144 50,987,543 ----------------------------------------------------------- MEDIA (2.7%) CBS Cl B 599,908 608,287 39,912 1,248,107 3,431,474 3,479,402 228,297 7,139,173 Comcast Cl A 2,148,695 1,292,482(f) 106,443 3,547,620 31,478,381 18,934,862 1,559,390 51,972,633 DIRECTV Group 204,716 209,156 -- 413,872(b) 4,483,280 4,580,516 -- 9,063,796 DreamWorks Animation SKG Cl A -- 3,854 -- 3,854(b) -- 84,595 -- 84,595 Gannett 498,635(f) 501,357 27,201 1,027,193 2,877,124 2,892,830 156,950 5,926,904 Marvel Entertain- ment -- 14,171 -- 14,171(b) -- 389,844 -- 389,844 Meredith 14,134 86,571 -- 100,705(f) 225,720 1,382,539 -- 1,608,259 New York Times Cl A 109,515(f) 266,866(f) 27,468 403,849 544,290 1,326,324 136,516 2,007,130 News Corp Cl A 259,074(f) 283,178(f) 29,044 571,296 1,655,483 1,809,507 185,591 3,650,581 Sirius XM Radio -- 15,046,171 -- 15,046,171(b) -- 1,805,541 -- 1,805,541 Time Warner Cable Cl A -- 59,461 -- 59,461(b,f) -- 1,107,758 -- 1,107,758 Virgin Media -- 5,987,186 -- 5,987,186(e) -- 27,181,825 -- 27,181,825 WorldSpace Cl A -- 263,942 -- 263,942(b) -- 3,167 -- 3,167 ----------------------------------------------------------- Total 44,695,752 64,978,710 2,266,744 111,941,206 ----------------------------------------------------------- METALS & MINING (1.0%) AK Steel Holding 105,674(f) 137,071(f) 4,617 247,362 852,789 1,106,163 37,259 1,996,211 Alcoa 474,946 48,086 4,814 527,846 3,699,829 374,590 37,501 4,111,920 AM Castle & Co -- 26,449 -- 26,449(f) -- 223,759 -- 223,759 Cliffs Natural Resources -- 14,804 -- 14,804(f) -- 343,009 -- 343,009 Compass Minerals Intl -- 5,450 -- 5,450 -- 327,927 -- 327,927 Freeport- McMoRan Copper & Gold 63,591(f) 42,418(f) 2,273 108,282 1,598,678 1,066,389 57,143 2,722,210 Horesehead Holding -- 25,185 -- 25,185(b) -- 99,733 -- 99,733 Kaiser Aluminum -- 8,262 -- 8,262(f) -- 205,228 -- 205,228 Nucor 278,500(f) 314,082(f) 14,620 607,202 11,360,015 12,811,404 596,350 24,767,769 Olympic Steel -- 15,484 -- 15,484 -- 245,731 -- 245,731 Reliance Steel & Aluminum -- 15,731 -- 15,731(f) -- 348,127 -- 348,127 RTI Intl Metals -- 9,465 -- 9,465(b) -- 125,979 -- 125,979 Timminco -- 510,164 -- 510,164(b,c,f) -- 1,441,189 -- 1,441,189 United States Steel 107,701 112,157(f) 7,163 227,021 3,234,261 3,368,074 215,105 6,817,440 Worthington Inds -- 22,881 -- 22,881 -- 230,183 -- 230,183 ----------------------------------------------------------- Total 20,745,572 22,317,485 943,358 44,006,415 -----------------------------------------------------------
17
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED MULTILINE RETAIL (0.6%) Big Lots 49,161(f) 80,289(f) 12,297 141,747(b) $ 661,215 $ 1,079,887 $ 165,395 $ 1,906,497 Dillard's Cl A -- 53,223 -- 53,223(f) -- 231,520 -- 231,520 Dollar Tree -- 8,846 -- 8,846(b) -- 377,813 -- 377,813 Family Dollar Stores 137,895 175,923(f) 6,942 320,760 3,829,345 4,885,382 192,779 8,907,506 Fred's Cl A -- 33,104 -- 33,104(f) -- 339,647 -- 339,647 JC Penney 50,077 51,311 -- 101,388(f) 838,790 859,459 -- 1,698,249 Kohl's 65,693(f) 113,484(f) 3,613 182,790(b) 2,411,590 4,165,998 132,633 6,710,221 Macy's 66,493 83,729 -- 150,222 595,112 749,375 -- 1,344,487 Nordstrom -- 82,493 -- 82,493(f) -- 1,046,836 -- 1,046,836 Sears Holdings -- 8,132 -- 8,132(b,f) -- 332,761 -- 332,761 ----------------------------------------------------------- Total 8,336,052 14,068,678 490,807 22,895,537 ----------------------------------------------------------- MULIT- UTILITIES (0.2%) CH Energy Group -- 3,442 -- 3,442 -- 174,096 -- 174,096 DTE Energy -- 2,526 -- 2,526 -- 87,147 -- 87,147 MDU Resources Group -- 10,592 -- 10,592 -- 210,675 -- 210,675 PG&E -- 80,109 -- 80,109 -- 3,097,815 -- 3,097,815 TECO Energy -- 120,193 -- 120,193 -- 1,443,518 -- 1,443,518 Vectren -- 7,668 -- 7,668 -- 197,758 -- 197,758 Wisconsin Energy -- 51,986 -- 51,986(f) -- 2,317,536 -- 2,317,536 ----------------------------------------------------------- Total -- 7,528,545 -- 7,528,545 ----------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (14.3%) Anadarko Petroleum 227,182 -- -- 227,182 8,346,667 -- -- 8,346,667 Apache 49,069 176,609 6,669 232,347 3,680,175 13,245,675 500,175 17,426,025 Cabot Oil & Gas 61,226 55,530(f) 7,148 123,904 1,683,103 1,526,520 196,499 3,406,122 Chesapeake Energy 304,346 289,099 20,619 614,064 4,811,710 4,570,655 325,986 9,708,351 Chevron 1,644,212 1,385,499 79,246 3,108,957 115,949,829 97,705,390 5,588,428 219,243,647 Cimarex Energy -- 13,126 -- 13,126(f) -- 326,050 -- 326,050 Clayton Williams Energy -- 5,179 -- 5,179(b) -- 206,124 -- 206,124 Comstock Resources -- 20,170 -- 20,170(b,f) -- 769,082 -- 769,082 ConocoPhil- lips 561,368 584,206 29,500 1,175,074 26,681,821 27,767,311 1,402,135 55,851,267 CONSOL Energy 72,035 85,435 7,246 164,716 1,963,674 2,328,958 197,526 4,490,158 Contango Oil & Gas -- 5,181 -- 5,181(b,f) -- 231,073 -- 231,073 Devon Energy 48,553 -- -- 48,553 2,990,865 -- -- 2,990,865 EOG Resources 104,193 112,266(f) 7,526 223,985 7,061,160 7,608,267 510,037 15,179,464 EXCO Resources -- 18,093 -- 18,093(b) -- 183,463 -- 183,463 Exxon Mobil 586,725(g) 625,884 5,218 1,217,827 44,872,728 47,867,608 399,073 93,139,409 Frontier Oil -- 14,907 -- 14,907(f) -- 212,872 -- 212,872 Frontline -- 4,642 -- 4,642(c,f) -- 132,343 -- 132,343 Goodrich Petroleum -- 7,657 -- 7,657(b) -- 221,287 -- 221,287 Gran Tierra Energy -- 87,228 -- 87,228(b,c) -- 246,855 -- 246,855 Hess 134,042(f) 127,604(f) 8,562 270,208 7,454,076 7,096,058 476,133 15,026,267 James River Coal -- 16,847 -- 16,847(b) -- 228,445 -- 228,445 Marathon Oil 363,777 412,818 20,516 797,111 9,905,648 11,241,034 558,651 21,705,333 Massey Energy 104,037 92,601 13,763 210,401 1,579,282 1,405,683 208,922 3,193,887 McMoRan Exploration -- 30,874 -- 30,874(b) -- 206,547 -- 206,547 Murphy Oil 90,076 111,186 4,618 205,880 3,979,558 4,912,197 204,023 9,095,778 Newfield Exploration -- 7,467 -- 7,467(b) -- 143,292 -- 143,292 Noble Energy -- 103,023 6,831 109,854 -- 5,040,915 334,241 5,375,156 Occidental Petroleum 405,601 312,463(f) 1,058 719,122 22,125,535 17,044,857 57,714 39,228,106 Peabody Energy 124,318 136,760 10,757 271,835 3,107,950 3,419,000 268,925 6,795,875 Penn Virginia -- 11,931 -- 11,931(f) -- 245,779 -- 245,779 Petrohawk Energy -- 3,969 -- 3,969(b,f) -- 78,229 -- 78,229 PetroQuest Energy -- 24,474 -- 24,474(b,f) -- 154,920 -- 154,920 Pioneer Natural Resources 100,107 141,145 10,313 251,565 1,465,566 2,066,363 150,982 3,682,911
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COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Plains Exploration & Production -- 7,946 -- 7,946(b,f) $ -- $ 167,820 $ -- $ 167,820 Range Resources -- 33,648 4,996 38,644 -- 1,205,944 179,057 1,385,001 Rosetta Resources -- 43,026 -- 43,026(b) -- 261,168 -- 261,168 Southwest- ern Energy 203,387(f) 218,764 16,904 439,055(b) 6,437,199 6,923,881 535,012 13,896,092 Spectra Energy 242,810 479,403 18,039 740,252 3,523,173 6,956,138 261,746 10,741,057 St. Mary Land & Exploration -- 10,285 -- 10,285(f) -- 199,015 -- 199,015 Stone Energy -- 22,251 -- 22,251(b) -- 190,914 -- 190,914 Sunoco 54,967(f) 42,251(f) 5,420 102,638 2,546,071 1,957,066 251,054 4,754,191 Swift Energy -- 45,994 -- 45,994(b,f) -- 704,628 -- 704,628 Tesoro 98,048(f) 77,808(f) 5,008 180,864 1,689,367 1,340,632 86,288 3,116,287 USEC -- 77,943 -- 77,943(b) -- 396,730 -- 396,730 VAALCO Energy -- 46,283 -- 46,283(b,f) -- 347,585 -- 347,585 Valero Energy 170,934(f) 204,530 12,352 387,816 4,122,928 4,933,264 297,930 9,354,122 Western Refining -- 23,140 -- 23,140 -- 269,812 -- 269,812 Williams Companies -- 202,174 -- 202,174 -- 2,860,762 -- 2,860,762 World Fuel Services -- 7,441 -- 7,441(f) -- 251,283 -- 251,283 ----------------------------------------------------------- Total 285,978,085 287,399,494 12,990,537 586,368,116 ----------------------------------------------------------- PAPER & FOREST PRODUCTS (--%) Wausau Paper -- 39,145 -- 39,145(f) -- 372,269 -- 372,269 ----------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Estee Lauder Companies Cl A 92,113(f) 87,587(f) 7,320 187,020 2,417,966 2,299,159 192,150 4,909,275 ----------------------------------------------------------- PHARMACEU- TICALS (13.3%) Abbott Laborato- ries -- 122,292 6,628 128,920 -- 6,779,868 367,456 7,147,324 Bristol- Myers Squibb 373,524 -- -- 373,524 7,997,149 -- -- 7,997,149 Eli Lilly & Co 295,088(f) 283,187 18,537 596,812 10,865,140 10,426,945 682,532 21,974,617 Forest Laborato- ries 200,439 430,301 9,278 640,018(b) 5,018,993 10,774,737 232,321 16,026,051 Johnson & Johnson 1,640,525 1,636,996 81,332 3,358,853 94,641,886 94,438,299 4,692,043 193,772,228 King Pharmaceu- ticals 400,546 793,580 -- 1,194,126(b) 3,500,772 6,935,889 -- 10,436,661 Merck & Co 772,283 508,625 24,905 1,305,813 22,048,680 14,521,244 711,038 37,280,962 Mylan 53,769 123,475 -- 177,244(b,f) 609,203 1,398,972 -- 2,008,175 Par Pharmaceu- tical Companies -- 19,731 -- 19,731(b) -- 242,889 -- 242,889 Pfizer 6,118,008 7,072,211 332,441 13,522,660 89,200,557 103,112,837 4,846,989 197,160,383 Schering- Plough 908,187 434,393 44,895 1,387,475 15,947,764 7,627,941 788,356 24,364,061 Valeant Pharmaceu- ticals Intl -- 36,414 -- 36,414(b,f) -- 790,184 -- 790,184 ViroPharma -- 92,903 -- 92,903(b) -- 1,114,836 -- 1,114,836 VIVUS -- 21,562 -- 21,562(b) -- 105,869 -- 105,869 Watson Pharmaceu- ticals -- 46,739 -- 46,739(b,f) -- 1,275,040 -- 1,275,040 Wyeth 235,581 266,933 12,410 514,924 10,122,916 11,470,111 533,258 22,126,285 ----------------------------------------------------------- Total 259,953,060 271,015,661 12,853,993 543,822,714 ----------------------------------------------------------- PROFES- SIONAL SERVICES (--%) Administaff -- 15,452 -- 15,452 -- 325,883 -- 325,883 Heidrick & Struggles Intl -- 15,205 -- 15,205 -- 231,116 -- 231,116 Huron Consulting Group -- 4,487 -- 4,487(b) -- 224,260 -- 224,260 Kelly Services Cl A -- 32,477 -- 32,477 -- 294,242 -- 294,242 Korn/Ferry Intl -- 21,781 -- 21,781(b,f) -- 204,741 -- 204,741 Manpower -- 8,767 -- 8,767 -- 249,509 -- 249,509 TrueBlue -- 49,670 -- 49,670(b,f) -- 422,195 -- 422,195 ----------------------------------------------------------- Total -- 1,951,946 -- 1,951,946 ----------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.2%) American Campus Communities -- 11,424 -- 11,424(f) -- 244,131 -- 244,131 BRE Properties Cl A -- 3,175 -- 3,175(f) -- 80,613 -- 80,613 Capstead Mtge -- 26,825 -- 26,825 -- 286,223 -- 286,223 Digital Realty Trust -- 3,469 -- 3,469(f) -- 110,661 -- 110,661
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COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Equity Residential -- 144,231 8,007 152,238 $ -- $ 3,451,449 $ 191,608 $ 3,643,057 Health Care REIT -- 5,787 -- 5,787(f) -- 218,806 -- 218,806 Investors Real Estate Trust -- 22,612 -- 22,612 -- 224,989 -- 224,989 Liberty Property Trust -- 7,850 -- 7,850 -- 157,000 -- 157,000 Public Storage 58,068(f) -- 3,788 61,856 3,592,667 -- 234,364 3,827,031 UDR -- 9,138 -- 9,138(f) -- 107,190 -- 107,190 ----------------------------------------------------------- Total 3,592,667 4,881,062 425,972 8,899,701 ----------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (--%) Avatar Holdings -- 8,745 -- 8,745(b) -- 226,933 -- 226,933 St. Joe -- 6,506 -- 6,506(b,f) -- 156,469 -- 156,469 ----------------------------------------------------------- Total -- 383,402 -- 383,402 ----------------------------------------------------------- ROAD & RAIL (3.7%) Arkansas Best -- 33,461 -- 33,461 -- 782,653 -- 782,653 Burlington Northern Santa Fe 219,040 314,011 13,811 546,862 14,511,400 20,803,229 914,979 36,229,608 Con-way -- 3,857 -- 3,857 -- 84,970 -- 84,970 CSX 390,872 417,739(f) 24,120 832,731 11,319,653 12,097,721 698,515 24,115,889 Genesee & Wyoming Cl A -- 10,684 -- 10,684(b,f) -- 290,284 -- 290,284 Kansas City Southern -- 6,630 -- 6,630(b,f) -- 120,401 -- 120,401 Norfolk Southern 430,857 452,461 18,332 901,650 16,527,675 17,356,404 703,216 34,587,295 Old Dominion Frieght Line -- 10,109 -- 10,109(b,f) -- 253,534 -- 253,534 Ryder System 54,245(f) 84,319 5,892 144,456 1,832,396 2,848,296 199,032 4,879,724 Saia -- 26,543 -- 26,543(b) -- 283,745 -- 283,745 Union Pacific 547,180 566,518 24,988 1,138,686 23,961,012 24,807,822 1,094,225 49,863,059 Werner Enterprises -- 18,060 -- 18,060 -- 270,900 -- 270,900 ----------------------------------------------------------- Total 68,152,136 79,999,959 3,609,967 151,762,062 ----------------------------------------------------------- SEMICONDUC- TORS & SEMICONDUC- TOR EQUIPMENT (2.4%) Altera 284,124 281,189 13,898 579,211 4,369,827 4,324,687 213,751 8,908,265 Amkor Technology -- 141,788 -- 141,788(b,f) -- 328,948 -- 328,948 Atmel -- 32,711 -- 32,711(b,f) -- 109,255 -- 109,255 Infineon Technolo- gies -- 806,777 -- 806,777(b,c,f) -- 718,921 -- 718,921 Infineon Technolo- gies ADR -- 614,065 -- 614,065(b,c) -- 528,096 -- 528,096 Intel 2,783,428 1,283,714 120,082 4,187,224 35,906,221 16,559,910 1,549,058 54,015,189 Lam Research -- 26,944 -- 26,944(b,f) -- 544,538 -- 544,538 Linear Technology 166,697(f) 203,498(f) 10,335 380,530 3,904,044 4,765,923 242,046 8,912,013 LSI 237,133(f) 406,802(f) 71,557 715,492(b) 754,083 1,293,630 227,551 2,275,264 MEMC Electronic Materials 144,127 152,983 -- 297,110(b) 1,960,127 2,080,569 -- 4,040,696 Microchip Technology 138,807 121,743 10,930 271,480 2,633,169 2,309,465 207,342 5,149,976 MKS Instruments -- 29,302 -- 29,302(b,f) -- 411,693 -- 411,693 Natl Semiconduc- tor -- 114,937(f) 18,685 133,622 -- 1,165,461 189,466 1,354,927 NVIDIA 95,822 21,718 -- 117,540(b,f) 761,785 172,658 -- 934,443 OmniVision Technolo- gies -- 40,728 -- 40,728(b) -- 272,470 -- 272,470 Sigma Designs -- 26,295 -- 26,295(b,f) -- 268,735 -- 268,735 Silicon Image -- 79,753 -- 79,753(b,f) -- 292,694 -- 292,694 Spansion Cl A -- 1,738,038 -- 1,738,038(b) -- 116,449 -- 116,449 Teradyne -- 33,804 -- 33,804(b) -- 162,597 -- 162,597 Xilinx 255,847 290,253(f) 13,507 559,607 4,311,022 4,890,763 227,593 9,429,378 Zoran -- 33,505 -- 33,505(b) -- 199,020 -- 199,020 ----------------------------------------------------------- Total 54,600,278 41,516,482 2,856,807 98,973,567 ----------------------------------------------------------- SOFTWARE (2.5%) BMC Software -- 41,845(f) 3,785 45,630(b) -- 1,059,934 95,874 1,155,808 Compuware -- 240,368 32,971 273,339(b) -- 1,562,392 214,312 1,776,704 Intuit -- 47,822 -- 47,822(b) -- 1,083,168 -- 1,083,168
20
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED Microsoft 1,151,519 2,175,020 -- 3,326,539 $ 19,690,975 $ 37,192,842 $ -- $ 56,883,817 Oracle 1,507,562 659,566 -- 2,167,128(b,f) 25,372,268 11,100,496 -- 36,472,764 Quality Systems -- 8,208 -- 8,208(f) -- 305,994 -- 305,994 Red Hat -- 6,267 -- 6,267(b,f) -- 91,812 -- 91,812 Salesfor- ce.com 11,626(f) 47,195(f) 7,605 66,426(b) 309,368 1,255,859 202,369 1,767,596 Symantec 154,679 -- 17,055 171,734(b) 2,371,229 -- 261,453 2,632,682 Take-Two Interactive Software -- 20,438 -- 20,438 -- 143,475 -- 143,475 TeleCommu- nication Systems Cl A -- 31,053 -- 31,053(b) -- 222,339 -- 222,339 ----------------------------------------------------------- Total 47,743,840 54,018,311 774,008 102,536,159 ----------------------------------------------------------- SPECIALTY RETAIL (4.7%) Aaron Rents -- 24,988 -- 24,988(f) -- 546,238 -- 546,238 Abercrombie & Fitch Cl A 133,207(f) 121,228 6,200 260,635 2,377,745 2,163,920 110,670 4,652,335 Advance Auto Parts -- 4,756 -- 4,756 -- 155,664 -- 155,664 Aeropostale -- 18,721 -- 18,721(b,f) -- 395,200 -- 395,200 American Eagle Outfitters -- 12,985 -- 12,985 -- 116,995 -- 116,995 Asbury Automotive Group -- 38,005 -- 38,005(f) -- 136,058 -- 136,058 AutoNation 173,695(f) 212,973(f) 25,484 412,152(b) 1,611,890 1,976,389 236,492 3,824,771 AutoZone 28,942(f) 23,871(f) 1,914 54,727(b) 3,846,102 3,172,217 254,351 7,272,670 Barnes & Noble -- 14,133 -- 14,133(f) -- 232,064 -- 232,064 Bed Bath & Beyond 144,495(f) 193,604(f) 10,196 348,295(b) 3,356,619 4,497,421 236,853 8,090,893 Best Buy 144,404 125,015 9,875 279,294 4,046,200 3,502,920 276,698 7,825,818 Blockbuster Cl A -- 261,540 -- 261,540(b,f) -- 333,464 -- 333,464 Brown Shoe -- 35,184 -- 35,184(f) -- 165,013 -- 165,013 Cato Cl A -- 27,254 -- 27,254(f) -- 360,570 -- 360,570 Chico's FAS -- 96,855 -- 96,855(b) -- 383,546 -- 383,546 Children's Place Retail Stores -- 22,270 -- 22,270(b,f) -- 418,899 -- 418,899 Collective Brands -- 48,547 -- 48,547(b) -- 517,996 -- 517,996 Dress Barn -- 37,279 -- 37,279(b,f) -- 321,345 -- 321,345 Finish Line Cl A -- 51,549 -- 51,549 -- 244,858 -- 244,858 Foot Locker -- 60,996 -- 60,996(f) -- 448,931 -- 448,931 Gap 286,082 290,846 16,390 593,318 3,227,005 3,280,743 184,879 6,692,627 Group 1 Automotive -- 34,272 -- 34,272(f) -- 341,692 -- 341,692 Home Depot 2,249,714(g) 2,397,534 106,943 4,754,191 48,436,343 51,618,906 2,302,483 102,357,732 Hot Topic -- 49,620 -- 49,620(b,f) -- 423,755 -- 423,755 Jo-Ann Stores -- 18,977 -- 18,977(b,f) -- 242,336 -- 242,336 Jos A Bank Clothiers -- 19,777 -- 19,777(b,f) -- 543,076 -- 543,076 Limited Brands 114,145(f) 133,601 23,072 270,818 904,028 1,058,120 182,730 2,144,878 Lowe's Companies 752,480 749,982(g) 27,373 1,529,835 13,747,810 13,702,170 500,105 27,950,085 Men's Wearhouse -- 37,223 -- 37,223(f) -- 433,648 -- 433,648 Monro Muffler Brake -- 6,976 -- 6,976 -- 169,308 -- 169,308 Office Depot 149,209 499,362 -- 648,571(b) 322,291 1,078,622 -- 1,400,913 PetSmart -- 9,435 -- 9,435(f) -- 177,095 -- 177,095 RadioShack 168,700(f) 165,444(f) 21,168 355,312 1,933,302 1,895,988 242,585 4,071,875 Rent-A- Center -- 43,584 -- 43,584(b) -- 647,222 -- 647,222 Ross Stores -- 9,891 -- 9,891(f) -- 290,993 -- 290,993 Sherwin- Williams 53,160(f) 45,446 3,450 102,056 2,538,390 2,170,047 164,737 4,873,174 Stage Stores -- 34,037 -- 34,037 -- 243,365 -- 243,365 Staples 28,256 100,397 11,529 140,182 450,401 1,600,328 183,772 2,234,501 Tiffany & Co -- 51,022 -- 51,022(f) -- 1,058,707 -- 1,058,707 TJX Companies 76,140 -- -- 76,140 1,478,639 -- -- 1,478,639 Urban Outfitters -- 3,466 -- 3,466(b,f) -- 54,000 -- 54,000 Wet Seal Cl A -- 86,206 -- 86,206(b,f) -- 224,998 -- 224,998 ----------------------------------------------------------- Total 88,276,765 101,344,827 4,876,355 194,497,947 -----------------------------------------------------------
21
COMMON STOCKS (CONTINUED) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED TEXTILES, APPAREL & LUXURY GOODS (0.6%) Carter's -- 26,542 -- 26,542(b,f) $ -- $ 450,949 $ -- $ 450,949 Coach 206,729 320,745(f) 13,511 540,985(b) 3,018,243 4,682,876 197,261 7,898,380 Jones Apparel Group 116,009 143,519 -- 259,528 401,391 496,576 -- 897,967 Liz Claiborne 229,550(f) 253,530(f) 15,249 498,329 505,010 557,766 33,548 1,096,324 Nike Cl B 51,608 79,319 4,007 134,934 2,335,262 3,589,185 181,317 6,105,764 Polo Ralph Lauren -- 27,092(f) 5,022 32,114 -- 1,111,585 206,053 1,317,638 Skechers USA Cl A -- 24,247 -- 24,247(b,f) -- 241,500 -- 241,500 Steven Madden -- 16,880 -- 16,880(b) -- 293,374 -- 293,374 VF 55,629 65,686(f) 4,070 125,385 3,116,337 3,679,730 228,001 7,024,068 ----------------------------------------------------------- Total 9,376,243 15,103,541 846,180 25,325,964 ----------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.2%) Capitol Federal Financial -- 2,312 -- 2,312 -- 95,717 -- 95,717 First Niagara Financial Group -- 42,786 -- 42,786 -- 558,785 -- 558,785 Fannie Mae 1,336,093 -- -- 1,336,093 809,139 -- -- 809,139 Freddie Mac 794,150 112,515 -- 906,665 472,519 66,946 -- 539,465 Hudson City Bancorp -- 224,552 -- 224,552 -- 2,604,804 -- 2,604,804 MGIC Investment 154,094 -- -- 154,094(f) 425,299 -- -- 425,299 NewAlliance Bancshares -- 12,085 -- 12,085(f) -- 132,814 -- 132,814 Ocwen Financial -- 34,121 -- 34,121(b) -- 303,677 -- 303,677 People's United Financial -- 22,442 -- 22,442 -- 367,151 -- 367,151 Trustco Bank NY -- 23,917 -- 23,917 -- 160,244 -- 160,244 United Financial Bancorp -- 17,441 -- 17,441 -- 239,116 -- 239,116 ----------------------------------------------------------- Total 1,706,957 4,529,254 -- 6,236,211 ----------------------------------------------------------- TOBACCO (0.2%) Philip Morris Intl 191,327 -- -- 191,327 7,107,798 -- -- 7,107,798 ----------------------------------------------------------- TRADING COMPANIES & DISTRIBU- TORS (0.3%) Beacon Roofing Supply -- 27,278 -- 27,278(b) -- 347,249 -- 347,249 Fastenal 47,200(f) 74,300(f) 5,278 126,778 1,613,296 2,539,574 180,402 4,333,272 GATX -- 3,343 -- 3,343(f) -- 80,566 -- 80,566 Rush Enterprises Cl A -- 27,585 -- 27,585(b,f) -- 251,024 -- 251,024 Watsco -- 12,534 -- 12,534 -- 414,249 -- 414,249 WESCO Intl -- 16,458 -- 16,458(b) -- 303,156 -- 303,156 WW Grainger 29,299(f) 37,197(f) 2,918 69,414 2,137,362 2,713,521 212,868 5,063,751 ----------------------------------------------------------- Total 3,750,658 6,649,339 393,270 10,793,267 ----------------------------------------------------------- WATER UTILITIES (--%) Aqua America -- 5,838 -- 5,838 -- 121,080 -- 121,080 California Water Service Group -- 4,243 -- 4,243 -- 184,571 -- 184,571 ----------------------------------------------------------- Total -- 305,651 -- 305,651 ----------------------------------------------------------- WIRELESS TELECOMMU- NICATION SERVICES (0.2%) Sprint Nextel 1,511,110 1,283,585 84,763 2,879,458(b) 3,671,997 3,119,112 205,974 6,997,083 USA Mobility -- 37,213 -- 37,213(b) -- 393,341 -- 393,341 ----------------------------------------------------------- Total 3,671,997 3,512,453 205,974 7,390,424 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost: $5,887,050,565) $1,846,763,087 $2,059,825,946 $89,170,299 $3,995,759,332 - ------------------------------------------------------------------------------------------------------------------------------------
22
PREFERRED STOCKS (--%) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED CAPITAL MARKETS Lehman Brothers Holdings Cv -- -- 12,750 12,750(b) $ -- $ -- $ 147,441 $ 147,441 Lehman Brothers Holdings Cv -- -- 12,750 12,750(b) -- -- 119,077 119,077 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL PREFERRED STOCKS (Cost: $2,550,000) $ -- $ -- $ 266,518 $ 266,518 - ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUNDS (2.8%) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED RiverSource Short-Term Cash Fund, 0.47% 38,574,554 65,890,575 -- 104,465,129(h) $ 38,574,554 $ 65,890,575 $ -- $ 104,465,129 SSgA U.S. Treasury Money Market Fund -- -- 872,145 872,145 -- -- 872,145 872,145 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL MONEY MARKET FUNDS (Cost: $105,337,274) $ 38,574,554 $ 65,890,575 $ 872,145 $ 105,337,274 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (8.6%) ISSUER SHARES SHARES SHARES SHARES VALUE(A) VALUE(A) VALUE(A) VALUE(A) RIVERSOURCE RIVERSOURCE SELIGMAN DISCIPLINED SELIGMAN DISCIPLINED RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND RIVERSOURCE RIVERSOURCE COMMON EQUITY FUND DISCIPLINED LARGE CAP STOCK PRO FORMA DISCIPLINED LARGE CAP STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED EQUITY FUND EQUITY FUND FUND COMBINED CASH COLLATERAL REINVEST- MENT FUND JPMorgan Prime Money Market Fund 149,027,673 203,391,339 -- 352,419,012 $ 149,027,673 $ 203,391,339 $ -- $ 352,419,012 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $352,419,012) $ 149,027,673 $ 203,391,339 $ -- $ 352,419,012 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $6,347,356,851)(i) $2,034,365,314 $2,329,107,860 $90,308,962 $4,453,782,136 - ------------------------------------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS OUTSTANDING AT JAN. 31, 2009 RiverSource Disciplined Equity Fund
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------- S&P 500 Index 184 $37,835,000 March 2009 $(2,208,635)
RiverSource Large Cap Equity Fund
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------- Russell 2000 Mini Index 234 $10,356,840 March 2009 $ (124,593) S&P 500 Index 285 58,603,125 March 2009 (7,248,513) - ---------------------------------------------------------------------------------------------------------------- Total $(7,373,106) - ----------------------------------------------------------------------------------------------------------------
NOTES TO COMBINED PORTFOLIO OF INVESTMENTS (A) Securities are valued by procedures described in Note 1 to the financial statements in the annual report. (B) Non-income producing. (C) Foreign security values are stated in U.S. dollars. At Jan. 31, 2009, the value of foreign securities represented 1.9% of net assets. 23 NOTES TO COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED) (D) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Jan. 31, 2009, the value of these securities amounted to $2,109,750 or 0.1% of net assets. (E) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Jan. 31, 2009, is as follows:
VALUE AS A VALUE AS A PERCENTAGE OF PERCENTAGE OF RIVERSOURCE DISCIPLINED RIVERSOURCE LARGE ACQUISITION EQUITY FUND CAP EQUITY FUND SECURITY DATES COST NET ASSETS NET ASSETS ------------------------------------------------------------------------------------------------------------------------ Apollo Management LP* 08-02-07 thru 09-30-08 $ 30,730,942 -- 0.10% Virgin Media 07-26-07 thru 08-06-08 101,975,398 -- 1.28% VALUE AS A VALUE AS A PERCENTAGE OF PERCENTAGE OF SELIGMAN COMMON PRO FORMA STOCK FUND COMBINED SECURITY NET ASSETS NET ASSETS -------------------------------------------------------------------- Apollo Management LP* -- 0.05% Virgin Media -- 0.66%
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (F) At Jan. 31, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (G) At Jan. 31, 2009, investments in securities included securities valued at $31,228,992 that were partially pledged as collateral to cover initial margin deposits on open interest rate futures contracts. (H) Affiliated Money Market Fund -- See Note 6 and/or 7 to the financial statements in the annual report. The rate shown is the seven-day current annualized yield at Jan. 31, 2009. (I) At Jan. 31, 2009, the approximate cost of securities for federal income tax purposes and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was:
RIVERSOURCE DISCIPLINED RIVERSOURCE RIVERSOURCE SELIGMAN EQUITY FUND DISCIPLINED LARGE CAP COMMON STOCK PRO FORMA EQUITY FUND EQUITY FUND FUND COMBINED Cost of securities for federal income tax purposes: $ 3,267,681,000 $2,961,456,000 $118,220,000 $ 6,347,357,000 Unrealized appreciation $ 19,778,000 $ 44,376,000 $ 1,813,000 $ 65,967,000 Unrealized depreciation (1,253,094,000) (676,724,000) (29,724,000) (1,959,542,000) - -------------------------------------------------------------------------------------------------------------------- Net unrealized depreciation $(1,233,316,000) $ (632,348,000) $(27,911,000) $(1,893,575,000) - --------------------------------------------------------------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. 24 PART C. OTHER INFORMATION Item 15. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940. Item 16. Exhibits (1)(a) Articles of Incorporation, as amended November 10, 1988, filed as Exhibit 1 to Post-Effective Amendment No. 38 to Registration Statement No. 2-38355, are incorporated by reference. (1)(b) Articles of Amendment, dated June 16, 1999, filed electronically as Exhibit (a)(2) to Post-Effective Amendment No. 67 to Registration Statement No. 2-38355, are incorporated by reference. (1)(c) Articles of Amendment, dated November 14, 2002, filed electronically on or about March 5, 2003 as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 74 Registration Statement No. 2-38355, are incorporated by reference. (1)(d) Articles of Amendment, dated April 21, 2006, filed electronically on or about Sept. 27, 2006 as Exhibit (a)(4) to Registrant's Post-Effective Amendment No. 82 to Registration Statement No. 2-38355 are incorporated by reference. (1)(e) Certificate of Designation, dated Nov. 28, 2006, filed electronically on or about Sept. 26, 2007 as Exhibit (a)(5) to Registrant's Post-Effective Amendment No. 84 to Registration Statement No. 2-38355 is incorporated by reference. (2) By-laws, as amended April 13, 2006, filed electronically on or about Sept. 25, 2008 as Exhibit (b) to Registrant's Post-Effective Amendment No. 85 to Registration Statement No. 2-38355 are incorporated by reference. (3) Not applicable. (4) Form of Agreement and Plan of Reorganization is included herein as Exhibit A to Part A of this Registration Statement. (5) Not applicable. (6) Investment Management Services Agreement, dated May 1, 2006, between Registrant and RiverSource Investments, LLC filed electronically on or about Sept. 27, 2006 as Exhibit (d) to Registrant's Post-Effective Amendment No. 82 to Registration Statement No. 2-38355 is incorporated by reference. (7)(a) Distribution Agreement, effective Aug. 1, 2006, amended and restated as of Sept. 11, 2007, between Registrant and RiverSource Distributors, Inc. filed electronically on or about Oct. 30, 2007 as Exhibit (e)(2) to RiverSource Diversified Income Series, Inc. Post-Effective Amendment No. 63 to Registration Statement No. 2-51586 is incorporated by reference. (7)(b) Distribution Agreement, effective Nov. 7, 2008, between Registrant and Seligman Advisors, Inc. filed electronically on or about Nov. 25, 2008 as Exhibit (e)(2) to RiverSource Investment Series, Inc. Post-Effective Amendment No. 121 to Registration Statement No. 2-11328 is incorporated by reference. (7)(c) Form of Service Agreement for RiverSource Distributors, Inc. and RiverSource Service Corporation filed electronically on or about Aug. 27, 2007 as Exhibit (e)(3) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference. (7)(d) Form of RiverSource Funds Dealer Agreement filed electronically on or about Aug. 27, 2007 as Exhibit (e)(4) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference. (8) Deferred Compensation Plan, amended and restated Jan. 1, 2009, filed electronically on or about Jan. 27, 2009 as Exhibit (f) to RiverSource Equity Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-13188 is incorporated by reference. (9) Form of Master Global Custody Agreement with JP Morgan Chase Bank, N.A. filed electronically on or about Dec. 23, 2008 as Exhibit (g) to RiverSource International Mangers, Inc. Post-Effective Amendment No. 18 to Registration Statement No. 333-64010 is incorporated by reference. (10)(a) Plan of Distribution and Agreement of Distribution, dated Aug. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Distributors, Inc. filed electronically on or about March 27, 2009 as Exhibit (m)(1) to RiverSource Income Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-10700 is incorporated by reference. (10)(b) Plan of Distribution and Agreement of Distribution, effective Nov. 7, 2008, amended and restated Nov. 12, 2008, between Registrant and Seligman Advisors, Inc. filed electronically on or about March 27, 2009 as Exhibit (m)(2) to RiverSource Income Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-10700 is incorporated by reference. (10)(c) Rule 18f - 3(d) Plan, amended and restated as of Nov. 12, 2008, filed electronically on or about March 27, 2009 as Exhibit (n) to RiverSource Income Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-10700 is incorporated by reference. (11) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith as Exhibit (11). (12) Tax opinion to be filed by Amendment. (13)(a) Administrative Services Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and Ameriprise Financial, Inc. filed electronically on or about Feb. 27, 2009 as Exhibit (h)(1) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (13)(b) Plan Administration Services Agreement, dated Dec. 1, 2006, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation filed electronically on or about March 27, 2009 as Exhibit (h)(3) to RiverSource Income Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-10700 is incorporated by reference. (13)(c) Transfer Agency Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between Registrant and RiverSource Service Corporation filed electronically on or about March 27, 2009 as Exhibit (h)(2) to RiverSource Income Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-10700 is incorporated by reference. (13)(d) License Agreement, effective May 1, 2006, amended and restated as of Nov. 12, 2008, between Ameriprise Financial, Inc. and RiverSource Group of Funds filed electronically on or about Feb. 27, 2009 as Exhibit (h)(4) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (13)(e) Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, amended and restated Nov. 12, 2008, between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, RiverSource Distributors, Inc., Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.) and the Registrant filed electronically on or about Feb. 27, 2009 as Exhibit (h)(3) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (14)(a) Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP), dated April 13, 2009 is filed electronically herewith as Exhibit (14)(a). (14)(b) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP), dated April 13, 2009 is filed electronically herewith as Exhibit (14)(b). (15) Financial Statements: Not applicable. (16) Directors/Trustees Power of Attorney to sign this Registration Statement and its amendments, dated Jan. 8, 2009, filed electronically on or about Feb. 26, 2009 as Exhibit (16) to Registration Statement No. 333-157525 is incorporated by reference. (17)(a) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about Aug. 27, 2007 as Exhibit (p)(1) to RiverSource Sector Series, Inc. Post-Effective Amendment No. 39 to Registration Statement No. 33-20872 is incorporated by reference. (17)(b) Code of Ethics adopted under Rule 17j-1 for Registrant's principal underwriter, dated April 2008, filed electronically on or about April 25, 2008 as Exhibit (p)(2) to RiverSource Variable Series Trust Post-Effective Amendment No. 3 to Registration Statement No. 333-146374 is incorporated by reference. (17)(c) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser, dated Nov. 15, 2008, filed electronically on or about Nov. 25, 2008 as Exhibit (p)(3) to RiverSource Investment Series, Inc. Post-Effective Amendment No. 121 to Registration Statement No. 2-11328 is incorporated by reference. (17)(d) Prospectus, dated May 1, 2008, for Seligman Common Stock Fund, Inc. is filed electronically herewith as Exhibit (17)(d). (17)(e) Statement of Additional Information, dated April 1, 2009, for RiverSource Disciplined Equity Fund and RiverSource Large Cap Equity Fund is filed electronically herewith as Exhibit (17)(e). (17)(f) Prospectus, dated Sept. 29, 2008, for RiverSource Disciplined Equity Fund is filed electronically herewith as Exhibit (17)(f). (17)(g) Statement of Additional Information, dated May 1, 2008, for Seligman Common Stock Fund, Inc. is filed electronically herewith as Exhibit (17)(g). (17)(h) Prospectus, dated Sept. 29, 2008, for RiverSource Large Cap Equity Fund is filed electronically herewith as Exhibit (17)(h). (17)(i) Annual Report for the period ended December 31, 2008 for RiverSource Common Stock Fund, Inc. is filed electronically herewith as Exhibit (17)(i). (17)(j) Annual Report for the period ended July 31, 2008 for RiverSource Large Cap Equity Fund is filed electronically herewith as Exhibit (17)(j). (17)(k) Annual Report for the period ended July 31, 2008 for RiverSource Disciplined Equity Fund is filed electronically herewith as Exhibit (17)(k). (17)(l) Semiannual Report for the period ended January 31, 2009 for RiverSource Large Cap Equity Fund is filed electronically herewith as Exhibit (17)(l). (17)(m) Semiannual Report for the period ended January 31, 2009 for RiverSource Disciplined Equity Fund is filed electronically herewith as Exhibit (17)(m). (17)(n) Supplement, dated April 3, 2009, to the Seligman Common Stock Fund, Inc. prospectus, dated May 1, 2008, is filed electronically herewith as Exhibit (17)(n). (17)(o) Supplement, dated April 3, 2009, to the RiverSource Large Cap Equity Fund prospectus, dated Sept. 29, 2008, is filed electronically herewith as Exhibit (17)(o). Item 17. Undertakings. (1) The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post- effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The Registrant undertakes to file by Post-Effective Amendment an Opinion of Counsel supporting the tax consequences of the proposed reorganization within a reasonable time following the reorganization. SIGNATURES As required by the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed on behalf of the Registrant, in the City of Minneapolis, and State of Minnesota on the 14th day of April, 2009. RIVERSOURCE LARGE CAP SERIES, INC. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 14th day of April, 2009.
Signature Capacity - --------- ------------------ /s/ Stephen R. Lewis, Jr.* Chair of the Board - ------------------------------------- Stephen R. Lewis, Jr. /s/ Kathleen A. Blatz* Director - ------------------------------------- Kathleen A. Blatz /s/ Arne H. Carlson* Director - ------------------------------------- Arne H. Carlson /s/ Pamela G. Carlton* Director - ------------------------------------- Pamela G. Carlton /s/ Patricia M. Flynn* Director - ------------------------------------- Patricia M. Flynn /s/ Anne P. Jones* Director - ------------------------------------- Anne P. Jones /s/ Jeffrey Laikind* Director - ------------------------------------- Jeffrey Laikind /s/ John F. Maher* Director - ------------------------------------- John F. Maher /s/ Catherine James Paglia* Director - ------------------------------------- Catherine James Paglia /s/ Leroy C. Richie* Director - ------------------------------------- Leroy C. Richie /s/ Alison Taunton-Rigby* Director - ------------------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director - ------------------------------------- William F. Truscott
* Signed pursuant to Directors/Trustees Power of Attorney, dated Jan. 8, 2009, filed electronically on or about Feb. 26, 2009 as Exhibit (16) to Registration Statement No. 333-157525, by: /s/ Scott R. Plummer - ------------------------------------- Scott R. Plummer EXHIBIT INDEX (11) Opinion and consent of counsel as to the legality of the securities being registered. (14)(a) Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP), dated April 13, 2009. (14)(b) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP), dated April 13, 2009. (17)(d) Prospectus, dated May 1, 2008, for Seligman Common Stock Fund, Inc. (17)(e) Statement of Additional Information, dated April 1, 2009, for RiverSource Disciplined Equity Fund and RiverSource Large Cap Equity Fund. (17)(f) Prospectus, dated Sept. 29, 2008, for RiverSource Disciplined Equity Fund. (17)(g) Statement of Additional Information, dated May 1, 2008, for Seligman Common Stock Fund, Inc. (17)(h) Prospectus, dated Sept. 29, 2008, for RiverSource Large Cap Equity Fund. (17)(i) Annual Report for the period ended December 31, 2008 for RiverSource Common Stock Fund, Inc. (17)(j) Annual Report for the period ended July 31, 2008 for RiverSource Large Cap Equity Fund. (17)(k) Annual Report for the period ended July 31, 2008 for RiverSource Disciplined Equity Fund. (17)(l) Semiannual Report for the period ended January 31, 2009 for RiverSource Large Cap Equity Fund. (17)(m) Semiannual Report for the period ended January 31, 2009 for RiverSource Disciplined Equity Fund. (17)(n) Supplement, dated April 3, 2009, to the Seligman Common Stock Fund, Inc. prospectus, dated May 1, 2008. (17)(o) Supplement, dated April 3, 2009, to the RiverSource Large Cap Equity Fund prospectus, dated Sept. 29, 2008. EX-99.11 2 c49443a1exv99w11.txt EX-99.11 April 14, 2009 RiverSource Large Cap Series, Inc. 50606 Ameriprise Financial Center Minneapolis, MN 55474 Gentlemen: I have examined the Articles of Incorporation and the By-Laws of RiverSource Large Cap Series, Inc. (the Company) and all necessary certificates, permits, minute books, documents and records of the Company, and the applicable statutes of the State of Minnesota, and it is my opinion that the shares sold in accordance with applicable federal and state securities laws will be legally issued, fully paid, and nonassessable. This opinion may be used in connection with this Amendment to the Registration Statement. Sincerely, /s/ Scott R. Plummer - ------------------------------------- Scott R. Plummer General Counsel RiverSource Large Cap Series, Inc. EX-99.14.A 3 c49443a1exv99w14wa.txt EX-99.14.A CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in this Registration Statement on Form N-14 (the "Registration Statement") of our report dated February 27, 2009, relating to the financial statements and financial highlights of Seligman Common Stock Fund, Inc. appearing in the Annual Report on Form N-CSR of Seligman Common Stock Fund, Inc. for the year ended December 31, 2008. /s/ DELOITTE & TOUCHE LLP New York, New York April 13, 2009 EX-99.14.B 4 c49443a1exv99w14wb.txt EX-99.14.B Consent of Independent Registered Public Accounting Firm We consent to the reference to our firm under the caption "Financial Highlights" in the Proxy Statement and to the incorporation by reference of our report dated September 22, 2008 with respect to the financial statements and financial highlights of RiverSource Disciplined Equity Fund and RiverSource Large Cap Equity Fund included in the Annual Reports for the year ended July 31, 2008 in the Registration Statement (Form N-14) of the RiverSource Large Cap Series, Inc. filed with the Securities and Exchange Commission in this Pre-Effective Amendment No. 1 to the Registration Statement under the Securities Act of 1933 (Registration No. 333-157525). /s/ Ernst & Young LLP Minneapolis, Minnesota April 13, 2009 EX-99.17.E 5 c49443a1exv99w17we.txt EX-99.17.E STATEMENT OF ADDITIONAL INFORMATION APRIL 1, 2009 RIVERSOURCE BOND SERIES, INC. RiverSource Floating Rate Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RIVERSOURCE CALIFORNIA TAX-EXEMPT TRUST RiverSource California Tax-Exempt Fund RIVERSOURCE DIMENSIONS SERIES, INC. RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Disciplined Small Cap Value Fund RIVERSOURCE DIVERSIFIED INCOME SERIES, INC. RiverSource Diversified Bond Fund RIVERSOURCE EQUITY SERIES, INC. RiverSource Mid Cap Growth Fund RIVERSOURCE GLOBAL SERIES, INC. RiverSource Absolute Return Currency and Income Fund RiverSource Emerging Markets Bond Fund RiverSource Global Bond Fund RiverSource Global Technology Fund Threadneedle Emerging Markets Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund Threadneedle Global Extended Alpha Fund RIVERSOURCE GOVERNMENT INCOME SERIES, INC. RiverSource Short Duration U.S. Government Fund RiverSource U.S. Government Mortgage Fund RIVERSOURCE HIGH YIELD INCOME SERIES, INC. RiverSource High Yield Bond Fund RIVERSOURCE INCOME SERIES, INC. RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. RiverSource Partners International Select Growth Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund RIVERSOURCE INTERNATIONAL SERIES, INC. RiverSource Disciplined International Equity Fund Threadneedle European Equity Fund Threadneedle International Opportunity Fund RIVERSOURCE INVESTMENT SERIES, INC. RiverSource Balanced Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Disciplined Large Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Mid Cap Value Fund RIVERSOURCE LARGE CAP SERIES, INC. RiverSource Disciplined Equity Fund RiverSource Growth Fund RiverSource Large Cap Equity Fund RiverSource Large Cap Value Fund RIVERSOURCE MANAGERS SERIES, INC. RiverSource Partners Aggressive Growth Fund RiverSource Partners Fundamental Value Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Equity Fund RiverSource Partners Small Cap Value Fund RIVERSOURCE MARKET ADVANTAGE SERIES, INC. RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Total Equity Fund RiverSource S&P 500 Index Fund RiverSource Small Company Index Fund RIVERSOURCE MONEY MARKET SERIES, INC. RiverSource Cash Management Fund RIVERSOURCE SECTOR SERIES, INC. RiverSource Dividend Opportunity Fund RiverSource Real Estate Fund RIVERSOURCE SELECTED SERIES, INC. RiverSource Precious Metals and Mining Fund RIVERSOURCE SERIES TRUST RiverSource 120/20 Contrarian Equity Fund RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE SPECIAL TAX-EXEMPT SERIES TRUST RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RIVERSOURCE STRATEGIC ALLOCATION SERIES, INC. RiverSource Strategic Allocation Fund RiverSource Strategic Income Allocation Fund RIVERSOURCE STRATEGY SERIES, INC. RiverSource Equity Value Fund RiverSource Partners Small Cap Growth Fund RiverSource Small Cap Advantage Fund RIVERSOURCE TAX-EXEMPT INCOME SERIES, INC. RiverSource Tax-Exempt High Income Fund RIVERSOURCE TAX-EXEMPT MONEY MARKET SERIES, INC. RiverSource Tax-Exempt Money Market Fund RIVERSOURCE TAX-EXEMPT SERIES, INC. RiverSource Intermediate Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund
This is the Statement of Additional Information (SAI) for each of the funds listed on the previous page. This SAI is not a prospectus. It should be read together with the appropriate current fund prospectus, the date of which can be found in Table 1 of this SAI. Each fund's financial statements for its most recent fiscal period are contained in the fund's Annual or Semiannual Report to shareholders. The Independent Registered Public Accounting Firm's Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities and any applicable Schedule of Affiliated Funds, contained in the Annual Report, are incorporated in this SAI by reference. No other portion of the Annual Report is incorporated by reference. For a free copy of a fund prospectus, annual or semiannual report, contact your financial institution or write to RiverSource Family of Funds, 734 Ameriprise Financial Center, Minneapolis, MN 55474, call (888) 791-3380 or visit riversource.com/funds. Each fund is governed by a Board of Directors/Trustees (the "Board") that meets regularly to review a wide variety of matters affecting the funds. Detailed information about fund governance, the funds' investment manager, RiverSource Investments, LLC (the "investment manager" or "RiverSource Investments"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), and other aspects of fund management can be found by referencing the Table of Contents below, or the List of Tables on the following page. TABLE OF CONTENTS Fundamental and Nonfundamental Investment Policies.............................. p. 6 Investment Strategies and Types of Investments.................................. p. 11 Information Regarding Risks and Investment Strategies........................... p. 13 Securities Transactions......................................................... p. 37 Brokerage Commissions Paid to Brokers Affiliated with the Investment Manager.... p. 51 Valuing Fund Shares............................................................. p. 55 Portfolio Holdings Disclosure................................................... p. 66 Proxy Voting.................................................................... p. 67 Investing in a Fund............................................................. p. 70 Selling Shares.................................................................. p. 74 Pay-out Plans................................................................... p. 75 Capital Loss Carryover.......................................................... p. 76 Taxes........................................................................... p. 79 Service Providers............................................................... p. 84 Investment Management Services................................................ p. 84 Administrative Services....................................................... p. 135 Transfer Agency Services...................................................... p. 139 Plan Administration Services.................................................. p. 140 Distribution Services......................................................... p. 140 Plan and Agreement of Distribution............................................ p. 143 Payments to Financial Intermediaries.......................................... p. 148 Custodian Services............................................................ p. 149 Board Services Corporation.................................................... p. 150 Organizational Information...................................................... p. 150 Board Members and Officers...................................................... p. 155 Control Persons and Principal Holders of Securities............................. p. 169 Information Regarding Pending and Settled Legal Proceedings..................... p. 184 Independent Registered Public Accounting Firm................................... p. 185 Appendix A: Description of Ratings.............................................. p. A-1 Appendix B: State Risk Factors.................................................. p. B-1 Appendix C: Additional Information about the S&P 500 Index...................... p. C-1 Appendix D: Seligman Funds...................................................... p. D-1
Statement of Additional Information - April 1, 2009 Page 2 LIST OF TABLES 1. Fund Fiscal Year Ends, Prospectus Date and Investment Categories........... p. 4 2. Fundamental Policies....................................................... p. 7 3. Investment Strategies and Types of Investments............................. p. 11 4. Total Brokerage Commissions................................................ p. 39 5. Brokerage Directed for Research and Turnover Rates......................... p. 42 6. Securities of Regular Brokers or Dealers................................... p. 45 7. Brokerage Commissions Paid to Investment Manager or Affiliates............. p. 51 8. Valuing Fund Shares........................................................ p. 55 9. Class A Sales Charge....................................................... p. 70 10. Public Offering Price...................................................... p. 71 11. Capital Loss Carryover..................................................... p. 76 12. Corporate Deduction and Qualified Dividend Income.......................... p. 81 13. Investment Management Services Agreement Fee Schedule...................... p. 84 14. PIA Indexes................................................................ p. 92 15A. Performance Incentive Adjustment Calculation............................... p. 94 15B. Performance Incentive Adjustment Calculation............................... p. 95 16. Management Fees and Nonadvisory Expenses................................... p. 96 17. Subadvisers and Subadvisory Agreement Fee Schedules........................ p. 99 18. Subadvisory Fees........................................................... p. 101 19. Portfolio Managers......................................................... p. 104 20. Administrative Services Agreement Fee Schedule............................. p. 135 21. Administrative Fees........................................................ p. 137 22. Sales Charges Paid to Distributor.......................................... p. 140 23. 12b-1 Fees................................................................. p. 144 24. Unreimbursed Distribution Expenses......................................... p. 147 25. Fund History Table......................................................... p. 151 26. Board Members.............................................................. p. 155 27. Fund Officers.............................................................. p. 156 28. Committee Meetings......................................................... p. 158 29. Board Member Holdings...................................................... p. 159 30. Board Member Compensation -- All Funds..................................... p. 165 31. Board Member Compensation -- Individual Funds.............................. p. 166 32. Control Persons and Principal Holders of Securities........................ p. 169
The RiverSource Family of Funds includes a comprehensive array of funds from RiverSource Investments, including several Seligman funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource family. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds. Please reference Appendix D for a complete list of Seligman funds. Statement of Additional Information - April 1, 2009 Page 3 TABLE 1. FUND FISCAL YEAR ENDS, PROSPECTUS DATE AND INVESTMENT CATEGORIES
FUND FISCAL YEAR END PROSPECTUS DATE FUND INVESTMENT CATEGORY - --------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity April 30 June 27, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income October 31 Dec. 30, 2008 Taxable fixed income* - --------------------------------------------------------------------------------------------------------------- Balanced September 30 Nov. 28, 2008 Balanced - --------------------------------------------------------------------------------------------------------------- California Tax-Exempt August 31** Oct. 30, 2008 State tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- Cash Management July 31 Sept. 29, 2008 Taxable money market - --------------------------------------------------------------------------------------------------------------- Disciplined Equity July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Disciplined International Equity October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth September 30 Nov. 28, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value September 30 Nov. 28, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Diversified Bond August 31 Oct. 30, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Diversified Equity Income September 30 Nov. 28, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Dividend Opportunity June 30 Aug. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Emerging Markets Bond October 31 Dec. 30, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Equity Value March 31 May 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Floating Rate July 31 Sept. 29, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Global Bond October 31 Dec. 30, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Global Technology October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Growth July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- High Yield Bond May 31 July 30, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Income Builder Basic Income January 31*** April 1, 2009 Fund-of-funds - fixed income - --------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income January 31*** April 1, 2009 Fund-of-funds - fixed income - --------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income January 31*** April 1, 2009 Fund-of-funds - fixed income - --------------------------------------------------------------------------------------------------------------- Income Opportunities July 31 Sept. 29, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Inflation Protected Securities July 31 Sept. 29, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt November 30 Jan. 29, 2009 Tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- Large Cap Equity July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Large Cap Value July 31 Sept. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Limited Duration Bond July 31 Sept. 29, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Mid Cap Growth November 30 Jan. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Mid Cap Value September 30 Nov. 28, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt August 31** Oct. 30, 2008 State tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- New York Tax-Exempt August 31** Oct. 30, 2008 State tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth May 31 July 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners Fundamental Value May 31 July 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners International Select Growth October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners International Select Value October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners International Small Cap October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners Select Value May 31 July 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity May 31 July 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth March 31 May 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Partners Small Cap Value May 31 July 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive January 31 April 1, 2009 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative January 31 April 1, 2009 Fund-of-funds - fixed income - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate January 31 April 1, 2009 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive January 31 April 1, 2009 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative January 31 April 1, 2009 Fund-of-funds - fixed income - --------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity January 31 April 1, 2009 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Precious Metals and Mining March 31 May 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Real Estate June 30 Aug. 29, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 April 30 June 27, 2008 Fund-of-funds - equity - ---------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 4
FUND FISCAL YEAR END PROSPECTUS DATE FUND INVESTMENT CATEGORY - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 April 30 June 27, 2008 Fund-of-funds - equity - --------------------------------------------------------------------------------------------------------------- S&P 500 Index January 31 April 1, 2009 Equity - --------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government May 31 July 30, 2008 Taxable fixed income - --------------------------------------------------------------------------------------------------------------- Small Cap Advantage March 31 May 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Small Company Index January 31 April 1, 2009 Equity - --------------------------------------------------------------------------------------------------------------- Strategic Allocation September 30 Nov. 28, 2008 Balanced - --------------------------------------------------------------------------------------------------------------- Strategic Income Allocation September 30 Nov. 28, 2008 Taxable fixed income* - --------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond November 30 Jan. 29, 2009 Tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income November 30 Jan. 29, 2009 Tax-exempt fixed income - --------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market December 31 Feb. 27, 2009 Tax-exempt money market - --------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Threadneedle European Equity October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income Fund October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha Fund October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity October 31 Dec. 30, 2008 Equity - --------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage May 31 July 30, 2008 Taxable fixed income - ---------------------------------------------------------------------------------------------------------------
* The taxable fixed income fund investment category includes Absolute Return Currency and Income Fund, which is an alternative investment strategy. Although Strategic Income Allocation Fund is a taxable fixed income fund, it may invest up to 10% of its portfolio in equity securities. ** The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended June 30. *** The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 to Jan. 31, 2008. For years prior to 2008, the fiscal period ended May 31. Statement of Additional Information - April 1, 2009 Page 5 FUNDAMENTAL AND NONFUNDAMENTAL INVESTMENT POLICIES Fundamental investment policies adopted by a fund cannot be changed without the approval of a majority of the outstanding voting securities of the fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). Nonfundamental investment policies may be changed by the Board at any time. Notwithstanding any of a fund's other investment policies, each fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the fund for the purpose of having those assets managed as part of a combined pool. FUNDS-OF-FUNDS Funds-of-funds invest in a combination of underlying funds. These underlying funds have their own investment policies that may be more or less restrictive than the policies of the funds-of-funds. The policies of the underlying funds may permit funds-of-funds to engage in investment strategies indirectly that would otherwise be prohibited under the investment restrictions of the funds-of- funds. FUNDAMENTAL POLICIES Fundamental policies are policies that can be changed only with shareholder approval. FOR EACH FUND, THE FUND WILL NOT: - Act as an underwriter (sell securities for others). However, under the securities laws, the fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. - Lend securities or participate in an interfund lending program if the total of all such loans would exceed 33 1/3% of the fund's total assets except this fundamental investment policy shall not prohibit the fund from purchasing money market securities, loans, loan participation or other debt securities, or from entering into repurchase agreements. For funds- of-funds - equity, under current Board policy, the fund has no current intention to lend to a material extent. - Borrow money, except for temporary purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings) immediately after the borrowings. For funds-of-funds - equity, under current Board policy, the fund has no current intention to borrow to a material extent. - Issue senior securities, except as permitted under the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief. ADDITIONALLY FOR CASH MANAGEMENT, THE FUND WILL NOT: - Buy on margin or sell short or deal in options to buy or sell securities. - Purchase common stocks, preferred stocks, warrants, other equity securities, corporate bonds or debentures, state bonds, municipal bonds, or industrial revenue bonds. ADDITIONALLY FOR TAX-EXEMPT MONEY MARKET, THE FUND WILL NOT: - Buy on margin or sell short. ADDITIONALLY FOR DISCIPLINED LARGE CAP VALUE, INCOME BUILDER FUNDS, PORTFOLIO BUILDER FUNDS, THREADNEEDLE GLOBAL EQUITY INCOME AND THREADNEEDLE GLOBAL EXTENDED ALPHA, THE FUNDS WILL NOT: - Purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that: (a) up to 25% of its total assets may be invested without regard to these limitations and (b) a fund's assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder, or any applicable exemptive relief. Statement of Additional Information - April 1, 2009 Page 6 In addition to the policies described above and any fundamental policy described in the prospectus, the chart below shows fund-specific policies that may be changed only with shareholder approval. The chart indicates whether or not the fund has a policy on a particular topic. A dash indicates that the fund does not have a policy on a particular topic. The specific policy is stated in the paragraphs that follow the table. TABLE 2. FUNDAMENTAL POLICIES The fund will not:
C D E BUY MORE INVEST MORE CONCENTRATE A B THAN THAN IN F BUY OR SELL BUY OR SELL 10% OF AN 5% IN AN ANY ONE INVEST LESS FUND REAL ESTATE COMMODITIES ISSUER ISSUER INDUSTRY THAN 80% - -------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity A1 B5 C1 D1 E8 -- - -------------------------------------------------------------------------------------------------------------- Absolute Return Currency and A1 B1 -- -- E7 -- Income - -------------------------------------------------------------------------------------------------------------- Balanced A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- California Tax-Exempt A1 B1 -- -- -- F1 - -------------------------------------------------------------------------------------------------------------- Cash Management A3 A3 C1 D1 -- -- - -------------------------------------------------------------------------------------------------------------- Disciplined Equity A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Disciplined International Equity A1 B4 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value A1 B3 -- -- E1 -- - -------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap A1 B4 C1 D1 E1 -- Equity - -------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value A1 B4 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Diversified Bond A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Diversified Equity Income A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Dividend Opportunity A1 B1 C1 D1 -- -- - -------------------------------------------------------------------------------------------------------------- Emerging Markets Bond A1 B4 -- -- E5 -- - -------------------------------------------------------------------------------------------------------------- Equity Value A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Floating Rate A1 B4 C1 D1 E6 -- - -------------------------------------------------------------------------------------------------------------- Global Bond A1 B1 C1 -- E1 -- - -------------------------------------------------------------------------------------------------------------- Global Technology A1 B1 -- -- -- -- - -------------------------------------------------------------------------------------------------------------- Growth A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- High Yield Bond A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Income Builder Basic Income* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Income Opportunities A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Inflation Protected Securities A1 B1 -- -- E1 -- - -------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt A1 B1 C1 D1 -- F3(i) - -------------------------------------------------------------------------------------------------------------- Large Cap Equity A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Large Cap Value A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Limited Duration Bond A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Mid Cap Growth A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Mid Cap Value A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt A1 B1 -- -- -- F1 - -------------------------------------------------------------------------------------------------------------- New York Tax-Exempt A1 B1 -- -- -- F1 - -------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Partners Fundamental Value A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Partners International Select A1 B3 C1 D1 E1 -- Growth - -------------------------------------------------------------------------------------------------------------- Partners International Select A1 B3 C1 D1 E1 -- Value - -------------------------------------------------------------------------------------------------------------- Partners International Small Cap A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Partners Select Value A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity A1 B3 C1 D1 E1 -- - 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Statement of Additional Information - April 1, 2009 Page 7
C D E BUY MORE INVEST MORE CONCENTRATE A B THAN THAN IN F BUY OR SELL BUY OR SELL 10% OF AN 5% IN AN ANY ONE INVEST LESS FUND REAL ESTATE COMMODITIES ISSUER ISSUER INDUSTRY THAN 80% - -------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Partners Small Cap Value A1 B3 -- -- E1 -- - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive* A1 B1 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative* A1 B1 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate* A1 B1 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate A1 B1 -- -- E2 -- Aggressive* - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate A1 B1 -- -- E2 -- Conservative* - -------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity* A1 B1 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Precious Metals and Mining A1 B1(ii) -- -- E3 -- - -------------------------------------------------------------------------------------------------------------- Real Estate A1 B1 -- -- -- -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2010* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2015* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2020* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2025* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2030* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2035* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2040* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- Retirement Plus 2045* A1 B4 -- -- E2 -- - -------------------------------------------------------------------------------------------------------------- S&P 500 Index A1 B1 -- -- E4 -- - -------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Small Cap Advantage A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Small Company Index A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Strategic Allocation A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Strategic Income Allocation A1 B3 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond A1 B1 C1 D1 -- F3(iii) - -------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income A1 B1 C1 D1 -- F2 - -------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market A2 B2 C1 D1 -- F3 - -------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Threadneedle European Equity A1 B1 -- -- E1 -- - -------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity A1 B1 C1 D1 E1 -- - -------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity A1 B3 -- -- E1 -- Income - -------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended A1 B3 -- -- E1 -- Alpha - -------------------------------------------------------------------------------------------------------------- Threadneedle International A1 B1 C1 D1 E1 -- Opportunity - -------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage A1 B1 C1 D1 E1 -- - 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* The fund invests in a combination of underlying funds. These underlying funds have adopted their own investment policies that may be more or less restrictive than those of the fund. The policies of the underlying funds may permit a fund to engage in investment strategies indirectly that would otherwise be prohibited under the fund's investment restrictions. (i) For purposes of this policy, the fund will not include any investments subject to the alternative minimum tax. (ii) Additionally, the fund may purchase gold, silver, or other precious metals, strategic metals or other metals occurring naturally with such metals. (iii) The fund does not intend to purchase bonds or other debt securities the interest from which is subject to the alternative minimum tax. A. BUY OR SELL REAL ESTATE A1 - The fund will not buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. A2 - The fund will not invest in real estate, but the fund can invest in municipal bonds and notes secured by real estate or interest therein. For purposes of this policy, real estate includes real estate limited partnerships. Statement of Additional Information - April 1, 2009 Page 8 A3 - The fund will not buy or sell real estate, commodities or commodity contracts. For purposes of this policy, real estate includes real estate limited partnerships. B. BUY OR SELL PHYSICAL COMMODITIES B1 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. B2 - The fund will not invest in commodities or commodity contracts. B3 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. B4 - The fund will not buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from entering into forward currency contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. B5 - The fund will not buy or sell commodities, except that the fund may to the extent consistent with its investment objective(s), invest in securities of companies that purchase or sell commodities or which invest in such programs, and purchase and sell options, forward contracts, futures contracts, and options on futures contracts and enter into swap contracts and other financial transactions relating to commodities. This restriction does not apply to foreign currency transactions including without limitation forward currency contracts. C. BUY MORE THAN 10% OF AN ISSUER C1 - The fund will not purchase more than 10% of the outstanding voting securities of an issuer, except that up to 25% of the fund's assets may be invested without regard to this 10% limitation. For tax-exempt funds, for purposes of this policy, the terms of a municipal security determine the issuer. D. INVEST MORE THAN 5% IN AN ISSUER D1 - The fund will not invest more than 5% of its total assets in securities of any company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities, or other investment companies, and except that up to 25% of the fund's total assets may be invested without regard to this 5% limitation. For tax-exempt funds, for purposes of this policy, the terms of a municipal security determine the issuer. E. CONCENTRATE E1 - The fund will not concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. E2 - The fund will not concentrate in any one industry. According to the present interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. The fund itself does not intend to concentrate, however, the aggregation of holdings of the underlying funds may result in the fund indirectly investing more than 25% of its assets in a particular industry. The fund does not control the investments of the underlying funds and any indirect concentration will occur only as a result of the fund following its investment objectives by investing in the underlying funds. E3 - The fund will not invest less than 25% of its total assets in the precious metals industry, based on current market value at the time of purchase, unless market conditions temporarily require a defensive investment strategy. E4 - The fund will not concentrate in any one industry unless that industry represents more than 25% of the index tracked by the fund. For all other industries, in accordance with the current interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. E5 - While the fund may invest 25% or more of its total assets in the securities of foreign governmental and corporate entities located in the same country, it will not invest 25% or more of its total assets in any single foreign governmental issuer. E6 - The fund will not concentrate in any one industry. According to the present interpretation by the SEC, this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any Statement of Additional Information - April 1, 2009 Page 9 one industry. For purposes of this restriction, loans will be considered investments in the industry of the underlying borrower, rather than that of the seller of the loan. E7 - The fund will not concentrate in any one industry, provided however, that this restriction shall not apply to securities or obligations issued or guaranteed by the U.S. Government, banks or bank holding companies or finance companies. For all other industries, this means that up to 25% of the fund's total assets, based on current market value at the time of purchase, can be invested in any one industry. E8 - The fund will not purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their agencies, instrumentalities or political subdivisions; and b) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder and any applicable exemptive relief. F. INVEST LESS THAN 80% F1 - The fund will not under normal market conditions, invest less than 80% of its net assets in municipal obligations that are generally exempt from federal income tax as well as respective state and local income tax. F2 - The fund will not under normal market conditions, invest less than 80% of its net assets in bonds and notes issued by or on behalf of state and local governmental units whose interest, in the opinion of counsel for the issuer, is exempt from federal income tax and is not subject to the alternative minimum tax. F3 - The fund will not under normal market conditions, invest less than 80% of its net assets in bonds and other debt securities issued by or on behalf of state or local governmental units whose interest, in the opinion of counsel for the issuer, is exempt from federal income tax. NONFUNDAMENTAL POLICIES Nonfundamental policies are policies that can be changed by the Board without shareholder approval. The following nonfundamental policies are in addition to those described in the prospectus. FOR FUNDS OTHER THAN MONEY MARKET FUNDS: - No more than 15% of the fund's net assets will be held in securities and other instruments that are illiquid. FOR MONEY MARKET FUNDS: - No more than 10% of the fund's net assets will be held in securities and other instruments that are illiquid. ADDITIONALLY, REGARDING LIMITING INVESTMENTS IN FOREIGN SECURITIES: FOR 120/20 CONTRARIAN EQUITY, BALANCED, DISCIPLINED EQUITY, DISCIPLINED LARGE CAP GROWTH, DISCIPLINED LARGE CAP VALUE DISCIPLINED SMALL AND MID CAP EQUITY, DISCIPLINED SMALL CAP VALUE, DIVERSIFIED BOND, DIVERSIFIED EQUITY INCOME, DIVIDEND OPPORTUNITY, EQUITY VALUE, FLOATING RATE, GROWTH, HIGH YIELD BOND, INCOME OPPORTUNITIES, INFLATION PROTECTED SECURITIES, LARGE CAP EQUITY, LARGE CAP VALUE, LIMITED DURATION BOND, MID CAP GROWTH, MID CAP VALUE, PARTNERS AGGRESSIVE GROWTH, PARTNERS FUNDAMENTAL VALUE, PARTNERS SELECT VALUE, PARTNERS SMALL CAP EQUITY, PARTNERS SMALL CAP GROWTH, PARTNERS SMALL CAP VALUE, REAL ESTATE, AND SMALL CAP ADVANTAGE: - Up to 25% of the fund's net assets may be invested in foreign investments. FOR PRECIOUS METALS AND MINING: - Under normal market conditions, the fund intends to invest at least 50% of its total assets in foreign investments. FOR SHORT DURATION U.S. GOVERNMENT AND U.S. GOVERNMENT MORTGAGE: - Up to 20% of the fund's net assets may be invested in foreign investments. FOR STRATEGIC ALLOCATION: - The fund may invest its total assets, up to 50%, in foreign investments. Statement of Additional Information - April 1, 2009 Page 10 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS This table shows many of the various investment strategies and investments the funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager or subadviser (individually and collectively, the "investment manager") may make on behalf of a fund. For a description of principal risks for an individual fund, please see the applicable prospectus for that fund. Notwithstanding a fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to attempt to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. Fund-of-funds invest in a combination of underlying funds, although they may invest directly in stocks, bonds and other securities. These underlying funds have their own investment strategies and types of investments they are allowed to engage in and purchase. Fund-of-funds currently only invest in underlying funds, which may invest directly in securities and engage in investment strategies, indicated in the table below. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS: A black circle indicates that the investment strategy or type of investment generally is authorized for a category of funds. Exceptions are noted in the footnotes to the table. See Table 1 for fund categories. TABLE 3. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
FUNDS-OF-FUNDS - TAXABLE TAXABLE TAX-EXEMPT TAX-EXEMPT STATE EQUITY AND FIXED MONEY MONEY FIXED TAX-EXEMPT INVESTMENT STRATEGY BALANCED EQUITY FIXED INCOME INCOME MARKET MARKET INCOME FIXED INCOME - --------------------------------------------------------------------------------------------------------------------------------- Agency and government securities - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Borrowing - - - - - -- - - - --------------------------------------------------------------------------------------------------------------------------------- Cash/money market instruments - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Collateralized bond obligations - - A - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Commercial paper - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Common stock - - - - B -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Convertible securities - - - - C -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Corporate bonds - - - - D -- - - - --------------------------------------------------------------------------------------------------------------------------------- Debt obligations - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Depositary receipts - - - - -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Derivative instruments (including options and futures) - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Exchange-traded funds - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Floating rate loans - -- - - -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Foreign currency transactions - - - - -- -- - -- - --------------------------------------------------------------------------------------------------------------------------------- Foreign securities - - - - - -- - - - --------------------------------------------------------------------------------------------------------------------------------- Funding agreements - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- High yield debt securities (junk bonds) - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Illiquid and restricted securities - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Indexed securities - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Inflation protected securities - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Inverse floaters - E - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Investment companies - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Lending of portfolio securities - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Loan participations - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Mortgage- and asset-backed securities - - F - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Mortgage dollar rolls - G - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Municipal obligations - - - - -- - - - - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 11
FUNDS-OF-FUNDS - TAXABLE TAXABLE TAX-EXEMPT TAX-EXEMPT STATE EQUITY AND FIXED MONEY MONEY FIXED TAX-EXEMPT INVESTMENT STRATEGY BALANCED EQUITY FIXED INCOME INCOME MARKET MARKET INCOME FIXED INCOME - --------------------------------------------------------------------------------------------------------------------------------- Pay-in-kind securities - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Preferred stock - - - - H -- -- - H - - --------------------------------------------------------------------------------------------------------------------------------- Real estate investment trusts - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Repurchase agreements - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Reverse repurchase agreements - - - - - -- - - - --------------------------------------------------------------------------------------------------------------------------------- Short sales I I - I -- -- I I - --------------------------------------------------------------------------------------------------------------------------------- Sovereign debt - - - - - -- - - - --------------------------------------------------------------------------------------------------------------------------------- Structured investments - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Swap agreements - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Variable- or floating-rate securities - - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- Warrants - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- When-issued securities and forward commitments - - - - -- -- - - - --------------------------------------------------------------------------------------------------------------------------------- Zero-coupon and step-coupon securities - - - - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
A. The following funds are not authorized to invest in collateralized bond obligations: Partners International Select Growth, Partners International Select Value, Partners International Small Cap, Partners Select Value, Partners Small Cap Equity, Partners Small Cap Growth, Partners Small Cap Value, and Small Cap Advantage. B. The following funds are not authorized to invest in common stock: Short Duration U.S. Government, U.S. Government Mortgage. C. The following funds are not authorized to invest in convertible securities: Short Duration U.S. Government, U.S. Government Mortgage. D. While the fund is prohibited from investing in corporate bonds, it may invest in securities classified as corporate bonds if they meet the requirements of Rule 2a-7 of the 1940 Act. E. The following funds are authorized to invest in inverse floaters: Real Estate. F. The following funds are not authorized to invest in mortgage- and asset- backed securities: Partners Small Cap Growth, S&P 500 Index, Small Cap Advantage, Small Company Index. G. The following funds are authorized to invest in mortgage dollar rolls: Real Estate. H. The following funds are not authorized to invest in preferred stock: Tax- Exempt High Income, Intermediate Tax-Exempt, Tax-Exempt Bond, Short Duration U.S. Government, U.S. Government Mortgage. I. The funds are not prohibited from engaging in short sales, however, each fund will seek Board approval prior to utilizing short sales as an active part of its investment strategy. Statement of Additional Information - April 1, 2009 Page 12 INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). A mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with a fund at any time (for a description of principal risks for an individual fund, please see that fund's prospectus): ACTIVE MANAGEMENT RISK. For a fund that is actively managed, its performance will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the fund's investment objective. Due to its active management, a fund could underperform other mutual funds with similar investment objectives. AFFILIATED FUND RISK. For funds-of-funds, the risk that the investment manager may have potential conflicts of interest in selecting underlying funds because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds. However, the investment manager is a fiduciary to the funds and is legally obligated to act in their best interests when selecting underlying funds, without taking fees into consideration. ALLOCATION RISK. For funds-of-funds, the risk that the investment manager's evaluations regarding asset classes or underlying funds may be incorrect. There is no guarantee that the underlying funds will achieve their investment objectives. There is also a risk that the selected underlying funds' performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the asset class. BORROWING RISK. To the extent the fund borrows money for investment purposes, which is commonly referred to as "leveraging," the fund's exposure to fluctuations in the prices of its assets will be increased as compared to the fund's exposure if the fund did not borrow. The fund's borrowing activities will exaggerate any increase or decrease in the net asset value of the fund. In addition, the interest which the fund pays on borrowed money, together with any additional costs of maintaining a borrowing facility, are additional costs borne by the fund and could reduce or eliminate any net investment profits. Unless profits on assets acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish the investment performance of the fund compared with what it would have been without borrowing. When the fund borrows money it must comply with certain asset coverage requirements, which at times may require the fund to dispose of some of its holdings, even though it may be disadvantageous to do so at the time. CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the fund purchases unrated securities, or if the rating of a security is reduced after purchase, the fund will depend on the investment manager's analysis of credit risk more heavily than usual. CONFIDENTIAL INFORMATION ACCESS RISK. For funds investing in floating rate loans, the investment manager normally will seek to avoid the receipt of material, non-public information (Confidential Information) about the issuers of floating rate loans being considered for acquisition by the fund, or held in the fund. In many instances, issuers of floating rate loans offer to furnish Confidential Information to prospective purchasers or holders of the issuer's floating rate loans to help potential investors assess the value of the loan. The investment manager's decision not to receive Confidential Information from these issuers may disadvantage the fund as compared to other floating rate loan investors, and may adversely affect the price the fund pays for the loans it purchases, or the price at which the fund sells the loans. Further, in situations when holders of floating rate loans are asked, for example, to grant consents, waivers or amendments, the investment manager's ability to assess the desirability of such consents, waivers or amendments may be compromised. For these and other reasons, it is possible that the investment manager's decision under normal circumstances not to receive Confidential Information could adversely affect the fund's performance. COUNTERPARTY RISK. Counterparty risk is the risk that a counterparty to a financial instrument entered into by the fund or held by a special purpose or structured vehicle becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The fund may obtain only limited recovery or may obtain no recovery in such circumstances. The fund will typically enter into financial instrument transactions with counterparties whose credit rating is investment grade, or, if unrated, determined to be of comparable quality by the investment manager. Statement of Additional Information - April 1, 2009 Page 13 DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Gains or losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial gain or loss for the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Certain derivatives have the potential for unlimited losses regardless of the size of the initial investment. DIVERSIFICATION RISK. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the fund's performance, the fund may be more exposed to the risks of loss and volatility than a fund that invests more broadly. For funds-of-funds, although most of the underlying funds are diversified funds, because the fund invests in a limited number of underlying funds, it is considered a non-diversified fund. EXCHANGE-TRADED FUND (ETF) RISK. The price movement of an ETF may not track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the fund's expenses and similar expenses incurred through ownership of the ETF. FOREIGN/EMERGING MARKETS RISK. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rates between local currency and the U.S. dollar. Whenever the fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. GEOGRAPHIC CONCENTRATION RISK. The fund may be particularly susceptible to economic, political or regulatory events affecting companies and countries within the specific geographic region in which the fund focuses its investments. Currency Statement of Additional Information - April 1, 2009 Page 14 devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the fund may be more volatile than a more geographically diversified fund. For state-specific funds. Because state-specific tax-exempt funds invest primarily in the municipal securities issued by the state and political sub- divisions of the state, each fund will be particularly affected by political and economic conditions and developments in the state in which it invests. This vulnerability to factors affecting the state's tax- exempt investments will be significantly greater than that of a more geographically diversified fund, which may result in greater losses and volatility. See Appendix B for details. The value of municipal securities owned by a fund also may be adversely affected by future changes in federal or state income tax laws. In addition, because of the relatively small number of issuers of tax-exempt securities, the fund may invest a higher percentage of its assets in a single issuer and, therefore, be more exposed to the risk of loss by investing in a few issuers than a fund that invests more broadly. At times, the fund and other accounts managed by the investment manager may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments. HIGHLY LEVERAGED TRANSACTIONS RISK. Certain corporate loans and corporate debt securities involve refinancings, recapitalizations, mergers and acquisitions, and other financings for general corporate purposes. These investments also may include senior obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code (commonly known as "debtor-in-possession" financings), provided that such senior obligations are determined by the fund's investment manager upon its credit analysis to be a suitable investment by the fund. In such highly leveraged transactions, the borrower assumes large amounts of debt in order to have the financial resources to attempt to achieve its business objectives. Such business objectives may include but are not limited to: management's taking over control of a company (leveraged buy-out); reorganizing the assets and liabilities of a company (leveraged recapitalization); or acquiring another company. Loans or securities that are part of highly leveraged transactions involve a greater risk (including default and bankruptcy) than other investments. IMPAIRMENT OF COLLATERAL RISK. The value of collateral, if any, securing a floating rate loan can decline, and may be insufficient to meet the borrower's obligations or difficult to liquidate. In addition, the fund's access to collateral may be limited by bankruptcy or other insolvency laws. Further, certain floating rate loans may not be fully collateralized and may decline in value. INDEXING RISK. For funds that are managed to an index, the fund's performance will rise and fall as the performance of the index rises and falls. INFLATION PROTECTED SECURITIES RISK. Inflation-protected debt securities tend to react to change in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation- protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the fund may have no income at all. Income earned by a shareholder depends on the amount of principal invested and that principal will not grow with inflation unless the investor reinvests the portion of fund distributions that comes from inflation adjustments. INITIAL PUBLIC OFFERING (IPO) RISK. IPOs are subject to many of the same risks as investing in companies with smaller market capitalizations. To the extent a fund determines to invest in IPOs it may not be able to invest to the extent desired, because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available. The investment performance of a fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the fund is able to do so. In addition, as a fund increases in size, the impact of IPOs on the fund's performance will generally decrease. IPOs will frequently be sold within 12 months of purchase. This may result in increased short-term capital gains, which will be taxable to shareholders as ordinary income. INTEREST RATE RISK. The securities in the portfolio are subject to the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. LEVERAGE RISK. Leverage occurs when the fund increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. Due to the fact that short sales involve borrowing securities and then selling them, the fund's short sales effectively leverage the fund's assets. The use of leverage may make any change in the fund's Statement of Additional Information - April 1, 2009 Page 15 net asset value ("NAV") even greater and thus result in increased volatility of returns. The fund's assets that are used as collateral to secure the short sales may decrease in value while the short positions are outstanding, which may force the fund to use its other assets to increase the collateral. Leverage can also create an interest expense that may lower the fund's overall returns. Lastly, there is no guarantee that a leveraging strategy will be successful. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the portfolio managers may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The portfolio managers may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole as a result of the factors used in the quantitative method, the weight placed on each factor, and changes in the factors' historical trends. The quantitative methodology employed by the investment manager has been extensively tested using historical securities market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the fund to achieve its objective. REINVESTMENT RISK. The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. SHORT SALES RISK. The fund may make short sales, which involves selling a security the fund does not own in anticipation that the security's price will decline. The fund must borrow those securities to make delivery to the buyer. The fund may not always be able to borrow a security it wants to sell short. The fund will suffer a loss if it sells a security short and the value of the security rises rather than falls. It is possible that the fund's long positions will decline in value at the same time that the value of its short positions increase, thereby increasing potential losses to the fund. Short sales expose the fund to the risk that it will be required to buy the security sold short (also known as "covering" the short position) at a time when the security has appreciated in value, thus resulting in a loss to the fund. The fund may also be required to close out a short position at a time when it might not otherwise choose, for example, if the lender of the security calls it back, which may have the effect of reducing or eliminating potential gain, or cause the fund to realize a loss. Short positions introduce more risk to the fund than long positions (purchases) because the maximum sustainable loss on a security purchased (held long) is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Additionally, the fund's use of short sales in effect "leverages" the fund, as the fund intends to use the cash proceeds from short sales to invest in additional long positions. This leverage effect potentially exposes the fund to greater risks due to unanticipated market movements, which may magnify losses and increase the volatility of returns. See Leverage Risk and Market Risk. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. TAX RISK. As a regulated investment company, a fund must derive at least 90% of its gross income for each taxable year from sources treated as "qualifying income" under the Internal Revenue Code of 1986, as amended. The Fund currently intends to take positions in forward currency contracts with notional value up to the Fund's total net assets. Although foreign currency gains currently constitute "qualifying income" the Treasury Department has the authority to issue regulations Statement of Additional Information - April 1, 2009 Page 16 excluding from the definition of "qualifying incomes" a fund's foreign currency gains not "directly related" to its "principal business" of investing in stocks or securities (or options and futures with respect thereto). Such regulations might treat gains from some of the Fund's foreign currency-denominated positions as not "qualifying income" and there is a remote possibility that such regulations might be applied retroactively, in which case, the Fund might not qualify as a regulated investment company for one or more years. In the event the Treasury Department issues such regulations, the Fund's Board of Directors may authorize a significant change in investment strategy or Fund liquidation. TRACKING ERROR RISK. For funds that are managed to an index, the fund may not track the index perfectly because differences between the index and the fund's portfolio can cause differences in performance. The investment manager purchases securities and other instruments in an attempt to replicate the performance of the index. However, the tools that the investment manager uses to replicate the index are not perfect and the fund's performance is affected by factors such as the size of the fund's portfolio, transaction costs, management fees and expenses, brokerage commissions and fees, the extent and timing of cash flows in and out of the fund and changes in the index. In addition, the returns from a specific type of security (for example, mid-cap stocks) may trail returns from other asset classes or the overall market. Each type of security will go through cycles of doing better or worse than stocks or bonds in general. These periods may last for several years. UNDERLYING FUND SELECTION RISK. For funds-of-funds, the risk that the selected underlying funds' performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the investment category. INVESTMENT STRATEGIES The following information supplements the discussion of each fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes strategies that many mutual funds use and types of securities that they purchase. Please refer to the table titled Investment Strategies and Types of Investments to see which are applicable to various categories of funds. AGENCY AND GOVERNMENT SECURITIES The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities, including mortgage pass through certificates of the Government National Mortgage Association (GNMA), are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government- sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation(*) (FHLMC), Federal National Mortgage Association(*) (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset- Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Inflation Risk, Interest Rate Risk, Prepayment and Extension Risk, and Reinvestment Risk. BORROWING If the fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If the fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. Under the 1940 Act, the fund is required to maintain continuous asset coverage of 300% with respect to such borrowings and to sell (within three days) sufficient portfolio holdings to restore such coverage if it should decline to less than 300% due to market fluctuations or otherwise, even if such liquidations of the fund's holdings may be disadvantageous from an investment standpoint. Leveraging by means of borrowing may exaggerate the effect of any increase or decrease in the value of portfolio securities or the fund's NAV, and money borrowed will be subject to interest and other costs (which may include commitment fees and/or the cost of maintaining minimum average balances) which may or may not exceed the income received from the securities purchased with borrowed funds. Statement of Additional Information - April 1, 2009 Page 17 Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk. * On Sept. 7, 2008, the Federal Housing Finance Agency (FHFA), an agency of the U.S. government, placed the FHLMC and FNMA into conservatorship, a statutory process with the objective of returning the entities to normal business operations. FHFA will act as the conservator to operate the enterprises until they are stabilized. CASH/MONEY MARKET INSTRUMENTS Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. A fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject a fund to certain costs and expenses. See Appendix A for a discussion of securities ratings. Bankers' acceptances are marketable short-term credit instruments used to finance the import, export, transfer or storage of goods. They are termed "accepted" when a bank guarantees their payment at maturity. Bank certificates of deposit are certificates issued against funds deposited in a bank (including eligible foreign branches of U.S. banks), are for a definite period of time, earn a specified rate of return and are normally negotiable. A 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 Family of Funds and other institutional clients of RiverSource Investments. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk and Inflation Risk. COLLATERALIZED BOND OBLIGATIONS Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of bonds, which may include junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, may earn certain of the tiers investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield Debt Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Credit Risk, Interest Rate Risk and Prepayment and Extension Risk. COMMERCIAL PAPER Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk and Liquidity Risk. COMMON STOCK Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Statement of Additional Information - April 1, 2009 Page 18 Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Issuer Risk, Market Risk, and Small and Mid-Sized Company Risk. CONVERTIBLE SECURITIES Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Interest Rate Risk, Issuer Risk, Market Risk, Prepayment and Extension Risk, and Reinvestment Risk. CORPORATE BONDS Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield Debt Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See Appendix A for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk. DEBT OBLIGATIONS Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a fixed, variable or floating rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High- Yield Debt Securities (Junk Bonds).) Statement of Additional Information - April 1, 2009 Page 19 Generally, debt obligations that are investment grade are those that have been rated in one of the top four credit quality categories by two out of the three independent rating agencies. In the event that a debt obligation has been rated by only two agencies, the most conservative, or lower, rating must be in one of the top four credit quality categories in order for the security to be considered investment grade. If only one agency has rated the debt obligation, that rating must be in one of the top four credit quality categories for the security to be considered investment grade. See Appendix A for a discussion of securities ratings. All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by a fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating agency or its rating system, a fund will attempt to use comparable ratings as standards for selecting investments. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Credit Risk, Interest Rate Risk, Issuer Risk, Prepayment and Extension Risk, and Reinvestment Risk. DEPOSITARY RECEIPTS Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, and Market Risk. DERIVATIVE INSTRUMENTS Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward- based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange- traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. Options. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the Statement of Additional Information - April 1, 2009 Page 20 security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If a fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, Chicago Board Options Exchange, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. Futures Contracts. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indexes (such as the S&P 500 Index), foreign currencies and other financial instruments and indexes. A fund may engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the fund may invest in futures contracts without registering with the CFTC. Options on Futures Contracts. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. Statement of Additional Information - April 1, 2009 Page 21 Options on Indexes. Options on indexes are securities traded on national securities exchanges. An option on an index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. Options may also be traded with respect to other types of indexes, such as options on indexes of commodities futures. Currency Options. Options on currencies are contracts that give the buyer the right, but not the obligation, to buy (call options) or sell (put options) a specified amount of a currency at a predetermined price (strike rate) on or before the option matures (expiry date). Conversely, the seller has the obligation to buy or sell a currency option upon exercise of the option by the purchaser. Currency options are traded either on a national securities exchange or over-the-counter. Tax and Accounting Treatment. As permitted under federal income tax laws and to the extent a fund is allowed to invest in futures contracts, a fund would intend to identify futures contracts as part of a mixed straddle and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If a fund is using short futures contracts for hedging purposes, the fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. Any losses incurred on securities that are part of a straddle may be deferred to the extent there is unrealized appreciation on the offsetting position until the offsetting position is sold. Federal income tax treatment of gains or losses from transactions in options, options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, a fund would either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The Internal Revenue Service (IRS) has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (a fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last- quoted sales price on their primary exchange. Other Risks of Derivatives. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange- traded derivatives since they often can only be closed out with the other party to the transaction. Statement of Additional Information - April 1, 2009 Page 22 Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Derivatives Risk and Liquidity Risk. EXCHANGE-TRADED FUNDS Exchange-traded funds (ETFs) represent shares of ownership in mutual funds, unit investment trusts or depositary receipts. ETFs hold portfolios of securities that are designed to replicate, as closely as possible before expenses, the price and yield of a specified market index. The performance results of ETFs will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by ETFs. ETF shares are sold and redeemed at net asset value only in large blocks called creation units and redemption units, respectively. ETF shares also may be purchased and sold in secondary market trading on national securities exchanges, which allows investors to purchase and sell ETF shares at their market price throughout the day. Although one or more of the other risks described in this SAI may apply, investments in ETFs involve the same risks associated with a direct investment in the types of securities included in the indices the ETFs are designed to replicate, including Market Risk. Shares of an ETF may trade at a market price that is less than their net asset value and an active trading market in such shares may not develop or continue. Finally, there can be no assurance that the portfolio of securities purchased by an ETF to replicate a particular index will replicate such index. FLOATING RATE LOANS Most floating rate loans are acquired directly from the agent bank or from another holder of the loan by assignment. Most such loans are secured, and most impose restrictive covenants which must be met by the borrower. These loans are typically made by a syndicate of banks and institutional investors, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan. Floating rate loans may include delayed draw term loans and prefunded or synthetic letters of credit. A fund's ability to receive payments of principal and interest and other amounts in connection with loans held by it will depend primarily on the financial condition of the borrower. The failure by the fund to receive scheduled interest or principal payments on a loan would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or purchasing an assignment in a loan. In selecting the loans in which the fund will invest, however, the investment manager will not rely on that credit analysis of the agent bank, but will perform its own investment analysis of the borrowers. The investment manager's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. The majority of loans the fund will invest in will be rated by one or more of the nationally recognized rating agencies. Investments in loans may be of any quality, including "distressed" loans, and will be subject to the fund's credit quality policy. Loans may be structured in different forms, including assignments and participations. In an assignment, a fund purchases an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The borrower of a loan may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that a fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan. Corporate loans in which a fund may purchase a loan assignment are made generally to finance internal growth, mergers, acquisitions, recapitalizations, stock repurchases, leveraged buy-outs, dividend payments to sponsors and other corporate activities. Under current market conditions, most of the corporate loans purchased by the fund will represent loans made to highly leveraged corporate borrowers. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in economic or market conditions. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the investment manager believes are attractive arise. Statement of Additional Information - April 1, 2009 Page 23 Certain of the loans acquired by a fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan assignment. To the extent that the fund is committed to make additional loans under such an assignment, it will at all times designate cash or securities in an amount sufficient to meet such commitments. Notwithstanding its intention in certain situations to not receive material, non-public information with respect to its management of investments in floating rate loans, the investment manager may from time to time come into possession of material, non-public information about the issuers of loans that may be held in a fund's portfolio. Possession of such information may in some instances occur despite the investment manager's efforts to avoid such possession, but in other instances the investment manager may choose to receive such information (for example, in connection with participation in a creditors' committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, the investment manager's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on the investment manager's ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time. In some instances, other accounts managed by the investment manager may hold other securities issued by borrowers whose floating rate loans may be held in a fund's portfolio. These other securities may include, for example, debt securities that are subordinate to the floating rate loans held in the fund's portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer's floating rate loans. In such cases, the investment manager may owe conflicting fiduciary duties to the fund and other client accounts. The investment manager will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if the investment manager's client accounts collectively held only a single category of the issuer's securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with floating rate loans include: Credit Risk and Prepayment and Extension Risk. FOREIGN CURRENCY TRANSACTIONS Investments in foreign countries usually involve currencies of foreign countries. In addition, a fund may hold cash and cash equivalent investments in foreign currencies. As a result, the value of a fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, a fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing a fund's NAV (Net Asset Value) to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. Spot Rates and Derivative Instruments. A fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts). (See also Derivative Instruments.) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. A fund may enter into forward contracts for a variety of reasons, but primarily it will enter into such contracts for risk management (hedging) or for investment purposes. A fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When a fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment, usually in U.S. dollars, although it could desire to lock in the price of the security in another currency. By entering into a forward contract, a fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. A fund may enter into forward contracts when management of the fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a fund may seek to hedge Statement of Additional Information - April 1, 2009 Page 24 the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. Unless specifically permitted, a fund would not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate it to deliver an amount of foreign currency in excess of the value of its securities or other assets denominated in that currency. This method of protecting the value of the fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. A fund may also enter into forward contracts when its management believes the currency of a particular country will increase in value relative to another currency. A fund may buy currencies forward to gain exposure to a currency without incurring the additional costs of purchasing securities denominated in that currency. Absolute Return Currency and Income Fund is designed to invest in a combination of forward currency contracts and U.S. dollar-denominated market instruments in an attempt to obtain an investment result that is substantially the same as a direct investment in a foreign currency-denominated instrument. For example, the combination of U.S. dollar-denominated instruments with long forward currency exchange contracts creates a position economically equivalent to a position in the foreign currency, in anticipation of an increase in the value of the foreign currency against the U.S. dollar. Conversely, the combination of U.S. dollar- denominated instruments with short forward currency exchange contracts is economically equivalent to borrowing the foreign currency for delivery at a specified date in the future, in anticipation of a decrease in the value of the foreign currency against the U.S. dollar. This strategy may also be employed by other funds. Unanticipated changes in the currency exchange results could result in poorer performance for funds that enter into these types of transactions. A fund may designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the circumstance set forth above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts. At maturity of a forward contract, a fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, the same maturity date, and covering the same amount of foreign currency. If a fund engages in an offsetting transaction, it would incur a gain or loss to the extent there has been movement in forward contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency. Although a fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. It would do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one rate, while offering a lesser rate of exchange should a fund desire to resell that currency to the dealer. For Absolute Return Currency and Income Fund, it is possible, under certain circumstances, including entering into forward currency contracts for investment purposes, that the fund may have to limit or restructure its forward contract currency transactions to qualify as a "regulated investment company" under the Internal Revenue Code. Options on Foreign Currencies. A fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a fund may buy put options on the foreign currency. If the value of the currency does decline, a fund would have the right to sell the currency for a fixed amount in dollars and would offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities a fund plans to buy, or where a fund would benefit from increased exposure to the currency, a fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. Statement of Additional Information - April 1, 2009 Page 25 As in the case of other types of options, however, the benefit to a fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. A fund may write options on foreign currencies for the same types of purposes. For example, when a fund anticipates a decline in the dollar value of foreign- denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a fund could write a put option on the relevant currency. If rates move in the manner projected, the put option would expire unexercised and allow the fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if a fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the- counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Foreign Currency Futures and Related Options. A fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A fund may use currency futures for the same purposes as currency forward contracts, subject to CFTC limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the fund's investments. A currency hedge, for example, should protect a Yen- denominated bond against a decline in the Yen, but will not protect a fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a fund's investments denominated in foreign currency will change in Statement of Additional Information - April 1, 2009 Page 26 response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a fund's investments denominated in that currency over time. A fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund would not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Derivatives Risk, Interest Rate Risk, and Liquidity Risk. FOREIGN SECURITIES Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union (EU) presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the admission of other countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk and Issuer Risk. FUNDING AGREEMENTS A fund may invest in funding agreements issued by domestic insurance companies. Funding agreements are short-term, privately placed, debt obligations of insurance companies that offer a fixed- or floating-rate of interest. These investments are not readily marketable and therefore are considered to be illiquid securities. (See also Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with funding agreements include: Credit Risk and Liquidity Risk. Statement of Additional Information - April 1, 2009 Page 27 HIGH-YIELD DEBT SECURITIES (JUNK BONDS) High yield (high-risk) debt securities are sometimes referred to as junk bonds. They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See Appendix A for a discussion of securities ratings. (See also Debt Obligations.) All fixed rate interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher- rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than a default by issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher- rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield debt securities include: Credit Risk, Interest Rate Risk, and Prepayment and Extension Risk. ILLIQUID AND RESTRICTED SECURITIES Illiquid securities are securities that are not readily marketable. These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent a fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for the securities. Disposing of illiquid or restricted securities may involve time- consuming negotiations and legal expense, and it may be difficult or impossible for a fund to sell the investment promptly and at an acceptable price. In determining the liquidity of all securities and derivatives, such as Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S. government or its agencies and instrumentalities the investment manager, under guidelines established by the Board, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk. INDEXED SECURITIES The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise Statement of Additional Information - April 1, 2009 Page 28 or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk and Market Risk. INFLATION PROTECTED SECURITIES Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor's assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation-protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders. Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation- protected securities include: Interest Rate Risk and Market Risk. INITIAL PUBLIC OFFERINGS (IPOS) Companies issuing IPOs generally have limited operating histories, and their prospects for future profitability are uncertain. These companies often are engaged in new and evolving businesses and are particularly vulnerable to competition and to changes in technology, markets and economic conditions. They may be dependent on certain key managers and third parties, need more personnel and other resources to manage growth and require significant additional capital. They may also be dependent on limited product lines and uncertain property rights and need regulatory approvals. Funds that invest in IPOs can be affected by sales of additional shares and by concentration of control in existing management and principal shareholders. Stock prices of IPOs can also be highly unstable, due to the absence of a prior public market, the small number of shares available for trading and limited investor information. Most IPOs involve a high degree of risk not normally associated with offerings of more seasoned companies. Although one or more risks described in this SAI may apply, the largest risks associated with IPOs include: Small and Mid-Sized Company Risk and Initial Public Offering (IPO) Risk. INVERSE FLOATERS Inverse floaters or inverse floating rate securities are a type of derivative long-term fixed income obligation with a floating or variable interest rate that moves in the opposite direction of short-term interest rates. As short-term interest rates go down, the holders of the inverse floaters receive more income and, as short-term interest rates go up, the holders of the inverse floaters receive less income. As with all long-term fixed income securities, the price of the inverse floater moves inversely Statement of Additional Information - April 1, 2009 Page 29 with long-term interest rates; as long-term interest rates go down, the price of the inverse floater moves up and, when long-term interest rates go up, the price of the inverse floater moves down. While inverse floater securities tend to provide more income than similar term and credit quality fixed-rate bonds, they also exhibit greater volatility in price movement (both up and down). In the municipal market an inverse floater is typically created when the owner of a municipal fixed rate bond transfers that bond to a trust in exchange for cash and a residual interest in the trust's assets and cash flows (inverse floater certificates). The trust funds the purchase of the bond by issuing two classes of certificates: short-term floating rate notes (typically sold to third parties) and the inverse floaters (also known as residual certificates). No additional income beyond that provided by the trust's underlying bond is created; rather, that income is merely divided-up between the two classes of certificates. The holder of the inverse floating rate securities typically has the right to (1) cause the holders of the short-term floating rate notes to tender their notes at par ($100) and (2) to return the inverse floaters and withdraw the underlying bonds, thereby collapsing the trust. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with transactions in inverse floaters include: Interest Rate Risk, Credit Risk, Liquidity Risk and Market Risk. INVESTMENT COMPANIES Investing in securities issued by registered and unregistered investment companies may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Market Risk. LENDING OF PORTFOLIO SECURITIES A fund may lend certain of its portfolio securities. The current policy of the Board is to make these loans, either long- or short-term, to broker-dealers. Loans will be structured in a manner that will enable a fund to call the loan in order to vote in a proxy solicitation if the fund has knowledge of a material event to be voted on that would affect the fund's investment in the loaned security. In making loans, the lender receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the Board. If the market price of the loaned securities goes up, the lender will get additional collateral on a daily basis. If the market price of the loaned securities goes down, the borrower may request that some collateral be returned. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the lender receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The lender may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The lender will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk. LOAN PARTICIPATIONS Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk. MORTGAGE- AND ASSET-BACKED SECURITIES Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental Statement of Additional Information - April 1, 2009 Page 30 credit enhancement. Commercial mortgage-backed securities (CMBS) are a specific type of mortgage-backed security collateralized by a pool of mortgages on commercial real estate. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage- backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage- backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset- backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage and asset-backed securities include: Credit Risk, Interest Rate Risk, Liquidity Risk, and Prepayment and Extension Risk. MORTGAGE DOLLAR ROLLS Mortgage dollar rolls are investments in which an investor sells mortgage-backed securities for delivery in the current month and simultaneously contracts to purchase substantially similar securities on a specified future date. While an investor foregoes principal and interest paid on the mortgage-backed securities during the roll period, the investor is compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk and Interest Rate Risk. MUNICIPAL OBLIGATIONS Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax Statement of Additional Information - April 1, 2009 Page 31 and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See Appendix A for a discussion of securities ratings. (See also Debt Obligations.) Taxable Municipal Obligations. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non- qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Inflation Risk, Interest Rate Risk, and Market Risk. PREFERRED STOCK Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk and Market Risk. REAL ESTATE INVESTMENT TRUSTS Real estate investment trusts (REITs) are pooled investment vehicles that manage a portfolio of real estate or real estate related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property, such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels, and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the tax law. The failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. A fund will indirectly bear its proportionate share of any expenses paid by a REIT in which it invests. REITs often do not provide complete tax information until after the calendar year-end. Consequently, because of the delay, it may be necessary for a fund investing in REITs to request permission to extend the deadline for issuance of Forms 1099-DIV beyond January 31. In the alternative, amended Forms 1099-DIV may be sent. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Interest Rate Risk, Issuer Risk and Market Risk. Statement of Additional Information - April 1, 2009 Page 32 REPURCHASE AGREEMENTS Repurchase agreements may be entered into with certain banks or non-bank dealers. In a repurchase agreement, the purchaser buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the purchaser's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk. REVERSE REPURCHASE AGREEMENTS In a reverse repurchase agreement, an investor sells a security and enters into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk and Interest Rate Risk. SHORT SALES In short selling transactions, a fund sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, a fund must borrow the security to make delivery to the buyer. A fund is obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by a fund, which may result in a loss or gain, respectively. Unlike taking a long position in a security by purchasing the security, where potential losses are limited to the purchase price, short sales have no cap on maximum losses, and gains are limited to the price of the security at the time of the short sale. Short sales of forward commitments and derivatives do not involve borrowing a security. These types of short sales may include futures, options, contracts for differences, forward contracts on financial instruments and options such as contracts, credit linked instruments, and swap contracts. A fund may not always be able to borrow a security it wants to sell short. A fund also may be unable to close out an established short position at an acceptable price and may have to sell long positions at disadvantageous times to cover its short positions. The value of your investment in a fund will fluctuate in response to the movements in the market. Fund performance also will depend on the effectiveness of the investment manager's research and the management team's investment decisions. Short sales also involve other costs. A fund must repay to the lender an amount equal to any dividends or interest that accrues while the loan is outstanding. To borrow the security, a fund may be required to pay a premium. A fund also will incur truncation costs in effecting short sales. The amount of any ultimate gain for a fund resulting from a short sale will be decreased and the amount of any ultimate loss will be increased, by the amount of premiums, interest or expenses a fund may be required to pay in connection with the short sale. Until a fund closes the short position, it will earmark and reserve fund assets, in cash or liquid securities to offset a portion of the leverage risk. Realized gains from short sales are typically treated as short-term gains/losses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Market Risk and Short Sales Risk. SOVEREIGN DEBT A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Statement of Additional Information - April 1, 2009 Page 33 Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk and Foreign/Emerging Markets Risk. STRUCTURED INVESTMENTS A structured investment is a security whose return is tied to an underlying index or to some other security or pool of assets. Structured investments generally are individually negotiated agreements and may be traded over-the- counter. Structured investments are created and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments, such as commercial bank loans, and the issuance by that entity of one or more classes of debt obligations ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities, and interest rate provisions. The extent of the payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Structured securities are often offered in different classes. As a result a given class of a structured security may be either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and at any given time there may be no active trading market for a particular structured security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured investments include: Credit Risk and Liquidity Risk. SWAP AGREEMENTS Swap agreements are typically individually negotiated agreements that obligate two parties to exchange payments based on a reference to a specified asset, reference rate or index. Swap agreements will tend to shift a party's investment exposure from one type of investment to another. A swap agreement can increase or decrease the volatility of a fund's investments and its net asset value. Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. Swap agreements entail the risk that a party will default on its payment obligations. A fund will enter into a swap agreement only if the claims- paying ability of the other party or its guarantor is considered to be investment grade by the investment manager. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in one of the three highest rating categories of at least one Nationally Recognized Statistical Rating Organization (NRSRO) at the time of entering into the transaction. If there is a default by the other party to such a transaction, a fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, a fund may seek to minimize counterparty risk by requiring the counterparty to post collateral. Swap agreements are usually entered into without an upfront payment because the value of each party's position is the same. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty or the other. Interest Rate Swaps. Interest rate swap agreements are often used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. They are financial instruments that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified dates in the future. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined specified (notional) amount. The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps can be based on various measures of interest rates, including LIBOR, swap rates, treasury rates and other foreign interest rates. Cross Currency Swaps. Cross currency swaps are similar to interest rate swaps, except that they involve multiple currencies. A fund may enter into a currency swap when it has exposure to one currency and desires exposure to a different currency. Typically the interest rates that determine the currency swap payments are fixed, although occasionally one or both parties may pay a floating rate of interest. Unlike an interest rate swap, however, the principal amounts are exchanged at the Statement of Additional Information - April 1, 2009 Page 34 beginning of the contract and returned at the end of the contract. In addition to paying and receiving amounts at the beginning and termination of the agreements, both sides will also have to pay in full periodically based upon the currency they have borrowed. Change in foreign exchange rates and changes in interest rates, as described above, may negatively affect currency swaps. Total Return Swaps. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. For example, CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of commercial mortgage- backed securities. In a typical total return equity swap, payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement. Swaption Transaction. A swaption is an option on a swap agreement and a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms, in return for payment of the purchase price (the "premium") of the option. The fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The writer of the contract receives the premium and bears the risk of unfavorable changes in the market value on the underlying swap agreement. Swaptions can be bundled and sold as a package. These are commonly called interest rate caps, floors and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts. Credit Default Swaps. Credit default swaps are contracts in which third party credit risk is transferred from one party to another party by one party, the protection buyer, making payments to the other party, the protection seller, in return for the ability of the protection buyer to deliver a reference obligation, or portfolio of reference obligations, to the protection seller upon the occurrence of certain credit events relating to the issuer of the reference obligation and receive the notional amount of the reference obligation from the protection seller. A fund may use credit default swaps for various purposes including to increase or decrease its credit exposure to various issuers. For example, as a seller in a transaction, a fund could use credit default swaps as a way of increasing investment exposure to a particular issuer's bonds in lieu of purchasing such bonds directly. Similarly, as a buyer in a transaction, a fund may use credit default swaps to hedge its exposure on bonds that it owns or in lieu of selling such bonds. A credit default swap agreement may have as reference obligations one or more securities that are not currently held by the fund. The fund may be either the buyer or seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a seller, the fund generally receives an up front payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full face amount of deliverable obligations of the reference obligations that may have little or no value. If the fund is a buyer and no credit event occurs, the fund recovers nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference obligation that may have little or no value. Credit default swap agreements can involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging risk, correlation risk and liquidity risk. A fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A fund's obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the fund). In connection with credit default swaps in which a fund is the buyer, the fund will segregate or "earmark" cash or other liquid assets, or enter into certain Statement of Additional Information - April 1, 2009 Page 35 offsetting positions, with a value at least equal to the fund's exposure (any accrued but unpaid net amounts owed by the fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a fund is the seller, the fund will segregate or "earmark" cash or other liquid assets, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the fund). Such segregation or "earmarking" will ensure that the fund has assets available to satisfy its obligations with respect to the transaction. Such segregation or "earmarking" will not limit the fund's exposure to loss. The use of swap agreements by a fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index, but also of the swap itself, without the benefit of observing the performance of the swap under all the possible market conditions. Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment. Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Credit Risk, Liquidity Risk and Market Risk. VARIABLE- OR FLOATING-RATE SECURITIES Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the investor to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the investor as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the lender's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk. WARRANTS Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Market Risk. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, a fund may lose the opportunity to obtain a price and yield considered to be advantageous. Statement of Additional Information - April 1, 2009 Page 36 Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk. ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See Appendix A for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero- coupon, step-coupon, and pay-in-kind securities include: Credit Risk and Interest Rate Risk. A fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed- delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments. SECURITIES TRANSACTIONS Except as otherwise noted, the description of policies and procedures in this section also applies to any fund subadviser. Subject to policies set by the Board, as well as the terms of the investment management agreements, the investment manager or subadviser is authorized to determine, consistent with a fund's investment objective and policies, which securities will be purchased, held, or sold. In determining where the buy and sell orders are to be placed, the investment manager has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the Board. Each fund, the investment manager, any subadviser and RiverSource Distributors, Inc. (principal underwriter and distributor of the Funds) has a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the fund. A fund's securities may be traded on an agency basis with brokers or dealers or on a principal basis with dealers. In an agency trade, the broker-dealer generally is paid a commission. In a principal trade, the investment manager will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. The investment manager may pay the dealer a commission or instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. BROKER-DEALER SELECTION In selecting broker-dealers to execute transactions, the investment manager and each subadviser will consider from among such factors as the ability to minimize trading costs, trading expertise, infrastructure, ability to provide information or services, financial condition, confidentiality, competitiveness of commission rates, evaluations of execution quality, promptness of execution, past history, ability to prospect for and find liquidity, difficulty of trade, security's trading characteristics, size of order, liquidity of market, block trading capabilities, quality of settlement, specialized expertise, overall responsiveness, willingness to commit capital and research services provided. The Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the funds as a factor in the selection of broker-dealers through which to execute securities transactions. On a periodic basis, the investment manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions, including review by an independent third-party evaluator. The review evaluates execution, operational efficiency, and research services. COMMISSION DOLLARS Broker-dealers typically provide a bundle of services including research and execution of transactions. The research provided can be either proprietary (created and provided by the broker-dealer) or third party (created by a third party but provided by the broker-dealer). Consistent with the interests of the fund, the investment manager and each subadviser may use broker-dealers who provide both types of research products and services in exchange for commissions, known as "soft dollars," generated by transactions in fund accounts. Statement of Additional Information - April 1, 2009 Page 37 The receipt of research and brokerage products and services is used by the investment manager, and by each subadviser, to the extent it engages in such transactions, to supplement its own research and analysis activities, by receiving the views and information of individuals and research staffs of other securities firms, and by gaining access to specialized expertise on individual companies, industries, areas of the economy and market factors. Research and brokerage products and services may include reports on the economy, industries, sectors and individual companies or issuers; statistical information; accounting and tax law interpretations; political analyses; reports on legal developments affecting portfolio securities; information on technical market actions; credit analyses; on-line quotation systems; risk measurement; analyses of corporate responsibility issues; on-line news services; and financial and market database services. Research services may be used by the investment manager in providing advice to multiple RiverSource accounts, including the funds (or by any subadviser to any other client of the subadviser) even though it is not possible to relate the benefits to any particular account or fund. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The Board has adopted a policy authorizing the investment manager to do so, to the extent authorized by law, if the investment manager or subadviser determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or the investment manager's or subadviser's overall responsibilities with respect to a fund and the other funds or accounts for which it acts as investment manager (or by any subadviser to any other client of that subadviser). As a result of these arrangements, some portfolio transactions may not be effected at the lowest commission, but overall execution may be better. The investment manager and each subadviser have represented that under its procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services and research products and services provided. The investment manager or a subadviser may use step-out transactions. A "step- out" is an arrangement in which the investment manager or subadviser executes a trade through one broker-dealer but instructs that broker-dealer to step-out all or a part of the trade to another broker-dealer. The second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The investment manager or subadviser may receive research products and services in connection with step-out transactions. Use of fund commissions may create potential conflicts of interest between the investment manager or subadviser and a fund. However, the investment manager and each subadviser has policies and procedures in place intended to mitigate these conflicts and ensure that the use of fund commissions falls within the "safe harbor" of Section 28(e) of the Securities Exchange Act of 1934. Some products and services may be used for both investment decision-making and non-investment decision-making purposes ("mixed use" items). The investment manager and each subadviser, to the extent it has mixed use items, has procedures in place to assure that fund commissions pay only for the investment decision-making portion of a mixed-use item. TRADE AGGREGATION AND ALLOCATION Generally, orders are processed and executed in the order received. When a fund buys or sells the same security as another portfolio, fund, or account, the investment manager or subadviser carries out the purchase or sale pursuant to policies and procedures designed in such a way believed to be fair to the fund. Purchase and sale orders may be combined or aggregated for more than one account if it is believed it would be consistent with best execution. Aggregation may reduce commission costs or market impact on a per-share and per-dollar basis, although aggregation may have the opposite effect. There may be times when not enough securities are received to fill an aggregated order, including in an initial public offering, involving multiple accounts. In that event, the investment manager and each subadviser has policies and procedures designed in such a way believed to result in a fair allocation among accounts, including the fund. From time to time, different portfolio managers with the investment manager may make differing investment decisions related to the same security. However, with certain exceptions for funds managed using strictly quantitative methods, a portfolio manager or portfolio management team may not sell a security short if the security is owned in another portfolio managed by that portfolio manager or portfolio management team. On occasion, a fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. The investment manager has portfolio management teams in its Minneapolis and Los Angeles offices that may share research information regarding leveraged loans. The investment manager operates separate and independent trading desks in these locations for the purpose of purchasing and selling leveraged loans. As a result, the investment manager does not aggregate orders in leveraged loans across portfolio management teams. For example, funds and other client accounts being managed by these portfolio management teams may purchase and sell the same leveraged loan in the secondary market on the same day at different times and at different prices. There is also the potential for a particular account or group of accounts, including a fund, to forego an opportunity or to receive a different allocation (either larger or smaller) than might otherwise Statement of Additional Information - April 1, 2009 Page 38 be obtained if the investment manager were to aggregate trades in leveraged loans across the portfolio management teams. Although the investment manager does not aggregate orders in leveraged loans across its portfolio management teams in Minneapolis and Los Angeles, it operates in this structure subject to its duty to seek best execution. The following table shows total brokerage commissions paid in the last three fiscal periods. Substantially all firms through whom transactions were executed provide research services. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 4. TOTAL BROKERAGE COMMISSIONS
TOTAL BROKERAGE COMMISSIONS - ------------------------------------------------------------------------------------------------------ FUND 2009 2008 2007 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ------------------------------------------------------------------------------------------------------ Income Builder Basic Income $ 0 $ 0(a) $ 0 - ------------------------------------------------------------------------------------------------------ Income Builder Enhanced Income 0 0(a) 0 - ------------------------------------------------------------------------------------------------------ Income Builder Moderate Income 0 0(a) 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Aggressive 0 0 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Conservative 0 0 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate 0 0 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive 0 0 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative 0 0 0 - ------------------------------------------------------------------------------------------------------ Portfolio Builder Total Equity 0 0 0 - ------------------------------------------------------------------------------------------------------ S&P 500 Index 16,486 40,706 21,050 - ------------------------------------------------------------------------------------------------------ Small Company Index 123,243 108,360 56,843 - ------------------------------------------------------------------------------------------------------ 2008 2007 2006 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------ Equity Value 591,525 773,828 721,284 - ------------------------------------------------------------------------------------------------------ Partners Small Cap Growth 581,945 850,077 1,410,791 - ------------------------------------------------------------------------------------------------------ Precious Metals and Mining 960,159 494,184 801,550 - ------------------------------------------------------------------------------------------------------ Small Cap Advantage 2,546,419 3,585,711 3,379,812 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ------------------------------------------------------------------------------------------------------ 120/20 Contrarian Equity 38,557(b) N/A N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2010 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2015 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2020 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2025 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2030 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2035 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2040 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ Retirement Plus 2045 0 0(c) N/A - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ------------------------------------------------------------------------------------------------------ High Yield Bond 0 0 0 - ------------------------------------------------------------------------------------------------------ Partners Aggressive Growth 859,002 1,160,632 556,410 - ------------------------------------------------------------------------------------------------------ Partners Fundamental Value 292,900 217,139 346,840 - ------------------------------------------------------------------------------------------------------ Partners Select Value 838,472 1,757,678 445,429 - ------------------------------------------------------------------------------------------------------ Partners Small Cap Equity 519,535 455,170 459,451 - ------------------------------------------------------------------------------------------------------ Partners Small Cap Value 1,179,158 1,422,160 2,624,255 - ------------------------------------------------------------------------------------------------------ Short Duration U.S. Government 43,210 42,504 24,483 - ------------------------------------------------------------------------------------------------------ U.S. Government Mortgage 17,640 10,386 6,379 - ------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 39
TOTAL BROKERAGE COMMISSIONS - ------------------------------------------------------------------------------------------------------ FUND 2008 2007 2006 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ------------------------------------------------------------------------------------------------------ Dividend Opportunity $ 412,022 $ 576,524 $ 456,446 - ------------------------------------------------------------------------------------------------------ Real Estate 173,705 187,309 152,782 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ------------------------------------------------------------------------------------------------------ Cash Management 0 0 0 - ------------------------------------------------------------------------------------------------------ Disciplined Equity 1,951,255 1,577,337 987,624 - ------------------------------------------------------------------------------------------------------ Disciplined Small and Mid Cap Equity 124,754 156,759 8,916(d) - ------------------------------------------------------------------------------------------------------ Disciplined Small Cap Value 75,041 64,928 33,110(e) - ------------------------------------------------------------------------------------------------------ Floating Rate 861 0 0(e) - ------------------------------------------------------------------------------------------------------ Growth 10,366,547 12,096,184 10,375,981 - ------------------------------------------------------------------------------------------------------ Income Opportunities 0 0 0 - ------------------------------------------------------------------------------------------------------ Inflation Protected Securities 11,586 0 0 - ------------------------------------------------------------------------------------------------------ Large Cap Equity 10,502,917 15,040,354 9,944,390 - ------------------------------------------------------------------------------------------------------ Large Cap Value 61,073 88,935 138,363 - ------------------------------------------------------------------------------------------------------ Limited Duration Bond 4,138 5,172 4,006 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ------------------------------------------------------------------------------------------------------ California Tax-Exempt 1,938 4,143 666(f) - ------------------------------------------------------------------------------------------------------ Diversified Bond 111,876 91,815 108,055 - ------------------------------------------------------------------------------------------------------ Minnesota Tax-Exempt 3,418 7,293 1,254(f) - ------------------------------------------------------------------------------------------------------ New York Tax-Exempt 724 1,524 255(f) - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ------------------------------------------------------------------------------------------------------ Balanced 493,156 567,773 420,523 - ------------------------------------------------------------------------------------------------------ Disciplined Large Cap Growth 150,374 45,978(g) N/A - ------------------------------------------------------------------------------------------------------ Disciplined Large Cap Value 6,631(h) N/A N/A - ------------------------------------------------------------------------------------------------------ Diversified Equity Income 4,085,552 3,790,954 2,923,490 - ------------------------------------------------------------------------------------------------------ Mid Cap Value 1,672,775 1,219,474 1,354,225 - ------------------------------------------------------------------------------------------------------ Strategic Allocation 1,049,954 1,425,483 638,067 - ------------------------------------------------------------------------------------------------------ Strategic Income Allocation 17,707 6,639(g) N/A - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ------------------------------------------------------------------------------------------------------ Absolute Return Currency and Income 0 0 0(i) - ------------------------------------------------------------------------------------------------------ Disciplined International Equity 514,960 547,910 60,738(j) - ------------------------------------------------------------------------------------------------------ Emerging Markets Bond 0 0 0(k) - ------------------------------------------------------------------------------------------------------ Global Bond 18,925 17,268 9,664 - ------------------------------------------------------------------------------------------------------ Global Technology 471,967 1,027,281 1,237,181 - ------------------------------------------------------------------------------------------------------ Partners International Select Growth 1,690,066 1,932,330 1,265,256 - ------------------------------------------------------------------------------------------------------ Partners International Select Value 1,558,333 1,426,926 1,533,794 - ------------------------------------------------------------------------------------------------------ Partners International Small Cap 270,663 353,096 366,091 - ------------------------------------------------------------------------------------------------------ Threadneedle Emerging Markets 3,346,690 3,361,865 3,017,380 - ------------------------------------------------------------------------------------------------------ Threadneedle European Equity 396,474 282,104 160,239 - ------------------------------------------------------------------------------------------------------ Threadneedle Global Equity 1,185,084 1,474,583 1,249,847 - ------------------------------------------------------------------------------------------------------ Threadneedle Global Equity Income 5,030(l) N/A N/A - ------------------------------------------------------------------------------------------------------ Threadneedle Global Extended Alpha 6,647(l) N/A N/A - ------------------------------------------------------------------------------------------------------ Threadneedle International Opportunity 1,020,584 1,150,182 989,118 - ------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 40
TOTAL BROKERAGE COMMISSIONS - ------------------------------------------------------------------------------------------------------ FUND 2008 2007 2006 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ------------------------------------------------------------------------------------------------------ Intermediate Tax-Exempt $ 684 $ 2,175 $ 438 - ------------------------------------------------------------------------------------------------------ Mid Cap Growth 2,165,273 2,813,784 1,867,241 - ------------------------------------------------------------------------------------------------------ Tax-Exempt Bond 6,431 19,450 4,257 - ------------------------------------------------------------------------------------------------------ Tax-Exempt High Income 24,531 74,062 17,679 - ------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market 0 0 0 - ------------------------------------------------------------------------------------------------------
(a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (d) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (e) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (f) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended on June 30. (g) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (i) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (j) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (k) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (l) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 41 For the last fiscal period, transactions were specifically directed to firms in exchange for research services as shown in the following table. The table also shows portfolio turnover rates for the last two fiscal periods. Higher turnover rates may result in higher brokerage expenses and taxes. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 5. BROKERAGE DIRECTED FOR RESEARCH AND TURNOVER RATES
- ---------------------------------------------------------------------------------------------------------------------- BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2009 2008 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ---------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income(a) $ 0(b) $ 0(b) 39% 19% - ---------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income(a) 0(b) 0(b) 36 24 - ---------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income(a) 0(b) 0(b) 40 19 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 0(b) 0(b) 35 40 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative 0(b) 0(b) 27 29 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 0(b) 0(b) 34 27 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive 0(b) 0(b) 33 33 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative 0(b) 0(b) 29 31 - ---------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 0(b) 0(b) 28 31 - ---------------------------------------------------------------------------------------------------------------------- S&P 500 Index 0 0 5 4 - ---------------------------------------------------------------------------------------------------------------------- Small Company Index 0 0 23 14 - ---------------------------------------------------------------------------------------------------------------------- 2008 2007 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ---------------------------------------------------------------------------------------------------------------------- Equity Value 62,307,537 72,239 25 37 - ---------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 84,593,491 36,661 122 119 - ---------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining 50,317,759 38,416 241(c) 114 - ---------------------------------------------------------------------------------------------------------------------- Small Cap Advantage 113,545,867 207,170 179 158 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ---------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 86,825(d) 53 23(d) N/A - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 0(b) 0(b) 92 80(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 0(b) 0(b) 47 48(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 0(b) 0(b) 50 40(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 0(b) 0(b) 41 37(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 0(b) 0(b) 50 32(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 0(b) 0(b) 44 38(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 0(b) 0(b) 52 33(e) - ---------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 0(b) 0(b) 50 57(e) - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ---------------------------------------------------------------------------------------------------------------------- High Yield Bond 0 0 64 95 - ---------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 74,286,129 54,797 141 163 - ---------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value 0 0 14 12 - ---------------------------------------------------------------------------------------------------------------------- Partners Select Value 111,988,669 113,732 88 159(f) - ---------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 5,029,719 7,350 106 70 - ---------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value 474,998,456 70,029 45 58 - ---------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government 0 0 209 168 - ---------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 0 0 354(g) 306(g) - ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 42
- ---------------------------------------------------------------------------------------------------------------------- BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2008 2007 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ---------------------------------------------------------------------------------------------------------------------- Dividend Opportunity $ 15,749,145 $ 54,405 20% 17% - ---------------------------------------------------------------------------------------------------------------------- Real Estate 1,084,912 605 52 38 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ---------------------------------------------------------------------------------------------------------------------- Cash Management 0 0 N/A N/A - ---------------------------------------------------------------------------------------------------------------------- Disciplined Equity 0 0 58 62 - ---------------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 0 0 56 84 - ---------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 0 0 87 127 - ---------------------------------------------------------------------------------------------------------------------- Floating Rate 0 0 43 91 - ---------------------------------------------------------------------------------------------------------------------- Growth 1,339,656,389 1,904,948 112 98 - ---------------------------------------------------------------------------------------------------------------------- Income Opportunities 0 0 75 122 - ---------------------------------------------------------------------------------------------------------------------- Inflation Protected Securities 0 0 59 76 - ---------------------------------------------------------------------------------------------------------------------- Large Cap Equity 1,378,682,998 1,744,468 68 66 - ---------------------------------------------------------------------------------------------------------------------- Large Cap Value 9,016,509 10,770 24 35 - ---------------------------------------------------------------------------------------------------------------------- Limited Duration Bond 0 0 218(h) 263 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ---------------------------------------------------------------------------------------------------------------------- California Tax-Exempt(i) 0 0 49 62 - ---------------------------------------------------------------------------------------------------------------------- Diversified Bond 0 0 226 295 - ---------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt(i) 0 0 23 26 - ---------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt(i) 0 0 31 28 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ---------------------------------------------------------------------------------------------------------------------- Balanced 67,135,127 86,479 105 124 - ---------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 0 0 70 21(j) - ---------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 0(k) 0(k) 6(k) N/A - ---------------------------------------------------------------------------------------------------------------------- Diversified Equity Income 557,479,269 554,662 31 31 - ---------------------------------------------------------------------------------------------------------------------- Mid Cap Value 200,044,593 196,118 34 24 - ---------------------------------------------------------------------------------------------------------------------- Strategic Allocation 0 0 123 123 - ---------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation 0 0 137 70 - ---------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ---------------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income 0 0 39 36 - ---------------------------------------------------------------------------------------------------------------------- Disciplined International Equity 0 0 61 47 - ---------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond 0 0 82 41 - ---------------------------------------------------------------------------------------------------------------------- Global Bond 0 0 75 77 - ---------------------------------------------------------------------------------------------------------------------- Global Technology 20,896,126 37,913 81 167 - ---------------------------------------------------------------------------------------------------------------------- Partners International Select Growth 97,589,551 156,876 85 104 - ---------------------------------------------------------------------------------------------------------------------- Partners International Select Value 559,869,117 309,044 40 28 - ---------------------------------------------------------------------------------------------------------------------- Partners International Small Cap 0 0 87 96 - ---------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 0 0 133 125 - ---------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 0 0 180 114 - ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 0 0 97 100 - ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 0(l) 0(l) 10(l) N/A - ---------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 0(l) 0(l) 36(l) N/A - ---------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 0 0 78 84 - ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 43
- ------------------------------------------------------------------------------------------------------------------------ BROKERAGE DIRECTED FOR RESEARCH* ------------------------------------- AMOUNT OF TURNOVER RATES AMOUNT OF COMMISSIONS ------------------------------------- FUND TRANSACTIONS IMPUTED OR PAID 2008 2007 - ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ------------------------------------------------------------------------------------------------------------------------ Intermediate Tax-Exempt $ 0 $ 0 36% 53% - ------------------------------------------------------------------------------------------------------------------------ Mid Cap Growth 54,423,999 96,049 76 87 - ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Bond 0 0 37 51 - ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt High Income 0 0 37 47 - ------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market 0 0 N/A N/A - ------------------------------------------------------------------------------------------------------------------------
* Reported numbers include third party soft dollar commissions and portfolio manager directed commissions directed for research. RiverSource also receives proprietary research from brokers, but these amounts have not been included in the table. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) The underlying funds may have directed transactions to firms in exchange for research services. (c) Higher turnover rates may result in higher brokerage expenses and taxes. The higher turnover rate can be primarily attributed to repositioning the fund to a smaller number of holdings as it worked through risk management and secondarily, market volatility made up the balance of the turnover rate. (d) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (e) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (f) The turnover rate increase from 2006 was the result of a change in subadvisers during the fiscal period. (g) A significant portion of the turnover was the result of "roll" transactions in the liquid derivatives and Treasury securities. In the derivative transactions, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. In the Treasury transactions, existing holdings are sold to purchase newly issued securities with slightly longer maturity dates. Although these transactions affect the turnover rate of the portfolio, they do not change the risk exposure or result in material transaction costs. The remaining turnover resulted from strategic reallocations and relative value trading. After transaction costs, we expect this activity to enhance the returns on the overall fund. (h) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been 124% for the year ended July 31, 2008. (i) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended on June 30. (j) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (k) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (l) For the period from Aug. 1, 2008 (when the Fund became available) to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 44 As of the end of the most recent fiscal period, the fund held securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 6. SECURITIES OF REGULAR BROKERS OR DEALERS
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - -------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income None N/A - -------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income None N/A - -------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative None N/A - -------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity None N/A - -------------------------------------------------------------------------------------------------------------------- S&P 500 Index Ameriprise Financial $ 65,185 -------------------------------------------------------------------- Charles Schwab 190,015 -------------------------------------------------------------------- Citigroup 289,179 -------------------------------------------------------------------- E*Trade Financial 9,587 -------------------------------------------------------------------- Franklin Resources 109,671 -------------------------------------------------------------------- Goldman Sachs Group 533,707 -------------------------------------------------------------------- JPMorgan Chase & Co. 1,423,202 -------------------------------------------------------------------- Legg Mason 34,047 -------------------------------------------------------------------- Morgan Stanley 321,071 -------------------------------------------------------------------- PNC Financial Services Group 207,965 - -------------------------------------------------------------------------------------------------------------------- Small Company Index Investment Technology Group 1,062,970 -------------------------------------------------------------------- LaBranche & Co. 408,547 -------------------------------------------------------------------- optionsXpress 525,824 -------------------------------------------------------------------- Piper Jaffray Companies 490,510 - -------------------------------------------------------------------------------------------------------------------- Stifel Financial 1,019,664 - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - -------------------------------------------------------------------------------------------------------------------- Equity Value Citigroup 7,790,004 -------------------------------------------------------------------- JPMorgan Chase & Co. 7,116,343 - -------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth Investment Technology Group 1,107,259 -------------------------------------------------------------------- optionsXpress Holdings 531,170 - -------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining None N/A - -------------------------------------------------------------------------------------------------------------------- Small Cap Advantage Investment Technology Group 507,980 -------------------------------------------------------------------- optionsXpress Holdings 890,530 - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - -------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity Citigroup 757,493 - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 None N/A - -------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 None N/A - --------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 45
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - -------------------------------------------------------------------------------------------------------------------- High Yield Bond None N/A - -------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth None N/A - -------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value Citigroup $ 4,183,179 -------------------------------------------------------------------- E*TRADE Financial 234,643 -------------------------------------------------------------------- JPMorgan Chase & Co. 33,857,771 -------------------------------------------------------------------- Merrill Lynch & Co. 4,984,920 -------------------------------------------------------------------- Morgan Stanley 3,640,571 - -------------------------------------------------------------------------------------------------------------------- Partners Select Value None N/A - -------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity Eaton Vance 1,570,095 -------------------------------------------------------------------- Knight Capital Group Cl A 65,220 -------------------------------------------------------------------- optionsXpress Holdings 1,281,324 - -------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value Knight Capital Group Cl A 1,312,597 - -------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government Morgan Stanley Mortgage Loan Trust 3,369,665 - -------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage ChaseFlex Trust 505,036 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mtge Trust 2,982,060 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 2,944,373 -------------------------------------------------------------------- GS Mortgage Securities II 883,204 -------------------------------------------------------------------- JPMorgan Mortgage Trust 820,077 -------------------------------------------------------------------- Morgan Stanley Mortgage Loan Trust 883,637 - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - -------------------------------------------------------------------------------------------------------------------- Dividend Opportunity Citigroup 23,201,974 -------------------------------------------------------------------- Goldman Sachs Group 32,663,485 -------------------------------------------------------------------- JPMorgan Chase & Co. 22,009,110 -------------------------------------------------------------------- PNC Financial Services Group 3,911,464 - -------------------------------------------------------------------------------------------------------------------- Real Estate None N/A - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - -------------------------------------------------------------------------------------------------------------------- Cash Management Bear Stearns Companies 25,000,000 -------------------------------------------------------------------- Citigroup Funding 196,618,680 -------------------------------------------------------------------- Credit Suisse NY 146,620,740 -------------------------------------------------------------------- Goldman Sachs Group 25,000,000 -------------------------------------------------------------------- JPMorgan Chase & Co. 136,841,050 -------------------------------------------------------------------- Lehman Brothers Holdings* 80,100,000 -------------------------------------------------------------------- Merrill Lynch & Co. 152,998,540 -------------------------------------------------------------------- Morgan Stanley 20,720,382 - -------------------------------------------------------------------------------------------------------------------- Disciplined Equity Charles Schwab 4,016,005 -------------------------------------------------------------------- Citigroup 89,269,962 -------------------------------------------------------------------- E*TRADE 773,132 -------------------------------------------------------------------- Goldman Sachs Group 4,770,869 -------------------------------------------------------------------- JPMorgan Chase & Co. 41,756,101 -------------------------------------------------------------------- Lehman Brothers Holdings* 7,515,746 -------------------------------------------------------------------- Merrill Lynch & Co. 19,815,362 -------------------------------------------------------------------- Morgan Stanley 39,406,764 - -------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value Knight Capital Group Cl A 145,822 -------------------------------------------------------------------- Piper Jaffray Companies 63,829 -------------------------------------------------------------------- Westwood Holdings Group 134,188 - -------------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity Knight Capital Group Cl A 72,493 - --------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 46
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- Floating Rate Ameritrade Holding Corp. $ 745,332 -------------------------------------------------------------------- Bear Stearns Commercial Mtg Securities 943,533 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mtge Trust 1,952,180 -------------------------------------------------------------------- CS First Boston Mtge Securities 855,783 -------------------------------------------------------------------- Lehman Brothers Holdings* 963,838 -------------------------------------------------------------------- Merrill Lynch Mtge Trust 1,153,729 -------------------------------------------------------------------- Nuveen Investments 1,658,970 - -------------------------------------------------------------------------------------------------------------------- Growth Lehman Brothers Holdings* 6,021,142 - -------------------------------------------------------------------------------------------------------------------- Income Opportunities None N/A - -------------------------------------------------------------------------------------------------------------------- Inflation Protected Securities None N/A - -------------------------------------------------------------------------------------------------------------------- Large Cap Equity Citigroup 26,071,447 -------------------------------------------------------------------- Goldman Sachs Group 22,551,709 -------------------------------------------------------------------- JPMorgan Chase & Co. 47,861,246 -------------------------------------------------------------------- Legg Mason 4,714,454 -------------------------------------------------------------------- Lehman Brothers Holdings* 19,819,100 -------------------------------------------------------------------- Merrill Lynch & Co. 4,367,136 -------------------------------------------------------------------- Morgan Stanley 17,105,697 -------------------------------------------------------------------- PNC Financial Services Group 7,082,875 - -------------------------------------------------------------------------------------------------------------------- Large Cap Value Citigroup 878,430 -------------------------------------------------------------------- Goldman Sachs Group 326,303 -------------------------------------------------------------------- JPMorgan Chase & Co. 1,210,083 -------------------------------------------------------------------- Legg Mason 111,487 -------------------------------------------------------------------- Lehman Brothers Holdings* 366,723 -------------------------------------------------------------------- Merrill Lynch & Co. 173,678 -------------------------------------------------------------------- Morgan Stanley 465,824 -------------------------------------------------------------------- PNC Financial Services Group 288,083 - -------------------------------------------------------------------------------------------------------------------- Limited Duration Bond Bear Stearns Adjustable Rate Mortgage Trust 872,823 -------------------------------------------------------------------- Bear Stearns Commercial Mtg Securities 641,299 -------------------------------------------------------------------- ChaseFlex Trust 248,077 -------------------------------------------------------------------- Citigroup 1,259,000 -------------------------------------------------------------------- Citigroup Commercial Mtge Trust 696,777 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mtge Trust 170,687 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 278,727 -------------------------------------------------------------------- Credit Suisse NY 226,272 -------------------------------------------------------------------- CS First Boston Mtge Securities 676,454 -------------------------------------------------------------------- GS Mortgage Securities II 799,079 -------------------------------------------------------------------- JPMorgan Chase & Co. 991,462 -------------------------------------------------------------------- JPMorgan Chase Commercial Mtge Securities 3,563,196 -------------------------------------------------------------------- LB-UBS Commercial Mtge Trust 1,587,416 -------------------------------------------------------------------- Lehman Brothers Holdings* 544,494 -------------------------------------------------------------------- Merrill Lynch & Co. 706,410 -------------------------------------------------------------------- Merrill Lynch Mtge Trust 122,321 -------------------------------------------------------------------- Morgan Stanley 944,154 -------------------------------------------------------------------- Morgan Stanley Capital 1 692,480 -------------------------------------------------------------------- Morgan Stanley Mtge Loan Trust 840,855 - --------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 47
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - -------------------------------------------------------------------------------------------------------------------- California Tax-Exempt None N/A - -------------------------------------------------------------------------------------------------------------------- Diversified Bond Bear Stearns Adjustable Rate Mortgage Trust $ 17,436,578 -------------------------------------------------------------------- Bear Stearns Commercial Mtg Securities 21,099,342 -------------------------------------------------------------------- ChaseFlex Trust 1,571,241 -------------------------------------------------------------------- Citigroup 28,310,330 -------------------------------------------------------------------- Citigroup Commercial Mtge Trust 14,460,744 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mtge Trust 3,136,137 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 5,831,624 -------------------------------------------------------------------- Credit Suisse NY 4,591,057 -------------------------------------------------------------------- CS First Boston Mtge Securities 14,248,373 -------------------------------------------------------------------- GS Mortgage Securities II 13,047,600 -------------------------------------------------------------------- JPMorgan Chase Bank 8,319,926 -------------------------------------------------------------------- JPMorgan Chase Commercial Mtge Securities 69,173,902 -------------------------------------------------------------------- JPMorgan Chase & Co. 16,062,237 -------------------------------------------------------------------- LB-UBS Commercial Mtge Trust 30,843,436 -------------------------------------------------------------------- Lehman Brothers Holdings* 12,531,597 -------------------------------------------------------------------- Merrill Lynch & Co. 13,901,778 -------------------------------------------------------------------- Merrill Lynch Mtge Trust 3,496,976 -------------------------------------------------------------------- Morgan Stanley 16,923,975 -------------------------------------------------------------------- Morgan Stanley Capital 1 16,818,388 -------------------------------------------------------------------- Morgan Stanley Mtge Loan Trust 14,352,406 - -------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt None N/A - -------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt None N/A - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - -------------------------------------------------------------------------------------------------------------------- Balanced Bear Stearns Adjustable Rate Mortgage Trust 2,056,495 -------------------------------------------------------------------- Bear Stearns Commercial Mtg Securities 2,433,377 -------------------------------------------------------------------- ChaseFlex Trust 950,665 -------------------------------------------------------------------- Citigroup 11,143,567 -------------------------------------------------------------------- Citigroup Commercial Mtge Trust 1,597,731 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mtge Trust 352,251 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 641,835 -------------------------------------------------------------------- Credit Suisse NY 336,023 -------------------------------------------------------------------- CS First Boston Mtge Securities 618,807 -------------------------------------------------------------------- Goldman Sachs Group 2,224,256 -------------------------------------------------------------------- GS Mortgage Securities II 1,093,832 -------------------------------------------------------------------- JPMorgan Chase & Co. 13,228,624 -------------------------------------------------------------------- JPMorgan Chase Bank 485,791 -------------------------------------------------------------------- JPMorgan Chase Commercial Mtge Securities 5,788,325 -------------------------------------------------------------------- LB-UBS Commercial Mtge Trust 3,548,011 -------------------------------------------------------------------- Legg Mason 378,164 -------------------------------------------------------------------- Lehman Brothers Holdings* 93,125 -------------------------------------------------------------------- Merrill Lynch & Co. 2,155,227 -------------------------------------------------------------------- Merrill Lynch Mtge Trust 222,584 -------------------------------------------------------------------- Morgan Stanley 1,939,572 -------------------------------------------------------------------- Morgan Stanley Capital 1 1,954,402 -------------------------------------------------------------------- PNC Financial Services Group 2,794,751 - -------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth Goldman Sachs Group 2,407,041 -------------------------------------------------------------------- Merrill Lynch & Co. 1,031,582 -------------------------------------------------------------------- Morgan Stanley 2,026,438 - --------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 48
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value Citigroup $ 465,556 -------------------------------------------------------------------- Lehman Brothers Holdings* 587 -------------------------------------------------------------------- Merrill Lynch & Co. 131,307 -------------------------------------------------------------------- Morgan Stanley 89,056 - -------------------------------------------------------------------------------------------------------------------- Diversified Equity Income Citigroup 40,913,779 -------------------------------------------------------------------- JPMorgan Chase & Co. 49,760,204 - -------------------------------------------------------------------------------------------------------------------- Mid Cap Value None N/A - -------------------------------------------------------------------------------------------------------------------- Strategic Allocation Bear Stearns Commercial Mortgage Securities 3,562,336 -------------------------------------------------------------------- Charles Schwab 1,763,164 -------------------------------------------------------------------- Citigroup 30,594,415 -------------------------------------------------------------------- Citigroup Commercial Mortgage Trust 1,642,261 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mortgage Trust 2,042,743 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 641,835 -------------------------------------------------------------------- CS First Boston Mortgage Securities 4,882,828 -------------------------------------------------------------------- Goldman Sachs Group 994,048 -------------------------------------------------------------------- GS Mortgage Securities II 1,523,546 -------------------------------------------------------------------- JPMorgan Chase & Co. 16,986,581 -------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities 6,446,223 -------------------------------------------------------------------- Knight Capital Group Cl A 73,899 -------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust 4,304,264 -------------------------------------------------------------------- Lehman Brothers Holdings* 29,688 -------------------------------------------------------------------- Merrill Lynch & Co. 6,168,171 -------------------------------------------------------------------- Merrill Lynch Mortgage Trust 927,435 -------------------------------------------------------------------- Morgan Stanley 7,342,576 -------------------------------------------------------------------- Morgan Stanley Capital 1 1,337,566 -------------------------------------------------------------------- Morgan Stanley Mortgage Loan Trust 1,512,553 - -------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation Ameritrade Holding Corp. - subsidiary 594,322 -------------------------------------------------------------------- Bear Stearns Adjustable Rate Mortgage Trust 203,614 -------------------------------------------------------------------- Bear Stearns Commercial Mortgage Securities 909,594 -------------------------------------------------------------------- Charles Schwab 25,090 -------------------------------------------------------------------- Citigroup 720,374 -------------------------------------------------------------------- Citigroup/Deutsche Bank Commercial Mortgage Trust 939,180 -------------------------------------------------------------------- CS First Boston Mortgage Securities 1,639,456 -------------------------------------------------------------------- Goldman Sachs Group 34,304 -------------------------------------------------------------------- JPMorgan Chase & Co. 217,669 -------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities 1,875,303 -------------------------------------------------------------------- Lehman Brothers Holdings* 11,788 -------------------------------------------------------------------- Merrill Lynch & Co. 158,624 -------------------------------------------------------------------- Merrill Lynch Mortgage Trust 366,194 -------------------------------------------------------------------- Morgan Stanley 555,840 -------------------------------------------------------------------- Morgan Stanley Capital 1 119,467 -------------------------------------------------------------------- Morgan Stanley Mortgage Loan Trust 756,276 -------------------------------------------------------------------- Nuveen Investments 105,610 - --------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 49
VALUE OF SECURITIES OWNED AT FUND ISSUER END OF FISCAL PERIOD - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - -------------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income Bear Stearns Companies $ 745,926 -------------------------------------------------------------------- Citigroup 619,416 -------------------------------------------------------------------- Credit Suisse First Boston USA 636,727 -------------------------------------------------------------------- GS Mortgage Securities II 2,521,127 -------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities 849,854 -------------------------------------------------------------------- Lehman Brothers Holdings* 75,200 -------------------------------------------------------------------- Morgan Stanley 633,832 -------------------------------------------------------------------- Morgan Stanley, Dean Witter Capital 1 1,167,921 - -------------------------------------------------------------------------------------------------------------------- Disciplined International Equity None N/A - -------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond Morgan Stanley 1,258,573 - -------------------------------------------------------------------------------------------------------------------- Global Bond Bear Stearns Commercial Mortgage Securities 1,106,194 -------------------------------------------------------------------- Citigroup 709,276 -------------------------------------------------------------------- Citigroup Commercial Mortgage Trust 1,294,437 -------------------------------------------------------------------- Credit Suisse Mortgage Capital Ctfs 715,932 -------------------------------------------------------------------- Credit Suisse NY 452,945 -------------------------------------------------------------------- CS First Boston Mortgage Securities 1,407,343 -------------------------------------------------------------------- GS Mortgage Securities II 1,260,948 -------------------------------------------------------------------- JPMorgan Chase Commercial Mortgage Securities 6,275,448 -------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust 4,531,712 -------------------------------------------------------------------- Lehman Brothers Holdings* 171,600 -------------------------------------------------------------------- Merrill Lynch & Co. 588,461 -------------------------------------------------------------------- Morgan Stanley Capital 1 1,458,809 - -------------------------------------------------------------------------------------------------------------------- Global Technology None N/A - -------------------------------------------------------------------------------------------------------------------- Partners International Select Growth None N/A - -------------------------------------------------------------------------------------------------------------------- Partners International Select Value Credit Suisse Group 13,198,329 - -------------------------------------------------------------------------------------------------------------------- Partners International Small Cap None N/A - -------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets None N/A - -------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity Credit Suisse Group 791,189 - -------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Goldman Sachs Group 1,322,195 -------------------------------------------------------------------- JPMorgan Chase & Co. 8,071,264 - -------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income JPMorgan Chase & Co. 138,146 - -------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha None N/A - -------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity Credit Suisse Group 3,541,191 - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - -------------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt None N/A - -------------------------------------------------------------------------------------------------------------------- Mid Cap Growth TD AmeriTrade Holding 5,944,887 - -------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond None N/A - -------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income None N/A - -------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - -------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market None N/A - --------------------------------------------------------------------------------------------------------------------
* Subsequent to Aug. 31, 2008. Lehman Brothers Holdings filed a Chapter 11 bankruptcy petition. Statement of Additional Information - April 1, 2009 Page 50 BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE INVESTMENT MANAGER Affiliates of the investment manager may engage in brokerage and other securities transactions on behalf of a fund according to procedures adopted by the Board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the Board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. The investment manager will use an affiliate only if (i) the investment manager determines that the fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the fund and (ii) the affiliate charges the fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Information about any brokerage commissions paid by a fund in the last three fiscal periods to brokers affiliated with the fund's investment manager is contained in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 7. BROKERAGE COMMISSIONS PAID TO INVESTMENT MANAGER OR AFFILIATES
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2009 2008 2007 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - -------------------------------------------------------------------------------------------------------------------------- Income Builder None -- -- -- -- $ 0(a) $ 0 Basic Income - -------------------------------------------------------------------------------------------------------------------------- Income Builder None -- -- -- -- 0(a) 0 Enhanced Income - -------------------------------------------------------------------------------------------------------------------------- Income Builder None -- -- -- -- 0(a) 0 Moderate Income - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder None -- -- -- -- 0 0 Aggressive - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder None -- -- -- -- 0 0 Conservative - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate None -- -- -- -- 0 0 Aggressive - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate None -- -- -- -- 0 0 Conservative - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total None -- -- -- -- 0 0 Equity - -------------------------------------------------------------------------------------------------------------------------- S&P 500 Index None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Small Company Index None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- 2008 2007 2006 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - -------------------------------------------------------------------------------------------------------------------------- Equity Value None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth UBS 1 $3,919 0.67% 1.57% 0 0 Securities - -------------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage None -- -- -- -- 0 0 - --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 51
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2008 2007 2006 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - -------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity None(b) -- -- -- -- N/A N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 None -- -- -- -- 0(c) N/A - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - -------------------------------------------------------------------------------------------------------------------------- High Yield Bond None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth JPMorgan 2 $3,532 0.41% 0.26% $ 23 $ 57* Securities, Inc. - -------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Select Value Gabelli & 3 0 -- -- 7,352 14,216 Co. - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity JPMorgan 2 0 -- -- 568 0 Securities, Inc. - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value Goldman 4 0 -- -- 0 1,821 Sachs & Co. - -------------------------------------------------------------------------------------------------------------------------- Short Duration None -- -- -- -- 0 0 U.S. Government - -------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - -------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity -- -- -- -- 0 0 None - -------------------------------------------------------------------------------------------------------------------------- Real Estate None -- -- -- -- 0 0 - --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 52
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2008 2007 2006 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - -------------------------------------------------------------------------------------------------------------------------- Cash Management None -- -- -- -- $ 0 $ 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Equity None 0 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Small and None -- -- -- -- 0 0(d) Mid Cap Equity - -------------------------------------------------------------------------------------------------------------------------- Disciplined Small None -- -- -- -- 0 0(e) Cap Value - -------------------------------------------------------------------------------------------------------------------------- Floating Rate None -- -- -- -- 0 0(e) - -------------------------------------------------------------------------------------------------------------------------- Growth None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Income Opportunities None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Inflation Protected None -- -- -- -- 0 0 Securities - -------------------------------------------------------------------------------------------------------------------------- Large Cap Equity None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Large Cap Value None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Limited Duration Bond None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - -------------------------------------------------------------------------------------------------------------------------- California Tax-Exempt None -- -- -- -- 0 0(f) - -------------------------------------------------------------------------------------------------------------------------- Diversified Bond None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt None -- -- -- -- 0 0(f) - -------------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt None -- -- -- -- 0 0(f) - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - -------------------------------------------------------------------------------------------------------------------------- Balanced None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap None -- -- -- -- 0(g) N/A Growth - -------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap None(h) -- -- -- -- N/A N/A Value - -------------------------------------------------------------------------------------------------------------------------- Diversified Equity Income None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Mid Cap Value None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Strategic Allocation None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Strategic Income None -- -- -- -- 0(g) N/A Allocation - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - -------------------------------------------------------------------------------------------------------------------------- Absolute Return Currency None -- -- -- -- 0 0(i) and Income - -------------------------------------------------------------------------------------------------------------------------- Disciplined International None -- -- -- -- 0 0(j) Equity - -------------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond None -- -- -- -- 0 0(k) - -------------------------------------------------------------------------------------------------------------------------- Global Bond None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Global Technology None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners International JPMorgan 2 0 -- -- 0 8,149 Select Growth Securities, Inc. - -------------------------------------------------------------------------------------------------------------------------- Partners International Sanford 5 1,677 0.11% 0.04% N/A N/A Select Value Bernstein - --------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 53
PERCENT OF AGGREGATE AGGREGATE DOLLAR AGGREGATE AGGREGATE DOLLAR AMOUNT OF DOLLAR DOLLAR AMOUNT OF PERCENT OF TRANSACTIONS AMOUNT OF AMOUNT OF COMMISSIONS AGGREGATE INVOLVING COMMISSIONS COMMISSIONS NATURE OF PAID TO BROKERAGE PAYMENT OF PAID TO PAID TO BROKER AFFILIATION BROKER COMMISSIONS COMMISSIONS BROKER BROKER FUND ---------------------------------------------------------------------------------------------- 2008 2007 2006 - -------------------------------------------------------------------------------------------------------------------------- Partners International None -- -- -- -- $ 0 $ 0 Small Cap - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging None -- -- -- -- 0 0 Markets - -------------------------------------------------------------------------------------------------------------------------- Threadneedle European None -- -- -- -- 0 0 Equity - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity None(l) -- -- -- -- N/A N/A Income - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global None(l) -- -- -- -- N/A N/A Extended Alpha - -------------------------------------------------------------------------------------------------------------------------- Threadneedle International None -- -- -- -- 0 0 Opportunity - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - -------------------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Mid Cap Growth -- -- -- -- 0 0 None - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income None -- -- -- -- 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market None -- -- -- -- 0 0 - --------------------------------------------------------------------------------------------------------------------------
* Represents brokerage clearing fees. (1) Affiliate of UBS Global Asset Management, a subadviser. (2) Affiliate of American Century, a subadviser. (3) Affiliate of GAMCO Investors, Inc. a former subadviser, terminated Sept. 29, 2006. (4) Affiliate of Goldman Sachs Asset Management, L.P., a subadviser. (5) Affiliate of AllianceBernstein, a subadviser. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (d) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (e) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (f) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended on June 30. (g) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (i) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (j) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (k) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (l) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 54 VALUING FUND SHARES As of the end of the most recent fiscal period, the computation of net asset value per share of a class of a fund was based on net assets of that class divided by the number of class shares outstanding as shown in the following table. All expenses of a fund, including the management fee and, as applicable, distribution and plan administration fees, are accrued daily and taken into account for the purpose of determining NAV. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 8. VALUING FUND SHARES
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ----------------------------------------------------------------------------------------------------------------- Income Builder Basic Income Class A $ 186,970,729 22,677,468 $ 8.24 Class B 27,939,305 3,394,885 8.23 Class C 9,281,940 1,126,721 8.24 Class R4 8,257 1,000 8.26 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income Class A 164,090,568 21,598,784 7.60 Class B 18,998,046 2,503,256 7.59 Class C 7,980,635 1,051,482 7.59 Class R4 103,837 13,670 7.60 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income Class A 338,875,864 43,137,952 7.86 Class B 40,992,857 5,230,164 7.84 Class C 14,003,542 1,784,927 7.85 Class R4 14,829 1,885 7.87 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive Class A 294,773,096 45,416,245 6.49 Class B 56,863,918 8,803,125 6.46 Class C 11,330,376 1,765,176 6.42 Class R4 141,064 21,713 6.50 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative Class A 145,919,328 17,150,019 8.51 Class B 41,589,703 4,905,272 8.48 Class C 10,602,340 1,249,604 8.48 Class R4 20,746 2,461 8.43 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Class A 664,054,374 87,640,367 7.58 Class B 144,798,038 19,199,873 7.54 Class C 33,449,418 4,433,154 7.55 Class R4 78,368 10,348 7.57 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive Class A 644,510,105 91,887,421 7.01 Class B 130,075,493 18,628,806 6.98 Class C 26,360,644 3,778,666 6.98 Class R4 558,316 79,497 7.02 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative Class A 257,155,177 32,046,209 8.02 Class B 60,844,849 7,606,644 8.00 Class C 15,772,351 1,971,183 8.00 Class R4 25,381 3,177 7.99 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity Class A 245,908,353 40,787,041 6.03 Class B 45,514,660 7,624,879 5.97 Class C 9,263,309 1,558,801 5.94 Class R4 74,311 12,287 6.05 - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 55
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- S&P 500 Index Class D $ 21,470,665 7,875,153 $ 2.73 Class E 87,567,351 32,008,961 2.74 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Small Company Index Class A 280,601,738 99,425,503 2.82 Class B 50,844,680 22,379,419 2.27 Class R4 4,364,248 1,490,973 2.93 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ----------------------------------------------------------------------------------------------------------------- Equity Value Class A 862,727,060 72,058,965 11.97 Class B 120,949,564 10,071,167 12.01 Class C 5,338,784 448,976 11.89 Class I 12,824 1,070 11.99 Class R2 4,482 374 11.98 Class R3 138,368 11,549 11.98 Class R4 12,091,559 1,009,050 11.98 Class R5 4,482 374 11.98 Class W 4,551 380 11.98 - ----------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth Class A 85,394,093 21,986,547 3.88 Class B 29,411,794 8,128,195 3.62 Class C 3,421,880 945,054 3.62 Class I 51,476,161 12,858,908 4.00 Class R2 3,727 951 3.92 Class R3 3,743 951 3.94 Class R4 99,565 25,269 3.94 Class R5 3,757 951 3.95 - ----------------------------------------------------------------------------------------------------------------- Precious Metals and Mining Class A 114,874,726 9,640,748 11.92 Class B 18,946,175 1,733,817 10.93 Class C 2,372,836 220,757 10.75 Class I 11,952 989 12.08 Class R4 126,163 10,436 12.09 - ----------------------------------------------------------------------------------------------------------------- Small Cap Advantage Class A 230,690,809 57,253,295 4.03 Class B 56,041,681 15,694,536 3.57 Class C 4,766,747 1,332,984 3.58 Class I 6,231 1,484 4.20 Class R2 2,791 679 4.11 Class R3 2,800 679 4.12 Class R4 78,656 18,896 4.16 Class R5 2,814 679 4.14 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ----------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity Class A 36,243,211 2,101,033 17.25 Class B 2,370,747 137,839 17.20 Class C 735,615 42,785 17.19 Class I 8,604,172 498,000 17.28 Class R5 8,637 500 17.27 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 Class A 3,817,259 401,351 9.51 Class R2 4,456 468 9.52 Class R3 4,457 468 9.52 Class R4 4,457 468 9.52 Class R5 4,456 468 9.52 Class Y 12,474,568 1,310,311 9.52 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 56
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 Class A $ 6,249,844 643,613 $ 9.71 Class R2 4,522 465 9.72 Class R3 4,526 465 9.73 Class R4 4,531 465 9.74 Class R5 4,528 465 9.74 Class Y 23,422,088 2,406,288 9.73 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 Class A 3,300,828 343,364 9.61 Class R2 4,475 464 9.64 Class R3 4,479 464 9.65 Class R4 4,484 464 9.66 Class R5 4,483 464 9.66 Class Y 28,545,670 2,958,924 9.65 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 Class A 2,654,172 275,106 9.65 Class R2 4,509 466 9.68 Class R3 4,509 466 9.68 Class R4 4,508 465 9.69 Class R5 4,508 465 9.69 Class Y 32,457,897 3,352,142 9.68 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 Class A 3,045,696 313,665 9.71 Class R2 4,515 464 9.73 Class R3 4,525 464 9.75 Class R4 4,523 464 9.75 Class R5 4,522 464 9.75 Class Y 29,048,235 2,981,594 9.74 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 Class A 1,525,615 158,788 9.61 Class R2 4,496 467 9.63 Class R3 4,500 467 9.64 Class R4 4,505 467 9.65 Class R5 4,501 467 9.64 Class Y 19,849,186 2,059,793 9.64 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 Class A 1,439,574 151,317 9.51 Class R2 4,428 464 9.54 Class R3 4,433 464 9.55 Class R4 4,438 464 9.56 Class R5 4,433 464 9.55 Class Y 11,851,951 1,241,451 9.55 - ----------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 Class A 1,255,728 130,258 9.64 Class R2 4,500 466 9.66 Class R3 4,503 466 9.66 Class R4 4,507 466 9.67 Class R5 4,505 466 9.67 Class Y 9,024,069 933,476 9.67 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 57
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ----------------------------------------------------------------------------------------------------------------- High Yield Bond Class A $1,133,624,554 414,428,945 $ 2.74 Class B 173,554,717 63,456,498 2.74 Class C 18,643,745 6,860,137 2.72 Class I 72,462,449 26,516,567 2.73 Class R2 8,713 3,175 2.74 Class R3 4,652 1,695 2.74 Class R4 919,275 336,077 2.74 Class R5 4,640 1,695 2.74 Class W 22,509,875 8,291,217 2.71 - ----------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth Class A 397,989,258 37,586,201 10.59 Class B 80,526,824 7,903,728 10.19 Class C 3,063,824 300,672 10.19 Class I 142,475,018 13,230,406 10.77 Class R2 98,864 9,311 10.62 Class R3 6,106 572 10.67 Class R4 194,176 18,142 10.70 Class R5 6,131 572 10.72 - ----------------------------------------------------------------------------------------------------------------- Partners Fundamental Value Class A 648,273,411 107,013,817 6.06 Class B 161,959,464 27,725,640 5.84 Class C 15,456,453 2,634,236 5.87 Class I 158,842,048 25,935,802 6.12 Class R4 756,584 123,925 6.11 - ----------------------------------------------------------------------------------------------------------------- Partners Select Value Class A 322,819,045 66,170,721 4.88 Class B 76,607,986 16,502,135 4.64 Class C 6,664,913 1,436,484 4.64 Class I 20,062,162 4,037,490 4.97 Class R4 79,781 16,172 4.93 - ----------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity Class A 196,047,618 36,467,629 5.38 Class B 25,634,234 5,074,867 5.05 Class C 2,237,185 443,555 5.04 Class I 9,369 1,724 5.43 Class R4 3,201,957 586,546 5.46 - ----------------------------------------------------------------------------------------------------------------- Partners Small Cap Value Class A 365,495,630 77,217,068 4.73 Class B 128,472,761 28,915,951 4.44 Class C 10,463,204 2,349,002 4.45 Class I 15,384,753 3,159,844 4.87 Class R2 234,161 49,214 4.76 Class R3 5,675 1,183 4.80 Class R4 248,829 51,701 4.81 Class R5 9,191,753 1,907,742 4.82 - ----------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government Class A 539,251,179 113,827,935 4.74 Class B 158,544,398 33,462,620 4.74 Class C 9,625,747 2,031,863 4.74 Class I 92,658,581 19,540,682 4.74 Class R4 4,755,371 1,003,265 4.74 Class W 4,986 1,053 4.74 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 58
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage Class A $ 95,365,293 19,102,220 $ 4.99 Class B 33,665,806 6,741,320 4.99 Class C 4,185,697 838,003 4.99 Class I 221,547,618 44,419,486 4.99 Class R4 42,429,496 8,505,084 4.99 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ----------------------------------------------------------------------------------------------------------------- Dividend Opportunity Class A 1,166,836,238 151,153,162 7.72 Class B 171,162,689 22,320,646 7.67 Class C 21,336,365 2,787,614 7.65 Class I 196,677,710 25,428,411 7.73 Class R2 N/A N/A N/A Class R3 N/A N/A N/A Class R4 884,486 114,314 7.74 Class R5 N/A N/A N/A Class W 4,393 568 7.73 - ----------------------------------------------------------------------------------------------------------------- Real Estate Class A 86,019,287 7,529,295 11.42 Class B 14,247,297 1,256,751 11.34 Class C 1,419,450 125,279 11.33 Class I 113,290,977 9,895,570 11.45 Class R4 109,251 9,603 11.38 Class W 3,128 275 11.37 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ----------------------------------------------------------------------------------------------------------------- Cash Management Class A 4,728,063,840 4,735,985,483 1.00 Class B 85,972,944 86,123,177 1.00 Class C 7,698,464 7,709,484 1.00 Class I 86,515,821 86,572,983 1.00 Class R5 4,990 5,000 1.00 Class W 38,283,118 38,307,096 1.00 Class Y 33,285,660 33,299,232 1.00 - ----------------------------------------------------------------------------------------------------------------- Disciplined Equity Class A 1,067,408,739 181,520,585 5.88 Class B 35,383,368 6,102,723 5.80 Class C 2,787,743 482,134 5.78 Class I 391,424,906 66,059,325 5.93 Class R2 3,886 661 5.88 Class R3 3,892 661 5.89 Class R4 126,215,819 21,367,300 5.91 Class R5 3,897 661 5.90 Class W 1,355,143,677 231,124,956 5.86 - ----------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity Class A 16,737,687 1,995,771 8.39 Class B 1,001,638 121,121 8.27 Class C 162,845 19,685 8.27 Class I 15,280,626 1,816,335 8.41 Class R4 10,136 1,204 8.42 Class W 6,835,033 817,433 8.36 - ----------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value Class A 12,703,109 1,450,722 8.76 Class B 347,557 40,165 8.65 Class C 54,959 6,351 8.65 Class I 22,825,612 2,600,072 8.78 Class R2 3,982 455 8.75 Class R3 3,987 455 8.76 Class R4 8,777 1,000 8.78 Class R5 3,989 455 8.77 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 59
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Floating Rate Class A $ 261,075,201 29,120,778 $ 8.97 Class B 23,136,657 2,580,594 8.97 Class C 19,695,527 2,196,860 8.97 Class I 184,939,822 20,637,515 8.96 Class R4 183,544 20,426 8.99 Class R5 4,995 556 8.98 Class W 4,456 497 8.97 - ----------------------------------------------------------------------------------------------------------------- Growth Class A 1,590,672,418 58,435,801 27.22 Class B 189,224,073 7,631,999 24.79 Class C 13,114,426 530,243 24.73 Class I 326,363,923 11,697,509 27.90 Class R2 4,280 155 27.61 Class R3 4,286 155 27.65 Class R4 55,923,087 2,013,270 27.78 Class R5 4,290 155 27.68 Class W 4,336 157 27.62 - ----------------------------------------------------------------------------------------------------------------- Income Opportunities Class A 138,240,324 14,797,904 9.34 Class B 25,890,499 2,772,741 9.34 Class C 3,872,515 414,776 9.34 Class I 68,474,383 7,321,389 9.35 Class R4 142,584 15,216 9.37 - ----------------------------------------------------------------------------------------------------------------- Inflation Protected Securities Class A 222,999,226 21,714,361 10.27 Class B 36,023,542 3,509,539 10.26 Class C 10,682,613 1,040,718 10.26 Class I 402,165,599 39,165,376 10.27 Class R4 43,246 4,214 10.26 Class W 253,836,343 24,718,020 10.27 - ----------------------------------------------------------------------------------------------------------------- Large Cap Equity Class A 3,388,815,212 750,529,476 4.52 Class B 432,695,950 98,119,285 4.41 Class C 20,752,067 4,701,508 4.41 Class I 38,943,788 8,562,931 4.55 Class R2 3,743 822 4.55 Class R3 3,749 822 4.56 Class R4 179,264,616 39,104,432 4.58 Class R5 3,789 822 4.61 - ----------------------------------------------------------------------------------------------------------------- Large Cap Value Class A 35,085,132 8,397,421 4.18 Class B 7,328,116 1,765,846 4.15 Class C 659,182 159,562 4.13 Class I 11,230,530 2,671,840 4.20 Class R2 3,187 763 4.18 Class R3 3,192 763 4.18 Class R4 21,573 5,115 4.22 Class R5 3,253 763 4.26 - ----------------------------------------------------------------------------------------------------------------- Limited Duration Bond Class A 62,676,888 6,707,418 9.34 Class B 7,350,615 786,840 9.34 Class C 1,600,298 171,367 9.34 Class I 105,609,598 11,296,909 9.35 Class R4 9,369 1,000 9.37 Class W 4,793 512 9.36 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 60
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ----------------------------------------------------------------------------------------------------------------- California Tax-Exempt Class A $ 172,038,905 35,097,770 $ 4.90 Class B 4,711,779 961,893 4.90 Class C 2,843,385 579,342 4.91 - ----------------------------------------------------------------------------------------------------------------- Diversified Bond Class A 1,920,027,558 413,143,778 4.65 Class B 254,464,345 54,765,337 4.65 Class C 31,688,522 6,817,452 4.65 Class I 693,189,044 148,965,143 4.65 Class R2 9,610 2,067 4.65 Class R3 9,610 2,067 4.65 Class R4 75,478,505 16,261,328 4.64 Class R5 9,588 2,067 4.64 Class W 655,311,873 140,970,151 4.65 - ----------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt Class A 289,301,362 56,564,455 5.11 Class B 13,968,961 2,730,369 5.12 Class C 8,460,353 1,653,947 5.12 - ----------------------------------------------------------------------------------------------------------------- New York Tax-Exempt Class A 52,571,799 10,842,089 4.85 Class B 3,503,352 722,515 4.85 Class C 717,930 148,072 4.85 FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ----------------------------------------------------------------------------------------------------------------- Balanced Class A 634,072,106 69,966,655 9.06 Class B 26,100,296 2,897,118 9.01 Class C 3,748,762 416,783 8.99 Class R4 47,215,934 5,209,145 9.06 - ----------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth Class A 25,775,970 3,371,206 7.65 Class B 2,911,541 384,045 7.58 Class C 1,725,877 227,595 7.58 Class I 161,645,963 21,034,723 7.68 Class R2 7,654 1,000 7.65 Class R3 7,669 1,000 7.67 Class R4 22,347 2,910 7.68 Class R5 7,680 1,000 7.68 Class W 4,387 573 7.66 - ----------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value Class A 394,708 43,191 9.14 Class B 19,345 2,120 9.13 Class C 9,124 1,000 9.12 Class I 8,359,169 914,414 9.14 Class R2 9,129 1,000 9.13 Class R3 9,134 1,000 9.13 Class R4 9,138 1,000 9.14 Class R5 9,142 1,000 9.14 Class W 9,135 1,000 9.14 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 61
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Diversified Equity Income Class A $4,504,417,578 483,974,117 $ 9.31 Class B 633,359,809 67,927,974 9.32 Class C 93,320,596 10,037,632 9.30 Class I 189,996,681 20,429,835 9.30 Class R2 7,727,583 832,912 9.28 Class R3 108,542,942 11,676,683 9.30 Class R4 182,738,003 19,618,165 9.31 Class R5 45,588,984 4,896,103 9.31 Class W 3,363 361 9.32 - ----------------------------------------------------------------------------------------------------------------- Mid Cap Value Class A 1,745,361,398 244,325,635 7.14 Class B 164,379,864 23,826,489 6.90 Class C 54,137,367 7,844,791 6.90 Class I 15,525,593 2,138,378 7.26 Class R2 10,456,777 1,468,157 7.12 Class R3 30,952,140 4,330,118 7.15 Class R4 270,774,444 37,623,411 7.20 Class R5 65,029,360 9,020,432 7.21 Class W 3,638 506 7.19 - ----------------------------------------------------------------------------------------------------------------- Strategic Allocation Class A 1,437,164,150 157,978,918 9.10 Class B 169,089,504 18,763,641 9.01 Class C 59,278,791 6,608,282 8.97 Class I 3,946 434 9.09 Class R2 3,946 434 9.09 Class R3 3,946 434 9.09 Class R4 6,812,658 748,545 9.10 Class R5 3,946 434 9.09 - ----------------------------------------------------------------------------------------------------------------- Strategic Income Allocation Class A 148,194,341 16,594,182 8.93 Class B 18,190,751 2,036,698 8.93 Class C 5,807,175 650,672 8.92 Class R2 4,797 537 8.93 Class R3 4,797 537 8.93 Class R4 4,797 537 8.93 Class R5 4,797 537 8.93 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ----------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income Class A 175,659,037 17,625,597 9.97 Class B 3,268,605 328,166 9.96 Class C 9,463,358 951,266 9.95 Class I 202,106,353 20,252,851 9.98 Class R4 21,219 2,128 9.97 Class R5 9,399 942 9.98 Class W 303,933,095 30,493,927 9.97 - ----------------------------------------------------------------------------------------------------------------- Disciplined International Equity Class A 56,469,388 9,374,248 6.02 Class B 9,774,655 1,653,855 5.91 Class C 1,125,907 190,230 5.92 Class I 103,041,181 16,963,698 6.07 Class R2 3,062 509 6.02 Class R3 3,064 509 6.02 Class R4 60,625 9,985 6.07 Class R5 3,068 509 6.03 Class W 249,098,785 41,391,645 6.02 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 62
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Emerging Markets Bond Class A $ 9,670,545 1,370,967 $ 7.05 Class B 1,178,353 167,178 7.05 Class C 190,923 27,123 7.04 Class I 65,282,310 9,254,282 7.05 Class R4 14,966 2,122 7.05 Class W 104,386,031 14,813,074 7.05 - ----------------------------------------------------------------------------------------------------------------- Global Bond Class A 248,748,168 40,394,613 6.16 Class B 42,399,524 6,810,424 6.23 Class C 4,294,941 695,288 6.18 Class I 205,797,902 33,497,669 6.14 Class R4 118,425 19,229 6.16 Class W 135,156,943 21,988,540 6.15 - ----------------------------------------------------------------------------------------------------------------- Global Technology Class A 68,868,177 41,145,420 1.67 Class B 15,072,741 10,575,597 1.43 Class C 1,965,181 1,374,828 1.43 Class I 4,802 2,785 1.72 Class R4 80,257 47,182 1.70 - ----------------------------------------------------------------------------------------------------------------- Partners International Select Growth Class A 190,233,626 40,703,983 4.67 Class B 29,647,619 6,606,389 4.49 Class C 3,212,928 717,874 4.48 Class I 155,259,864 32,753,046 4.74 Class R4 549,030 116,504 4.71 - ----------------------------------------------------------------------------------------------------------------- Partners International Select Value Class A 659,380,574 131,334,112 5.02 Class B 112,548,353 23,561,229 4.78 Class C 12,609,706 2,647,530 4.76 Class I 95,735,708 18,694,350 5.12 Class R4 557,748 109,344 5.10 - ----------------------------------------------------------------------------------------------------------------- Partners International Small Cap Class A 27,160,173 7,106,419 3.82 Class B 4,963,699 1,344,161 3.69 Class C 450,022 122,028 3.69 Class I 14,279,407 3,686,270 3.87 Class R4 1,481,699 383,999 3.86 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Class A 250,088,197 50,453,378 4.96 Class B 28,179,486 6,354,512 4.43 Class C 3,162,935 711,847 4.44 Class I 7,972 1,558 5.12 Class R4 782,170 152,215 5.14 Class R5 2,746 535 5.13 - ----------------------------------------------------------------------------------------------------------------- Threadneedle European Equity Class A 57,915,534 14,934,494 3.88 Class B 10,080,353 2,636,641 3.82 Class C 954,195 250,456 3.81 Class I 5,191 1,336 3.89 Class R4 13,097 3,360 3.90 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 63
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Class A $ 380,429,958 73,040,390 $ 5.21 Class B 42,166,196 8,654,662 4.87 Class C 4,754,813 985,451 4.83 Class I 3,498 666 5.25 Class R2 3,314 634 5.23 Class R3 3,322 634 5.24 Class R4 5,067,319 963,574 5.26 Class R5 3,329 634 5.25 Class W 3,342 639 5.23 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income Class A 5,428,904 749,581 7.24 Class B 648,517 89,630 7.24 Class C 57,726 7,976 7.24 Class I 3,573,485 493,000 7.25 Class R2 7,248 1,000 7.25 Class R3 7,250 1,000 7.25 Class R4 8,696 1,199 7.25 Class R5 7,248 1,000 7.25 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha Class A 2,207,567 158,009 13.97 Class B 238,583 17,116 13.94 Class C 93,733 6,724 13.94 Class I 3,445,776 246,500 13.98 Class R2 6,979 500 13.96 Class R3 6,984 500 13.97 Class R4 23,241 1,663 13.98 Class R5 6,988 500 13.98 Threadneedle International Opportunity Class A 248,481,494 38,086,295 6.52 Class B 26,534,037 4,183,815 6.34 Class C 1,937,373 308,820 6.27 Class I 72,732,880 11,020,753 6.60 Class R2 3,285 496 6.62 Class R3 3,293 496 6.64 Class R4 167,848 25,145 6.68 Class R5 3,299 496 6.65 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ----------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt Class A 67,541,537 13,860,690 4.87 Class B 4,766,940 979,243 4.87 Class C 2,312,311 475,008 4.87 - ----------------------------------------------------------------------------------------------------------------- Mid Cap Growth Class A 348,889,713 66,587,189 5.24 Class B 44,292,642 10,090,767 4.39 Class C 2,596,534 591,200 4.39 Class I 53,382,926 9,727,776 5.49 Class R4 2,610,805 484,792 5.39 - ----------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond Class A 583,790,472 173,452,947 3.37 Class B 19,621,893 5,829,378 3.37 Class C 5,593,015 1,661,152 3.37 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 64
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE - ----------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income Class A $2,135,093,331 574,689,338 $ 3.72 Class B 53,720,142 14,466,113 3.71 Class C 12,329,720 3,317,475 3.72 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ----------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 138,915,998 138,948,951 1.00 - -----------------------------------------------------------------------------------------------------------------
FOR FUNDS OTHER THAN MONEY MARKET FUNDS. A fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): - Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. - Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. - Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. - Securities included in the NASDAQ National Market System for which a last- quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. - Futures and options traded on major exchanges are valued at the last- quoted sales price on their primary exchange. - Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars utilizing spot exchange rates at the close of regular trading on the Exchange. - Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the Board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. - Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. - Securities without a readily available market price and securities for which the price quotations or valuations received from other sources are deemed unreliable or not reflective of market value are valued at fair value as determined in good faith by the Board. The Board is responsible for selecting methods it believes provide fair value. - When possible, bonds are valued by a pricing service independent from the funds. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. The assets of funds-of-funds consist primarily of shares of the underlying funds, which are valued at their NAVs. Other securities held by funds-of-funds are valued as described above. FOR MONEY MARKET FUNDS. In accordance with Rule 2a-7 of the 1940 Act, all of the securities in the fund's portfolio are valued at amortized cost. The amortized cost method of valuation is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. Amortized cost does not take into consideration unrealized capital gains or losses. The Board has established procedures designed to stabilize the fund's price per share for purposes of sales and redemptions at $1, to the extent that it is reasonably possible to do so. These procedures include review of the fund's securities by the Board, at intervals deemed appropriate by it, to determine whether the fund's net asset value per share computed by using Statement of Additional Information - April 1, 2009 Page 65 available market quotations deviates from a share value of $1 as computed using the amortized cost method. The Board must consider any deviation that appears and, if it exceeds 0.5%, it must determine what action, if any, needs to be taken. If the Board determines a deviation exists that may result in a material dilution of the holdings of current shareholders or investors, or in any other unfair consequences for shareholders, it must undertake remedial action that it deems necessary and appropriate. Such action may include withholding dividends, calculating net asset value per share for purposes of sales and redemptions using available market quotations, making redemptions in kind, and selling securities before maturity in order to realize capital gains or losses or to shorten average portfolio maturity. While the amortized cost method provides certainty and consistency in portfolio valuation, it may result in valuations of securities that are either somewhat higher or lower than the prices at which the securities could be sold. This means that during times of declining interest rates the yield on the fund's shares may be higher than if valuations of securities were made based on actual market prices and estimates of market prices. Accordingly, if using the amortized cost method were to result in a lower portfolio value, a prospective investor in the fund would be able to obtain a somewhat higher yield than the investor would get if portfolio valuations were based on actual market values. Existing shareholders, on the other hand, would receive a somewhat lower yield than they would otherwise receive. The opposite would happen during a period of rising interest rates. PORTFOLIO HOLDINGS DISCLOSURE Each fund's Board and the investment manager believe that the investment ideas of the investment manager with respect to management of a fund should benefit the fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating fund trading strategies or by using fund portfolio holdings information for stock picking. However, each fund's Board also believes that knowledge of the fund's portfolio holdings can assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques. Each fund's Board has therefore adopted the investment manager's policies and approved the investment manager's procedures, including the investment manager's oversight of subadviser practices, relating to disclosure of the fund's portfolio securities. These policies and procedures are intended to protect the confidentiality of fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the fund not to provide or permit others to provide holdings information on a selective basis, and the investment manager does not intend to selectively disclose holdings information or expect that such holdings information will be selectively disclosed, except where necessary for the fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the fund and its shareholders. Although the investment manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the fund's compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the investment manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information. A complete schedule of each fund's portfolio holdings is available semi-annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of a fund's fiscal quarter, on the SEC's website. In addition, the investment manager makes publicly available information regarding a fund's top ten holdings (including name and percentage of a fund's assets invested in each such holding) and the percentage breakdown of a fund's investments by country, sector and industry, as applicable. This holdings information is generally made available through the website, marketing communications (including printed advertisements and sales literature), and/or telephone customer service centers that support the fund. This holdings information is generally as of a month-end and is not released until it is at least fifteen (15) days old. From time to time, the investment manager may make partial or complete fund holdings information that is not publicly available on the website or otherwise available in advance of the time restrictions noted above (1) to its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the fund (including, without limitation entities identified by name in the fund's prospectus or this SAI, such as custodians, auditors, subadvisers, financial printers (Cenveo, Inc., Vestek, Data Communique, Inc.), pricing services (including Reuters Pricing Service, FT Interactive Data Corporation, Bear Stearns Pricing Service, and Kenny S&P), proxy voting services (Institutional Shareholder Services), and companies that deliver or support systems that provide analytical or statistical information (including Factset Research Systems, Bloomberg, L.P.), (2) to facilitate the review and/or rating of the fund by Statement of Additional Information - April 1, 2009 Page 66 ratings and rankings agencies (including Morningstar, Inc., Thomson Financial and Lipper Inc.), (3) entities that provide trading, research or other investment related services (including Citigroup, Lehman Brothers Holdings, Merrill Lynch & Co., and Morgan Stanley), and (4) fund intermediaries that include the funds in discretionary wrap or other investment programs that request such information in order to support the services provided to investors in the programs. In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (for example, applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the fund discloses holdings information as required by federal, state or international securities laws, and may disclose holdings information in response to requests by governmental authorities, or in connection with litigation or potential litigation, a restructuring of a holding, where such disclosure is necessary to participate or explore participation in a restructuring of the holding (e.g., as part of a bondholder group), or to the issuer of a holding, pursuant to a request of the issuer or any other party who is duly authorized by the issuer. Each fund's Board has adopted the policies of the investment manager and approved the procedures Ameriprise Financial has established to ensure that the fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from the investment manager's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the fund's Board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of a fund and its shareholders, to consider any potential conflicts of interest between the fund, the investment manager, and its affiliates, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by a fund's Chief Compliance Officer or the fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re-authorize any ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the fund's shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above. Although the investment manager has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect a fund from the potential misuse of holdings information by individuals or firms in possession of that information. PROXY VOTING GENERAL GUIDELINES, POLICIES AND PROCEDURES The funds uphold a long tradition of supporting sound and principled corporate governance. For over 30 years, the Board, which consists of a majority of independent Board members, has determined policies and voted proxies. The funds' investment manager, RiverSource Investments, and the funds' administrator, Ameriprise Financial, provide support to the Board in connection with the proxy voting process. GENERAL GUIDELINES CORPORATE GOVERNANCE MATTERS -- The Board supports proxy proposals that it believes are tied to the interests of shareholders and votes against proxy proposals that appear to entrench management. For example: - The Board generally votes in favor of proposals for an independent chairman or, if the chairman is not independent, in favor of a lead independent director. - The Board supports annual election of all directors and proposals to eliminate classes of directors. - In a routine election of directors, the Board will generally vote with management's recommendations because the Board believes that management and nominating committees of independent directors are in the best position to know what qualifications are required of directors to form an effective board. However, the Board will generally vote against a nominee who has been assigned to the audit, compensation, or nominating committee if the nominee is not Statement of Additional Information - April 1, 2009 Page 67 independent of management based on established criteria. The Board will also withhold support for any director who fails to attend 75% of meetings or has other activities that appear to interfere with his or her ability to commit sufficient attention to the company and, in general, will vote against nominees who are determined to have been involved in options backdating. - The Board generally supports proposals requiring director nominees to receive a majority of affirmative votes cast in order to be elected to the board, and opposes cumulative voting based on the view that each director elected should represent the interests of all shareholders. - Votes in a contested election of directors are evaluated on a case-by-case basis. In general, the Board believes that incumbent management and nominating committees, with access to more and better information, are in the best position to make strategic business decisions. However, the Board will consider an opposing slate if it makes a compelling business case for leading the company in a new direction. SHAREHOLDER RIGHTS PLANS -- The Board generally supports shareholder rights plans based on a belief that such plans force uninvited bidders to negotiate with a company's board. The Board believes these negotiations allow time for the company to maximize value for shareholders by forcing a higher premium from a bidder, attracting a better bid from a competing bidder or allowing the company to pursue its own strategy for enhancing shareholder value. The Board supports proposals to submit shareholder rights plans to shareholders and supports limiting the vote required for approval of such plans to a majority of the votes cast. AUDITORS -- The Board values the independence of auditors based on established criteria. The Board supports a reasonable review of matters that may raise concerns regarding an auditor's service that may cause the Board to vote against a management recommendation, including, for example, auditor involvement in significant financial restatements, options backdating, material weaknesses in control, attempts to limit auditor liability or situations where independence has been compromised. STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The Board expects company management to give thoughtful consideration to providing competitive long-term employee incentives directly tied to the interest of shareholders. The Board votes against proxy proposals that it believes dilute shareholder value excessively. The Board believes that equity compensation awards can be a useful tool, when not abused, for retaining employees and giving them incentives to engage in conduct that will improve the performance of the company. In this regard, the Board generally favors minimum holding periods of stock obtained by senior management pursuant to an option plan and will vote against compensation plans for executives that it deems excessive. SOCIAL AND CORPORATE POLICY ISSUES -- The Board believes proxy proposals should address the business interests of the corporation. Shareholder proposals sometime seek to have the company disclose or amend certain business practices based purely on social or environmental issues rather than compelling business arguments. In general, the Board recognizes our fund shareholders are likely to have differing views of social and environmental issues and believes that these matters are primarily the responsibility of a company's management and its board of directors. POLICIES AND PROCEDURES The policy of the Board is to vote all proxies of the companies in which a fund holds investments. Because of the volume and complexity of the proxy voting process, including inherent inefficiencies in the process that are outside the control of the Board or the Proxy Team (below), not all proxies may be voted. The Board has implemented policies and procedures that have been reasonably designed to vote proxies and to ensure that there are no conflicts between interests of a fund's shareholders and those of the funds' principal underwriters, RiverSource Investments, or other affiliated persons. In exercising its proxy voting responsibilities, the Board may rely upon the research or recommendations of one or more third party service providers. The administration of the proxy voting process is handled by the RiverSource Proxy Administration Team ("Proxy Team"). In exercising its responsibilities, the Proxy Team may rely upon one or more third party service providers. The Proxy Team assists the Board in identifying situations where its guidelines do not clearly require a vote in a particular manner and assists in researching matters and making voting recommendations. RiverSource Investments may recommend that a proxy be voted in a manner contrary to the Board's guidelines. In making recommendations to the Board about voting on a proposal, the investment manager relies on its own investment personnel (or the investment personnel of a fund's subadviser(s)) and information obtained from an independent research firm. The investment manager makes the recommendation in writing. The process requires that Board members who are independent from the investment manager consider the recommendation and decide how to vote the proxy proposal or establish a protocol for voting the proposal. Statement of Additional Information - April 1, 2009 Page 68 On an annual basis, or more frequently as determined necessary, the Board reviews recommendations to revise the existing guidelines or add new guidelines. Recommendations are based on, among other things, industry trends and the frequency that similar proposals appear on company ballots. The Board considers management's recommendations as set out in the company's proxy statement. In each instance in which a fund votes against management's recommendation (except when withholding votes from a nominated director), the Board sends a letter to senior management of the company explaining the basis for its vote. This permits both the company's management and the Board to have an opportunity to gain better insight into issues presented by the proxy proposal(s). VOTING IN COUNTRIES OUTSIDE THE UNITED STATES (NON-U.S. COUNTRIES) -- Voting proxies for companies not domiciled in the United States may involve greater effort and cost due to the variety of regulatory schemes and corporate practices. For example, certain non-U.S. countries require securities to be blocked prior to a vote, which means that the securities to be voted may not be traded within a specified number of days before the shareholder meeting. The Board typically will not vote securities in non-U.S. countries that require securities to be blocked as the need for liquidity of the securities in the funds will typically outweigh the benefit of voting. There may be additional costs associated with voting in non-U.S. countries such that the Board may determine that the cost of voting outweighs the potential benefit. SECURITIES ON LOAN -- The Board will generally refrain from recalling securities on loan based upon its determination that the costs and lost revenue to the funds, combined with the administrative effects of recalling the securities, generally outweigh the benefit of voting the proxy. While neither the Board nor the funds' administrator assesses the economic impact and benefits of voting loaned securities on a case-by-case basis, situations may arise where the Board requests that loaned securities be recalled in order to vote a proxy. In this regard, if a proxy relates to matters that may impact the nature of a company, such as a proposed merger or acquisition, and the funds' ownership position is more significant, the Board has established a guideline to direct the funds' administrator to use its best efforts to recall such securities based upon its determination that, in these situations, the benefits of voting such proxies generally outweigh the costs or lost revenue to the funds, or any potential adverse administrative effects to the funds, of not recalling such securities. INVESTMENT IN AFFILIATED FUNDS -- Certain funds may invest in shares of other funds in the RiverSource Family of Funds (referred to in this context as "underlying funds") and may own substantial portions of these underlying funds. The proxy policy of the funds is to ensure that direct public shareholders of underlying funds control the outcome of any shareholder vote. To help manage this potential conflict of interest, recognizing that the direct public shareholders of these underlying funds may represent only a minority interest, the policy of the funds is to vote proxies of the underlying funds in the same proportion as the vote of the direct public shareholders. If there are no direct public shareholders of an underlying fund, the policy is to cast votes in accordance with instructions from the independent members of the Board. OBTAIN A PROXY VOTING RECORD Each year the funds file their proxy voting records with the SEC and make them available by August 31 for the 12-month period ending June 30 of that year. The records can be obtained without charge through riversource.com/funds or searching the website of the SEC at www.sec.gov. Statement of Additional Information - April 1, 2009 Page 69 INVESTING IN A FUND SALES CHARGE FOR FUNDS OTHER THAN MONEY MARKET FUNDS: Investors should understand that the purpose and function of the initial sales charge and distribution fee for Class A shares is the same as the purpose and function of the contingent deferred sales charge ("CDSC") and distribution fee for Class B and Class C shares. The sales charges and distribution fees applicable to each class pay for the distribution of shares of a fund. Shares of a fund are sold at the public offering price. The public offering price is the NAV of one share adjusted for the sales charge for Class A. For Class B, Class C, Class D, Class E, Class I, Class R2, Class R3, Class R4, Class R5, Class W and Class Y there is no initial sales charge so the public offering price is the same as the NAV. CLASS A - CALCULATION OF THE SALES CHARGE Sales charges are determined as shown in the following tables. The first table is organized by investment category. You can find your fund's investment category in Table 1. TABLE 9. CLASS A SALES CHARGE For all funds EXCEPT Absolute Return Currency and Income, Floating Rate, Inflation Protected Securities, Intermediate Tax-Exempt, Limited Duration Bond and Short Duration U.S. Government:
- --------------------------------------------------------------------------------- FUND-OF-FUNDS - FIXED INCOME, STATE TAX-EXEMPT FIXED INCOME, TAXABLE FIXED BALANCED, EQUITY, FUND-OF- INCOME, TAX-EXEMPT FIXED FUNDS - EQUITY INCOME ---------------------------------------------------------- FUND CATEGORY SALES CHARGE* AS A PERCENTAGE OF: - --------------------------------------------------------------------------------- PUBLIC PUBLIC OFFERING NET AMOUNT OFFERING NET AMOUNT TOTAL MARKET VALUE PRICE** INVESTED PRICE** INVESTED - --------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 4.75% 4.99% - --------------------------------------------------------------------------------- $50,000 - $99,999 4.75% 4.99% 4.25% 4.44% - --------------------------------------------------------------------------------- $100,000 - $249,999 3.50% 3.63% 3.50% 3.63% - --------------------------------------------------------------------------------- $250,000 - $499,999 2.50% 2.56% 2.50% 2.56% - --------------------------------------------------------------------------------- $500,000 - $999,999 2.00% 2.04% 2.00% 2.04% - --------------------------------------------------------------------------------- $1,000,000 or more*** 0.00% 0.00% 0.00% 0.00% - ---------------------------------------------------------------------------------
For Absolute Return Currency and Income, Floating Rate, Inflation Protected Securities, Intermediate Tax-Exempt, Limited Duration Bond and Short Duration U.S. Government:
- ----------------------------------------------------------------------------------------- SALES CHARGE* AS A PERCENTAGE OF SALES CHARGE* AS A PUBLIC OFFERING PERCENTAGE OF TOTAL MARKET VALUE PRICE** NET AMOUNT INVESTED - ----------------------------------------------------------------------------------------- Up to $49,999 3.00% 3.09% - ----------------------------------------------------------------------------------------- $50,000 - $99,999 3.00% 3.09% - ----------------------------------------------------------------------------------------- $100,000 - $249,999 2.50% 2.56% - ----------------------------------------------------------------------------------------- $250,000 - $499,999 2.00% 2.04% - ----------------------------------------------------------------------------------------- $500,000 - $999,999 1.50% 1.52% - ----------------------------------------------------------------------------------------- $1,000,000 or more*** 0.00% 0.00% - -----------------------------------------------------------------------------------------
* Because of rounding in the calculation of purchase price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. ** Purchase price includes the sales charge. *** Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial institution the following: a sales commission of up to 1.00% for a sale with a total market value of $1,000,000 to $2,999,999; a sales commission up to 0.50% for a sale of $3,000,000 to $9,999,999; and a sales commission up to 0.25% for a sale of $10,000,000 or more. Using the sales charge schedule in the table above, for Class A, the public offering price for an investment of less than $50,000, made on the last day of the most recent fiscal period, was determined as shown in the following table. The sales charge is paid to the distributor by the person buying the shares. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. Statement of Additional Information - April 1, 2009 Page 70 TABLE 10. PUBLIC OFFERING PRICE
PUBLIC NET ASSET 1.0 MINUS MAXIMUM OFFERING FUND VALUE SALES CHARGE PRICE - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ---------------------------------------------------------------------------------------------- Income Builder Basic Income $ 8.24 0.9525 $ 8.65 - ---------------------------------------------------------------------------------------------- Income Builder Enhanced Income 7.60 0.9525 7.98 - ---------------------------------------------------------------------------------------------- Income Builder Moderate Income 7.86 0.9525 8.25 - ---------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 6.49 0.9425 6.89 - ---------------------------------------------------------------------------------------------- Portfolio Builder Conservative 8.51 0.9525 8.93 - ---------------------------------------------------------------------------------------------- Portfolio Builder Moderate 7.58 0.9425 8.04 - ---------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive 7.01 0.9425 7.44 - ---------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative 8.02 0.9525 8.42 - ---------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 6.03 0.9425 6.40 - ---------------------------------------------------------------------------------------------- S&P 500 Index (for Class D) 2.73 No sales charge 2.73 - ---------------------------------------------------------------------------------------------- Small Company Index 2.82 0.9425 2.99 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ---------------------------------------------------------------------------------------------- Equity Value 11.97 0.9425 12.70 - ---------------------------------------------------------------------------------------------- Partners Small Cap Growth 3.88 0.9425 4.12 - ---------------------------------------------------------------------------------------------- Precious Metals and Mining 11.92 0.9425 12.65 - ---------------------------------------------------------------------------------------------- Small Cap Advantage 4.03 0.9425 4.28 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ---------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 17.25 0.9425 18.30 - ---------------------------------------------------------------------------------------------- Retirement Plus 2010 9.51 0.9425 10.09 - ---------------------------------------------------------------------------------------------- Retirement Plus 2015 9.71 0.9425 10.30 - ---------------------------------------------------------------------------------------------- Retirement Plus 2020 9.61 0.9425 10.20 - ---------------------------------------------------------------------------------------------- Retirement Plus 2025 9.65 0.9425 10.24 - ---------------------------------------------------------------------------------------------- Retirement Plus 2030 9.71 0.9425 10.30 - ---------------------------------------------------------------------------------------------- Retirement Plus 2035 9.61 0.9425 10.20 - ---------------------------------------------------------------------------------------------- Retirement Plus 2040 9.51 0.9425 10.09 - ---------------------------------------------------------------------------------------------- Retirement Plus 2045 9.64 0.9425 10.23 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ---------------------------------------------------------------------------------------------- High Yield Bond 2.74 0.9525 2.88 - ---------------------------------------------------------------------------------------------- Partners Aggressive Growth 10.59 0.9425 11.24 - ---------------------------------------------------------------------------------------------- Partners Fundamental Value 6.06 0.9425 6.43 - ---------------------------------------------------------------------------------------------- Partners Select Value 4.88 0.9425 5.18 - ---------------------------------------------------------------------------------------------- Partners Small Cap Equity 5.38 0.9425 5.71 - ---------------------------------------------------------------------------------------------- Partners Small Cap Value 4.73 0.9425 5.02 - ---------------------------------------------------------------------------------------------- Short Duration U.S. Government 4.74 0.9700 4.89 - ---------------------------------------------------------------------------------------------- U.S. Government Mortgage 4.99 0.9525 5.24 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ---------------------------------------------------------------------------------------------- Dividend Opportunity 7.72 0.9425 8.19 - ---------------------------------------------------------------------------------------------- Real Estate 11.42 0.9425 12.12 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ---------------------------------------------------------------------------------------------- Cash Management 1.00 No sales charge 1.00 - ---------------------------------------------------------------------------------------------- Disciplined Equity 5.88 0.9425 6.24 - ---------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 8.39 0.9425 8.90 - ---------------------------------------------------------------------------------------------- Disciplined Small Cap Value 8.76 0.9425 9.29 - ---------------------------------------------------------------------------------------------- Floating Rate 8.97 0.9700 9.25 - ----------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 71
PUBLIC NET ASSET 1.0 MINUS MAXIMUM OFFERING FUND VALUE SALES CHARGE PRICE - ---------------------------------------------------------------------------------------------- Growth $27.22 0.9425 $28.88 - ---------------------------------------------------------------------------------------------- Income Opportunities 9.34 0.9525 9.81 - ---------------------------------------------------------------------------------------------- Inflation Protected Securities 10.27 0.9700 10.59 - ---------------------------------------------------------------------------------------------- Large Cap Equity 4.52 0.9425 4.80 - ---------------------------------------------------------------------------------------------- Large Cap Value 4.18 0.9425 4.44 - ---------------------------------------------------------------------------------------------- Limited Duration Bond 9.34 0.9700 9.63 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ---------------------------------------------------------------------------------------------- California Tax-Exempt 4.90 0.9525 5.14 - ---------------------------------------------------------------------------------------------- Diversified Bond 4.65 0.9525 4.88 - ---------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 5.11 0.9525 5.36 - ---------------------------------------------------------------------------------------------- New York Tax-Exempt 4.85 0.9525 5.09 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ---------------------------------------------------------------------------------------------- Balanced 9.06 0.9425 9.61 - ---------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 7.65 0.9425 8.12 - ---------------------------------------------------------------------------------------------- Disciplined Large Cap Value 9.14 0.9425 9.70 - ---------------------------------------------------------------------------------------------- Diversified Equity Income 9.31 0.9425 9.88 - ---------------------------------------------------------------------------------------------- Mid Cap Value 7.14 0.9425 7.58 - ---------------------------------------------------------------------------------------------- Strategic Allocation 9.10 0.9425 9.66 - ---------------------------------------------------------------------------------------------- Strategic Income Allocation 8.93 0.9525 9.38 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ---------------------------------------------------------------------------------------------- Absolute Return Currency and Income 9.97 0.9700 10.28 - ---------------------------------------------------------------------------------------------- Disciplined International Equity 6.02 0.9425 6.39 - ---------------------------------------------------------------------------------------------- Emerging Markets Bond 7.05 0.9525 7.40 - ---------------------------------------------------------------------------------------------- Global Bond 6.16 0.9525 6.47 - ---------------------------------------------------------------------------------------------- Global Technology 1.67 0.9425 1.77 - ---------------------------------------------------------------------------------------------- Partners International Select Growth 4.67 0.9425 4.95 - ---------------------------------------------------------------------------------------------- Partners International Select Value 5.02 0.9425 5.33 - ---------------------------------------------------------------------------------------------- Partners International Small Cap 3.82 0.9425 4.05 - ---------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 4.96 0.9425 5.26 - ---------------------------------------------------------------------------------------------- Threadneedle European Equity 3.88 0.9425 4.12 - ---------------------------------------------------------------------------------------------- Threadneedle Global Equity 5.21 0.9425 5.53 - ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 7.24 0.9425 7.68 - ---------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 13.97 0.9425 14.82 - ---------------------------------------------------------------------------------------------- Threadneedle International Opportunity 6.52 0.9425 6.92 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ---------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 4.87 0.9700 5.02 - ---------------------------------------------------------------------------------------------- Mid Cap Growth 5.24 0.9425 5.56 - ---------------------------------------------------------------------------------------------- Tax-Exempt Bond 3.37 0.9525 3.54 - ---------------------------------------------------------------------------------------------- Tax-Exempt High Income 3.72 0.9525 3.91 - ---------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ---------------------------------------------------------------------------------------------- Tax-Exempt Money Market 1.00 No sales charge 1.00 - ----------------------------------------------------------------------------------------------
CLASS A - LETTER OF INTENT (LOI) If you intend to invest $50,000 or more over a period of time, you may be able to reduce the sales charge for investments in Class A by completing a LOI form and committing to invest a certain amount. The LOI must be filed with and accepted in good order by the distributor. The LOI can start at any time and you will have up to 13 months to fulfill your commitment. Existing Rights of Accumulation (ROA) can be included in your LOI. For example, a shareholder currently has $60,000 ROA in a fund in the RiverSource Family of Funds. Shareholder completes an LOI to invest $100,000 in funds Statement of Additional Information - April 1, 2009 Page 72 (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in funds' Class A shares in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Your investments will be charged the sales charge that applies to the amount you have committed to invest under the LOI. Five percent of the commitment amount will be placed in escrow. The LOI will remain in effect for the entire 13 months, even if you reach your commitment amount. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. Once the LOI has ended, future sales charges will be determined by ROA or the total value of the new investment combined with the market value of the existing RiverSource fund investments as described in the prospectus. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. The commitment amount does not include purchases in any class of funds other than Class A; does not include any new reinvested dividends and directed dividends earned in any funds during the 13-month period; purchases in funds held within a wrap product; and purchases of RiverSource Cash Management Fund and RiverSource Tax-Exempt Money Market Fund unless they are subsequently exchanged to Class A shares of a RiverSource fund within the 13 month period. A LOI is not an option (absolute right) to buy shares. If you purchase shares through different channels, for example, in a brokerage account or through a third party, you must inform your financial institution in writing about the LOI when placing any purchase orders during the period of the LOI. If you do not complete and file the LOI form, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. CLASS A SHARES Class A shares may be sold at net asset value to certain persons since such sales require less sales effort and lower sales-related expenses as compared with sales to the general public. If you are eligible to purchase Class A shares without a sales charge, you should inform your financial advisor, financial intermediary or the transfer agent of such eligibility and be prepared to provide proof thereof. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - Shareholders whose original purchase was in a Strategist fund merged into a RiverSource fund in 2000. - Participants of "eligible employee benefit plans" including 403(b) plans for which Ameriprise Financial Services, Inc. (Ameriprise Financial Services) serves as broker-dealer, and the school district or group received a written proposal from Ameriprise Financial Services between November 1, 2007 and December 31, 2008 (each a Qualifying 403(b) Plan). In order for participants in one of these 403(b) plans to receive this waiver, at least one participant account of the 403(b) plan must have been funded at Ameriprise Financial Services prior to December 31, 2009. This waiver may be discontinued for any Qualifying 403(b) Plan, in the sole discretion of the distributor, after December 31, 2009. - To participants in retirement and benefit plans made through financial intermediaries that perform participant recordkeeping or other administrative services for the plans and that have entered into arrangements with the funds and/or the distributor specifically for such purchases. CLASS B SHARES Class B shares have a CDSC for six years. For Class B shares purchased prior to May 21, 2005, those shares will convert to Class A shares in the ninth calendar year of ownership. For Class B shares purchased beginning May 21, 2005, those shares will convert to Class A shares one month after the eighth year of ownership. CLASS C SHARES Class C shares are available to all investors. Class C shares are sold without a front-end sales charge. For Class C shares, a 1% CDSC may apply if shares are sold within one year after purchase. Class C shares are subject to a distribution fee. CLASS D SHARES Class D shares are offered through wrap fee programs or other investment products. Class D shares are sold without a front-end sales charge or CDSC. Class D shares are subject to a distribution fee. CLASS E SHARES Class E shares are offered to qualifying institutional investors and brokerage accounts. Class E shares are sold without a front-end sales charge or CDSC. Class E shares are subject to a plan administration fee. CLASS I SHARES Class I shares are offered to qualifying institutional investors. Class I shares are sold without a front-end sales charge or CDSC. Statement of Additional Information - April 1, 2009 Page 73 CLASS R SHARES Class R2, Class R3, Class R4 and Class R5 shares are offered to certain institutional investors. Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or a CDSC. Class R2 and Class R3 shares are subject to a distribution fee. Class R2, Class R3 and R4 shares are subject to a plan administration fee. The following investors are eligible to purchase Class R2, Class R3, Class R4 and Class R5 shares: - Qualified employee benefit plans; - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code; - Nonqualified deferred compensation plans; - State sponsored college savings plans established under Section 529 of the Internal Revenue Code; - Health Savings Accounts (HSAs) created pursuant to public law 108-173. Additionally, the following eligible investors may purchase Class R5 shares: - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds); and - Bank Trusts. CLASS W SHARES Class W shares are offered to qualifying discretionary accounts. Class W shares are sold without a front-end sales charge or CDSC. Class W shares are subject to a distribution fee. CLASS Y SHARES Class Y shares are offered to certain institutional investors. Class Y shares are sold without a front-end sales charge or a CDSC. Class Y shares are subject to a plan administration fee. The following investors are eligible to purchase Class Y shares: - Qualified employee benefit plans; - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code; - Nonqualified deferred compensation plans; and - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. In addition, for Class I, Class R and Class W shares, the distributor, in its sole discretion, may accept investments from other purchasers not listed above. REJECTION OF BUSINESS Each fund and RiverSource Distributors, Inc. reserve the right to reject any business, in its sole discretion. SELLING SHARES You have a right to sell your shares at any time. For an explanation of sales procedures, please see the applicable prospectus. During an emergency, the Board can suspend the computation of NAV, stop accepting payments for purchase of shares, or suspend the duty of a fund to redeem shares for more than seven days. Such emergency situations would occur if: - The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or - Disposal of a fund's securities is not reasonably practicable or it is not reasonably practicable for the fund to determine the fair value of its net assets, or, - The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should a fund stop selling shares, the Board may make a deduction from the value of the assets held by the fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all shareholders. Each fund has elected to be governed by Rule 18f-1 under the 1940 Act, which obligates the fund to redeem shares in cash, with respect to any one shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the net assets of the Statement of Additional Information - April 1, 2009 Page 74 fund at the beginning of the period. Although redemptions in excess of this limitation would normally be paid in cash, the fund reserves the right to make these payments in whole or in part in securities or other assets in case of an emergency, or if the payment of a redemption in cash would be detrimental to the existing shareholders of the fund as determined by the Board. In these circumstances, the securities distributed would be valued as set forth in this SAI. Should a fund distribute securities, a shareholder may incur brokerage fees or other transaction costs in converting the securities to cash. PAY-OUT PLANS You can use any of several pay-out plans to redeem your investment in regular installments. If you redeem shares, you may be subject to a contingent deferred sales charge as discussed in the prospectus. While the plans differ on how the pay-out is figured, they all are based on the redemption of your investment. Net investment income dividends and any capital gain distributions will automatically be reinvested, unless you elect to receive them in cash. If you redeem an IRA or a qualified retirement account, certain restrictions, federal tax penalties, and special federal income tax reporting requirements may apply. You should consult your tax advisor about this complex area of the tax law. Applications for a systematic investment in a class of a fund subject to a sales charge normally will not be accepted while a pay-out plan for any of those funds is in effect. Occasional investments, however, may be accepted. To start any of these plans, please consult your financial institution. Your authorization must be received at least five days before the date you want your payments to begin. Payments will be made on a monthly, bimonthly, quarterly, semiannual, or annual basis. Your choice is effective until you change or cancel it. Statement of Additional Information - April 1, 2009 Page 75 CAPITAL LOSS CARRYOVER For federal income tax purposes, certain funds had total capital loss carryovers at the end of the most recent fiscal period that, if not offset by subsequent capital gains, will expire as follows. Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the funds are permitted to treat net capital losses realized between November 1 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. The total capital loss carryovers below include post- October losses, if applicable. It is unlikely that the Board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 11. CAPITAL LOSS CARRYOVER
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2009 IN 2010 IN 2011 IN 2012 IN 2013 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - -------------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income $ 8,559,573 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income 13,065,266 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income 19,970,659 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 10,806,229 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative 192,230 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 10,391,694 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive 13,834,899 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative 2,290,537 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 11,256,800 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- S&P 500 Index 5,965,014 0 942,797 0 0 2,640,220 - -------------------------------------------------------------------------------------------------------------------------- Small Company Index 22,588,242 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2014 IN 2015 IN 2016 IN 2017 IN 2018 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ------------------------------------------------------------------------------------------------------------ Income Builder Basic Income 0 0 0 $ 2,942,103 $ 5,617,470 - ------------------------------------------------------------------------------------------------------------ Income Builder Enhanced Income 0 0 0 5,920,892 7,144,374 - ------------------------------------------------------------------------------------------------------------ Income Builder Moderate Income 0 0 0 7,376,558 12,594,101 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Aggressive 0 0 0 2,936,474 7,869,755 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Conservative 0 0 0 0 192,230 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate 0 0 0 7,597,638 2,794,056 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive 0 0 0 1,997,917 11,836,982 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative 0 0 0 1,062,939 1,227,598 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Total Equity 0 0 0 3,787,911 7,468,889 - ------------------------------------------------------------------------------------------------------------ S&P 500 Index 235,890 66,065 0 0 2,080,042 - ------------------------------------------------------------------------------------------------------------ Small Company Index 0 0 0 0 22,588,242 - ------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL LOSS AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CARRY- EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING OVERS IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - -------------------------------------------------------------------------------------------------------------------------- Equity Value 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 6,394,289 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining 4,849,573 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage 37,352,005 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING IN 2013 IN 2014 IN 2015 IN 2016 IN 2017 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------------ Equity Value -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------ Partners Small Cap Growth -- -- -- -- 6,394,289 - ------------------------------------------------------------------------------------------------------------ Precious Metals and Mining -- -- -- -- 4,849,573 - ------------------------------------------------------------------------------------------------------------ Small Cap Advantage -- -- -- -- 37,352,005 - ------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 76
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - -------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity $ 1,239,657 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 103,637 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - -------------------------------------------------------------------------------------------------------------------------- High Yield Bond 1,376,549,063 0 226,001,198 517,121,802 552,664,309 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 1,129,815,010 0 763,613,904 315,348,051 23,741,111 27,111,944 - -------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Partners Select Value 15,718,808 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 20,350,484 0 0 14,147,440 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value 5,425,972 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government 183,673,285 0 117,356,906 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 210,465 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - -------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity 343,927,468 0 0 0 343,927,468 0 - -------------------------------------------------------------------------------------------------------------------------- Real Estate 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - -------------------------------------------------------------------------------------------------------------------------- Cash Management 8,101,462 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Equity 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 17,293,096 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 3,831,834 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Floating Rate 17,326,421 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Growth 202,027,584 0 0 0 178,158,939 0 - -------------------------------------------------------------------------------------------------------------------------- Income Opportunities 12,433,543 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Inflation Protected Securities 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Large Cap Equity 235,009,471 0 60,717,128 20,982,455 9,473,267 0 - -------------------------------------------------------------------------------------------------------------------------- Large Cap Value 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Limited Duration Bond 2,491,213 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2013 IN 2014 IN 2015 IN 2016 IN 2017 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - --------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 0 0 0 0 1,239,657 - --------------------------------------------------------------------------------------------------------- Retirement Plus 2010 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2015 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2020 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2025 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2030 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2035 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Retirement Plus 2040 0 0 0 0 103,637 - --------------------------------------------------------------------------------------------------------- Retirement Plus 2045 -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - --------------------------------------------------------------------------------------------------------- High Yield Bond 0 19,078,058 0 6,050,907 55,632,789 - --------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 0 0 0 0 0 - --------------------------------------------------------------------------------------------------------- Partners Fundamental Value -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Partners Select Value 0 0 0 0 15,718,808 - --------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 0 0 0 0 6,203,044 - --------------------------------------------------------------------------------------------------------- Partners Small Cap Value 0 0 0 0 5,425,972 - --------------------------------------------------------------------------------------------------------- Short Duration U.S. Government 36,267,962 20,469,230 9,579,187 0 0 - --------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 0 0 0 0 210,465 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - --------------------------------------------------------------------------------------------------------- Dividend Opportunity 0 0 0 0 0 - --------------------------------------------------------------------------------------------------------- Real Estate -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - --------------------------------------------------------------------------------------------------------- Cash Management 0 0 0 6,554 8,094,908 - --------------------------------------------------------------------------------------------------------- Disciplined Equity -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 0 93,125 21,904 2,186,828 14,991,239 - --------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 0 0 0 554,680 3,277,154 - --------------------------------------------------------------------------------------------------------- Floating Rate 0 0 33,562 3,488,601 13,804,258 - --------------------------------------------------------------------------------------------------------- Growth 0 0 0 0 23,868,645 - --------------------------------------------------------------------------------------------------------- Income Opportunities 0 0 0 1,946,556 10,486,987 - --------------------------------------------------------------------------------------------------------- Inflation Protected Securities -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Large Cap Equity 0 0 0 0 143,836,621 - --------------------------------------------------------------------------------------------------------- Large Cap Value -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Limited Duration Bond 0 0 2,205,797 0 285,416 - ---------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 77
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - -------------------------------------------------------------------------------------------------------------------------- California Tax-Exempt $ 1,415,210 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Diversified Bond 125,823,517 0 56,247,571 49,658,521 0 5,227,159 - -------------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 2,765,793 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt 102,852 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - -------------------------------------------------------------------------------------------------------------------------- Balanced 718,823,723 0 0 294,910,142 368,676,980 24,886,878 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 5,736,409 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 24,253 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Diversified Equity Income 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Mid Cap Value 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Strategic Allocation 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation 11,089 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - -------------------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Disciplined International Equity 23,521,188 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond 2,399,388 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Global Bond 6,492,562 0 0 3,665,053 0 0 - -------------------------------------------------------------------------------------------------------------------------- Global Technology 348,953,680 0 250,345,326 81,299,227 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners International Select Growth 57,544,459 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Partners International Select Value 0 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Partners International Small Cap 16,740,416 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 8,838,403 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 45,298,067 0 19,489,378 16,514,518 5,021,215 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 404,243,287 0 170,490,067 143,634,885 30,509,951 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 182,867 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 577,229 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 246,866,293 0 137,301,860 59,231,998 38,262,972 0 - -------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2013 IN 2014 IN 2015 IN 2016 IN 2017 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - --------------------------------------------------------------------------------------------------------- California Tax-Exempt 0 0 0 $359,905 $1,055,305 - --------------------------------------------------------------------------------------------------------- Diversified Bond 2,996,287 9,840,520 0 0 1,853,459 - --------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 1,199,755 913,006 3,601 0 649,431 - --------------------------------------------------------------------------------------------------------- New York Tax-Exempt 0 0 0 3,668 99,184 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - --------------------------------------------------------------------------------------------------------- Balanced 0 0 0 0 30,349,723 - --------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 0 0 0 0 5,736,409 - --------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 0 0 0 24,253 0 - --------------------------------------------------------------------------------------------------------- Diversified Equity Income -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Mid Cap Value -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Strategic Allocation -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Strategic Income Allocation 0 0 0 0 11,089 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - --------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Disciplined International Equity 0 0 0 23,521,188 0 - --------------------------------------------------------------------------------------------------------- Emerging Markets Bond 0 0 0 2,399,388 0 - --------------------------------------------------------------------------------------------------------- Global Bond 0 498,771 0 2,328,738 0 - --------------------------------------------------------------------------------------------------------- Global Technology 0 0 0 17,309,127 0 - --------------------------------------------------------------------------------------------------------- Partners International Select Growth 0 0 0 57,544,459 0 - --------------------------------------------------------------------------------------------------------- Partners International Select Value -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- Partners International Small Cap 0 0 0 16,740,416 0 - --------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 0 0 0 8,838,403 0 - --------------------------------------------------------------------------------------------------------- Threadneedle European Equity 0 0 0 4,272,956 0 - --------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 0 0 0 59,608,384 0 - --------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 0 0 0 182,867 0 - --------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 0 0 0 577,229 0 - --------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 0 0 0 12,069,463 0 - ---------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 78
TOTAL AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT CAPITAL LOSS EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND CARRYOVERS IN 2008 IN 2009 IN 2010 IN 2011 IN 2012 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - -------------------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt $ 538,998 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Mid Cap Growth 21,448,607 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 9,775,831 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 30,950,938 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - -------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 675 0 0 0 0 0 - -------------------------------------------------------------------------------------------------------------------------- AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING FUND IN 2013 IN 2014 IN 2015 IN 2016 IN 2017 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - --------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 0 $ 177,580 0 $ 361,418 0 - --------------------------------------------------------------------------------------------------------- Mid Cap Growth 0 0 0 21,448,607 0 - --------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 0 729,270 0 9,046,561 0 - --------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 0 0 0 30,950,938 0 - --------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - --------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 675 0 0 0 0 - ---------------------------------------------------------------------------------------------------------
TAXES SUBCHAPTER M COMPLIANCE Each fund has elected to be taxed under Subchapter M of the Internal Revenue Code as a regulated investment company. Each fund intends to maintain its qualification as a regulated investment company by meeting certain requirements relating to distributions, source of income, and asset diversification. Distribution requirements include distributing at least 90% of the fund's investment company taxable income and tax-exempt ordinary income to fund shareholders each taxable year. The source of income rules require that at least 90% of the fund's gross income be derived from dividends, interest, certain payments with respect to securities loans, gain from the sale or other disposition of stock, securities or foreign currencies (subject to certain limitations), and certain other income derived with respect to its business of investing in stock, securities or currencies, and net income from certain interests in qualified publicly traded partnerships. Asset diversification requirements are met when the Fund owns, at the end of each quarter of its taxable year, a portfolio, 50% of which includes cash and cash items, U.S. government securities, securities of other regulated investment companies and, securities of other issuers in which the fund has not invested more than 5% of the value of the fund's assets (or 10% of the value of the outstanding voting securities of any one issuer). Also, no more than 25% of the fund's assets may be invested in the securities of any one issuer or two or more issuers which the fund controls and which are engaged in the same or similar trades or businesses (excepting U.S. government securities and securities of other regulated investment companies) or the securities of one or more qualified publicly traded partnerships. This is a simplified description of the relevant laws. If the fund fails to qualify as a regulated investment company under Subchapter M, the fund would be taxed as a corporation on the entire amount of its taxable income without a dividends paid deduction. Also, "all of" a shareholder's distributions would become ordinary dividends (or could be treated as a return of capital, if there weren't sufficient earnings and profits). Under federal tax law, by the end of a calendar year a fund must declare and pay dividends representing 98% of ordinary income for that calendar year and 98% of net capital gains (both long-term and short-term) for the 12-month period ending Oct. 31 of that calendar year. The fund is subject to an excise tax equal to 4% of the excess, if any, of the amount required to be distributed over the amount actually distributed. Each fund intends to comply with federal tax law and avoid any excise tax. For purposes of the excise tax distributions, section 988 ordinary gains and losses are distributable based on an Oct. 31 year end. This is an exception to the general rule that ordinary income is paid based on a calendar year end. The fund intends to distribute sufficient dividends within each calendar year, as well as on a fiscal year basis, to avoid income and excise taxes. A fund may be subject to U.S. taxes resulting from holdings in passive foreign investment companies (PFIC). To avoid unfavorable tax consequences, a fund may make an election to mark to market its PFIC investments. A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by a fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of a fund's total assets at the close of its fiscal year consists of securities of foreign corporations, the fund will be eligible to file an election with the Internal Revenue Service (IRS) under which shareholders of the fund would be required to include their pro rata portions of foreign taxes withheld by foreign countries as gross income in their federal income tax returns. These pro rata portions of foreign taxes withheld may be taken as a credit or deduction in computing the shareholders' federal income taxes. If the election is filed, the fund will report to its shareholders the per share amount of such foreign taxes withheld and the amount of foreign tax credit or deduction available for federal income tax purposes. Statement of Additional Information - April 1, 2009 Page 79 A fund may use equalization payments to satisfy its requirement to make distributions of net investment income and capital gain net income. Equalization payments occur when a fund allocates a portion of its net investment income and realized capital gain net income to redemptions of fund shares. These payments reduce the amount of taxable distributions paid to shareholders. The IRS has not issued any guidance concerning the methods used to allocate investment income and capital gain to redemptions of shares. If the IRS determines that a fund is using an improper method of allocation for these purposes, the fund may be liable for additional federal income tax. This is a brief summary that relates to federal income taxation only. Shareholders should consult their tax advisor as to the application of federal, state, and local income tax laws to fund distributions. See Appendix B for more information regarding state tax-exempt funds. EXCHANGES For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. If you sell shares for less than their cost, the difference is a capital loss. If you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held more than one year). A capital loss on a sale or redemption of a security in a nonqualified account may be disallowed for tax purposes if the same or a substantially identical security is purchased or acquired within 30 days before or after the date of the loss transaction. This is called a wash sale. When a wash sale occurs, the loss is disallowed to the extent of shares repurchased, and the cost basis on the security acquired is increased by the amount of the loss that is disallowed. The loss is disallowed in a nonqualified account whether the purchase is in a nonqualified account or in an IRA or Roth IRA, however, an individual's cost basis in an IRA or Roth IRA is not increased due to the wash sale rules. The wash sale rules apply only to capital losses. Sales of securities that result in capital gains are generally recognized when incurred. If you buy Class A shares and within 91 days exchange into another fund, you may not include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. FOR EXAMPLE You purchase 100 shares of an equity fund having a public offering price of $10.00 per share. With a sales load of 5.75%, you pay $57.50 in sales load. With a NAV of $9.425 per share, the value of your investment is $942.50. Within 91 days of purchasing that fund, you decide to exchange out of that fund, now at a NAV of $11.00 per share, up from the original NAV of $9.425, and purchase a second fund, at a NAV of $15.00 per share. The value of your investment is now $1,100.00 ($11.00 x 100 shares). You cannot use the $57.50 paid as a sales load when calculating your tax gain or loss in the sale of the first fund shares. So instead of having a $100.00 gain ($1,100.00 - $1,000.00), you have a $157.50 gain ($1,100.00 - $942.50). You can include the $57.50 sales load in the calculation of your tax gain or loss when you sell shares in the second fund. The following paragraphs provide information based on a fund's investment category. You can find your fund's investment category in Table 1. FOR STATE TAX-EXEMPT FIXED INCOME AND TAX-EXEMPT FIXED INCOME FUNDS, all distributions of net investment income during the fund's fiscal year will have the same percentage designated as tax-exempt. This percentage is expected to be substantially the same as the percentage of tax-exempt income actually earned during any particular distribution period. FOR BALANCED, EQUITY, FUNDS-OF-FUNDS, TAXABLE MONEY MARKET AND TAXABLE FIXED INCOME FUNDS, if you have a nonqualified investment in a fund and you wish to move part or all of those shares to an IRA or qualified retirement account in the fund, you can do so without paying a sales charge. However, this type of exchange is considered a redemption of shares and may result in a gain or loss for tax purposes. See wash sale discussion above. In addition, this type of exchange may result in an excess contribution under IRA or qualified plan regulations if the amount exchanged exceeds annual contribution limitations. You should consult your tax advisor for further details about this complex subject. DISTRIBUTIONS DIVIDENDS Net investment income dividends received should be treated as dividend income for federal income tax purposes. Corporate shareholders are generally entitled to a deduction equal to 70% of that portion of a fund's dividend that is attributable to dividends the fund received from domestic (U.S.) securities. If there is debt-financed portfolio stock, that is, bank financing is used to purchase long securities, the 70% dividends received deduction would be reduced by the average amount of portfolio indebtedness divided by the average adjusted basis in the stock. This does not impact the qualified dividend income Statement of Additional Information - April 1, 2009 Page 80 available to individual shareholders. For the most recent fiscal period, net investment income dividends qualified for the corporate deduction as shown in the following table. Only certain qualified dividend income (QDI) will be subject to the 15% and 0% (for lower-bracket taxpayers) tax rates for 2008-2010. QDI is dividends earned from domestic corporations and qualified foreign corporations. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established U.S. securities market (ADRs), and certain other corporations eligible for relief under an income tax treaty with the U.S. that includes an exchange of information agreement. PFICs are excluded from this treatment. Holding periods for shares must also be met to be eligible for QDI treatment (more than 60 days for common stock and more than 90 days for certain preferred's dividends). The QDI for individuals for the most recent fiscal period is shown in the table below. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 12. CORPORATE DEDUCTION AND QUALIFIED DIVIDEND INCOME
PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - -------------------------------------------------------------------------------------------------- Income Builder Basic Income 13.39% 15.15% - -------------------------------------------------------------------------------------------------- Income Builder Enhanced Income 10.32 14.00 - -------------------------------------------------------------------------------------------------- Income Builder Moderate Income 14.02 16.58 - -------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 36.36 52.12 - -------------------------------------------------------------------------------------------------- Portfolio Builder Conservative 5.23 7.20 - -------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 12.95 18.45 - -------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive 20.91 29.91 - -------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative 8.87 12.44 - -------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 69.21 99.47 - -------------------------------------------------------------------------------------------------- S&P 500 Index 100.00 100.00 - -------------------------------------------------------------------------------------------------- Small Company Index 100.00 100.00 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - -------------------------------------------------------------------------------------------------- Equity Value 100.00 100.00 - -------------------------------------------------------------------------------------------------- Partners Small Cap Growth 7.42 7.52 - -------------------------------------------------------------------------------------------------- Precious Metals and Mining 1.58 7.77 - -------------------------------------------------------------------------------------------------- Small Cap Advantage 21.98 23.84 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - -------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 0 0 - -------------------------------------------------------------------------------------------------- Retirement Plus 2010 23.79 26.60 - -------------------------------------------------------------------------------------------------- Retirement Plus 2015 29.19 33.29 - -------------------------------------------------------------------------------------------------- Retirement Plus 2020 31.05 36.77 - -------------------------------------------------------------------------------------------------- Retirement Plus 2025 35.39 42.66 - -------------------------------------------------------------------------------------------------- Retirement Plus 2030 38.20 46.35 - -------------------------------------------------------------------------------------------------- Retirement Plus 2035 37.21 44.99 - -------------------------------------------------------------------------------------------------- Retirement Plus 2040 36.10 43.63 - -------------------------------------------------------------------------------------------------- Retirement Plus 2045 33.06 39.67 - --------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 81
PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - -------------------------------------------------------------------------------------------------- High Yield Bond 0% 0% - -------------------------------------------------------------------------------------------------- Partners Aggressive Growth 0 0 - -------------------------------------------------------------------------------------------------- Partners Fundamental Value 100.00 100.00 - -------------------------------------------------------------------------------------------------- Partners Select Value 28.75 30.44 - -------------------------------------------------------------------------------------------------- Partners Small Cap Equity 0 0 - -------------------------------------------------------------------------------------------------- Partners Small Cap Value 53.50 83.57 - -------------------------------------------------------------------------------------------------- Short Duration U.S. Government 0 0 - -------------------------------------------------------------------------------------------------- U.S. Government Mortgage 0 0 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - -------------------------------------------------------------------------------------------------- Dividend Opportunity 100.00 100.00 - -------------------------------------------------------------------------------------------------- Real Estate 1.69 15.81 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - -------------------------------------------------------------------------------------------------- Cash Management 0 0 - -------------------------------------------------------------------------------------------------- Disciplined Equity 100.00 100.00 - -------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 100.00 100.00 - -------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 100.00 100.00 - -------------------------------------------------------------------------------------------------- Floating Rate 0 0 - -------------------------------------------------------------------------------------------------- Growth 100.00 100.00 - -------------------------------------------------------------------------------------------------- Income Opportunities 0 0 - -------------------------------------------------------------------------------------------------- Inflation Protected Securities 0 0 - -------------------------------------------------------------------------------------------------- Large Cap Equity 100.00 100.00 - -------------------------------------------------------------------------------------------------- Large Cap Value 100.00 100.00 - -------------------------------------------------------------------------------------------------- Limited Duration Bond 0 0 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - -------------------------------------------------------------------------------------------------- California Tax-Exempt 0 0 - -------------------------------------------------------------------------------------------------- Diversified Bond 0 0 - -------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 0 0 - -------------------------------------------------------------------------------------------------- New York Tax-Exempt 0 0 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - -------------------------------------------------------------------------------------------------- Balanced 60.12 64.58 - -------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 100.00 100.00 - -------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 0 0 - -------------------------------------------------------------------------------------------------- Diversified Equity Income 100.00 100.00 - -------------------------------------------------------------------------------------------------- Mid Cap Value 100.00 100.00 - -------------------------------------------------------------------------------------------------- Strategic Allocation 52.43 76.74 - -------------------------------------------------------------------------------------------------- Strategic Income Allocation 4.53 3.90 - --------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 82
PERCENT OF DIVIDENDS QUALIFYING QUALIFIED DIVIDEND INCOME FUND FOR CORPORATE DEDUCTION FOR INDIVIDUALS - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - -------------------------------------------------------------------------------------------------- Absolute Return Currency and Income 0% 0% - -------------------------------------------------------------------------------------------------- Disciplined International Equity 0.54 100.00 - -------------------------------------------------------------------------------------------------- Emerging Markets Bond 0 0 - -------------------------------------------------------------------------------------------------- Global Bond 0 0 - -------------------------------------------------------------------------------------------------- Global Technology 0 0 - -------------------------------------------------------------------------------------------------- Partners International Select Growth 6.48 100.00 - -------------------------------------------------------------------------------------------------- Partners International Select Value 0 0 - -------------------------------------------------------------------------------------------------- Partners International Small Cap 0 0 - -------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 0 0 - -------------------------------------------------------------------------------------------------- Threadneedle European Equity 0 100.00 - -------------------------------------------------------------------------------------------------- Threadneedle Global Equity 100.00 100.00 - -------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 100.00 100.00 - -------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 0 0 - -------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 0 100.00 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - -------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 0 0 - -------------------------------------------------------------------------------------------------- Mid Cap Growth 25.80 25.95 - -------------------------------------------------------------------------------------------------- Tax-Exempt Bond 0 0 - -------------------------------------------------------------------------------------------------- Tax-Exempt High Income 0 0 - -------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - -------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 0 0 - --------------------------------------------------------------------------------------------------
CAPITAL GAINS DISTRIBUTIONS Capital gain distributions, if any, received by shareholders should be treated as long-term capital gains regardless of how long shareholders owned their shares. Short-term capital gains earned by a fund are paid to shareholders as part of their ordinary income dividend and are taxable as ordinary income. Special rates on capital gains may apply to sales of precious metals, if any, owned directly by a fund and to investments in REITs. Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable to fluctuations in exchange rates that occur between the time a fund accrues interest or other receivables, or accrues expenses or other liabilities denominated in a foreign currency and the time the fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition may be treated as ordinary or capital gains or losses. These gains or losses, referred to under the Code as "section 988" gains or losses, may increase or decrease the amount of a fund's investment company taxable income to be distributed to its shareholders as ordinary income. RETURN OF CAPITAL If a mutual fund is the holder of record of any share of stock on the record date for any dividend payable with respect to the stock, the dividend will be included in gross income by the fund as of the later of (1) the date the share became ex-dividend or (2) the date the fund acquired the share. Because the dividends on some foreign equity investments may be received some time after the stock goes ex-dividend, and in certain rare cases may never be received by the fund, this rule may cause a fund to pay income to its shareholders that it has not actually received. To the extent that the dividend is never received, the fund will take a loss at the time that a determination is made that the dividend will not be received. If a fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to its shareholders. A return of capital will generally not be taxable, however, any amounts received in excess of a shareholder's tax basis are treated as capital gain. Forms 1099 will be sent to shareholders to report any return of capital. Statement of Additional Information - April 1, 2009 Page 83 SERVICE PROVIDERS INVESTMENT MANAGEMENT SERVICES RiverSource Investments is the investment manager for each fund. Under the Investment Management Services Agreements, the investment manager, subject to the policies set by the Board, provides investment management services. For its services, the investment manager is paid a monthly fee based on the following schedule. Each class of a fund pays its proportionate share of the fee. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day. TABLE 13. INVESTMENT MANAGEMENT SERVICES AGREEMENT FEE SCHEDULE
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ 120/20 Contrarian Equity First $0.25 0.950% 0.950% Next 0.25 0.930 Next 0.50 0.910 Over 1.0 0.890 - ------------------------------------------------------------------------------------------------------------------------------ Absolute Return Currency and Income First 1.0 0.890 0.890 Next 1.0 0.865 Next 1.0 0.840 Next 3.0 0.815 Next 1.5 0.790 Next 1.5 0.775 Next 1.0 0.770 Next 5.0 0.760 Next 5.0 0.750 Next 4.0 0.740 Next 26.0 0.720 Over 50.0 0.700 - ------------------------------------------------------------------------------------------------------------------------------ Balanced First 1.0 0.530 0.530 Next 1.0 0.505 Next 1.0 0.480 Next 3.0 0.455 Next 1.5 0.430 Next 2.5 0.410 Next 5.0 0.390 Next 9.0 0.370 Over 24.0 0.350 - ------------------------------------------------------------------------------------------------------------------------------ California Tax-Exempt First 0.25 0.410 California - 0.410 Minnesota Tax-Exempt Next 0.25 0.385 Minnesota - 0.405 New York Tax-Exempt Next 0.25 0.360 New York - 0.410 Next 0.25 0.345 Next 6.5 0.320 Next 2.5 0.310 Next 5.0 0.300 Next 9.0 0.290 Next 26.0 0.270 Over 50.0 0.250 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 84
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Cash Management First $1.0 0.330% 0.285% Next 0.5 0.313 Next 0.5 0.295 Next 0.5 0.278 Next 2.5 0.260 Next 1.0 0.240 Next 1.5 0.220 Next 1.5 0.215 Next 1.0 0.190 Next 5.0 0.180 Next 5.0 0.170 Next 4.0 0.160 Over 24.0 0.150 - ------------------------------------------------------------------------------------------------------------------------------ Disciplined Equity First 1.0 0.600 Disciplined Equity - 0.575 Disciplined Large Cap Growth Next 1.0 0.575 Disciplined Large Cap Growth - 0.600 Disciplined Large Cap Value Next 1.0 0.550 Disciplined Large Cap Value - 0.600 Diversified Equity Income Next 3.0 0.525 Diversified Equity Income - 0.551 Growth Next 1.5 0.500 Growth - 0.584 Large Cap Equity Next 2.5 0.485 Large Cap Equity - 0.562 Large Cap Value Next 5.0 0.470 Large Cap Value - 0.600 Next 5.0 0.450 Next 4.0 0.425 Next 26.0 0.400 Over 50.0 0.375 - ------------------------------------------------------------------------------------------------------------------------------ Disciplined International Equity First 0.25 0.800 Disciplined International Equity - 0.790 Threadneedle European Equity Next 0.25 0.775 Threadneedle European Equity - 0.800 Threadneedle Global Equity Next 0.25 0.750 Threadneedle Global Equity - 0.789 Threadneedle Global Equity Income Next 0.25 0.725 Threadneedle Global Equity Income - 0.800 Threadneedle International Opportunity Next 1.0 0.700 Threadneedle International Opportunity - 0.793 Next 5.5 0.675 Next 2.5 0.660 Next 5.0 0.645 Next 5.0 0.635 Next 4.0 0.610 Next 26.0 0.600 Over 50.0 0.570 - ------------------------------------------------------------------------------------------------------------------------------ Disciplined Small and Mid Cap Equity First 1.0 0.700 Disciplined Small and Mid Cap Mid Cap Growth Next 1.0 0.675 Equity - 0.700 Next 1.0 0.650 Mid Cap Growth - 0.700 Next 3.0 0.625 Next 1.5 0.600 Next 2.5 0.575 Next 5.0 0.550 Next 9.0 0.525 Next 26.0 0.500 Over 50.0 0.475 - ------------------------------------------------------------------------------------------------------------------------------ Disciplined Small Cap Value First 0.25 0.850 0.850 Next 0.25 0.825 Next 0.25 0.800 Next 0.25 0.775 Next 1.0 0.750 Over 2.0 0.725 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 85
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Diversified Bond First $1.0 0.480% Diversified Bond - 0.446% Limited Duration Bond Next 1.0 0.455 Limited Duration Bond - 0.480 Next 1.0 0.430 Next 3.0 0.405 Next 1.5 0.380 Next 1.5 0.365 Next 1.0 0.360 Next 5.0 0.350 Next 5.0 0.340 Next 4.0 0.330 Next 26.0 0.310 Over 50.0 0.290 - ------------------------------------------------------------------------------------------------------------------------------ Dividend Opportunity First 0.50 0.610 0.584 Next 0.50 0.585 Next 1.0 0.560 Next 1.0 0.535 Next 3.0 0.510 Next 4.0 0.480 Next 5.0 0.470 Next 5.0 0.450 Next 4.0 0.425 Next 26.0 0.400 Over 50.0 0.375 - ------------------------------------------------------------------------------------------------------------------------------ Emerging Markets Bond First 0.25 0.720 Emerging Markets Bond - 0.720 Global Bond Next 0.25 0.695 Global Bond - 0.699 Next 0.25 0.670 Next 0.25 0.645 Next 6.5 0.620 Next 2.5 0.605 Next 5.0 0.590 Next 5.0 0.580 Next 4.0 0.560 Next 26.0 0.540 Over 50.0 0.520 - ------------------------------------------------------------------------------------------------------------------------------ Equity Value First 0.50 0.530 0.517 Next 0.50 0.505 Next 1.0 0.480 Next 1.0 0.455 Next 3.0 0.430 Over 6.0 0.400 - ------------------------------------------------------------------------------------------------------------------------------ Floating Rate First 1.0 0.610 0.610 Income Opportunities Next 1.0 0.585 Next 1.0 0.560 Next 3.0 0.535 Next 1.5 0.510 Next 1.5 0.495 Next 1.0 0.470 Next 5.0 0.455 Next 5.0 0.445 Next 4.0 0.420 Next 26.0 0.405 Over 50.0 0.380 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 86
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Global Technology First $0.25 0.720% 0.720% Next 0.25 0.695 Next 0.25 0.670 Next 0.25 0.645 Next 1.0 0.620 Over 2.0 0.595 - ------------------------------------------------------------------------------------------------------------------------------ High Yield Bond First 1.0 0.590 0.583 Next 1.0 0.565 Next 1.0 0.540 Next 3.0 0.515 Next 1.5 0.490 Next 1.5 0.475 Next 1.0 0.450 Next 5.0 0.435 Next 5.0 0.425 Next 4.0 0.400 Next 26.0 0.385 Over 50.0 0.360 - ------------------------------------------------------------------------------------------------------------------------------ Income Builder Basic Income N/A N/A N/A Income Builder Enhanced Income Income Builder Moderate Income Portfolio Builder Aggressive Portfolio Builder Conservative Portfolio Builder Moderate Portfolio Builder Moderate Aggressive Portfolio Builder Moderate Conservative Portfolio Builder Total Equity Retirement Plus 2010 Retirement Plus 2015 Retirement Plus 2020 Retirement Plus 2025 Retirement Plus 2030 Retirement Plus 2035 Retirement Plus 2040 Retirement Plus 2045 - ------------------------------------------------------------------------------------------------------------------------------ Inflation Protected Securities First 1.0 0.440 0.440 Next 1.0 0.415 Next 1.0 0.390 Next 3.0 0.365 Next 1.5 0.340 Next 1.5 0.325 Next 1.0 0.320 Next 5.0 0.310 Next 5.0 0.300 Next 4.0 0.290 Next 26.0 0.270 Over 50.0 0.250 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 87
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Intermediate Tax-Exempt First $1.0 0.390% 0.390% Next 1.0 0.365 Next 1.0 0.340 Next 3.0 0.315 Next 1.5 0.290 Next 2.5 0.280 Next 5.0 0.270 Next 35.0 0.260 Over 50.0 0.250 - ------------------------------------------------------------------------------------------------------------------------------ Mid Cap Value First 1.0 0.700 0.682 Next 1.0 0.675 Next 1.0 0.650 Next 3.0 0.625 Next 1.5 0.600 Next 2.5 0.575 Next 5.0 0.550 Next 9.0 0.525 Next 26.0 0.500 Over 50.0 0.475 - ------------------------------------------------------------------------------------------------------------------------------ Partners Aggressive Growth First 0.50 0.890 0.885 Next 0.50 0.865 Next 1.0 0.840 Next 1.0 0.815 Next 3.0 0.790 Over 6.0 0.765 - ------------------------------------------------------------------------------------------------------------------------------ Partners Fundamental Value First 0.50 0.730 0.718 Next 0.50 0.705 Next 1.0 0.680 Next 1.0 0.655 Next 3.0 0.630 Over 6.0 0.600 - ------------------------------------------------------------------------------------------------------------------------------ Partners International Select Growth First 0.25 1.000 0.992 Next 0.25 0.975 Next 0.25 0.950 Next 0.25 0.925 Next 1.0 0.900 Over 2.0 0.875 - ------------------------------------------------------------------------------------------------------------------------------ Partners International Select Value First 0.25 0.900 0.868 Next 0.25 0.875 Next 0.25 0.850 Next 0.25 0.825 Next 1.0 0.800 Over 2.0 0.775 - ------------------------------------------------------------------------------------------------------------------------------ Partners International Small Cap First 0.25 1.120 1.120 Next 0.25 1.095 Next 0.25 1.070 Next 0.25 1.045 Next 1.0 1.020 Over 2.0 0.995 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 88
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Partners Select Value First $0.50 0.780% 0.780% Next 0.50 0.755 Next 1.0 0.730 Next 1.0 0.705 Next 3.0 0.680 Over 6.0 0.650 - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Equity First 0.25 0.970 0.970 Next 0.25 0.945 Next 0.25 0.920 Next 0.25 0.895 Over 1.0 0.870 - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Growth First 0.25 0.920 0.920 Next 0.25 0.895 Next 0.25 0.870 Next 0.25 0.845 Next 1.0 0.820 Over 2.0 0.795 - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Value First 0.25 0.970 0.955 Next 0.25 0.945 Next 0.25 0.920 Next 0.25 0.895 Over 1.0 0.870 - ------------------------------------------------------------------------------------------------------------------------------ Precious Metals and Mining First 0.25 0.800 0.800 Next 0.25 0.775 Next 0.25 0.750 Next 0.25 0.725 Next 1.0 0.700 Over 2.0 0.675 - ------------------------------------------------------------------------------------------------------------------------------ Real Estate First 1.0 0.840 0.840 Next 1.0 0.815 Next 1.0 0.790 Next 3.0 0.765 Next 6.0 0.740 Next 12.0 0.730 Over 24.0 0.720 - ------------------------------------------------------------------------------------------------------------------------------ S&P 500 Index First 1.0 0.220 0.220 Next 1.0 0.210 Next 1.0 0.200 Next 4.5 0.190 Next 2.5 0.180 Next 5.0 0.170 Next 9.0 0.160 Next 26.0 0.140 Over 50.0 0.120 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 89
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Short Duration U.S. Government First $1.0 0.480% 0.480% Next 1.0 0.455 Next 1.0 0.430 Next 3.0 0.405 Next 1.5 0.380 Next 1.5 0.365 Next 1.0 0.340 Next 5.0 0.325 Next 5.0 0.315 Next 4.0 0.290 Next 26.0 0.275 Over 50.0 0.250 - ------------------------------------------------------------------------------------------------------------------------------ Small Cap Advantage First 0.25 0.790 0.786 Next 0.25 0.765 Next 0.25 0.740 Next 0.25 0.715 Next 1.0 0.690 Over 2.0 0.665 - ------------------------------------------------------------------------------------------------------------------------------ Small Company Index First 0.25 0.360 0.357 Next 0.25 0.350 Next 0.25 0.340 Next 0.25 0.330 Next 6.5 0.320 Next 7.5 0.300 Next 9.0 0.280 Next 26.0 0.260 Over 50.0 0.240 - ------------------------------------------------------------------------------------------------------------------------------ Strategic Allocation First 1.0 0.570 0.560 Next 1.0 0.545 Next 1.0 0.520 Next 3.0 0.495 Next 1.5 0.470 Next 2.5 0.450 Next 5.0 0.430 Next 9.0 0.410 Over 24.0 0.390 - ------------------------------------------------------------------------------------------------------------------------------ Strategic Income Allocation First 0.25 0.550 0.550 Next 0.25 0.525 Next 0.25 0.500 Over 0.75 0.475 - ------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Bond First 1.0 0.410 0.410 Next 1.0 0.385 Next 1.0 0.360 Next 3.0 0.335 Next 1.5 0.310 Next 2.5 0.300 Next 5.0 0.290 Next 9.0 0.280 Next 26.0 0.260 Over 50.0 0.250 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 90
DAILY RATE ON ASSETS ANNUAL RATE AT LAST DAY OF MOST FUND (BILLIONS) EACH ASSET LEVEL RECENT FISCAL PERIOD - ------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt High Income First $1.0 0.470% 0.454% Next 1.0 0.445 Next 1.0 0.420 Next 3.0 0.395 Next 1.5 0.370 Next 2.5 0.360 Next 5.0 0.350 Next 9.0 0.340 Next 26.0 0.320 Over 50.0 0.300 - ------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market First 1.0 0.330 0.330 Next 0.5 0.313 Next 0.5 0.295 Next 0.5 0.278 Next 2.5 0.260 Next 1.0 0.240 Next 1.5 0.220 Next 1.5 0.215 Next 1.0 0.190 Next 5.0 0.180 Next 5.0 0.170 Next 4.0 0.160 Over 24.0 0.150 - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Emerging Markets First 0.25 1.100 1.100 Next 0.25 1.080 Next 0.25 1.060 Next 0.25 1.040 Next 1.0 1.020 Next 5.5 1.000 Next 2.5 0.985 Next 5.0 0.970 Net 5.0 0.960 Next 4.0 0.935 Next 26.0 0.920 Over 50.0 0.900 - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Global Extended Alpha First 0.25 1.050 1.050 Next 0.25 1.030 Next 0.50 1.010 Next 1.0 0.990 - ------------------------------------------------------------------------------------------------------------------------------ U.S. Government Mortgage First 1.0 0.480 0.480 Next 1.0 0.455 Next 1.0 0.430 Next 3.0 0.405 Next 1.5 0.380 Next 1.5 0.365 Next 1.0 0.360 Next 5.0 0.350 Next 5.0 0.340 Next 4.0 0.330 Next 26.0 0.310 Over 50.0 0.290 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 91 Under the agreement, a fund also pays taxes, brokerage commissions and nonadvisory expenses, which include custodian fees and charges; fidelity bond premiums; certain legal fees; registration fees for shares; consultants' fees; compensation of Board members, officers and employees not employed by the investment manager or its affiliates; corporate filing fees; organizational expenses; expenses incurred in connection with lending securities; interest and fee expense related to a fund's participation in inverse floater structures; and expenses properly payable by a fund, approved by the Board. For Equity and Balanced Funds, except for S&P 500 Index and Small Company Index, before the fee based on the asset charge is paid, it is adjusted for the fund's investment performance relative to a Performance Incentive Adjustment Index (PIA Index) as shown in the table below. The adjustment increased or decreased the fee for the last fiscal period as shown in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 14. PIA INDEXES
FEE INCREASE OR FUND PIA INDEX (DECREASE) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING MARCH 31 - ---------------------------------------------------------------------------------------------- Equity Value Lipper Large-Cap Value Funds $ 615,240 - ---------------------------------------------------------------------------------------------- Partners Small Cap Growth Lipper Small-Cap Growth Funds 58,432 - ---------------------------------------------------------------------------------------------- Precious Metals and Mining Lipper Gold Funds (79,535) - ---------------------------------------------------------------------------------------------- Small Cap Advantage Lipper Small-Cap Core Funds (641,110) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING APRIL 30 - ---------------------------------------------------------------------------------------------- 120/20 Contrarian Equity Russell 3000 Index N/A* - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING MAY 31 - ---------------------------------------------------------------------------------------------- Partners Aggressive Growth Lipper Mid-Cap Growth Funds 491,209 - ---------------------------------------------------------------------------------------------- Partners Fundamental Value Lipper Large-Cap Core Funds(a) 219,383 - ---------------------------------------------------------------------------------------------- Partners Select Value Lipper Mid-Cap Value Funds(b) 465,782 - ---------------------------------------------------------------------------------------------- Partners Small Cap Equity Lipper Small-Cap Core Funds (75,993) - ---------------------------------------------------------------------------------------------- Partners Small Cap Value Lipper Small-Cap Value Funds (289,756) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING JUNE 30 - ---------------------------------------------------------------------------------------------- Dividend Opportunity Lipper Equity Income Funds 916,530 - ---------------------------------------------------------------------------------------------- Real Estate Lipper Real Estate Funds (190,002) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING JULY 31 - ---------------------------------------------------------------------------------------------- Disciplined Equity Lipper Large-Cap Core Funds (1,361,345) - ---------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity Lipper Mid-Cap Core Funds (79,088) - ---------------------------------------------------------------------------------------------- Disciplined Small Cap Value Lipper Small-Cap Value Funds (38,280) - ---------------------------------------------------------------------------------------------- Growth Lipper Large-Cap Growth Funds (3,707,468) - ---------------------------------------------------------------------------------------------- Large Cap Equity Lipper Large-Cap Core Funds (4,214,418) - ---------------------------------------------------------------------------------------------- Large Cap Value Lipper Large-Cap Value Funds (58,120) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING SEPTEMBER 30 - ---------------------------------------------------------------------------------------------- Balanced Lipper Balanced Funds (787,804) - ---------------------------------------------------------------------------------------------- Disciplined Large Cap Growth Lipper Large-Cap Growth Funds (106,808) - ---------------------------------------------------------------------------------------------- Disciplined Large Cap Value Lipper Large-Cap Value Funds N/A* - ---------------------------------------------------------------------------------------------- Diversified Equity Income Lipper Equity Income Funds 4,992,605 - ---------------------------------------------------------------------------------------------- Mid Cap Value Lipper Mid-Cap Value Funds 1,681,079 - ---------------------------------------------------------------------------------------------- Strategic Allocation Lipper Flexible Portfolio Funds (1,260,515) - ----------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 92
FEE INCREASE OR FUND LIPPER INDEX (DECREASE) - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING OCTOBER 31 - ---------------------------------------------------------------------------------------------- Lipper International Large-Cap Core Disciplined International Equity Funds $ (213,635) - ---------------------------------------------------------------------------------------------- Lipper Global Science and Technology Global Technology Funds(c) (148,556) - ---------------------------------------------------------------------------------------------- Lipper International Multi-Cap Partners International Select Growth Growth Funds (387,870) - ---------------------------------------------------------------------------------------------- Lipper International Multi-Cap Value Partners International Select Value Funds (2,449,779) - ---------------------------------------------------------------------------------------------- Partners International Small Cap Lipper International Small-Cap Funds (51,416) - ---------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Lipper Emerging Markets Funds 507,378 - ---------------------------------------------------------------------------------------------- Threadneedle European Equity Lipper European Funds 19,559 - ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Lipper Global Funds 393,409 - ---------------------------------------------------------------------------------------------- Threadneedle Global Equity Income MSCI All Country World Index N/A* - ---------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha MSCI All Country World Index N/A* - ---------------------------------------------------------------------------------------------- Lipper International Large-Cap Core Threadneedle International Opportunity Funds 119,014 - ---------------------------------------------------------------------------------------------- FISCAL YEAR ENDING NOVEMBER 30 - ---------------------------------------------------------------------------------------------- Mid Cap Growth Lipper Mid-Cap Growth Funds (965,508) - ----------------------------------------------------------------------------------------------
* See section titled "Transition Period" below. (a) The index against which the fund's performance was measured prior to Jan. 1, 2008 was the Lipper Large-Cap Value Funds Index. See "Change in Index" below. (b) The index against which the fund's performance was measured prior to Jan. 1, 2008 was the Lipper Multi-Cap Value Funds Index. See "Change in Index" below. (c) The index against which the fund's performance was measured prior to July 1, 2008 was the Lipper Science and Technology Funds Index. See "Change in Index" below. FOR ALL FUNDS NOTED IN TABLE 14 EXCEPT 120/20 CONTRARIAN EQUITY AND THREADNEEDLE GLOBAL EXTENDED ALPHA: The adjustment will be determined monthly by measuring the percentage difference over a rolling 12-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the fund and the annualized performance of the Index ("performance difference"). The performance difference is then used to determine the adjustment rate. The adjustment rate, computed to five decimal places, is determined in accordance with the following table and is applied against average daily net assets for the applicable rolling 12-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month. The table is organized by fund category. You can find your fund's category in Table 1. Statement of Additional Information - April 1, 2009 Page 93 TABLE 15A. PERFORMANCE INCENTIVE ADJUSTMENT CALCULATION
- -------------------------------------------------------------------------------------------------------- EQUITY FUNDS BALANCED FUNDS - -------------------------------------------------------------------------------------------------------- PERFORMANCE PERFORMANCE DIFFERENCE ADJUSTMENT RATE DIFFERENCE ADJUSTMENT RATE - -------------------------------------------------------------------------------------------------------- 0.00% - 0.50% 0 0.00% - 0.50% 0 - -------------------------------------------------------------------------------------------------------- 0.50% - 1.00% 6 basis points times the 0.50% - 1.00% 6 basis points times the performance difference over 0.50%, performance difference over 0.50%, times 100 (maximum of 3 basis times 100 (maximum of 3 basis points if a 1% performance points if a 1% performance difference) difference) - -------------------------------------------------------------------------------------------------------- 1.00% - 2.00% 3 basis points, plus 3 basis points 1.00% - 2.00% 3 basis points, plus 3 basis points times the performance difference times the performance difference over 1.00%, times 100 (maximum 6 over 1.00%, times 100 (maximum 6 basis points if a 2% performance basis points if a 2% performance difference) difference) - -------------------------------------------------------------------------------------------------------- 2.00% - 4.00% 6 basis points, plus 2 basis points 2.00% - 3.00% 6 basis points, plus 2 basis points times the performance difference times the performance difference over 2.00%, times 100 (maximum 10 over 2.00%, times 100 (maximum 8 basis points if a 4% performance basis points if a 3% performance difference) difference) - -------------------------------------------------------------------------------------------------------- 4.00% - 6.00% 10 basis points, plus 1 basis point 3.00% or 8 basis points times the performance difference more over 4.00%, times 100 (maximum 12 basis points if a 6% performance difference) - -------------------------------------------------------------------------------------------------------- 6.00% or more 12 basis points - --------------------------------------------------------------------------------------------------------
For example, if the performance difference for an Equity Fund is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] x 0.0002 [2 basis points] x 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the fund is 0.0012 per year. Where the fund's Class A performance exceeds that of the Index, the fee paid to the investment manager will increase. Where the performance of the Index exceeds the performance of the fund's Class A shares, the fee paid to the investment manager will decrease. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. TRANSITION PERIOD The performance incentive adjustment will not be calculated for the first 6 months from the inception of the fund. After 6 full calendar months, the performance fee adjustment will be determined using the average assets and performance difference over the first 6 full calendar months, and the adjustment rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 12 full calendar months, the full rolling 12-month period will take affect. CHANGE IN INDEX If an Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, for example, if Lipper reclassifies the fund from one peer group to another, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index; or (2) adoption of a methodology to transition to a substitute index it has approved. In the case of a change in index, a fund's performance will be compared to a 12- month blended index return that reflects the performance of the current index for the portion of the 12-month performance measurement period beginning the effective date of the current index and the performance of the prior index for the remainder of the measurement period. At the conclusion of the transition period, the performance of the prior index will be eliminated from the performance incentive adjustment calculation, and the calculation will include only the performance of the current index. FOR 120/20 CONTRARIAN EQUITY AND THREADNEEDLE GLOBAL EXTENDED ALPHA: The adjustment will be determined monthly by measuring the percentage difference over a rolling 36-month period (subject to earlier determination based on the Transition Period, as set forth below) between the annualized performance of one Class A share of the fund and the annualized performance of the Index ("performance difference"). The performance difference will then be used to determine the adjustment rate. The adjustment rate, computed to five decimal places, is determined in Statement of Additional Information - April 1, 2009 Page 94 accordance with the following table and is applied against average daily net assets for the applicable rolling 36-month period or Transition Period, and divided by 12 to obtain the fee reflecting the performance fee adjustment for that month. TABLE 15B. PERFORMANCE INCENTIVE ADJUSTMENT CALCULATION
- ----------------------------------------------------------------------------------------- PERFORMANCE DIFFERENCE ADJUSTMENT RATE - ----------------------------------------------------------------------------------------- 0.00% - 1.00% 0 - ----------------------------------------------------------------------------------------- 1.00% - 6.00% 10 basis points times the performance difference over 1.00%, times 100 (maximum 50 basis points if a 6% performance difference) - ----------------------------------------------------------------------------------------- 6.00% or more 50 basis points - -----------------------------------------------------------------------------------------
For example, if the performance difference is 2.38%, the adjustment rate is 0.00138 [the 1.38% performance difference over 1.00%] x 0.0010 [10 basis points] x 100. Rounded to five decimal places, the adjustment rate is 0.00138. This adjustment rate of 0.00138 is then applied against the average daily net assets for the applicable rolling 36-month or Transition Period, and divided by 12, which provides the performance adjustment fee for that month. Where the fund's Class A performance exceeds that of the Index for the applicable rolling 36- month period or Transition Period, the fee paid to the Investment Manager will increase by the adjustment rate. Where the performance of the Index exceeds the performance of the fund's Class A shares for the applicable rolling 36-month period or Transition Period, the fee paid to the Investment Manager will decrease by the adjustment rate. The 36-month comparison period rolls over with each succeeding month, so that it always equals 36 months, ending with the month for which the performance adjustment is being computed. TRANSITION PERIOD The performance incentive adjustment will not be calculated for the first 24 months from the inception of the fund. After 24 full calendar months, the performance fee adjustment will be determined using the average assets and Performance Difference over the first 24 full calendar months, and the Adjustment Rate will be applied in full. Each successive month an additional calendar month will be added to the performance adjustment computation. After 36 full calendar months, the full rolling 36-month period will take affect. CHANGE IN INDEX If an Index ceases to be published for a period of more than 90 days, changes in any material respect, otherwise becomes impracticable or, at the discretion of the Board, is no longer appropriate to use for purposes of a performance incentive adjustment, the Board may take action it deems appropriate and in the best interests of shareholders, including: (1) discontinuance of the performance incentive adjustment until such time as it approves a substitute index, or (2) adoption of a methodology to transition to a substitute index it has approved. In the case of a change in index, a fund's performance will be compared to a 36- month blended index return that reflects the performance of the current index for the portion of the 36-month performance measurement period beginning the effective date of the current index and the performance of the prior index for the remainder of the measurement period. At the conclusion of the transition period, the performance of the prior index will be eliminated from the performance incentive adjustment calculation, and the calculation will include only the performance of the current index. Statement of Additional Information - April 1, 2009 Page 95 The table below shows the total management fees paid by each fund for the last three fiscal periods as well as nonadvisory expenses, net of earnings credits, waivers and expenses reimbursed by the investment manager and its affiliates. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 16. MANAGEMENT FEES AND NONADVISORY EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES - ------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 - ------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ------------------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income N/A N/A N/A $ 139,640 $ 103,636(a) $ 145,971 - ------------------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income N/A N/A N/A 118,255 134,546(a) 153,282 - ------------------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income N/A N/A N/A 175,842 129,062(a) 202,410 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive N/A N/A N/A* 199,501 168,942 209,004 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative N/A N/A N/A* 146,492 96,147 134,788 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate N/A N/A N/A* 278,861 247,980 246,216 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive N/A N/A N/A* 299,503 247,472 355,360 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative N/A N/A N/A* 170,774 117,533 140,615 - ------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity N/A N/A N/A* 149,589 173,675 188,843 - ------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index $ 371,178 $ 579,548 $ 566,109 (194,370) (254,777) (272,996) - ------------------------------------------------------------------------------------------------------------------------------- (1,171,6- (1,007,3- Small Company Index 1,990,095 3,292,392 3,889,499 27) 06) (662,392) - ------------------------------------------------------------------------------------------------------------------------------- 2008 2007 2006 2008 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------------------------------- Equity Value 6,797,853 6,969,436 7,043,854 413,170 361,720 400,520 - ------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 1,887,518 2,066,992 1,878,991 99,186 111,014 343,335 - ------------------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining 956,280 876,127 579,779 175,405 144,337 207,159 - ------------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage 2,903,208 4,703,119 5,845,601 (383,991) (252,816) 510,707 - ------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ------------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 159,311(c) N/A N/A 21,297(b) N/A N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 N/A N/A N/A 41 4,075(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 N/A N/A N/A 310 3,927(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 N/A N/A N/A 745 6,231(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 N/A N/A N/A 332 4,478(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 N/A N/A N/A 431 2,766(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 N/A N/A N/A 487 878(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 N/A N/A N/A (796) 2,640(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 N/A N/A N/A (2,131) (2,522)(c) N/A - ------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ------------------------------------------------------------------------------------------------------------------------------- 11,401,8- 12,713,3- High Yield Bond 9,610,810 45 21 665,785 481,606 688,374 - ------------------------------------------------------------------------------------------------------------------------------- (1,047,8- Partners Aggressive Growth 5,729,264 4,627,106 1,950,153 (786,490) 23) (167,264) - ------------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value 7,668,633 7,530,722 7,971,622 (213,176) (215,041) 501,862 - ------------------------------------------------------------------------------------------------------------------------------- Partners Select Value 4,388,735 4,807,861 5,211,061 (142,897) (162,440) 330,794 - ------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 2,441,742 2,964,236 2,525,974 (539,268) (464,274) (134,739) - ------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value 6,511,571 9,159,989 9,285,758 (972,781) (878,605) 735,477 - ------------------------------------------------------------------------------------------------------------------------------- (1,025,9- (1,688,3- Short Duration U.S. Government 3,816,196 4,419,003 6,683,201 (771,512) 39) 00) - ------------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 1,958,404 1,348,887 1,327,433 (389,262) (438,473) (549,885) - -------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 96
- ----------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES - ----------------------------------------------------------------------------------------------------------------- FUND 2008 2007 2006 2008 2007 2006 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ----------------------------------------------------------------------------------------------------------------- Dividend Opportunity $12,015,660 $10,678,661 $ 7,688,134 $ 626,341 $ 540,349 $ 480,473 - ----------------------------------------------------------------------------------------------------------------- Real Estate 1,667,040 2,299,121 1,398,778 138,649 207,925 153,244 - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ----------------------------------------------------------------------------------------------------------------- Cash Management 15,026,220 12,713,351 10,801,723 1,290,897 859,062 (1,747,535) - ----------------------------------------------------------------------------------------------------------------- Disciplined Equity 17,556,244 14,110,274 5,175,451 726,080 (202,920) (83,131) - ----------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 365,578 273,481 13,335(d) 125,645 91,799 4,577(d) - ----------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 286,759 206,071 49,035(e) 33,868 37,535 9,684(e) - ----------------------------------------------------------------------------------------------------------------- Floating Rate 3,509,190 3,332,472 412,667(e) 293,676 151,486 19,402(e) - ----------------------------------------------------------------------------------------------------------------- Growth 12,541,267 22,705,786 19,922,079 850,735 954,358 1,214,759 - ----------------------------------------------------------------------------------------------------------------- Income Opportunities 1,767,885 2,116,555 2,229,460 196,944 187,627 198,512 - ----------------------------------------------------------------------------------------------------------------- Inflation Protected Securities 2,554,103 1,313,892 1,078,635 (238,396) (126,032) (45,905) - ----------------------------------------------------------------------------------------------------------------- Large Cap Equity 25,467,893 39,667,264 20,724,477 (995,206) 1,168,504 682,652 - ----------------------------------------------------------------------------------------------------------------- Large Cap Value 401,168 602,406 715,200 205,428 184,710 186,504 - ----------------------------------------------------------------------------------------------------------------- Limited Duration Bond 792,200 726,809 990,881 (78,320) (73,339) (96,959) - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ----------------------------------------------------------------------------------------------------------------- California Tax-Exempt 715,946 717,999 1,008,174(f) 44,499 20,854 (8,449)(f) - ----------------------------------------------------------------------------------------------------------------- Diversified Bond 14,772,880 12,770,016 12,388,294 (461,298) (1,129,485) (1,870,049) - ----------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 1,246,083 1,351,439 1,898,065(f) 506,328 676,782 599,362(f),(g) - ----------------------------------------------------------------------------------------------------------------- New York Tax-Exempt 242,807 279,438 402,241(f) 75,790 134,099 133,306(f),(g) - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ----------------------------------------------------------------------------------------------------------------- Balanced 3,977,541 6,315,077 5,690,832 437,940 368,447 563,493 - ----------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 905,956 114,048(h) N/A 195,661 54,709(h) N/A - ----------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 6,618(i) N/A N/A 2,877(i) N/A N/A - ----------------------------------------------------------------------------------------------------------------- Diversified Equity Income 44,177,652 42,530,087 37,321,661 1,905,627 1,561,033 1,761,776 - ----------------------------------------------------------------------------------------------------------------- Mid Cap Value 18,813,340 15,908,732 11,459,838 992,201 826,273 728,841 - ----------------------------------------------------------------------------------------------------------------- Strategic Allocation 10,108,947 11,025,000 7,064,937 1,047,907 921,198 665,164 - ----------------------------------------------------------------------------------------------------------------- Strategic Income Allocation 904,660 168,875(h) N/A 294,099 76,656(h) N/A - ----------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ----------------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income 4,188,137 887,341 176,149(j) 313,877 103,119 28,907(j) - ----------------------------------------------------------------------------------------------------------------- Disciplined International Equity 5,209,129 2,161,563 147,388(k) 512,793 358,005 48,716(k) - ----------------------------------------------------------------------------------------------------------------- Emerging Markets Bond 1,182,004 706,943 191,237(l) 172,124 120,044 77,772(l) - ----------------------------------------------------------------------------------------------------------------- Global Bond 5,074,934 3,438,893 3,734,676 165,694 (17,529) (159,716) - ----------------------------------------------------------------------------------------------------------------- Global Technology 857,290 1,412,081 1,327,883 188,087 187,390 249,939 - ----------------------------------------------------------------------------------------------------------------- Partners International Select Growth 5,965,413 6,048,963 4,039,162 334,550 672,542 530,707 - ----------------------------------------------------------------------------------------------------------------- Partners International Select Value 13,239,202 20,067,871 15,936,398 1,054,830 1,286,758 990,734 - ----------------------------------------------------------------------------------------------------------------- Partners International Small Cap 1,057,146 1,270,558 1,050,011 63,912 208,621 246,920 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 7,352,591 7,106,815 5,659,680 1,138,897 1,190,259 745,246 - ----------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 980,629 952,484 821,750 223,792 199,237 182,061 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 5,825,153 6,075,014 5,791,016 554,139 577,463 517,920 - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 15,723(m) N/A N/A 2,989(m) N/A N/A - ----------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 16,485(m) N/A N/A 1,122(m) N/A N/A - ----------------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 4,661,800 4,923,040 4,840,788 486,074 545,663 505,513 - -----------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 97
- ---------------------------------------------------------------------------------------------------------------- MANAGEMENT FEES NONADVISORY EXPENSES - ---------------------------------------------------------------------------------------------------------------- 2008 2007 2006 2008 2007 2006 - ---------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ---------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt $ 291,762 $ 321,011 $ 435,316 $ 2,588 $ (4,565) $ (25,206) - ---------------------------------------------------------------------------------------------------------------- Mid Cap Growth 4,726,590 6,373,531 9,852,112 437,496 241,412 670,574 - ---------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 2,764,541 3,157,092 3,345,629 506,736 (8,650) 905,255 - ---------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 11,447,732 13,006,578 15,027,647 2,984,232 (847,490) 8,025,340 - ---------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ---------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 464,177 406,763 390,170 161,459 32,730 118,441 - ----------------------------------------------------------------------------------------------------------------
* Effective Feb. 1, 2006, this fee was eliminated. (a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (d) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (e) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (f) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended June 30. (g) During 2006, the Fund changed the method of accounting for its participation in inverse floater structures. Previously, nonadvisory expenses for fiscal year end 2006 and 2005 were reported as $(68,320) and $161,536 for Minnesota Tax-Exempt Fund and $(21,864) and $54,945 for New York Tax-Exempt Fund, respectively. (h) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (i) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (j) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (k) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (l) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (m) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. MANAGER OF MANAGERS EXEMPTION The funds have received an order from the SEC that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. For California Tax-Exempt, Cash Management, Diversified Bond, Global Bond, High Yield Bond, Intermediate Tax- Exempt, Massachusetts Tax-Exempt, Michigan Tax- Exempt, Minnesota Tax-Exempt, New York Tax-Exempt, Ohio Tax-Exempt, Short Duration U.S. Government, Tax-Exempt Bond, Tax-Exempt High Income, Tax-Exempt Money Market and U.S. Government Mortgage funds: before the fund may rely on the order, holders of a majority of the fund's outstanding voting securities will need to approve operating the fund in this manner. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. SUBADVISORY AGREEMENTS The assets of certain funds are managed by subadvisers that have been selected by the investment manager, subject to the review and approval of the Board. The investment manager has recommended the subadvisers to the Board based upon its assessment of the skills of the subadvisers in managing other assets with objectives and investment strategies substantially similar to those of the applicable fund. Short-term investment performance is not the only factor in selecting or terminating a subadviser, and the investment manager does not expect to make frequent changes of subadvisers. Certain subadvisers, affiliated with the investment manager, have been directly approved by shareholders. These subadvisers are noted in Table 18. The investment manager allocates the assets of a fund with multiple subadvisers among the subadvisers. Each subadviser has discretion, subject to oversight by the Board and the investment manager, to purchase and sell portfolio assets, consistent with the fund's investment objectives, policies, and restrictions. Generally, the services that a subadviser provides to the fund are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with each subadviser under which the subadviser provides investment advisory assistance and day-to-day management of some or all of the fund's portfolio, as well as investment research and statistical information. A subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. Statement of Additional Information - April 1, 2009 Page 98 The following table shows the advisory fee schedules for fees paid by the investment manager to subadvisers for funds that have subadvisers. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 17. SUBADVISERS AND SUBADVISORY AGREEMENT FEE SCHEDULES
PARENT FUND SUBADVISER COMPANY FEE SCHEDULE - --------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - --------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth Essex Investment Management Company, LLC A 0.70% on the first $20 million, reducing to (effective Sept. 23, 2005) 0.60% as assets increase ------------------------------------------------------------------------------------------------------ Federated MDTA, LLC (MDTA)(a) (effective B 0.60% on the first $75 million, reducing to Sept. 23, 2005) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ Turner Investment Partners, Inc. N/A 0.60% on the first $50 million, reducing to (Turner) (effective Aug. 18, 2003) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ UBS Global Asset N/A 0.55% on the first $150 million, reducing to Management (Americas) (UBS) 0.50% as assets increase (effective Aug. 18, 2003) - --------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - --------------------------------------------------------------------------------------------------------------------------------- Partners Aggressive American Century Investment C 0.50% on the first $100 million, reducing to Growth Management, Inc. (American Century) 0.38% as assets increase (effective April 24, 2003) ------------------------------------------------------------------------------------------------------ Turner N/A 0.55% on the first $100 million, reducing to (effective April 24, 2003) 0.38% as assets increase - --------------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Davis Selected Advisers, N/A 0.45% on the first $100 million, reducing to Value LP (Davis)(a), (b) 0.25% as assets increase (effective June 18, 2001) - --------------------------------------------------------------------------------------------------------------------------------- Partners Select Value Systematic Financial Management, D 0.50% on the first $50 million, L.P. (Systematic)(a) reducing to 0.30% as assets (effective Sept. 29, 2006) increase ------------------------------------------------------------------------------------------------------ WEDGE Capital Management N/A 0.75% on the first $10 million, L.L.P. (WEDGE)(a) reducing to 0.30% as assets (effective Sept. 29, 2006) increase - --------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity American Century C 0.65% on the first $25 million, reducing to (effective Dec. 12, 2003) 0.55% as assets increase ------------------------------------------------------------------------------------------------------ Jennison Associates LLC (Jennison) E 0.55% on all assets (effective Feb. 22, 2008) ------------------------------------------------------------------------------------------------------ Lord, Abbett & Co. LLC N/A 0.65% on the first $100 million, (Lord Abbett) reducing to 0.55% as assets (effective Dec. 12, 2003) increase - --------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value Barrow, Hanley, Mewhinney & F 1.00% on the first $10 million, Strauss (BHMS)(a) reducing to 0.30% as assets (effective March 12, 2004) increase ------------------------------------------------------------------------------------------------------ Donald Smith & Co., Inc. N/A 0.60% on the first $175 million, (Donald Smith)(a) reducing to 0.55% as assets (effective March 12, 2004) increase ------------------------------------------------------------------------------------------------------ MDTA(a) B 0.60% on the first $75 million, reducing to (effective June 6, 2008) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ Metropolitan West Capital Management, LLC G 0.50% on all assets (MetWest Capital) (effective April 24, 2006) - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 99
PARENT FUND SUBADVISER COMPANY FEE SCHEDULE - --------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - --------------------------------------------------------------------------------------------------------------------------------- Partners International Columbia Wanger Asset Management L.P. H 0.70% on the first $100 million, reducing to Select Growth (Columbia WAM) (effective Sept. 5, 2001) 0.50% as assets increase ------------------------------------------------------------------------------------------------------ Principal Global Investors, LLC N/A 0.40% on the first $250 million, reducing to (Principal) (effective April 24, 2006) 0.25% as assets increase - --------------------------------------------------------------------------------------------------------------------------------- Partners International AllianceBernstein L.P. N/A 0.65% on the first $75 million, reducing to Select Value (AllianceBernstein) 0.30% as assets increase (effective Sept. 17, 2001) ------------------------------------------------------------------------------------------------------ Mondrian Investment Partners Limited N/A 0.70% on all assets (Mondrian) (effective August 18, 2008) ------------------------------------------------------------------------------------------------------ Tradewinds Global Investors, LLC N/A 0.50% on the first $250 million, reducing to (Tradewinds) (effective August 18, 2008) 0.40 as assets increase - --------------------------------------------------------------------------------------------------------------------------------- Partners International AIG Global Investment Corp. (AIGGIC) I 0.75% on the first $100 million, reducing to Small Cap (effective April 24, 2006) 0.70% as assets increase ------------------------------------------------------------------------------------------------------ Batterymarch Financial Management, Inc. J 0.75% on the first $100 million, reducing to (Batterymarch) (effective April 24, 2006) 0.70% as assets increase - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Threadneedle International Limited(b) K 0.45% of the first $150 million, reducing to Markets (Threadneedle) 0.30% as assets increase, and subject to a (effective July 9, 2004) performance incentive adjustment(c) - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Threadneedle(b) K 0.35% of the first $150 million, reducing to Equity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(c) - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) K 0.35% of the first $150 million, reducing to Equity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(c) - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) K 0.45% of the first $250 million, reducing to Equity Income (effective Aug. 1, 2008) 0.35% as assets increase, and subject to a performance incentive adjustment(c) - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Threadneedle(b) K 0.70% of the first $250 million, reducing to Extended Alpha (effective Aug. 1, 2008) 0.60% as assets increase, and subject to a performance incentive adjustment(c) - --------------------------------------------------------------------------------------------------------------------------------- Threadneedle Threadneedle(b) K 0.35% of the first $150 million, reducing to International Opportunity (effective July 9, 2004) 0.20% as assets increase, and subject to a performance incentive adjustment(c) - ---------------------------------------------------------------------------------------------------------------------------------
(a) The fee is calculated based on the combined net assets subject to the subadviser's investment management. (b) Davis is a 1940 Act affiliate of the investment manager because it owns or has owned more than 5% of the public issued securities of the investment manager's parent company, Ameriprise Financial. Threadneedle is an affiliate of the investment manager as an indirect wholly-owned subsidiary of Ameriprise Financial. (c) The adjustment for Threadneedle is based on the performance of one Class A share of the fund and the change in the PIA Index described in Table 14. The performance of the fund and the Index will be calculated using the method described above for the performance incentive adjustment paid to the investment manager under the terms of the Investment Management Services Agreement. The amount of the adjustment to Threadneedle's fee, whether positive or negative, shall be equal to one-half of the performance incentive adjustment made to the investment management fee payable to the investment manager under the terms of the Investment Management Services Agreement. The performance incentive adjustment was effective Dec. 1, 2004. A - Essex is majority owned by Affiliated Managers Group. B - Federated MDTA LLC is an indirect subsidiary of Federated Investors, Inc. C - American Century Investment Management, Inc. is a direct, wholly-owned subsidiary of American Century Companies, Inc. Statement of Additional Information - April 1, 2009 Page 100 D - Systematic is an affiliate of Affiliated Managers Group. E - Jennison Associates LLC's sole member is Prudential Investments Management, Inc. which is a direct, wholly-owned subsidiary of Prudential Asset Management Holding Company LLC, which is a direct, wholly-owned subsidiary of Prudential Financial, Inc. F - BHMS is an independent-operating subsidiary of Old Mutual Asset Management. G - MetWest Capital is a majority-owned subsidiary of Evergreen Investments and Wachovia Corporation. H - Columbia WAM is an indirect wholly-owned subsidiary of Columbia Management Group, Inc., which in turn is a wholly-owned subsidiary of Bank of America Corporation. I - AIGGIC is an indirect wholly-owned subsidiary of American International Group, Inc. (AIG). J - Batterymarch is a wholly-owned, independent subsidiary of Legg Mason, Inc. K - Threadneedle is an indirect wholly-owned subsidiary of Ameriprise Financial. The following table shows the subadvisory fees paid by the investment manager to subadvisers in the last three fiscal periods. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 18. SUBADVISORY FEES
SUBADVISORY FEES PAID --------------------------------------- FUND SUBADVISER 2008 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Essex $ 257,999 $ 281,295 $ 120,556(a) Growth -------------------------------------------------------------------------------------------- MDTA 397,581 411,034 165,110(a) -------------------------------------------------------------------------------------------- Turner 241,810 265,516 321,406 -------------------------------------------------------------------------------------------- UBS 293,079 342,871 371,341 -------------------------------------------------------------------------------------------- Former Subadviser: Bjurman, Barry & Associates N/A N/A 175,818(b) (from Aug. 18, 2003 to Sept. 23, 2005) -------------------------------------------------------------------------------------------- Former Subadviser: RS Investment Management, L.P. N/A N/A 257,675(b) (from Jan. 24, 2001 to Sept. 23, 2005) - ------------------------------------------------------------------------------------------------------------------------------ Small Cap Advantage Former Subadviser: Kenwood 2,318,621 3,180,483 2,856,138 (from May 4, 1999 to Nov. 21, 2008) - ------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ------------------------------------------------------------------------------------------------------------------------------ Partners Aggressive Growth American Century 1,438,912 1,321,245 512,880 -------------------------------------------------------------------------------------------- Turner 1,310,040 1,304,994 525,422 - ------------------------------------------------------------------------------------------------------------------------------ Partners Fundamental Value Davis 3,220,929 3,673,544 3,787,565 - ------------------------------------------------------------------------------------------------------------------------------ Partners Select Value Systematic 1,025,272 753,292(c) N/A -------------------------------------------------------------------------------------------- WEDGE 981,822 776,260(c) N/A -------------------------------------------------------------------------------------------- Former subadviser: GAMCO Asset Management Inc. N/A 786,466(d) 2,763,925 (from inception to September 28, 2006) - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Equity American Century 506,417 662,396 457,181 -------------------------------------------------------------------------------------------- Jennison 107,599(e) N/A N/A -------------------------------------------------------------------------------------------- Lord Abbett 583,123 677,462 433,231 -------------------------------------------------------------------------------------------- Former Subadviser: Wellington Management Company, 362,413(f) 650,960* 614,053* LLP (from Dec. 12, 2003 to Feb. 22, 2008) - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 101
SUBADVISORY FEES PAID --------------------------------------- FUND SUBADVISER 2008 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------ Partners Small Cap Value BHMS $ 865,372 $ 970,241 $1,008,072 -------------------------------------------------------------------------------------------- Donald Smith 984,692 1,180,183 1,242,221 -------------------------------------------------------------------------------------------- MDTA N/A(g) N/A N/A -------------------------------------------------------------------------------------------- MetWest Capital 955,503 1,769,553 225,545(h) -------------------------------------------------------------------------------------------- Former subadviser: Franklin Portfolio Associates 964,510 1,198,029 1,289,120 (from March 2004 to June 6, 2008) -------------------------------------------------------------------------------------------- Former subadviser: Royce & Associates, LLC N/A N/A 1,395,487(i) (from inception to April 24, 2006) -------------------------------------------------------------------------------------------- Former subadviser: Goldman Sachs Asset Management, N/A 38,601(j) 1,312,424(i) L.P. (from Aug. 2002 to April 24, 2006) - ------------------------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ------------------------------------------------------------------------------------------------------------------------------ Partners International Columbia WAM 1,557,963 1,568,158 1,264,808 Select Growth -------------------------------------------------------------------------------------------- Principal 1,849,485 1,760,150 632,882(k) -------------------------------------------------------------------------------------------- Former subadviser: American Century Global N/A N/A 821,124(l) Investment Management** (from Jan. 2005 to April 24, 2006) - ------------------------------------------------------------------------------------------------------------------------------ Partners International AllianceBernstein 6,268,208 7,962,307 6,022,579 Select Value -------------------------------------------------------------------------------------------- Mondrian 77,048(m) N/A N/A -------------------------------------------------------------------------------------------- Tradewinds 129,124(m) N/A N/A - ------------------------------------------------------------------------------------------------------------------------------ Partners International 355,245 Small Cap AIGGIC 425,696 201,650(k) -------------------------------------------------------------------------------------------- Batterymarch 386,194 439,593 205,659(k) -------------------------------------------------------------------------------------------- Former subadviser: Templeton Investment Counsel, N/A N/A 226,154(l) LLC (Franklin Templeton) (from Oct. 3, 2002 to April 24, 2006) -------------------------------------------------------------------------------------------- Former subadviser: Wellington Management Company, N/A N/A 243,185(l) LLP together with its affiliate Wellington Management International Ltd (from Oct. 3, 2002 to April 24, 2006) - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Emerging Markets Threadneedle 2,801,637 2,728,720 2,170,719 - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle European Equity Threadneedle 443,279 406,594 356,308 - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Global Equity Threadneedle 2,269,177 2,408,387 2,358,731 - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Global Equity Threadneedle 9,057(n) N/A N/A Income - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle Global Extended Threadneedle 11,750(n) N/A N/A Alpha - ------------------------------------------------------------------------------------------------------------------------------ Threadneedle International Threadneedle 1,907,215 1,895,712 1,948,352 Opportunity - ------------------------------------------------------------------------------------------------------------------------------
* Beginning on July 1, 2006, under the Subadvisory Agreement, RiverSource Investments is subject to a minimum annual fee of $350,000, payable to Wellington Management. ** American Century Global Investment Management managed the portion of the Fund's portfolio previously managed by American Century since Sept. 2001. The change of subadviser is the result of corporate restructuring of American Century and did not result in any modifications to the investment objective, principal investment strategies, portfolio managers, or the fees paid by the Fund. (a) For the fiscal period from Sept. 23, 2005 to March 31, 2006. (b) For the fiscal period from April 1, 2005 to Sept. 23, 2005. (c) For the fiscal period from Sept. 29, 2006 to May 31, 2007. (d) For the fiscal period from June 1, 2006 to Sept. 28, 2006. (e) For the fiscal period from Feb. 22, 2008 to May 31, 2008. (f) For the fiscal period from June 1, 2007 to Feb. 22, 2008. (g) The subadviser did not begin managing the fund until after the fund's fiscal year end. (h) For the fiscal period from April 24, 2006 to May 31, 2006. Statement of Additional Information - April 1, 2009 Page 102 (i) For the fiscal period from June 1, 2005 to April 24, 2006. (j) Payments made to subadviser in accordance with termination agreement. (k) For the fiscal period from April 24, 2006 to Oct. 31, 2006. (l) For the fiscal period from Nov. 1, 2005 to April 24, 2006. (m) For the fiscal period from Aug. 18, 2008 to Oct. 31, 2008. (n) For the fiscal period from Aug. 1, 2008 to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 103 PORTFOLIO MANAGERS. For funds other than money market funds, the following table provides information about the fund's portfolio managers as of the end of the most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 19. PORTFOLIO MANAGERS
OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Dimitris Bertsimas 32 RICs $9.23 billion 9 RICs ($6.78 B) None Basic Income 2 PIVs $595.75 million 15 other accounts $948.29 million --------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $948.29 million None None (9) (27) - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Dimitris Bertsimas 32 RICs $9.26 billion 9 RICs ($6.78 B) None Enhanced Income 2 PIVs $595.75 million 15 other accounts $948.29 million --------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $981.77 million None None (9) (27) - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Dimitris Bertsimas 32 RICs $9.06 billion 9 RICs ($6.78 B) $100,001 - Moderate Income 2 PIVs $595.75 million $500,000 15 other accounts $948.29 million --------------------------------------------------------------------------------------- Colin Lundgren 16 RICs $779.16 million None $100,001 - (9) (27) $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $10,001 - Aggressive $50,000 -------------------- ---------- David M. Joy 5 RICs $2.48 billion None None (1) (28) -------------------- ---------- Michelle M. None Keeley(c) -------------------- ---------- William F. None Truscott(c) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $10,001 - Conservative $50,000 -------------------- ---------- David M. Joy 5 RICs $2.64 billion None None (1) (28) -------------------- ---------- Michelle M. None Keeley(c) -------------------- ---------- William F. None Truscott(c) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $50,001 - Moderate $100,000 -------------------- ---------- David M. Joy 5 RICs $2.0 billion None None (1) (28) -------------------- ---------- Michelle M. None Keeley(c) -------------------- ---------- William F. None Truscott(c) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $10,001 - Moderate Aggressive $50,000 -------------------- ---------- David M. Joy None (1) (28) -------------------- ---------- Michelle M. 5 RICs $2.04 billion None None Keeley(c) -------------------- ---------- William F. $50,001 - Truscott(c) $100,000 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $10,001 - Moderate $50,000 Conservative -------------------- ---------- David M. Joy 5 RICs $2.51 billion None None (1) (28) -------------------- ---------- Michelle M. None Keeley(c) -------------------- ---------- William F. None Truscott(c) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Kent M. Bergene(b) $10,001 - Total Equity $50,000 -------------------- ---------- David M. Joy 5 RICs $2.54 billion None $100,000 - (1) (28) $500,000 -------------------- ---------- Michelle M. None Keeley(c) -------------------- ---------- William F. None Truscott(c) - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index Dimitris Bertsimas 32 RICs $9.44 billion 9 RICs ($6.78 B) None 2 PIVs $595.75 million 15 other accounts $948.29 million (2) (27) --------------------------------------------------------------------------------------- Georgios Vetoulis 2 RICs $511.99 million None None 1 PIV $586.92 million - -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 104
OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Small Company Index Dimitris Bertsimas 32 RICs $9.12 billion 9 RICs ($6.78 B) None 2 PIVs $595.75 million 15 other accounts $948.29 million (2) (27) --------------------------------------------------------------------------------------- Georgios Vetoulis 2 RICs $186.05 million None None 1 PIV $586.92 million - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ----------------------------------------------------------------------------------------------------------------------------------- Equity Value Warren Spitz $10,001 - $50,000 -------------------- ---------- Steve Schroll 11 RICs $15.57 billion $50,001 - (2) (29) 1 PIV $44.32 million 6 RICs ($15.06 B) $100,000 -------------------- ---------- Laton Spahr 7 other accounts $457.39 million $100,001 - $500,000 -------------------- ---------- Paul Stocking $100,001 - $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small UBS: Cap Growth Paul A. Graham 5 RICs $657.0 million 1 PIV $159.0 million 17 other accounts $322.0 million 1 other account --------------------------------------------------------- David N. Wabnik 5 RICs $657.0 million ($52.5 M) None (4) (30) 1 PIV $159.0 million 26 other accounts $290.0 million -------------------------------------------------------------------------------------------------------------- TURNER: William C. McVail 7 RICs $1.1 billion 1 RIC ($37.0 M); 10 PIVs $140.0 million 4 other accounts 50 other accounts $3.6 billion ($346.0 M) ---------------------------------------------------------------------------- Jason D. 15 RICs $3.7 billion 1 RIC ($56.0 M); Schrotberger 27 PIVs $499.0 million 2 PIVs ($4.0 M); 55 other accounts $2.9 billion 5 other accounts None (5) (31) ($457.0 M) ---------------------------------------------------------------------------- Rick Wetmore 4 RICs $418.0 million 4 other accounts 6 PIVs $43.0 million ($346 M) 41 other accounts $2.1 billion -------------------------------------------------------------------------------------------------------------- ESSEX: Nancy B. Prial 3 RICs $108.8 million None None (6) (32) 1 PIV $144.6 million 52 other accounts $567.7 million -------------------------------------------------------------------------------------------------------------- MDTA: Daniel J. Mahr(q) -------------------- Frederick L. Konopka 10 RICs $1.1 billion 4 PIVs $225.1 million None None (7) (33) -------------------- 48 other accounts $6.85 billion Brian M. Greenberg -------------------- Douglas K. Thunen - ----------------------------------------------------------------------------------------------------------------------------------- Precious Metals Clay Hoes 1 PIV $97.2 million None $10,001 - (2),(3) (29) and Mining $50,000 - ----------------------------------------------------------------------------------------------------------------------------------- Small Cap SELIGMAN: Advantage Neil T. Eigen(j) 3 RICs $480.10 million None 2 PIVs $173.20 million 1,383 other accounts $4.05 billion ---------------------------------------------------------------------------- Richard S. Rosen(j) 3 RICs $480.10 million None None (2) (34) 2 PIVs $173.20 million 1,383 other accounts $4.01 billion - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ----------------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Warren Spitz None Equity -------------------- ---------- Steve Schroll 11 RICs $17.52 billion $10,001 - 1 PIV $43.95 million 6 RICs ($17.0 B) $50,000 -------------------- ---------- Laton Spahr 7 other accounts $493.17 million $100,001 - (2) (29) $500,000 -------------------- ---------- Paul Stocking $100,001 - $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 Dimitris Bertsimas 17 RICs $7.85 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.05 billion None - -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 105
OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 Dimitris Bertsimas 17 RICs $7.83 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.04 billion None - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 Dimitris Bertsimas 17 RICs $7.83 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.03 billion None - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 Dimitris Bertsimas 17 RICs $7.83 billion 6 RICs ($6.35 B) $10,001 - (9) (27) 3 PIVs $57.83 million $50,000 14 other accounts $3.53 billion --------------------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.03 billion None None - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 Dimitris Bertsimas 17 RICs $7.83 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion --------------------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.03 billion None $10,001 - $50,000 - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 Dimitris Bertsimas 17 RICs $7.84 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.04 billion None - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 Dimitris Bertsimas 17 RICs $7.85 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.05 billion None - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 Dimitris Bertsimas 17 RICs $7.85 billion 6 RICs ($6.35 B) None (9) (27) 3 PIVs $57.83 million 14 other accounts $3.53 billion ---------------------------------------------------------------------------- Colin Lundgren 12 RICs $2.05 billion None - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ----------------------------------------------------------------------------------------------------------------------------------- High Yield Bond Scott Schroepfer 1 RIC $893.98 million None $100,001 - (2) (35) $500,000 --------------------------------------------------------------------------------------- Jennifer Ponce de 5 RICs $10.57 billion None None Leon 1 PIV $8.43 million 8 other accounts $2.13 billion - ----------------------------------------------------------------------------------------------------------------------------------- Partners Aggressive AMERICAN CENTURY: None None (10) (36) Growth Glenn A. Fogle 6 RICs $3.98 billion -------------------- Brad Eixmann 2 other accounts $148.74 million -------------------------------------------------------------------------------------------------------------- TURNER: None (5) (31) Christopher K. 15 RICs $4.4 billion 3 RICs ($885 M); McHugh 28 PIVs $586.0 million 3 PIVs ($30 M); 24 other accounts $2.4 billion 2 other accounts ($155 M) ---------------------------------------------------------------------------- Tara Hedlund 10 RICs $3.5 billion 1 RIC ($54 M); 21 PIVs $457.0 million 2 PIVs ($5 M); 14 other accounts $898.0 million 1 other account ($123 M) ---------------------------------------------------------------------------- Jason Schrotberger 15 RICs $4.0 billion 1 RIC ($54 M); 27 PIVs $528.0 million 3 PIVs ($30 M); 55 other accounts $3.2 billion 5 other accounts ($514 M) - ----------------------------------------------------------------------------------------------------------------------------------- Partners Fundamental DAVIS: None None(f) (13) (37) Value Christopher C. Davis 27 RICs $81.4 billion 12 PIVs $1.3 billion 128 other $13.9 billion accounts(e) --------------------------------------------------------- Kenneth C. Feinberg 27 RICs $81.3 billion 13 PIVs $1.3 billion 128 other $13.9 billion accounts(e) - ----------------------------------------------------------------------------------------------------------------------------------- Partners Select SYSTEMATIC: Value Ron Mushock 8 RIC $1.36 billion -------------------- 6 PIVs $519.0 million 1 other account None (25) (38) 1,979 other accounts $6.12 billion ($334 M) Kevin McCreesh -------------------------------------------------------------------------------------------------------------- WEDGE: R. Michael James 5 RICs $272.0 million -------------------- Peter R. Bridge 1 PIV $3.7 million None None (26) (39) -------------------- Paul M. VeZolles 201 other accounts $3.0 billion - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap AMERICAN CENTURY: None None (10) (36) Equity Thomas P. Vaiana 9 RICs $5.35 billion 2 PIVs $129.29 million 4 other accounts $244.93 million --------------------------------------------------------- Wihelmine von Turk 5 RICs $1.34 billion 1 PIV $85.54 million 2 other accounts $229.6 million --------------------------------------------------------- Brian Ertley 7 RICs $1.55 billion 1 PIV $85.54 million 4 other accounts $232.61 million --------------------------------------------------------- Melissa Fong 5 RICs $1.34 billion 1 PIV $85.54 million 2 other accounts $229.6 million -------------------------------------------------------------------------------------------------------------- JENNISON: None (12) (40) John Mullman 3 RICs $3.06 billion 3 PIVs 8 PIVs $775.81 million ($85.6 M)(h) 11 other accounts(g) $1.26 billion ---------------------------------------------------------------------------- Jason Swiatek 3 PIVs $639.57 million None 11 other accounts $1.28 billion -------------------------------------------------------------------------------------------------------------- LORD, ABBETT: Michael T. Smith 2 RICs $1.85 billion None None(i) (14) (41) 14 other accounts $991.3 million - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap DONALD SMITH: Value Donald G. Smith 2 RICs $1.14 billion -------------------- 1 PIV $122.0 million None None (15) (42) 37 other accounts $2.23 billion Richard L. Greenberg -------------------------------------------------------------------------------------------------------------- MDTA: Daniel J. Mahr(r) -------------------- 10 RICs $1.13 billion 4 PIVs $240.5 million None None (7) (33) Douglas Thunen 51 other accounts $7.61 billion -------------------- Frederick Konopka -------------------- Brian M. Greenberg -------------------------------------------------------------------------------------------------------------- BHMS: James S. McClure 4 RICs $666.0 million -------------------- 1 PIV $4.6 million None None (17) (43) 16 other accounts $716.2 million John P. Harloe -------------------------------------------------------------------------------------------------------------- METWEST: Samir Sikka 4 RICs $347.8 million 3 PIVs $61.2 million None None (18) (44) 9 other accounts $54.4 million - ----------------------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Todd White(n) 10 RICs $9.78 billion 3 RICs ($1.01 B); Government 5 PIVs $1.66 billion 1 other account None (2) (35) 40 other accounts(d) $16.02 billion $(113.3 M) --------------------------------------------------------------------------------------- John McColley(n) None N/A N/A - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Government Todd White(n) N/A N/A N/A N/A (2) (35) Mortgage - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ----------------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity Warren Spitz $500,001 - $1,000,000 -------------------- ---------- Steve Schroll 11 RICs $14.7 billion $100,001 - (2) (29) 1 PIV $26.73 million 6 RICs ($14.24 B) $500,000 -------------------- ---------- Laton Spahr 8 other accounts(d) $380.85 million $100,001 - $500,000 -------------------- ---------- Paul Stocking $50,001 - $100,000 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate Julene Melquist None None None $10,001 - (2),(3) (29) $50,000 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Equity Dimitris Bertsimas 22 RICs $3.74 billion 5 RICs ($2.32 B) $100,001 - 2 PIVs $22.75 million $500,000 14 other accounts $3.50 million --------------------------------------------------------------------------------------- (2) (27) Gina Mourtzinou 4 RICs $1.58 billion 4 RICs ($1.58 B) $50,001 - 5 other accounts $136.55 million $100,000 - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Small Dimitris Bertsimas 22 RICs $6.68 billion 5 RICs ($5.26 B) $100,001 - and Mid Cap Equity 2 PIVs $22.75 million $500,000 14 other accounts $3.50 million --------------------------------------------------------------------------------------- Gina Mourtzinou 4 RICs $4.52 billion 4 RICs ($4.52 B) None (2) (27) 5 other accounts $136.55 million --------------------------------------------------------------------------------------- Steve Kokkotos 2 RICs $1.33 billion 2 RICs ($1.33 B) $10,001 - 1 other account $10.19 million $50,000 - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Small Dimitris Bertsimas 22 RICs $6.68 billion 5 RICs ($5.27 B) $100,001 - Cap Value 2 PIVs $22.75 million $500,000 14 other accounts $3.50 million --------------------------------------------------------------------------------------- Gina Mourtzinou 4 RICs $4.52 billion 4 RICs ($4.52 B) $10,001 - (2) (27) 5 other accounts $136.55 million $50,000 --------------------------------------------------------------------------------------- Steve Kokkotos 2 RICs $1.33 billion 2 RICs ($1.33 B) $10,001 - 1 other account $10.19 million $50,000 - ----------------------------------------------------------------------------------------------------------------------------------- Floating Rate Lynn Hopton 11 PIVs $5.02 billion None -------------------- --------------- Yvonne Stevens 3 other accounts $496.12 million None --------------------------------------------------------- ---------- Steve Staver(l) 10 PIVs $4.65 billion None None (2) (45) 3 other accounts $507.57 million - ----------------------------------------------------------------------------------------------------------------------------------- Growth SELIGMAN: Erik J. Voss(l) 8 RICs $2.60 billion None None (2) (34) 20 other accounts $179.40 million - ----------------------------------------------------------------------------------------------------------------------------------- Income Opportunities Brian Lavin 1 RIC $871.16 million $50,001 - 1 PIV $7.02 million None $100,000 (2) (35) 1 other account $608.42 million --------------------------------------------------------- ---------- Jennifer Ponce de 5 RICs $11.59 billion $10,001 - Leon 1 PIV $7.02 million $50,000 8 other accounts $2.05 billion - ----------------------------------------------------------------------------------------------------------------------------------- Inflation Protected Margaret Brandt(n) None N/A N/A None --------------------------------------------------------------------------------------- Securities Todd White(n) 11 RICs $10.53 billion 3 RICs ($1.01 B); None (2) (35) 5 PIVs $1.66 billion 1 other account 40 other accounts(d) $16.02 billion ($113.3 M) - ----------------------------------------------------------------------------------------------------------------------------------- Large Cap Equity Dimitris 24 RICs $5.96 billion 7 RICs ($4.62 B) None (2) (27) Bertsimas(l) 2 PIVs $21.11 million 15 other accounts $3.31 billion ---------------------------------------------------------------------------- Gina Mourtzinou(l) 6 RICs $4.04 billion 6 RICs ($4.04 B) 5 other accounts $118.86 million - ----------------------------------------------------------------------------------------------------------------------------------- Large Cap Value Warren Spitz(l) 12 RICs $14.57 billion -------------------- Steve Schroll(l) 2 PIVs $27.55 million 7 RICs ($14.11 B) None (2) (29) -------------------- Laton Spahr(l) -------------------- Paul Stocking(l) 8 other accounts $441.14 million - ----------------------------------------------------------------------------------------------------------------------------------- Limited Duration Tom Murphy 5 RICs $9.93 billion 3 RICs ($1.32 B) $50,001 - Bond 2 PIVs $885.02 million $100,000 14 other accounts $10.75 billion --------------------------------------------------------------------------------------- Scott Schroepfer(m) 2 RICs $953.09 million None None (2) (35) --------------------------------------------------------------------------------------- Todd White(n) 10 RICs $10.37 billion 3 RICs ($1.01 B); None 5 PIVs $1.66 billion 1 other account 40 other accounts(d) $16.02 billion ($113.3 M) - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ----------------------------------------------------------------------------------------------------------------------------------- California Tax- 5 RICs $3.68 billion Exempt 11 other accounts $7.38 billion - -------------------- ------------------------------------ Minnesota Tax-Exempt Catherine Stienstra 5 RICs $3.55 billion None None (2) (35) 11 other accounts $7.38 billion - -------------------- ------------------------------------ New York Tax-Exempt 5 RICs $3.80 billion 11 other accounts $7.38 billion - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Bond Tom Murphy 5 RICs $6.55 billion 3 RICs ($1.33 B) $50,001 - 2 PIVs $880.06 million $100,000 14 other accounts $10.90 billion --------------------------------------------------------------------------------------- Scott Schroepfer(m) 2 RICs $953.09 million None None (2) (35) --------------------------------------------------------------------------------------- Todd White(n) 10 RICs $7.34 billion 3 RICs ($1.01 B); None 5 PIVs $1.66 billion 1 other account 40 other accounts(d) $16.02 billion ($113.3 M) - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUND WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ----------------------------------------------------------------------------------------------------------------------------------- Balanced Warren Spitz(l) None -------------------- ---------- Steve Schroll(l) 12 RICs $14.57 billion None -------------------- ---------- Laton Spahr(l) 2 PIVs $27.55 million 7 RICs ($14.11 B) $1 - (2) (29) $10,000 -------------------- ---------- Paul Stocking(l) 8 other accounts(d) $441.14 million None -------------------------------------------------------------------------------------------------------------- Tom Murphy 5 RICs $9.77 billion $10,001 - 2 PIVs $870.92 million 2 RICs ($996.38 M) $50,000 14 other accounts $10.19 billion --------------------------------------------------------------------------------------- Scott Schroepfer(m) 2 RICs $953.09 million None None (2) (35) --------------------------------------------------------------------------------------- Todd White(n) 10 RICs $10.32 billion 2 RICs ($801.35 None 5 PIVs $1.66 billion M); 40 other accounts(d) $16.02 billion 1 other account ($113.3 M) - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Dimitris Bertsimas 23 RICs $5.77 million 6 RICs ($4.42 B) None Large Cap 2 PIVs $21.11 million Growth 15 other accounts $3.31 billion (2) (27) --------------------------------------------------------------------------------------- Gina Mourtzinou 5 RICs $3.85 billion 5 RICs ($3.85 B) None 5 other accounts $118.86 million - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Dimitris Bertsimas 23 RICs $5.95 million 6 RICs ($4.61 B) None Large Cap 2 PIVs $21.11 million Value 15 other accounts $3.31 billion (2) (27) --------------------------------------------------------------------------------------- Gina Mourtzinou 5 RICs $4.03 billion 5 RICs ($4.03 B) None 5 other accounts $118.86 million - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Equity Warren Spitz $50,001 - Income $100,000 -------------------- ---------- Laton Spahr 11 RICs $8.78 billion $100,001 - $500,000 -------------------- ---------- Steve Schroll 2 PIVs $27.55 million 6 RICs ($8.32 B) $50,001 - (2) (29) $100,000 -------------------- ---------- Paul Stocking 8 other accounts(d) $441.14 million $100,001 - $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Mid Cap Value Warren Spitz $50,001 - $100,000 -------------------- ---------- Laton Spahr 11 RICs $12.21 billion $100,001 - $500,000 -------------------- ---------- Steve Schroll 2 PIVs $27.55 million 6 RICs ($11.75 B) $50,001 - (2) (29) $100,000 -------------------- ---------- Paul Stocking 8 other accounts(d) $441.14 million $100,001 - $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Strategic Tom Murphy 5 RICs $9.47 billion 2 RICs ($699.76 M) $100,001 - Allocation 2 PIVs $870.92 million $500,000 14 other accounts $10.19 billion --------------------------------------------------------------------------------------- Scott Schroepfer(m) 2 RICs $953.09 million None None (2) (35) --------------------------------------------------------------------------------------- Todd White(n) 10 RICs $10.07 billion 2 RICs ($549.42 None 5 PIVs $1.66 billion M); 40 other accounts(d) $16.02 billion 1 other account ($113.3 M) -------------------------------------------------------------------------------------------------------------- Dimitris Bertsimas 23 RICs $4.85 billion 6 RICs ($3.5 B) Over (2) (27) 2 PIVs $21.11 million $500,000 15 other accounts $3.31 billion --------------------------------------------------------------------------------------- Gina Mourtzinou 5 RICs $2.93 billion 5 RICs ($2.93 B) $100,001 - 5 other accounts $118.86 million $500,000 --------------------------------------------------------------------------------------- Alex Sauer-Budge 1 RIC $573.80 million 1 RIC ($573.8 M) $1 - $10,000 --------------------------------------------------------------------------------------- Steve E. Kokkotos 2 RICs $69.74 million 2 RICs ($69.74 M) $100,001 - 1 other account $9.26 million $500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Strategic Income Dimitris Bertsimas 23 RICs $5.95 billion 7 RICs ($4.62 B) None Allocation 2 PIVs $21.11 million 15 other accounts $3.31 billion (2) (27) --------------------------------------------------------------------------------------- Colin Lundgren 17 RICs $1.76 billion None None - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ----------------------------------------------------------------------------------------------------------------------------------- Absolute Return Nicholas Pifer 7 RICs $10.79 billion None $50,001 - (2) (35) Currency and 6 PIVs $284.56 million $100,000 Income 11 other accounts $3.27 billion - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Dimitris Bertsimas 23 RICs $4.53 billion 6 RICs ($3.35 B) $100,001 - International 2 PIVs $19.28 million $500,000 Equity 15 other accounts $2.88 billion (2) (27) --------------------------------------------------------------------------------------- Alex Sauer-Budge 1 RIC $837.35 million 1 RIC ($837.35 M) $1 - $10,000 - ----------------------------------------------------------------------------------------------------------------------------------- Emerging Markets Nicholas Pifer 7 RICs $11.31 billion None $10,001 - (2) (35) Bond 6 PIVs $284.56 million $50,000 11 other accounts $3.27 billion --------------------------------------------------------- ---------- Jim Carlene(m) 4 PIVs $312.86 million None 3 other accounts $170.11 million - ----------------------------------------------------------------------------------------------------------------------------------- Global Bond Nicholas Pifer 7 RICs $10.85 billion None $50,001 - (2) (35) 6 PIVs $284.56 million $100,000 11 other accounts $3.27 billion - ----------------------------------------------------------------------------------------------------------------------------------- Global SELIGMAN: Technology Richard M. 4 RICs $2.40 billion 2 PIVs ($1.5B); None (2) (46) Parower(o) 5 PIVs $1.50 billion 2 other accounts 6 other accounts $186.40 ($183.7 M) million(p) --------------------------------------------------------- Paul H. Wick(o) 4 RICs $2.40 billion 5 PIVs $1.50 billion 6 other accounts $185.60 million(p) --------------------------------------------------------- Reema D. Shah(o) 4 RICs $2.40 billion 5 PIVs $1.50 billion 5 other accounts $186.40 million(p) --------------------------------------------------------- Ajay Diwan(o) 4 RICs $2.40 billion 5 PIVs $1.50 billion 5 other accounts $189.20 million(p) ---------------------------------------------------------------------------- Benjamin Lu(o) 2 RICs $204.50 million None 2 PIVs $31.20 million 1 other account $0.05 million(p) - ----------------------------------------------------------------------------------------------------------------------------------- Partners COLUMBIA WAM: International P. Zachary Egan 1 RIC $3.0 billion None None (20) (47) Select Growth --------------------------------------------------------- Louis J. Mendes 2 RICs $4.0 billion -------------------------------------------------------------------------------------------------------------- PRINCIPAL: John Pihlblad 2 RICs $1.31 billion None None (21) (48) 2 PIVs $95.93 million 9 other accounts $987.26 million --------------------------------------------------------- Steven Larson 2 RICs $1.32 billion 2 PIVs $93.40 million 9 other accounts $987.26 million - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Partners ALLIANCEBERNSTEIN: International Select Kevin F. Simms 132 RICs $46.32 billion 3 RICs ($6.66 B); Value 168 PIVs $24.39 billion 9 PIVs ($1.17 B); 39,323 other $106.60 billion 139 other accounts accounts ($12.51 B) ---------------------------------------------------------------------------- Henry S. D'Auria 89 RICs $27.28 billion 2 RICs ($2.74 B); 103 PIVs $18.93 billion 7 PIVs ($563 M); 953 other $78.52 billion 131 other accounts accounts ($11.85 B) ---------------------------------------------------------------------------- Sharon E. Fay 132 RICs $46.32 billion 3 RICs ($6.66 B); 156 PIVs $21.41 billion 8 PIVs ($563 M); 39,323 other $106.60 billion 139 other accounts accounts ($12.51 B) ---------------------------------------------------------------------------- Marilyn G. Fedak 120 RICs $45.86 billion 3 RICs ($6.66 B); None (22) (49) 140 PIVs $17.32 billion 3 PIVs ($217 M); 39,230 other $89.62 billion 110 other accounts accounts ($7.76 B) ---------------------------------------------------------------------------- John P. Mahedy 119 RICs $45.62 billion 3 RICs ($6.66 B); 139 PIVs $17.20 billion 3 PIVs ($217 M); 39,211 other $88.11 billion 101 other accounts accounts ($7.55 B) ---------------------------------------------------------------------------- Giulio Martini 71 RICs $25.49 billion 2 RICs ($2.74 B); 106 PIVs $21.29 billion 8 PIVs ($1.13 B); 811 other $62.13 billion 105 other accounts accounts ($8.1 B) -------------------------------------------------------------------------------------------------------------- MONDRIAN: Ormala Krishnan 1 RIC $265.0 million None None (11) (50) 1 PIV $141.90 million 7 other accounts $528.80 million -------------------------------------------------------------------------------------------------------------- TRADEWINDS: Paul J. Hechmer 4 RICs $942.62 million 1 other account None (16) (51) 9 PIVs $560.69 million ($59.17 M) 49,903 other $11.14 billion accounts - ----------------------------------------------------------------------------------------------------------------------------------- Partners AIGGIC: International Small Chantal Brennan 2 RICs $347.0 million 3 other accounts Cap 4 PIVs $323.0 million ($90 M) 8 other accounts $255.0 million ---------------------------------------------------------------------------- Midori Katsumi 1 RIC $7.0 million 4 other accounts None (23) (52) 1 PIV $58.0 million ($200 M) 7 other accounts $269.0 million ---------------------------------------------------------------------------- Elizabeth Soon 2 RICs $69.0 million 3 other accounts 2 PIVs $53.0 million ($27 M) 7 other accounts $80.0 million -------------------------------------------------------------------------------------------------------------- BATTERYMARCH: Adam Petryk 8 RICs $2.36 billion None None (24) (53) 19 PIVs $1.45 billion 34 other accounts $3.66 billion --------------------------------------------------------- Charles F. Lovejoy 4 RICs $1.22 billion -------------------- Christopher W. 12 PIVs $669.86 million Floyd 22 other accounts $2.34 billion - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: Emerging Markets Julian A.S. Thompson 1 RIC $695.16 million 1 RIC ($695.16 M) None(k) (19) (54) Jules Mort 1 PIV $26.09 million 2 other accounts $18.74 million - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: European Equity Rob Jones 1 PIV $32.78 million None None(k) (19) (54) 1 other account $184.29 million - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: Global Equity Stephen Thornber 1 RIC $9.58 million 1 RIC ($9.58 M) None(k) (19) (54) 1 PIV $7.73 million 3 other accounts $346.56 million ---------------------------------------------------------------------------- Andrew Holliman 1 RIC $6.0 million 1 RIC ($6 M) 2 PIVs $404.78 million 2 other accounts $309.49 million - -----------------------------------------------------------------------------------------------------------------------------------
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OTHER ACCOUNTS MANAGED (EXCLUDING THE FUND) ------------------------------------------------------- POTENTIAL APPROXIMATE OWNERSHIP CONFLICTS NUMBER AND TYPE TOTAL NET PERFORMANCE BASED OF FUND OF STRUCTURE OF FUND PORTFOLIO MANAGER OF ACCOUNT* ASSETS ACCOUNTS(A) SHARES INTEREST COMPENSATION - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: Global Equity Income Stephen Thornber 1 RIC $432.44 million 1 RIC ($432.44 M) None(k) (19) (54) 1 PIV $7.73 million 3 other accounts $346.56 million ---------------------------------------------------------------------------- Jeremy Podger 1 RIC $6.0 million 1 RIC ($6 M) 2 PIVs $10.58 million 2 other accounts $221.36 million - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: Global Extended Andrew Holliman 1 RIC $432.44 million 1 RIC ($432.44 M) None(k) (19) (54) Alpha 2 PIVs $404.78 million 2 other accounts $309.49 million ---------------------------------------------------------------------------- Jeremy Podger 1 RIC $9.58 million 1 RIC ($9.58 M) 2 PIVs $10.58 million 2 other accounts $221.36 million - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle THREADNEEDLE: International Alex Lyle 1 RIC $9.85 billion 1 RIC ($9.85 B) None(k) (19) (54) Opportunity 28 PIVs $834.30 million 11 other accounts $415.43 million --------------------------------------------------------- Esther Perkins 1 RIC $9.85 billion 1 other account $184.29 million - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ----------------------------------------------------------------------------------------------------------------------------------- Intermediate Catherine Stienstra 5 RICs $3.30 billion None None (2) (35) Tax-Exempt 11 other accounts $6.33 billion - ----------------------------------------------------------------------------------------------------------------------------------- Mid Cap John K. Schonberg 2 RICs $256.55 million 2 RICs None (2) (55) Growth 2 PIVs $15.93 million ($256.55 M) 3 other accounts $2.61 million -------------------------------------------------------------------------------------------------------------- Sam Murphy 1 RIC $246.40 million 1 RIC ($246.4 M) None (2),(3) (55) -------------------- Mike Marzolf - ----------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Catherine Stienstra 5 RICs $2.77 billion None None (2) (36) Bond 11 other accounts $6.33 billion - ----------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Catherine Stienstra 5 RICs $1.18 billion None None (2) (35) High Income 11 other accounts $6.33 billion - -----------------------------------------------------------------------------------------------------------------------------------
* RIC refers to a Registered Investment Company; PIV refers to a Pooled Investment Vehicle. (a) Number of accounts for which the advisory fee paid is based in part or wholly on performance and the aggregate net assets in those accounts. (b) Mr. Bergene has overall accountability for the group that monitors the subadvisers for the funds and for making recommendations to the Boards of Directors on changes to those subadvisers. (c) Ms. Keeley, who serves as Executive Vice President -- Equity and Fixed Income for RiverSource Investments, and Mr. Truscott, who serves as Chief Investment Officer for RiverSource Investments, oversee the portfolio managers who manage other accounts for RiverSource Investments, including the underlying funds in which the Funds-of-Funds invest, and other accounts managed by RiverSource Investments and its affiliates including institutional assets, proprietary assets and hedge funds. (d) Reflects each wrap program strategy as a single client, rather than counting each participant in the program as a separate client. (e) Wrap accounts have been counted at the sponsor level. (f) Neither Christopher Davis nor Kenneth Feinberg own any shares of RiverSource Partners Fundamental Value Fund. However, both portfolio managers have over $1 million invested in the Davis Funds, which are managed in a similar style. (g) Other accounts exclude the assets and number of accounts in wrap fee programs that are managed using model portfolios. (h) Mr. Mullman only manages a portion of the accounts subject to a performance fee. The total assets shown reflect the portion of those accounts managed by Mr. Mullman. (i) Michael T. Smith does not own any shares of RiverSource Partners Small Cap Equity Fund. However, he invests in the Lord Abbett Small Cap Blend Fund, which is managed in a similar style. (j) The portfolio manager began managing the fund after its last fiscal year end; therefore reporting information is as of Dec. 31, 2007. (k) The fund is available for sale only in the U.S. The portfolio manager(s) do not reside in the U.S. and therefore do not hold any shares of the fund. (l) The portfolio manager began managing the fund after its last fiscal year end; therefore reporting information is as of Sept. 30, 2008. (m) The portfolio manager began managing the fund after its last fiscal year end; reporting information is as of Oct. 31, 2008. (n) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of Jan. 31, 2009. (o) The portfolio manager began managing the fund after its last fiscal year end; reporting information is provided as of Nov. 17, 2008. (p) Includes accounts managed in a personal capacity, the amounts for which are provided as of Nov. 30, 2008. (q) The portfolio manager began managing the fund as of Jan. 1, 2009; reporting information is as of March 31, 2008. (r) The portfolio manager began managing the fund as of Jan. 1, 2009; reporting information is as of May 31, 2008. POTENTIAL CONFLICTS OF INTEREST (1) Management of Funds-of-Funds differs from that of the other funds. The portfolio management process is set forth generally below and in more detail in the funds' prospectus. Statement of Additional Information - April 1, 2009 Page 112 Management of the portfolios is based on initial asset class guidance provided by the Capital Markets Committee, a group of RiverSource Investments investment professionals, and subsequent allocation determinations by the Asset Allocation Committee and Fund Selection Committee within established guidelines set forth in the prospectus. The Asset Allocation Committee, comprised of portfolio managers Joy, Keeley and Truscott, determines each funds-of-fund's allocation among the three main asset classes (equity, fixed income and cash) and allocation among investment categories within each asset class. The Fund Selection Committee, comprised portfolio managers Bergene, Joy, Keeley and Truscott, determines each funds-of-fund's allocation among the underlying funds. These allocation determinations are reviewed by the Asset Allocation Committee and Fund Selection Committee at least quarterly. Because of the structure of the funds-of-funds, the potential conflicts of interest for the portfolio managers may be different than the potential conflicts of interest for portfolio managers who manage other funds. These potential conflicts of interest include - The portfolio managers of the underlying funds are under the supervision of portfolio managers Keeley and Truscott. Keeley and Truscott may have influence over the management of the underlying funds through their supervision of the underlying funds' portfolio managers and/or through their ability, as part of the Asset Allocation Committee and Fund Selection Committee, to influence the allocation of funds-of-funds assets to or away from the underlying funds. - Portfolio managers Joy, Keeley and Truscott also serve as members of the Capital Markets Committee. As described above, the Capital Markets Committee provides initial guidance with respect to asset allocation, and its view may play a significant role in the asset class determinations made by the Asset Allocation Committee and, as a result, in the underlying fund determinations made by the Fund Selection Committee. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager has in place a Code of Ethics that is designed to address conflicts and that, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (2) RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage another account whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, competing investment decisions made for different accounts and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm's Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager's Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (3) The portfolio manager's responsibilities also include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that the portfolio manager manages versus communicating his or her analyses to other portfolio managers concerning securities that he or she follows as an analyst. (4) The management of a portfolio and other accounts by a portfolio manager could result in potential conflicts of interest if the portfolio and other accounts have different objectives, benchmarks and fees because the portfolio manager and his team must allocate time and investment expertise across multiple accounts, including the portfolio. The portfolio manager and his team manage the portfolio and other accounts utilizing a model portfolio approach that groups similar accounts within a model portfolio. UBS Global Asset Management (Americas) Inc. manages accounts according to the appropriate model portfolio, including where possible, those accounts that have specific investment restrictions. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across accounts, which may minimize the potential for conflicts of interest. Statement of Additional Information - April 1, 2009 Page 113 If a portfolio manager identifies a limited investment opportunity that may be suitable for more than one account or model portfolio, the portfolio may not be able to take full advantage of that opportunity due to an allocation or filled purchase or sale orders across all eligible model portfolios and accounts. To deal with these situations, UBS Global Asset Management (Americas) Inc. has adopted procedures for allocating portfolio trades among multiple accounts to provide fair treatment to all accounts. The management of personal accounts by a portfolio manager may also give rise to potential conflicts of interest. UBS Global Asset Management (Americas) Inc. has adopted Codes of Ethics that govern such personal trading, but there is no assurance that the Codes will adequately address all such conflicts. (5) As is typical for many money managers, potential conflicts of interest may arise related to Turner's management of accounts including the Fund where not all accounts are able to participate in a desired IPO, or other limited opportunity, relating to use of soft dollars and other brokerage practices, related to the voting of proxies, employee personal securities trading, and relating to a variety of other circumstances. In all cases, however, Turner believes it has written policies and procedures in place reasonably designed to prevent violations of the federal securities laws and to prevent material conflicts of interest from arising. Please also see Turner's Form ADV, Part II for a description of some of its policies and procedures in this regard. (6) Potential conflicts of interest may be presented in connection with the Portfolio Manager's management of the Fund's investments, on the one hand, and the investments of other accounts, on the other, such as conflicts of interest related to the aggregation of trades, the allocation of investment opportunities, contrary client positions and employee securities trading. Essex has established written policies and procedures relating to its investment management and trading practices that are designed to prevent such conflicts of interest. On occasion, employees of Essex may purchase or sell, for their own accounts, securities also invested in by clients or recommended to clients. Essex maintains a code of ethics that is designed to prevent the conflicts of interest presented by employees' personal securities transactions. (7) As a general matter, certain conflicts of interest may arise in connection with a portfolio manager's management of a fund's investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute fund portfolio trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or "soft dollars"). The Adviser has structured the portfolio managers' compensation in a manner, and the Fund has adopted policies and procedures, reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts. (8) N/A (9) Management of the Income Builder and Retirement Plus Funds-of-Funds differs from that of the other funds. The portfolio management process is set forth generally below and in more detail in the funds' prospectus. Management of the portfolios is based on proprietary, quantitative techniques and qualitative review of the quantitative output. Using these methodologies, a group of RiverSource investment professionals allocates each fund's assets within and across different asset classes in an effort to achieve the fund's objective of providing a high level of current income and growth of capital. After the initial allocation, the fund will be rebalanced monthly in an effort to maximize the level of income and capital growth, incorporating various measures of relative value subject to constraints that set minimum or maximum exposure within asset classes, as set forth in the prospectus. Within the equity and fixed income asset classes, the quantitative model establishes allocations for the funds, seeking to achieve each fund's objective by investing in defined investment categories. The target allocation range constraints are intended, in part, to promote diversification within the asset classes. Because of the structure of the funds-of-funds, the potential conflicts of interest for the portfolio managers may be different than the potential conflicts of interest for portfolio managers who manage other funds. These potential conflicts of interest include: - In certain cases, the portfolio managers of the underlying funds are the same as the portfolio managers of the Income Builder and Retirement Plus Funds-of-Funds, and could influence the allocation of funds-of-funds assets to or away from the underlying funds that they manage. - RiverSource Investments, LLC and its affiliates may receive higher compensation as a result of allocations to underlying funds with higher fees. - RiverSource Investments, LLC monitors the performance of the underlying funds and may, from time to time, recommend to the board of directors of the funds a change in portfolio management or fund strategy or the closure or merger of an underlying fund. In addition, RiverSource Investments, LLC may believe that certain funds may benefit Statement of Additional Information - April 1, 2009 Page 114 from additional assets or could be harmed by redemptions. All of these factors may also influence decisions in connection with the allocation of funds-of-funds assets to or away from certain underlying funds. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager has in place a Code of Ethics that is designed to address conflicts and that, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. (10) Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts include, for example, conflicts among investment strategies and conflicts in the allocation of investment opportunities. American Century has adopted policies and procedures that are designed to minimize the effects of these conflicts. Responsibility for managing American Century client portfolios is organized according to investment discipline. Investment disciplines include, for example, quantitative equity, small- and mid-cap growth, large-cap growth, value, international, fixed income, asset allocation, and sector funds. Within each discipline are one or more portfolio teams responsible for managing specific client portfolios. Generally, client portfolios with similar strategies are managed by the same team using the same objective, approach, and philosophy. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest. For each investment strategy, one portfolio is generally designated as the "policy portfolio." Other portfolios with similar investment objectives, guidelines and restrictions are referred to as "tracking portfolios." When managing policy and tracking portfolios, a portfolio team typically purchases and sells securities across all portfolios that the team manages. American Century's trading systems include various order entry programs that assist in the management of multiple portfolios, such as the ability to purchase or sell the same relative amount of one security across several funds. In some cases a tracking portfolio may have additional restrictions or limitations that cause it to be managed separately from the policy portfolio. Portfolio managers make purchase and sale decisions for such portfolios alongside the policy portfolio to the extent the overlap is appropriate, and separately, if the overlap is not. American Century may aggregate orders to purchase or sell the same security for multiple portfolios when it believes such aggregation is consistent with its duty to seek best execution on behalf of its clients. Orders of certain client portfolios may, by investment restriction or otherwise, be determined not available for aggregation. American Century has adopted policies and procedures to minimize the risk that a client portfolio could be systematically advantaged or disadvantaged in connection with the aggregation of orders. To the extent equity trades are aggregated, shares purchased or sold are generally allocated to the participating portfolios pro rata based on order size. Because initial public offerings (IPOs) are usually available in limited supply and in amounts too small to permit across- the-board pro rata allocations, American Century has adopted special procedures designed to promote a fair and equitable allocation of IPO securities among clients over time. Fixed income securities transactions are not executed through a centralized trading desk. Instead, portfolio teams are responsible for executing trades with broker/dealers in a predominantly dealer marketplace. Trade allocation decisions are made by the portfolio manager at the time of trade execution and orders entered on the fixed income order management system. Finally, investment of American Century's corporate assets in proprietary accounts may raise additional conflicts of interest. To mitigate these potential conflicts of interest, American Century has adopted policies and procedures intended to provide that trading in proprietary accounts is performed in a manner that does not give improper advantage to American Century to the detriment of client portfolios. (11) Mondrian does not foresee any material conflicts of interest that may arise in the management of the funds and any other accounts managed with similar investment guidelines. Mondrian acts solely as an investment manager and does not engage in any other business activities. The following is a list of some potential conflicts of interest that can arise in the course of normal investment management business activities. Mondrian maintains and operates various policies and procedures which are designed to prevent or manage any of the conflicts identified below so that the interests of its clients are always put ahead of Mondrian's own interests or those of its employees and directors: Allocation of aggregated trades Mondrian may from time to time aggregate trades for a number of its clients. Mondrian's policy requires that all allocations of aggregated trades must be fair between clients. Transactions involving commingled orders are allocated in a manner deemed equitable to each account. When a combined order is executed in a series of transactions, at different prices, each account participating in the order may be allocated an average price obtained from the broker/dealer. When a trade can be allocated in a cost efficient manner to our clients, it will be prorated across all participating accounts. Mondrian may randomly allocate purchases or sales among participating Statement of Additional Information - April 1, 2009 Page 115 accounts when the amounts involved are too small to be evenly proportioned in a cost efficient manner. In performing random allocations, Mondrian will consider consistency of strategy implementation among participating accounts. Allocation of investment opportunities Mondrian is an investment manager of multiple client portfolios. As such, it has to ensure that investment opportunities are allocated fairly between clients. There is a potential risk that Mondrian may favor one client over another client in making allocations of investment opportunities. Mondrian makes security selection decisions at committee level. Those securities identified as investment opportunities are added to a list of approved securities; portfolios will hold only such approved securities. All portfolios governed by the same or a similar mandate will be structured similarly (that is, will hold the same or comparable stocks), and will exhibit similar characteristics. Sale and purchase opportunities identified at regular investment meetings will be applied to portfolios across the board, subject to the requirements of individual client mandates. See also "Side-by-side management of hedge funds" below. Allocation of IPO opportunities Initial Public Offerings ("IPO's") present a potential conflict of interest when they are priced at a discount to the anticipated secondary market price and the issuer has restricted or scaled back its allocation due to market demand. In such instances, the IPO allocation could be divided among a small select group of clients with others not receiving the allocation they would otherwise be entitled to. Mondrian clients with relevant mandates are given an equal opportunity, proportionate to the size of their portfolio, to participate in IPO trades. All IPO purchases are allocated on a strict pro-rata basis. Dealing in investments as principal in connections with the provision of seed capital A conflict of interest exists when a portfolio management firm manages its own money alongside client money. Mondrian generally does not trade for its own account. However, Mondrian and its affiliates have provided the seed capital to certain investment vehicles that have been established by Mondrian group entities. Mondrian serves as the investment manager to these investment vehicles. Mondrian operates dealing policies designed to ensure the fair and equal treatment of all clients e.g. the allocation of aggregated trades among clients. These policies ensure that any portfolios in which Mondrian has an investment interest do not receive favorable treatment relative to other client portfolios. Directorships and external arrangements Certain Mondrian staff may hold positions in external organizations. There is a potential risk that Mondrian personnel may place their own interests (resulting from outside employment/directorships) ahead of the interests of Mondrian clients. Before accepting an executive or non-executive directorship or any other appointment in another company, employees, including executive directors, must obtain the prior approval of the Chief Executive Officer. The Chief Compliance Officer must also be informed of all such appointments and changes. The CEO and CCO will only permit appointments that would not present a conflict of interest with the individual's responsibilities to Mondrian clients. Dual agency Dual Agency (also known as Cross Trading) concerns those transactions where Mondrian may act as agent for both the buyer and seller. In such circumstances there is a potential conflict of interest as it may be possible to favor one client over another when establishing the execution price and/or commission rate. Although it rarely does so, Mondrian may act as agent for both buying and selling parties with respect to transactions in investments. If Mondrian proposes to act in such capacity, the Portfolio Manager will first obtain approval from the Chief Compliance Officer. The CCO has an obligation to ensure that both parties are treated fairly in any such trade. Employee personal account dealing There are a number of potential conflicts when staff of an investment firm engage in buying and selling securities for their personal account. Mondrian has arrangements in place to ensure that none of its directors, officers or employees (or persons connected to them by way of a business or domestic relationship) effects any transaction on their own account which conflicts with client interests. Mondrian's rules which govern personal account dealing and general ethical standards are set out in the Mondrian Investment Partners Code of Ethics. Statement of Additional Information - April 1, 2009 Page 116 Gifts and entertainment (received) In the normal course of business Mondrian employees may receive gifts and entertainment from third parties e.g. brokers and other service providers. This results in a potential conflict of interest when selecting third parties to provide services to Mondrian and its clients. Mondrian has a policy which requires that gifts and entertainment received are reported to the Chief Compliance Officer (any items in excess of L100 require pre-approval). All gifts and entertainment are reviewed to ensure that they are not inappropriate and that staff have not been unduly influenced by them. Gifts and entertainment (given) In the normal course of business, Mondrian employees may provide gifts and entertainment to third parties. Excessively lavish gifts and entertainment would be inappropriate. Mondrian has a policy which requires that any gifts and entertainment provided are reported to the Chief Compliance Officer (any items in excess of L200 require pre-approval). All gifts and entertainment are reviewed to ensure that they are not inappropriate and that staff have not attempted to obtain undue influence from them. Performance fees Where an investment firm has clients with a performance fee arrangement there is a risk that those clients could be favored over clients without performance fees. Mondrian charges fees as a proportion of assets under management. In a very limited number of situations, in addition to this fee basis, certain accounts also include a performance fee basis. The potential conflict of interest arising from these fee arrangements is addressed by Mondrian's procedures for the allocation of aggregated trades among clients. Investment opportunities are allocated totally independently of fee arrangements. Side-by-side management of hedge funds (Mondrian Alpha Funds) Where an investment manager has responsibility for managing long only portfolios alongside portfolios that can take short positions there is potential for a conflict of interest to arise between the two types of portfolio. Mondrian acts as investment manager for two Fixed Income Alpha and one Equity Alpha fund. The Alpha Funds are permitted to take short positions and are also permitted to invest in some or all of the same securities that Mondrian manages for other clients. Mondrian is satisfied that the investment styles of these different products significantly reduce the likelihood of a conflict of interest arising. However, Mondrian has a number of policies and procedures in place that are designed to ensure that any potential conflicts are correctly managed and monitored so that all clients are treated fairly. Soft dollar arrangements Where an investment manager has soft dollar arrangements in place with a broker/dealer there is a potential conflict of interest as trading volumes through that broker/dealer are usually important in ensuring that soft dollar targets are met. As is typical in the investment management industry, Mondrian client funds are used to pay brokerage commissions for the execution of transactions in the client's portfolio. As part of that execution service, brokers generally provide proprietary research to their clients as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; and providing information on economic factors and trends. Proprietary research may be used by Mondrian in connection with its investment decision-making process with respect to one or more accounts managed by it, and it may or may not be used, or used exclusively, with respect to the account generating the brokerage. With the exception of the receipt of proprietary research, Mondrian has no other soft dollar or commission sharing arrangements in place with brokers. (12) In managing other portfolios (including affiliated accounts), certain potential conflicts of interest may arise. Potential conflicts include, for example, conflicts among investment strategies, conflicts in the allocation of investment opportunities, or conflicts due to different fees. As part of its compliance program, Jennison has adopted policies and procedures that seek to address and minimize the effects of these conflicts. Jennison's portfolio managers typically manage multiple accounts. These accounts may include, among others, mutual funds, separately managed advisory accounts (assets managed on behalf of institutions such as pension funds, colleges and universities, foundations), commingled trust accounts, other types of unregistered commingled accounts, affiliated single client and commingled insurance separate accounts, model nondiscretionary portfolios, and model portfolios used for wrap fee programs. Portfolio managers make investment decisions for each portfolio based on the investment Statement of Additional Information - April 1, 2009 Page 117 objectives, policies, practices and other relevant investment considerations that the managers believe are applicable to that portfolio. Consequently, portfolio managers may recommend the purchase (or sale) of certain securities for one portfolio and not another portfolio. Securities purchased in one portfolio may perform better than the securities purchased for another portfolio. Similarly, securities sold from one portfolio may result in better performance if the value of that security declines. Generally, however, portfolios in a particular product strategy (e.g., large cap growth equity) with similar objectives are managed similarly. Accordingly, portfolio holdings and industry and sector exposure tend to be similar across a group of accounts in a strategy that have similar objectives, which tends to minimize the potential for conflicts of interest. While these accounts have many similarities, the investment performance of each account will be different primarily due to differences in guidelines, timing of investments, fees, expenses and cash flows. Furthermore, certain accounts (including affiliated accounts) in certain investment strategies may buy or sell securities while accounts in other strategies may take the same or differing, including potentially opposite, position. For example, certain strategies may short securities that may be held long in other strategies. The strategies that sell a security short held long by another strategy could lower the price for the security held long. Similarly, if a strategy is purchasing a security that is held short in other strategies, the strategies purchasing the security could increase the price of the security held short. Jennison has policies and procedures that seek to mitigate, monitor and manage this conflict. In addition, Jennison has adopted trade aggregation and allocation procedures that seek to treat all clients (including affiliated accounts) fairly and equitably. These policies and procedures address the allocation of limited investment opportunities, such as IPOs and the allocation of transactions across multiple accounts. Some accounts have higher fees, including performance fees, than others. These differences may give rise to a potential conflict that a portfolio manager may favor the higher fee-paying account over the other or allocate more time to the management of one account over another. While Jennison does not monitor the specific amount of time that a portfolio manager spends on a single portfolio, senior Jennison personnel periodically review the performance of Jennison's portfolio managers as well as periodically assess whether the portfolio manager has adequate resources to effectively manage the accounts assigned to that portfolio manager. Jennison also believes that its compensation structure tends to mitigate this conflict. (13) Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one portfolio or other account. More specifically, portfolio managers who manage multiple portfolios and/or other accounts are presented with the following potential conflicts: - The management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. Davis Advisors seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the portfolios. - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one portfolio or other account, a portfolio may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible portfolios and other accounts. To deal with these situations, Davis Advisors has adopted procedures for allocating portfolio transactions across multiple accounts. - With respect to securities transactions for the portfolios, Davis Advisors determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), Davis Advisors may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Davis Advisors may place separate, non- simultaneous, transactions for a portfolio and another account which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the portfolio or the other account. - Finally, substantial investment of Davis Advisor or Davis Family assets in certain mutual funds may lead to conflicts of interest. To mitigate these potential conflicts of interest, Davis Advisors has adopted policies and procedures intended to ensure that all clients are treated fairly over time. Davis Advisors does not receive an incentive based fee on any account. (14) Conflicts of interest may arise in connection with the investment manager's management of the investments of the relevant fund and the investments of the other accounts. Such conflicts may arise with respect to the allocation of investment opportunities among the relevant fund and other accounts Conflicts of interest may arise in connection with the portfolio managers' management of the investments of the relevant fund and the investments of the other accounts included in the table above. Such conflicts may arise with respect to the allocation of investment opportunities among the relevant fund and other accounts with similar investment objectives and policies. A portfolio manager potentially could use information concerning the relevant fund's transactions to the advantage of other accounts and to the Statement of Additional Information - April 1, 2009 Page 118 detriment of the relevant fund. To address these potential conflicts of interest, Lord Abbett has adopted and implemented a number of policies and procedures. Lord Abbett has adopted Policies and Procedures for Evaluating Best Execution of Equity Transactions, as well as Trading Practices/Best Execution Procedures. The objective of these policies and procedures is to ensure the fair and equitable treatment of transactions and allocation of investment opportunities on behalf of all accounts managed by Lord Abbett. In addition, Lord Abbett's Code of Ethics sets forth general principles for the conduct of employee personal securities transactions in a manner that avoids any actual or potential conflicts of interest with the interests of Lord Abbett's clients including the relevant fund. Moreover, Lord Abbett's Statement of Policy and Procedures on Receipt and Use of Inside Information sets forth procedures for personnel to follow when they have inside information. Lord Abbett is not affiliated with a full service broker-dealer and therefore does not execute any portfolio transactions through such an entity, a structure that could give rise to additional conflicts. Lord Abbett does not conduct any investment bank functions and does not manage any hedge funds. Lord Abbett does not believe that any material conflicts of interest exist in connection with the portfolio managers' management of the investments of the relevant fund and the investments of the other accounts referenced in the table above. (15) Donald Smith & Co., Inc. is very sensitive to conflicts of interest that could possibly arise in its capacity of serving as an investment adviser. It remains committed to resolving any and all conflicts in the best interest of its clients. Donald Smith & Co., Inc. is an independent investment advisor with no parent or subsidiary organizations. Additionally, it has no affiliated organizations, brokerage, nor any investment banking activities. Clients include mutual funds, public and corporate pension plans, endowments and foundations, and other separate accounts. Donald Smith & Co., Inc. has put in place systems, policies and procedures, which have been designed to maintain fairness in portfolio management across all clients. Potential conflicts between funds or with other types of accounts are managed via allocation policies and procedures, internal review processes, and direct oversight by Donald G. Smith, President. (16) Tradewinds recognizes that actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, Tradewinds, because it manages multiple accounts is presented with several potential conflicts and it seeks to manage these conflicts as follows: - The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Tradewinds seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models. - If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Tradewinds has adopted procedures for fairly allocating portfolio transactions across multiple accounts. - With respect to many of its clients' accounts, Tradewinds determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Tradewinds may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Tradewinds may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts. - Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions (e.g., short selling) or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Tradewinds has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities. Tradewinds has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. (17) Actual or potential conflicts of interest may arise when a portfolio manager has management responsibilities to more than one account (including the Fund). BHMS manages potential conflicts between funds or with other types of accounts through allocation policies and procedures, internal review processes and oversight by directors and independent third parties to ensure that no client, regardless of type or fee structure, is intentionally favored at the expense of another. Allocation policies are designed to address potential conflicts in situations where two or more funds or accounts participate in investment decisions involving the same securities. Statement of Additional Information - April 1, 2009 Page 119 (18) Certain conflicts of interest may arise in connection with the management of multiple portfolios and investment strategies. Potential conflicts include the allocation of investment opportunities across client accounts and the allocation of similar investments across different strategies. MetWest Capital has adopted policies and procedures designed to minimize the effects of these conflicts. Responsibility for managing MetWest Capital client portfolios is organized according to investment strategy. All accounts in each strategy are managed to a model portfolio, as specified by the investment team. The investment team implements the model consistently across client portfolios. Consequently, position sizes and industry and sector allocations are similar across our clients' portfolios. Typically, no positions differ from portfolio to portfolio, except in the case of client-imposed restrictions. For such a portfolio, the investment team determines the position(s) that comply with client requirements. This process minimizes the potential for conflicts of interest. MetWest Capital's allocation policy allocates all investment opportunities among clients in the fairest possible way, taking into account clients' best interests. We have adopted policies and procedures designed to ensure that allocations do not involve a practice of favoring or disfavoring any strategy, client or group of clients. Account and strategy performance is never a factor in trade allocations. When necessary, we address known conflicts of interests in our trading practices by disclosure to clients and/or in our Form ADV or other appropriate action. The decision to buy or sell a position in the model portfolio is based on the direction of the investment team. Once the decision is made, traders prepare the trade "blocks." All participating strategies and client portfolios (those without pending cash flows or prohibited transactions) are block-traded together, typically grouped either by custodian or trade broker according to best-execution practices. Orders are placed to ensure random fills so that no one strategy, client or group of clients is favored or disfavored on a systematic basis. Each portfolio/relationship manager is responsible for reviewing the blocks and implementing all buy and sell orders for his/her accounts, taking into consideration client-specific factors. A committee, comprised of the Chief Investment Officer and portfolio/relationship managers, reviews trade reports for all accounts on a daily basis. (19) Threadneedle Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including proprietary accounts, separate accounts for institutions, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. In addition, the portfolio manager's responsibilities at Threadneedle Investments include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that he/she manages versus communicating his/her analyses to other portfolio managers concerning securities that he/she follows as an analyst. Threadneedle Investments has a fiduciary responsibility to all of the clients for which it manages accounts. Threadneedle Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. Threadneedle Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. (20) Like other investment professionals with multiple clients, a Fund's portfolio manager(s) may face certain potential conflicts of interest in connection with managing both the Fund and other accounts at the same time. The Advisor and the Funds have adopted compliance policies and procedures that attempt to address certain of the potential conflicts that portfolio managers face in this regard. Certain of these conflicts of interest are summarized below. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (performance fee accounts), if any, may raise potential conflicts of interest for a portfolio manager by creating an incentive to favor higher fee accounts. Potential conflicts of interest also may arise when a portfolio manager has personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to the Advisor's Code of Ethics and certain limited exceptions, the Advisor's investment professionals do not have the opportunity to invest in client accounts, other than the Funds. A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. The effects of this potential conflict may be more pronounced where funds and/or accounts managed by a particular portfolio manager have different investment strategies. Statement of Additional Information - April 1, 2009 Page 120 A portfolio manager may be able to select or influence the selection of the broker/dealers that are used to execute securities transactions for the Funds. A portfolio manager's decision as to the selection of broker/dealers could produce disproportionate costs and benefits among the Funds and the other accounts the portfolio manager manages. A potential conflict of interest may arise when a portfolio manager buys or sells the same securities for a Fund and other accounts. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a Fund as well as other accounts, the Advisor's trading desk may, to the extent consistent with applicable laws and regulations, aggregate the securities to be sold or bought in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a Fund or another account if a portfolio manager favors one account over another in allocating the securities bought or sold. "Cross trades," in which a portfolio manager sells a particular security held by a Fund to another account (potentially saving transaction costs for both accounts), could involve a potential conflict of interest if, for example, a portfolio manager is permitted to sell a security from one account to another account at a higher price than an independent third party would pay. The Advisor and the Funds have adopted compliance procedures that provide that any transactions between the Fund and another account managed by the Advisor are to be made at an independent current market price, consistent with applicable laws and regulation. Another potential conflict of interest may arise based on the different investment objectives and strategies of a Fund and other accounts managed by its portfolio manager(s). Depending on another account's objectives and other factors, a portfolio manager may give advice to and make decisions for a Fund that may differ from advice given, or the timing or nature of decisions made, with respect to another account. A portfolio manager's investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a portfolio manager may buy or sell a particular security for certain accounts, and not for a Fund, even though it could have been bought or sold for the Fund at the same time. A portfolio manager also may buy a particular security for one or more accounts when one or more other accounts are selling the security (including short sales). There may be circumstances when a portfolio manager's purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts, including the Funds. A Fund's portfolio manager(s) also may have other potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the Fund and other accounts. Many of the potential conflicts of interest to which the Advisor's portfolio managers are subject are essentially the same as or similar to the potential conflicts of interest related to the investment management activities of the Advisor and its affiliates. (21) Principal Global Investors provides investment advisory services to numerous clients other than the Fund. The investment objectives and policies of these accounts may differ from those of the Fund. Based on these differing circumstances, potential conflicts of interest may arise because the subadviser may be required to pursue different investment strategies on behalf of the Fund and other client accounts. For example, a subadviser may be required to consider an individual client's existing positions, personal tax situation, suitability, personal biases and investment time horizon, which considerations would not affect his investment decisions on behalf of the Fund. This means that research on securities to determine the merits of including them in the Fund's portfolio are similar, but not identical, to those employed in building private client portfolios. As a result, there may be instances in which a subadviser purchases or sells an investment for one or more private accounts and not for the Fund, or vice versa. To the extent the Fund and other clients seek to acquire the same security at about the same time, the Fund may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the Fund may not be able to obtain as large an execution of an order to sell or as high a price for any particular security if the subadviser desires to sell the same portfolio security at the same time on behalf of other clients. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Fund. (22) As an investment adviser and fiduciary, AllianceBernstein owes its clients and shareholders an undivided duty of loyalty. We recognize that conflicts of interest are inherent in our business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AllianceBernstein Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. We place the interests of our clients first and expect all of our employees to meet their fiduciary duties. Statement of Additional Information - April 1, 2009 Page 121 Employee Personal Trading AllianceBernstein has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of AllianceBernstein own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, AllianceBernstein permits its employees to engage in personal securities transactions, and also allows them to acquire investments in the AllianceBernstein Mutual Funds through direct purchase, 401K/profit sharing plan investment and/or notionally in connection with deferred incentive compensation awards. AllianceBernstein's Code of Ethics and Business Conduct requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers approved by AllianceBernstein. The Code also requires preclearance of all securities transactions and imposes a one-year holding period for securities purchased by employees to discourage short-term trading. Managing Multiple Accounts for Multiple Clients AllianceBernstein has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, AllianceBernstein's policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. No investment professional that manages client accounts carrying performance fees is compensated directly or specifically for the performance of those accounts. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is not tied specifically to the performance of any particular client's account, nor is it directly tied to the level or change in the level of assets under management. Allocating Investment Opportunities AllianceBernstein has policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The investment professionals at AllianceBernstein routinely are required to select and allocate investment opportunities among accounts. Portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar accounts, which minimizes the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons. AllianceBernstein's procedures are also designed to prevent potential conflicts of interest that may arise when AllianceBernstein has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which AllianceBernstein could share in investment gains. To address these conflicts of interest, AllianceBernstein's policies and procedures require, among other things, the prompt dissemination to investment professionals of any initial or changed investment recommendations by analysts; the aggregation of orders to facilitate best execution for all accounts; price averaging for all aggregated orders; objective allocation for limited investment opportunities (e.g., on a rotational basis) to ensure fair and equitable allocation among accounts; and limitations on short sales of securities. These procedures also require documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. (23) AIG Global Investment Corp. ("AIGGIC") aims to conduct its activities in such a manner that permits it to deal fairly with each of its clients on an overall basis in accordance with applicable securities laws and fiduciary obligations. In that regard, AIGGIC has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which AIGGIC believes address the conflicts associated with managing multiple accounts for Statement of Additional Information - April 1, 2009 Page 122 multiple clients (including affiliated clients). AIGGIC also monitors a variety of areas, including compliance with guidelines of the Fund and other accounts it manages and compliance with AIGGIC's Code of Ethics. Furthermore, AIGGIC's management periodically reviews the performance of a portfolio manager. Although AIGGIC does not track the time a portfolio manager spends on a single portfolio, AIGGIC does periodically assess whether a portfolio manager has adequate time and resources to effectively manage all of such portfolio manager's accounts. (24) Batterymarch recognizes that actual or potential conflicts may arise in managing multiple client accounts. A brief description of some of the potential conflicts of interest and compliance factors that may arise as a result is included below. We do not believe any of these potential conflicts of interest and compliance factors pose significant risk to any client account. Allocation of Limited Investment Opportunities If an investment team identifies a limited investment opportunity (including initial public offerings) that may be suitable for multiple client accounts, each account may not be able to take full advantage of that opportunity due to liquidity constraints or other factors. Batterymarch has adopted policies and procedures designed to ensure that allocations of limited investment opportunities are conducted in a fair and equitable manner between client accounts. Although Batterymarch strives to ensure that client accounts managed under similar investment mandates have similar portfolio characteristics, Batterymarch does not "clone" client accounts (i.e., assemble multiple client accounts with identical portfolios of securities). As a result, the portfolio of securities held in any single client account may perform better or worse than the portfolio of securities held in another similarly managed client account. Allocation of Partially-Filled Transactions in Securities Batterymarch often aggregates for execution as a single transaction orders for the purchase or sale of a particular security for multiple client accounts. If Batterymarch is unable to fill an aggregated order completely, but receives a partial fill, Batterymarch will typically allocate the transactions relating to the partially filled order to clients on a pro-rata basis with a minimum fill size. Batterymarch may make exceptions from this general policy from time to time based on factors such as the availability of cash, country/regional/sector allocation decisions, investment guidelines and restrictions, and the costs for minimal allocation actions. Opposite (i.e., Contradictory) Transactions in Securities Batterymarch provides investment advisory services for various clients and under various investment mandates and may give advice, and take action, with respect to any of those clients that may differ from the advice given, or the timing or nature of action taken, with respect to any other individual client account. In the course of providing advisory services, Batterymarch may simultaneously recommend the sale of a particular security for one client account while recommending the purchase of the same or a similar security for another account. This may occur for a variety of reasons. For example, in order to raise cash to handle a redemption/withdrawal from a client account, Batterymarch may be forced to sell a security that is ranked a "buy" by its stock selection model. Certain Batterymarch portfolio managers that manage long-only portfolios also manage portfolios that sell securities short. As such, Batterymarch may purchase or sell a security in one or more of its long-only portfolios under management during the same day it executes an opposite transaction in the same or a similar security for one or more of its portfolios under management that hold securities short, and certain Batterymarch client account portfolios may contain securities sold short that are simultaneously held as long positions in certain of the long- only portfolios managed by Batterymarch. The stock selection model(s), risk controls and portfolio construction rules used by Batterymarch to manage its clients' long-only portfolios differ from the model and rules that are used to manage client account portfolios that hold securities short. Because different stock selection models, risk controls and portfolio construction rules are used, it is possible that the same or similar securities may be ranked differently for different mandates and that the timing of trading in such securities may differ. Batterymarch has created certain compliance policies and procedures designed to minimize harm from such contradictory activities/events. Selection of Brokers/Dealers In selecting a broker or dealer, Batterymarch may choose a broker whose commission rate is in excess of that which another broker might have charged for the same transaction, based upon Batterymarch's judgment of that broker's superior execution capabilities and/or as a result of Batterymarch's perceived value of the broker's research services. Although Batterymarch does not participate in any traditional soft dollar arrangements whereby a broker purchases research from a third party on Batterymarch's behalf, Batterymarch does receive proprietary research services from brokers. Batterymarch generally seeks to achieve trade executions with brokers of the highest quality and at the lowest possible cost, although there can be no assurance that this objective will always be achieved. Batterymarch does not enter into any arrangements with brokers, formal or otherwise, regarding order flow as a result of research received. Clients should consider that there is a potential conflict of interest between their interests in obtaining best execution Statement of Additional Information - April 1, 2009 Page 123 and an investment adviser's receipt of research from brokers selected by the investment adviser for trade executions. The proprietary research services which Batterymarch obtains from brokers may be used to service all of Batterymarch's clients and not just those clients paying commissions to brokers providing those research services, and not all proprietary research may be used by Batterymarch for the benefit of the one or more client accounts which paid commissions to a broker providing such research. Personal Securities Transactions Batterymarch allows its employees to trade in securities that it recommends to advisory clients. Batterymarch's supervised persons, to the extent not prohibited by Batterymarch's Code of Ethics, may buy, hold or sell securities or investment products (including interests in partnerships and investment companies) at or about the same time that Batterymarch is purchasing, holding or selling the same or similar securities or investment products for client account portfolios and the actions taken by such persons on a personal basis may be, or may be deemed to be, inconsistent with the actions taken by Batterymarch for its client accounts. Clients should understand that these activities may create a conflict of interest between Batterymarch, its supervised persons and its clients. Batterymarch employees may also invest in mutual funds that are managed by Batterymarch. This may result in a potential conflict of interest since Batterymarch employees have knowledge of such funds' investment holdings, which is non-public information. To address this, Batterymarch has adopted a written Code of Ethics designed to prevent and detect personal trading activities that may interfere or conflict with client interests (including shareholders' interests in funds managed by Batterymarch). Batterymarch and certain Batterymarch employees may also have ownership interests in certain other client accounts, including pooled investment vehicles, that invest in long and short positions. Firm and employee ownership of such accounts may create additional potential conflicts of interest for Batterymarch. Performance-Based Fee Arrangements Batterymarch manages some accounts under performance-based fee arrangements. Batterymarch recognizes that this type of incentive compensation creates the risk for potential conflicts of interest. This structure may create an incentive to allocate investments having a greater potential for higher returns to accounts of those clients paying the higher performance fee. To prevent conflicts of interest, Batterymarch generally requires portfolio decisions to be made on a product specific basis. Additionally, Batterymarch requires average pricing of all aggregated orders. Lastly, the investment performance on specific accounts is not a factor in determining the portfolio managers' compensation; performance analysis is reviewed on an aggregate product basis. Although Batterymarch believes that its policies and procedures are appropriate to prevent, eliminate or minimize the harm of many potential conflicts of interest between Batterymarch, its related persons and clients, clients should be aware that no set of policies and procedures can possibly anticipate or relieve all potential conflicts of interest. Moreover, it is possible that additional potential conflicts of interest may exist that Batterymarch has not identified in the summary above. Batterymarch's CCO conducts a review of the firm's potential conflicts of interest and a risk assessment on an annual basis. (25) Systematic Financial Management, L.P. is an affiliated firm of Affiliated Managers Group, Inc. (AMG) a publicly traded asset management company, which invests in mid-sized asset management firms. Neither AMG nor any of their affiliates formulate advice for Systematic's clients and do not, in Systematic's view, present any potential conflict of interest with Systematic's clients. Portfolio managers oversee the investment of various types of accounts in the same strategy such as mutual funds, pooled investment vehicles and separate accounts for individuals and institutions. Investment decisions are generally applied to all accounts utilizing that particular strategy taking into consideration client restrictions, instructions and individual needs. A portfolio manager may manage an account whose fees may be higher or lower than the basic fee schedule to provide for varying client circumstances. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of client trades. However, Systematic has a variety of internal controls in place that are reasonably designed to detect such conflicts and protect the interests of its clients. Conflicts of interest, including employee personal securities trading, security selection, proxy voting and security allocation, may arise as a result of providing advisory services to a diverse group of clients invested in various strategies. To mitigate such potential conflicts and harm to Systematic's clients, Systematic has adopted policies and procedures, including but not limited to, its Code of Ethics, which addresses personal securities trading, Proxy Voting and Trade Error Policies. These policies and procedures are subject to periodic testing and reviews, which are reasonably designed to detect such conflicts and protect the interests of its clients. A portfolio manager may also face other potential conflicts of interest in managing the Partners Select Value Fund. The description above is not a complete Statement of Additional Information - April 1, 2009 Page 124 description of every conflict of interest that could be deemed to exist in managing this Fund and other accounts listed above. (26) During the normal course of managing assets for multiple clients of varying types and asset levels, WEDGE will inevitably encounter conflicts of interest that could, if not properly addressed, be harmful to one or more of its clients. Those of a material nature that are encountered most frequently surround security selection, brokerage selection, employee personal securities trading, proxy voting and the allocation of securities. WEDGE is therefore forced to consider the possible personal conflicts that occur for an analyst and portfolio manager as well as those for the firm when a security is recommended for purchase or sale. When trading securities, WEDGE must address the issues surrounding the selection of brokers to execute trades considering the personal conflicts of the trader and the firm's conflict to obtain best execution of client transactions versus offsetting the cost of research or enhancing its relationship with a broker for potential future gain. And finally, WEDGE must consider the implications that a limited supply or demand for a particular security poses on the allocation of that security across accounts. To mitigate these conflicts and ensure its clients are not negatively impacted by the adverse actions of WEDGE or its employees, WEDGE has implemented a series of policies including its Personal Security Trading Policy, Proxy Voting Policy, Equity Trading Policy, Trading Error Policy, and others designed to prevent and detect conflicts when they occur. WEDGE reasonably believes that these and other policies combined with the periodic review and testing performed by its compliance professionals adequately protects the interests of its clients. STRUCTURE OF COMPENSATION (27) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three- year, five-year and ten-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool would also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. In addition, where portfolio managers invest in a hedge fund managed by the investment manager, they receive a cash reimbursement for the investment management fees charged on their hedge fund investments. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (28) The compensation of RiverSource Investments employees consists of (i) a base salary, (ii) an annual cash bonus, and (iii) equity incentive awards in the form of stock options and/or restricted stock. The annual cash bonus is based on management's assessment of the employee's performance relative to individual and business unit goals and objectives which, for portfolio managers Joy, Keeley and Truscott, may be based, in part, on achieving certain investment performance goals and retaining and attracting assets under management, and for portfolio manager Bergene, on developing competitive products, managing existing products, and selecting and monitoring subadvisers for funds. In addition, subject to certain vesting requirements, the compensation of portfolio managers Joy, Keeley and Truscott, includes an annual award based on the performance of Ameriprise Financial over rolling three-year periods. This program is being discontinued and the final award under this plan covers the three-year period that started in January 2007 and ends in December 2009. RiverSource Investments' portfolio managers are provided with a benefit package including life insurance, health insurance and participation in the company's 401(k) plan comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments' portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (29) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the Statement of Additional Information - April 1, 2009 Page 125 performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. With the exception of Mr. Spitz, the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, plus, where applicable, a percentage of the assets of the funds they support as research analysts, and by the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Mr. Spitz receives a bonus based on management fees on one product and asset retention efforts associated with other products managed by the team. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (30) As an employer, UBS Global Asset Management operates within a highly competitive compensation environment. To review industry comparatives, we measure our compensation structures against benchmark data of competitors provided by McLagan Partners, the industry standard provider for compensation measurement and assessment, on an annual basis. We also perform compensation analysis on an as-needed basis, e.g., when bringing new employees into the organization, or when the market shifts and we need to consider adjustments for retention purposes. Our Global Head of Compensation works closely with our parent company and various data sources to validate our procedures and assumptions. Our compensation and benefits programs are designed to provide our investment professionals with incentives to excel, and to promote an entrepreneurial, performance-oriented culture. They also align the interests of our investment professionals with the interests of our clients. Overall compensation can be grouped into four categories: 1. Competitive salary, benchmarked annually to maintain very competitive compensation opportunities. 2. Annual bonus, tied to individual contributions and investment performance. 3. Analyst incentives, tied to performance of model portfolios. 4. UBS equity awards, promoting company-wide success and employee retention. Base salary is used to recognize the experience, skills and knowledge that our investment professionals bring to their roles. Salary levels are monitored and adjusted periodically in order to remain competitive within the investment management industry. Annual bonuses are strictly and rigorously correlated with performance. As such, annual incentives can be highly variable, and are based on three components: 1) the firm's overall business success; 2) the performance of the respective asset class and/or investment mandate; and 3) an individual's specific contribution to the firm's results. We strongly believe that tying bonuses to both long-term (3-year) and shorter-term (1-year) portfolio performance closely aligns our investment professionals' interests with those of our clients. Analyst Incentives. Because we value our proprietary research, we have designed a compensation system that has made investment analysis a highly regarded career within our firm. Grouped into 12 global sector teams, our analysts manage model portfolios in global and local sectors. Our portfolio managers use the model sector portfolios to build actual client portfolios. Analyst incentives are tied to the performance of the model portfolios, which we evaluate over rolling three-year periods. One-third of each analyst's rating is based upon the performance of the model global sector portfolio; one-third on the model local sector portfolio; and one-third is a qualitative assessment of their contribution. We believe that this system closely aligns our analysts' incentives with our clients. UBS AG equity. Many of our senior investment professionals are required to defer a portion of their annual performance-based incentive in the form of deferred or restricted UBS AG shares or employee stock options. Not only does this reinforce the critical importance of creating long- term business value, it also serves as an effective retention tool as the equity shares typically vest over a number of years. Broader equity share ownership is encouraged for all employees through "Equity Plus". This long-term incentive program gives employees the opportunity to purchase UBS stock with after-tax funds from their bonus or salary. Two UBS stock options are given for each share acquired and held for two years. We feel this engages our employees as partners in the firm's success, and helps to maximize our integrated business strategy. (31) Turner's investment professionals receive a base salary commensurate with their level of experience. Turner's goal is to maintain competitive base salaries through review of industry standards, market conditions, and salary surveys. Bonus Statement of Additional Information - April 1, 2009 Page 126 compensation, which is a multiple of base salary, is based on the performance of each individual's sector and portfolio assignments relative to appropriate market benchmarks. In addition, each employee is eligible for equity awards. Turner believes this compensation provides incentive to attract and retain highly qualified people. The objective performance criteria noted above accounts for 90% of the bonus calculation. The remaining 10% is based upon subjective, "good will" factors including teamwork, interpersonal relations, the individual's contribution to overall success of the firm, media and client relations, presentation skills, and professional development. Portfolio managers/analysts are reviewed on an annual basis. The Chief Investment Officer, Robert E. Turner, CFA, is responsible for setting base salaries, bonus targets, and making all subjective judgments related to an investment professionals' compensation. (32) The professionals at Essex are compensated by a three-tiered approach. First, all of the investment professionals have industry-competitive base salaries and receive a percentage of the firm's profits through a profit-sharing/pension plan. Second, Essex's professionals receive a year-end bonus based on their personal performance and Essex's composite performance relative to our peers and benchmark. Third, Essex offers a competitive benefits package including comprehensive family health coverage. Essex's yearly investment performance drives the portfolio managers' incentive portion ("bonus") of their compensation package. The portfolio managers' bonus is based on their respective portfolios' absolute, relative, and risk-adjusted performance. Eighty percent of the evaluation is based on the performance of the portfolios and twenty percent is based on teamwork, communication, and other subjective criteria. We also incent them on their one, two and three-year performance track record. As an added retention mechanism, Essex offers ownership to both existing and prospective employees. The current ownership structure allows Essex to capitalize a portion of its free cash flow each year and transform it into stock ownership. Essex envisions granting ownership as an additional incentive to the employees who contribute the greatest to the firm's future success. Finally, Essex is committed to using a fundamental team approach and culture that encourages continuity among its investment professionals and makes a conscious effort to reward its team members accordingly. (33) The portfolio managers are paid a fixed base salary and a variable annual incentive. Base salary is determined within a market competitive position-specific salary range, based on experience and performance. For purposes of calculating the annual incentive amount, each mutual fund and institutional account managed by MDTA is categorized as reflecting one of several designated "Strategies." The annual incentive amount is based on current calendar year asset-weighted composite investment performance of each Strategy, which is measured on a total return basis gross of fees and expenses vs. the Strategy's designated benchmark (i.e., with respect to the Fund's Strategy, Russell 2000 Growth Index). The portfolio managers are also part of investment teams for other accounts in addition to the Fund. Such other accounts may be categorized as reflecting different Strategies, which may have different benchmarks. Although the performance of each Strategy composite is considered in calculating the annual incentive amount, their relative weightings differ. The performance of one of the other Strategies (which does not include the Fund in its composite performance) represents a significant portion of the calculation. The remaining Strategies are divided into two groups, with each Strategy within a group receiving equal weighting. The Strategy to which the Fund is assigned and the other Strategies in the same group receive higher weighting than Strategies in the other group. As a separate matter, pursuant to the terms of a business acquisition agreement, the portfolio managers may receive additional consideration based on the achievement of specified revenue targets. (34) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three- year and five-year) performance of those accounts in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon Statement of Additional Information - April 1, 2009 Page 127 their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (35) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by the aggregate market competitive bonus targets for the teams of which the portfolio manager is a member and by the short-term (typically one-year) and long-term (typically three-year) performance of those accounts in relation to applicable benchmarks or the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (36) The compensation of American Century's portfolio managers is structured to align the interests of portfolio managers with those of the shareholders whose assets they manage. For the fiscal year ended May 31, 2008, it included the components described below, each of which is determined with reference to a number of factors, such as overall performance, market competition, and internal equity. Compensation is not directly tied to the value of assets held in client portfolios. Base Salary Portfolio managers receive base pay in the form of a fixed annual salary. Bonus A significant portion of portfolio manager compensation takes the form of an annual incentive bonus tied to performance. Bonus payments are determined by a combination of factors. One factor is fund investment performance. For most American Century mutual funds, investment performance is measured by a combination of one- and three- year pre-tax performance relative to various benchmarks and/or internally-customized peer groups. The performance comparison periods may be adjusted based on a fund's inception date or a portfolio manager's tenure on the fund. Custom peer groups are constructed using all the funds in appropriate Lipper or Morningstar categories as a starting point. Funds are then eliminated from the peer group that is both more stable over the long- term (i.e., has less peer turnover) and that more closely represents the fund's true peers based on internal investment mandates. Portfolio managers may have responsibility for multiple American Century mutual funds. In such cases, the performance of each is assigned a percentage weight appropriate for the portfolio manager's relative levels of responsibility. Portfolio managers also may have responsibility for portfolios that are managed in a fashion similar to that of other American Century mutual funds. This is the case for the Partners Small Cap Equity and Partners Aggressive Growth Funds. If the performance of a similarly managed account is considered for purposes of compensation, it is either measured in the same way as a comparable American Century mutual fund (i.e., relative to the performance of a benchmark and/or peer group) or relative to the performance of such mutual fund. Performance of Partners Small Cap Equity Fund is measured relative to the performance of a comparable American Century mutual fund. Performance of Partners Aggressive Growth Fund is not separately considered in determining portfolio manager compensation. A second factor in the bonus calculation relates to the performance of all American Century funds managed according to a particular investment style, such as U.S. growth or value. Performance is measured for each product individually as described above and then combined to create an overall composite for the product group. These composites may measure one-year performance (equal weighted) or a combination of one- and three-year performance (asset weighted) depending on the portfolio manager's responsibilities and products managed. This feature is designed to encourage effective teamwork among portfolio management teams in achieving long-term investment success for similarly styled portfolios. A portion of some portfolio managers' bonuses may be tied to individual performance goals, such as research projects and the development of new products. Statement of Additional Information - April 1, 2009 Page 128 Restricted Stock Plans Portfolio managers are eligible for grants of restricted stock of ACC. These grants are discretionary, and eligibility and availability can vary from year to year. The size of an individual's grant is determined by individual and product performance as well as other product-specific considerations. Grants can appreciate/depreciate in value based on the performance of the ACC stock during the restriction period (generally three years). Deferred Compensation Plans Portfolio managers are eligible for grants of deferred compensation. These grants are used in very limited situations, primarily for retention purposes. Grants are fixed and can appreciate/depreciate in value based on the performance of the American Century mutual funds in which the portfolio manager chooses to invest them. (37) Kenneth Feinberg's compensation as a Davis Advisors employee consists of (i) a base salary, (ii) an annual bonus equal to a percentage of growth in Davis Advisors' profits, (iii) awards of equity ("Units") in Davis Advisors including Units, options on Units, and/or phantom Units, and (iv) an incentive plan whereby Davis Advisors purchases shares in selected funds managed by Davis Advisors. At the end of specified periods, generally five years following the date of purchase, some, all, or none of the fund shares will be registered in the employee's name based on fund performance after expenses on a pre-tax basis versus the S&P 500 Index and versus peer groups as defined by Morningstar or Lipper. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. Christopher Davis's annual compensation as an employee of Davis Advisors consists of a base salary. Davis Advisors' portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees. (38) Ron Mushock and Kevin McCreesh are partners of the firm and co-Portfolio managers for the strategy. Employee-owners receive a fixed base salary and income distributions scaled to the company's profit margins and their respective individual ownership interests. Other investment professionals are compensated with both a competitive salary and an annual performance bonus determined by their contribution to our investment process and its results. Total compensation is influenced by Systematic's overall profitability and therefore is based in part on the aggregate performance of all of Systematic's portfolios, including the Partners Select Value Fund. Systematic's ability to offer equity ownership to senior professionals also provides a significant incentive for our investment team. Moreover, Messrs. Mushock and McCreesh are provided with a benefits package, including health insurance, and participation in a company 401(k) plan, comparable to that received by other Systematic employees. The co-Portfolio managers are not compensated based solely on the performance of, or the value of assets held in the Partners Select Value Fund or any other individual fund managed by Systematic. (39) WEDGE's incentive compensation has been structured to reward all professionals for their contribution to the growth and profitability of the firm. Compensation is not directly tied to fund performance or growth in assets for any fund or other account managed by a portfolio manager. General Partners are compensated via a percentage of the firm's net profitability following a peer review, which focuses on performance in their specific area of responsibility, as well as their contribution to the general management of the firm, and their importance to the firm in the future. Other investment professionals receive a competitive salary and bonus based on the firm's investment and business success and their specific contribution to that record. (40) Jennison seeks to maintain a highly competitive compensation program designed to attract and retain outstanding investment professionals, which includes portfolio managers and research analysts, and to align the interests of its investment professionals with those of its clients and overall firm results. Overall firm profitability determines the total amount of incentive compensation pool that is available for investment professionals. Investment professionals are compensated with a combination of base salary and discretionary cash bonus. In general, the cash bonus comprises the majority of the compensation for investment professionals. Additionally, senior investment professionals, including portfolio managers and senior research analysts, are eligible to participate in a voluntary deferred compensation program where all or a portion of the discretionary cash bonus can be deferred. Participants in the deferred compensation plan are permitted to allocate the deferred amounts among various options that track the gross of fee pre-tax performance of various mutual funds, of which nearly all of the equity options are managed by Jennison, and composites of accounts managed by Jennison, which may include accounts managed for unregistered products. Investment professionals' total compensation is determined through a subjective process that evaluates numerous qualitative and quantitative factors. There is no particular weighting or formula for considering the factors. Some portfolio managers or analysts may manage or contribute ideas to more than one product strategy and are evaluated accordingly. The factors considered for an investment professional whose primary role is portfolio management will differ from an investment professional who is a portfolio manager with research analyst responsibilities. Statement of Additional Information - April 1, 2009 Page 129 The following factors, listed in order of importance, will be reviewed for each portfolio manager: - One and three year pre-tax investment performance of groupings of accounts (a "Composite") relative to market conditions, pre-determined passive indices, such as the Russell 2000 Index, and industry peer group data for the product strategy (e.g., large cap growth, large cap value) for which the portfolio manager is responsible; - Historical and long-term business potential of the product strategies; - Qualitative factors such as teamwork and responsiveness; and Other factors such as experience and other responsibilities such as being a team leader or supervisor may also affect an investment professional's total compensation. (41) Lord Abbett compensates its portfolio managers on the basis of salary, bonus and profit sharing plan contributions. The level of compensation takes into account the portfolio manager's experience, reputation and competitive market rates. Fiscal year-end bonuses, which can be a substantial percentage of base level compensation, are determined after an evaluation of various factors. These factors include the portfolio manager's investment results and style consistency, the dispersion among funds with similar objectives, the risk taken to achieve the fund returns, and similar factors. Investment results are evaluated based on an assessment of the portfolio manager's three- and five-year investment returns on a pre-tax basis vs. both the appropriate style benchmarks and the appropriate peer group rankings. Finally, there is a component of the bonus that reflects leadership and management of the investment team. The evaluation does not follow a formulaic approach, but rather is reached following a review of these factors. No part of the bonus payment is based on the portfolio manager's assets under management, the revenues generated by those assets, or the profitability of the portfolio manager's unit. Lord Abbett does not manage hedge funds. Lord Abbett may designate a bonus payment of a manager for participation in the firm's senior incentive compensation plan, which provides for a deferred payout over a five-year period. The plan's earnings are based on the overall asset growth of the firm as a whole. Lord Abbett believes this incentive focuses portfolio managers on the impact their fund's performance has on the overall reputation of the firm as a whole and encourages exchanges of investment ideas among investment professionals managing different mandates. Lord Abbett provides a 401(k) profit-sharing plan for all eligible employees. Contributions to a portfolio manager's profit-sharing account are based on a percentage of the portfolio manager's total base and bonus paid during the fiscal year, subject to a specified maximum amount. The assets of this profit-sharing plan are entirely invested in Lord Abbett-sponsored funds. (42) All employees at Donald Smith & Co., Inc. are compensated on incentive plans. The compensation for portfolio managers, analysts and traders at Donald Smith consists of a base salary, a partnership interest in the firm's profits, and possibly an additional, discretionary bonus. This discretionary bonus can exceed 100% of the base salary if performance for clients exceeds established benchmarks. The current benchmark utilized is the Russell 2000 Value Index. Additional distribution of firm ownership is a strong motivation for continued employment at Donald Smith & Co., Inc. Administrative personnel are also given a bonus as a function of their contribution and the profitability of the firm. (43) In addition to base salary, all portfolio managers and analysts at BHMS share in a bonus pool that is distributed semi- annually. Analysts and portfolio managers are rated on their value added to the team-oriented investment process. Overall compensation applies with respect to all accounts managed and compensation does not differ with respect to distinct accounts managed by a portfolio manager. Compensation is not tied to a published or private benchmark. It is important to understand that contributions to the overall investment process may include not recommending securities in an analyst's sector if there are no compelling opportunities in the industries covered by that analyst. The compensation of portfolio managers is not directly tied to fund performance or growth in assets for any fund or other account managed by a portfolio manager and portfolio managers are not compensated for bringing in new business. Of course, growth in assets from the appreciation of existing assets and/or growth in new assets will increase revenues and profit. The consistent, long-term growth in assets at any investment firm is to a great extent, dependent upon the success of the portfolio management team. The compensation of the portfolio management team at the Adviser will increase over time, if and when assets continue to grow through competitive performance. (44) MetWest Capital's compensation system is designed not only to attract and retain experienced, highly qualified investment personnel, but also to closely align employees' interests with clients' interests. Compensation for investment professionals consists of a base salary, bonus, and generous benefits. Benefits include a comprehensive insurance benefits program (medical, vision and dental), 401(k) plan with an employer-matched contribution. A material portion of each such professional's annual compensation is in the form of a bonus tied to results relative to clients' benchmarks and overall client satisfaction. Bonuses may range from 20% to over 100% of salary. MetWest Capital's compensation system is not determined on an account- specific basis. Rather, bonuses are tied to overall firm profitability and composite performance relative to the benchmark. The primary benchmark for the Small Statement of Additional Information - April 1, 2009 Page 130 Cap Intrinsic Value strategy is the Russell 2000 Value Index. To reinforce long-term focus, performance is measured over MetWest Capital's investment horizon (typically two to four years). Analysts are encouraged to maintain a long-term focus and are not compensated for the number of their recommendations that are purchased in the portfolio. Rather, their bonuses are tied to overall strategy performance. Mr. Lisenbee is an owner of MetWest Capital. As such, his compensation consists of a fixed salary and participation in the firm's profits. (45) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is based upon a percentage of profits generated by the institutional portfolios they manage. Lynn Hopton and Yvonne Stevens may also be paid from a bonus pool based upon the performance of the mutual fund(s) they manage. Funding for this bonus pool is determined by a percentage of the aggregate assets under management in the mutual fund(s) they manage, and by the short term (typically one-year) and long-term (typically three- year) performance of the mutual fund(s) in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool related to mutual funds and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. Senior management of RiverSource Investments does not have discretion over the size of the bonus pool related to institutional portfolios. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (46) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus, and in some instances the base salary, are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the management fees on the accounts managed by the portfolio managers, including the fund. The percentage of management fees that fund the bonus pool is based on the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (47) As of December 31, 2007, the portfolio managers received all of their compensation from the Advisor and its parent company, Columbia Management. P. Zachary Egan and Louis J. Mendes each received compensation in the form of salary and bonus. Typically, a high proportion of an analyst's or portfolio manager's bonus is paid in cash with a smaller proportion going into two separate incentive plans. The first plan is a notional investment based on the performance of certain Columbia Funds, including the Columbia Acorn Funds. The second plan consists of Bank of America restricted stock and/or options. Both plans vest over three years from the date of issuance. The CWAM total bonus pool, including cash and the two incentive plans, is based on a formula, with firm wide investment performance as the primary driver. Analysts and portfolio managers are positioned in a number of compensation tiers based on cumulative performance. Excellent performance results in advancement to a higher tier until the highest tier is reached. Higher tiers have higher base compensation levels and wider bonus ranges. While cumulative performance places analysts and managers in tiers, current year performance drives changes in bonus levels. Incentive bonuses vary by tier, and can range between a fraction of base pay to several times base pay; the objective being to provide very competitive total compensation for high performing analysts and portfolio managers. In addition, Mr. Egan received a final distribution on September 30, 2007 in connection with his association with the Advisor prior to its acquisition in September 2000 and the Advisor's performance through September 30, 2005. Mr. Mendes received a final distribution on September 30, 2007 from a supplemental pool for the Advisor's employees Statement of Additional Information - April 1, 2009 Page 131 that was established in connection with the acquisition of CWAM and was based on the Advisor's performance through September 30, 2005. (48) Principal Global Investors offers all employees a competitive salary and incentive compensation plan that is evaluated annually. Percentages of base salary versus performance bonus vary by position but are based on nationally competitive market data and are consistent with industry standards. Total cash compensation is targeted at the median of the market and benefits are targeted slightly above median. The investment staff is compensated under a base salary plus variable annual bonus (incentive compensation). The incentive compensation plan for equity portfolio managers is 90% weighted to investment performance and 10% weighted to Principal Global Investors annual performance score. The incentive bonus for equity portfolio managers ranges from 150% to 300% of actual base earnings, depending on job level. - Investment performance is based on gross performance versus a benchmark, peer group or both, depending on the client mandate. - Performance versus peers is measured for a period up to three years (shorter if the portfolio manager has managed the respective portfolio for a period less than three years). - Versus the peer group, incentive payout starts at 54th percentile and reaches 100% at the 25th percentile for the 1, 2, and 3-year periods. 3.33% of incentive payout is achieved at 54th percentile. No payout is realized if performance is at or below 55th percentile. As a wholly owned subsidiary of Principal Financial Group, all Principal Global employees are eligible to participate in our Employee Stock Purchase Plan that allows them to purchase company stock at a 15% discount each quarter. In addition, through our 401(k) plan, employees are able to contribute to an Employee Stock Ownership Plan (ESOP) through which they can buy additional company stock. (49) AllianceBernstein's compensation program for investment professionals is designed to be competitive and effective in order to attract and retain the highest caliber employees. The compensation program for investment professionals is designed to reflect their ability to generate long-term investment success for our clients, including shareholders of the AllianceBernstein Mutual Funds. Investment professionals do not receive any direct compensation based upon the investment returns of any individual client account, nor is compensation tied directly to the level or change in the level of assets under management. Investment professionals' annual compensation is comprised of the following: (i) Fixed base salary: This is generally the smallest portion of compensation. The base salary is a relatively low, fixed salary within a similar range for all investment professionals. The base salary (determined at the outset of employment based on level of experience), does not change significantly from year-to-year, and hence, is not particularly sensitive to performance. (ii) Discretionary incentive compensation in the form of an annual cash bonus: AllianceBernstein's overall profitability determines the total amount of incentive compensation available to investment professionals. This portion of compensation is determined subjectively based on qualitative and quantitative factors. In evaluating this component of an investment professional's compensation, AllianceBernstein considers the contribution to his/her team or discipline as it relates to that team's overall contribution to the long-term investment success, business results and strategy of AllianceBernstein. Quantitative factors considered include, among other things, relative investment performance (e.g., by comparison to competitor or peer group funds or similar styles of investments, and appropriate, broad-based or specific market indices), and consistency of performance. There are no specific formulas used to determine this part of an investment professional's compensation and the compensation is not tied to any pre-determined or specified level of performance. AllianceBernstein also considers qualitative factors such as the complexity and risk of investment strategies involved in the style or type of assets managed by the investment professional; success of marketing/business development efforts and client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of AllianceBernstein's leadership criteria. (iii) Discretionary incentive compensation in the form of awards under AllianceBernstein's Partners Compensation Plan ("deferred awards"): AllianceBernstein's overall profitability determines the total amount of deferred awards available to investment professionals. The deferred awards are allocated among investment professionals based on criteria similar to those used to determine the annual cash bonus. There is no fixed formula for determining these amounts. Deferred awards, for which there are various investment options, vest over a four-year period and are generally forfeited if the employee resigns or AllianceBernstein terminates his/her employment. Investment options under the deferred awards plan include many of the same AllianceBernstein Mutual Funds offered to mutual fund investors, thereby creating a close alignment between the financial interests of the investment professionals and those of AllianceBernstein's clients and mutual fund shareholders with respect to the performance of those mutual funds. AllianceBernstein also permits deferred award recipients to allocate up to 50% of their award to investments in AllianceBernstein's publicly traded equity securities (prior to 2002, investment professional compensation also included discretionary long-term incentive in the form of restricted grants of AllianceBernstein's Master Limited Partnership Units). Statement of Additional Information - April 1, 2009 Page 132 (iv) Contributions under AllianceBernstein's Profit Sharing/401(k) Plan: The contributions are based on AllianceBernstein's overall profitability. The amount and allocation of the contributions are determined at the sole discretion of AllianceBernstein. (50) Mondrian has the following programs in place to retain key investment staff: 1. Competitive Salary -- All investment professionals are remunerated with a competitive base salary. 2. Profit Sharing Bonus Pool -- All Mondrian staff, including portfolio managers and senior officers, qualify for participation in an annual profit sharing pool determined by the company's profitability (approximately 30% of profits). 3. Equity Ownership -- Mondrian is ultimately controlled by a partnership of senior management and private equity funds sponsored by Hellman & Friedman LLC, an independent private equity firm. Mondrian is currently 61% owned by approximately 70 of its senior employees, including the majority of investment professionals, senior client service officers, and senior operations personnel, and 39% owned by private equity funds sponsored by Hellman & Friedman, LLC. The private equity funds sponsored by Hellman & Friedman LLC are passive, non-controlling minority investors in Mondrian and do not have day-to-day involvement in the management of Mondrian. Incentives (Bonus and Equity Programs) focus on the key areas of research quality, long-term and short-term stock performance, teamwork, client service and marketing. As an individual's ability to influence these factors depends on that individual's position and seniority within the firm, so the allocation of participation in these programs will reflect this. At Mondrian, the investment management of particular portfolios is not "star manager" based but uses a team system. This means that Mondrian's investment professionals are primarily assessed on their contribution to the team's effort and results, though with an important element of their assessment being focused on the quality of their individual research contribution. Compensation Committee In determining the amount of bonuses and equity awarded, Mondrian's Board of Directors consults with the company's Compensation Committee, who will make recommendations based on a number of factors including investment research, organization management, team work, client servicing and marketing. Defined Contribution Pension Plan All portfolio managers are members of the Mondrian defined contribution pension plan where Mondrian pays a regular monthly contribution and the member may pay additional voluntary contributions if they wish. The Plan is governed by Trustees who have responsibility for the trust fund and payments of benefits to members. In addition, the Plan provides death benefits for death in service and a spouse's or dependant's pension may also be payable. Mondrian believes that this compensation structure, coupled with the opportunities that exist within a successful and growing business, are adequate to attract and retain high caliber employees. (51) Tradewinds offers a highly competitive compensation structure with the purpose of attracting and retaining the most talented investment professionals. These professionals are rewarded through a combination of cash and long-term incentive compensation as determined by the firm's executive committee. Total cash compensation (TCC) consists of both a base salary and an annual bonus that can be a multiple of the base salary. The firm annually benchmarks TCC to prevailing industry norms with the objective of achieving competitive levels for all contributing professionals. Available bonus pool compensation is primarily a function of the firm's overall annual profitability. Individual bonuses are based primarily on the following: - Overall performance of client portfolios; - Objective review of stock recommendations and the quality of primary research; - Subjective review of the professional's contributions to portfolio strategy, teamwork, collaboration and work ethic. To further strengthen our incentive compensation package and to create an even stronger alignment to the long-term success of the firm, Tradewinds has made available to most investment professionals equity participation opportunities, the values of which are determined by the increase in profitability of Tradewinds over time. Finally, some of our investment professionals have received additional remuneration as consideration for signing employment agreements. These agreements range from retention agreements to long-term employment contracts with significant non-solicitation and, in some cases, non- compete clauses. (52) Compensation for AIGGIC portfolio managers has both a salary and a bonus component. The salary component is a fixed base salary, which is generally based upon several factors, including experience and market levels of salary for such position. The bonus component is based both on a portfolio manager's individual performance and the organizational performance of AIGGIC. The bonus component is generally calculated as follows: (1) 60% is linked to the management of a portfolio manager's funds; (2) 20% is based on AIGGIC's profitability; and (3) 20% is determined on a discretionary basis (including individual qualitative goals). For the 60% component, the measures for a portfolio manager may vary according to the day-to-day responsibilities of a particular portfolio manager. The measures comprise any combination of (a) total return measures, (b) benchmark measures and (c) peer group measures. Any long-term compensation may include stock options and restricted stock units, both having vesting schedules. Statement of Additional Information - April 1, 2009 Page 133 (53) In addition to customary employee benefits (e.g., medical coverage), Batterymarch's compensation for investment professionals includes a combination of base salary, annual bonus and long-term incentive compensation, as well as a generous benefits package made available to all Batterymarch employees on a non-discretionary basis. Specifically, the package includes: - competitive base salaries; - individual performance-based bonuses based on the investment professionals' added value to the portfolios for which they are responsible measured on a one-, three- and five-year basis versus benchmarks and peer universes as well as their contributions to research, client service and new business development; - corporate profit-sharing; and - annual contribution to a non-qualified deferred compensation plan that has a cliff-vesting requirement (i.e., they must remain employed with the firm for at least 31 months to receive payment). Performance is evaluated on an aggregate product basis that the portfolio manager is responsible for and is generally not analyzed by any individual client portfolios. Portfolio manager compensation is not tied to, nor increased or decreased as the result of, any performance fees that may be earned by Batterymarch. Lastly, portfolio managers do not receive a percentage of the revenue earned on any of Batterymarch's client portfolios. (54) The portfolio manager's compensation as a Threadneedle Investments employee consists of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award. The annual bonus is paid from a bonus pool that is based on both mutual fund and institutional portfolio performance. Funding for the bonus pool is determined by the aggregate market competitive bonus targets for the teams of which the portfolio manager is a member and generally by the performance of the accounts compared to applicable benchmarks. Senior management of Threadneedle Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his/her performance as an employee subject to the total fund managers' bonus pool being within the overall Corporate bonus pool which is based on the profitability of Threadneedle. Threadneedle Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company pension plan, comparable to that received by other Threadneedle employees. (55) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, plus, where applicable, a percentage of the assets of the funds they support as research analysts, and by the short term (typically one-year) and long-term (typically three-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. Statement of Additional Information - April 1, 2009 Page 134 ADMINISTRATIVE SERVICES Each fund listed in the table below has an Administrative Services Agreement with Ameriprise Financial. Under this agreement, the fund pays Ameriprise Financial for providing administration and accounting services. The fee is calculated as follows: TABLE 20. ADMINISTRATIVE SERVICES AGREEMENT FEE SCHEDULE
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ------------------------------------------------------------------------------------------ $500,000,001 - $1,000,000,001 - $3,000,000,001 - FUND $0 - 500,000,000 1,000,000,000 3,000,000,000 $12,000,000,000 12,000,000,001 + - ------------------------------------------------------------------------------------------------------------------------------ 120/20 Contrarian Equity 0.080% 0.075% 0.070% 0.060% 0.050% Absolute Return Currency and Income Disciplined International Equity Disciplined Small Cap Value Emerging Markets Bond Global Bond Partners International Select Growth Partners International Select Value Partners International Small Cap Partners Small Cap Equity Partners Small Cap Growth Partners Small Cap Value Small Cap Advantage Small Company Index Strategic Allocation Threadneedle Emerging Markets Threadneedle European Equity Threadneedle Global Equity Threadneedle Global Equity Income Threadneedle Global Extended Alpha Threadneedle International Opportunity - ------------------------------------------------------------------------------------------------------------------------------ California Tax-Exempt 0.070% 0.065% 0.060% 0.050% 0.040% Diversified Bond Floating Rate High Yield Bond Income Opportunities Inflation Protected Intermediate Tax-Exempt Limited Duration Bond Minnesota Tax-Exempt New York Tax-Exempt Short Duration U.S. Government Strategic Income Allocation Tax-Exempt Bond Tax-Exempt High Income U.S. Government Mortgage - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 135
ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES ------------------------------------------------------------------------------------------ $500,000,001 - $1,000,000,001 - $3,000,000,001 - FUND $0 - 500,000,000 1,000,000,000 3,000,000,000 $12,000,000,000 12,000,000,001 + - ------------------------------------------------------------------------------------------------------------------------------ Balanced 0.060% 0.055% 0.050% 0.040% 0.030% Cash Management Disciplined Equity Disciplined Large Cap Growth Disciplined Large Cap Value Disciplined Small and Mid Cap Equity Diversified Equity Income Dividend Opportunity Equity Value Global Technology Growth Large Cap Equity Large Cap Value Mid Cap Growth Mid Cap Value Partners Aggressive Growth Partners Fundamental Value Partners Select Value Precious Metals and Mining Real Estate S&P 500 Index Tax-Exempt Money Market - ------------------------------------------------------------------------------------------------------------------------------ Income Builder Basic Income 0.020% 0.020% 0.020% 0.020% 0.020% Income Builder Enhanced Income Income Builder Moderate Income Portfolio Builder Aggressive Portfolio Builder Conservative Portfolio Builder Moderate Portfolio Builder Moderate Aggressive Portfolio Builder Moderate Conservative Portfolio Builder Total Equity Retirement Plus 2010 Retirement Plus 2015 Retirement Plus 2020 Retirement Plus 2025 Retirement Plus 2030 Retirement Plus 2035 Retirement Plus 2040 Retirement Plus 2045 - ------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 136 The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day. Fees paid in each of the last three fiscal periods are shown in the table below. The table also shows the daily rate applied to each fund's net assets as of the last day of the most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 21. ADMINISTRATIVE FEES
- ---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE - --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2009 2008 2007 FUND ASSETS - ---------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ------------------------------------------------------------------------------------------------------------ Income Builder Basic Income $ 56,956 $ 38,041(a) $ 25,671 0.020% - ------------------------------------------------------------------------------------------------------------ Income Builder Enhanced Income 54,275 45,848(a) 37,153 0.020 - ------------------------------------------------------------------------------------------------------------ Income Builder Moderate Income 108,149 82,229(a) 58,560 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Aggressive 96,644 110,897 86,301 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Conservative 36,929 26,665 24,051 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate 193,553 183,783 138,034 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive 205,250 223,400 172,602 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative 72,830 62,617 50,763 0.020 - ------------------------------------------------------------------------------------------------------------ Portfolio Builder Total Equity 84,413 101,924 76,312 0.020 - ------------------------------------------------------------------------------------------------------------ S&P 500 Index 101,230 158,059 153,231 0.060 - ------------------------------------------------------------------------------------------------------------ Small Company Index 446,427 738,676 867,030 0.080 - ------------------------------------------------------------------------------------------------------------ 2008 2007 2006 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------------ Equity Value 680,124 674,042 558,514 0.057 - ------------------------------------------------------------------------------------------------------------ Partners Small Cap Growth 159,051 173,239 180,537 0.080 - ------------------------------------------------------------------------------------------------------------ Precious Metals and Mining 77,686 67,215 50,123 0.060 - ------------------------------------------------------------------------------------------------------------ Small Cap Advantage 363,599 534,163 568,712 0.080 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ------------------------------------------------------------------------------------------------------------ 120/20 Contrarian Equity 13,416(b) N/A N/A 0.080 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2010 3,623 1,779(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2015 5,483 1,861(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2020 7,572 2,961(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2025 7,280 2,293(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2030 7,160 2,579(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2035 4,249 1,548(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2040 4,915 2,928(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ Retirement Plus 2045 1,670 586(c) N/A 0.020 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ------------------------------------------------------------------------------------------------------------ High Yield Bond 1,069,014 1,259,292 1,328,295 0.065 - ------------------------------------------------------------------------------------------------------------ Partners Aggressive Growth 350,088 334,364 130,418 0.059 - ------------------------------------------------------------------------------------------------------------ Partners Fundamental Value 594,407 645,012 658,982 0.057 - ------------------------------------------------------------------------------------------------------------ Partners Select Value 300,721 355,085 443,873 0.060 - ------------------------------------------------------------------------------------------------------------ Partners Small Cap Equity 208,114 267,622 205,335 0.080 - ------------------------------------------------------------------------------------------------------------ Partners Small Cap Value 565,329 754,675 858,118 0.080 - ------------------------------------------------------------------------------------------------------------ Short Duration U.S. Government 541,748 623,283 821,082 0.068 - ------------------------------------------------------------------------------------------------------------ U.S. Government Mortgage 285,601 196,713 172,175 0.070 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ------------------------------------------------------------------------------------------------------------ Dividend Opportunity 1,033,158 884,333 658,242 0.055 - ------------------------------------------------------------------------------------------------------------ Real Estate 132,646 153,117 91,341 0.060 - ------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 137
- ---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE - --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2008 2007 2006 FUND ASSETS - ---------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ------------------------------------------------------------------------------------------------------------ Cash Management $2,507,729 $2,141,669 $1,741,492 0.048% - ------------------------------------------------------------------------------------------------------------ Disciplined Equity 1,701,542 1,224,572 496,810 0.053 - ------------------------------------------------------------------------------------------------------------ Disciplined Small and Mid Cap Equity 38,114 24,904 1,143(d) 0.060 - ------------------------------------------------------------------------------------------------------------ Disciplined Small Cap Value 30,592 20,681 4,615(e) 0.080 - ------------------------------------------------------------------------------------------------------------ Floating Rate 398,924 378,190 46,916(e) 0.070 - ------------------------------------------------------------------------------------------------------------ Growth 1,477,804 1,763,087 1,791,547 0.053 - ------------------------------------------------------------------------------------------------------------ Income Opportunities 202,872 242,883 253,936 0.070 - ------------------------------------------------------------------------------------------------------------ Inflation Protected Securities 399,972 209,028 169,778 0.068 - ------------------------------------------------------------------------------------------------------------ Large Cap Equity 2,524,199 3,245,953 2,119,930 0.049 - ------------------------------------------------------------------------------------------------------------ Large Cap Value 45,929 60,574 78,248 0.060 - ------------------------------------------------------------------------------------------------------------ Limited Duration Bond 115,529 105,993 133,102 0.070 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ------------------------------------------------------------------------------------------------------------ California Tax-Exempt(f) 122,235 122,586 149,235 0.070 - ------------------------------------------------------------------------------------------------------------ Diversified Bond 2,012,548 1,752,212 1,698,244 0.060 - ------------------------------------------------------------------------------------------------------------ Minnesota Tax-Exempt(f) 215,249 234,353 286,050 0.070 - ------------------------------------------------------------------------------------------------------------ New York Tax-Exempt(f) 41,455 47,710 57,973 0.070 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ------------------------------------------------------------------------------------------------------------ Balanced 519,542 623,784 697,753 0.059 - ------------------------------------------------------------------------------------------------------------ Disciplined Large Cap Growth 101,276 11,405(g) N/A 0.060 - ------------------------------------------------------------------------------------------------------------ Disciplined Large Cap Value 662(h) N/A N/A 0.060 - ------------------------------------------------------------------------------------------------------------ Diversified Equity Income 3,272,256 3,449,519 2,960,505 0.047 - ------------------------------------------------------------------------------------------------------------ Mid Cap Value 1,335,281 1,196,773 854,082 0.053 - ------------------------------------------------------------------------------------------------------------ Strategic Allocation 1,505,894 1,340,234 948,662 0.074 - ------------------------------------------------------------------------------------------------------------ Strategic Income Allocation 115,139 21,493(g) N/A 0.070 - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ------------------------------------------------------------------------------------------------------------ Absolute Return Currency and Income 373,454 79,761 15,823(i) 0.079 - ------------------------------------------------------------------------------------------------------------ Disciplined International Equity 549,173 209,295 14,739(j) 0.080 - ------------------------------------------------------------------------------------------------------------ Emerging Markets Bond 131,334 78,549 21,248(k) 0.080 - ------------------------------------------------------------------------------------------------------------ Global Bond 572,976 388,646 412,783 0.079 - ------------------------------------------------------------------------------------------------------------ Global Technology 83,820 103,335 101,197 0.060 - ------------------------------------------------------------------------------------------------------------ Partners International Select Growth 511,522 490,174 347,819 0.080 - ------------------------------------------------------------------------------------------------------------ Partners International Select Value 1,395,090 1,759,221 1,306,775 0.078 - ------------------------------------------------------------------------------------------------------------ Partners International Small Cap 79,183 92,062 83,383 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle Emerging Markets 498,019 503,279 406,991 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle European Equity 96,107 105,886 89,350 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle Global Equity 549,601 611,621 532,772 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle Global Equity Income 1,528(l) N/A N/A 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle Global Extended Alpha 1,256(l) N/A N/A 0.080 - ------------------------------------------------------------------------------------------------------------ Threadneedle International Opportunity 460,205 540,718 470,847 0.080 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ------------------------------------------------------------------------------------------------------------ Intermediate Tax-Exempt 52,367 57,618 74,912 0.070 - ------------------------------------------------------------------------------------------------------------ Mid Cap Growth 471,791 652,889 946,943 0.060 - ------------------------------------------------------------------------------------------------------------ Tax-Exempt Bond 463,150 525,515 544,894 0.069 - ------------------------------------------------------------------------------------------------------------ Tax-Exempt High Income 1,603,416 1,823,812 2,064,819 0.063 - ------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 138
- ---------------------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES PAID IN: DAILY RATE - --------------------------------------------------------------------------------------------------- APPLIED TO FUND 2008 2007 2006 FUND ASSETS - ---------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market $ 84,396 $ 73,957 $ 69,922 0.060% - ------------------------------------------------------------------------------------------------------------
(a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (d) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (e) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (f) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended on June 30. (g) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (i) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (j) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (k) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (l) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Third parties with which Ameriprise Financial contracts to provide services for the fund or its shareholders may pay a fee to Ameriprise Financial to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the fund. TRANSFER AGENCY SERVICES Each fund has a Transfer Agency Agreement with RiverSource Service Corporation (the "transfer agent") located at 734 Ameriprise Financial Center, Minneapolis, MN 55474. This agreement governs RiverSource Service Corporation's responsibility for administering and/or performing transfer agent functions, for acting as service agent in connection with dividend and distribution functions and for performing shareholder account administration agent functions in connection with the issuance, exchange and redemption or repurchase of the fund's shares. CLASS A, CLASS B, CLASS C AND CLASS D. For Class A, Class B, Class C and Class D, RiverSource Service Corporation will earn a fee from the fund determined by multiplying the number of shareholder accounts at the end of the day by a rate determined for each class per year and dividing by the number of days in the year. The fund will pay on the basis of the relative percentage of net assets of each class of shares, first allocating the base fee (equal to Class A shares) across share classes, and then allocating the incremental per share class fee, based on the number of shareholder accounts. The fee varies depending on the investment category of the fund. You can find your fund's investment category in Table 1. BALANCED, EQUITY, FUNDS-OF-FUNDS - EQUITY FUNDS The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows:
Class A Class B Class C Class D ------- ------- ------- ------- $19.50 $20.50 $20.00 $19.50
FUNDS-OF-FUNDS - FIXED INCOME, STATE TAX-EXEMPT FIXED INCOME, TAXABLE FIXED INCOME, TAX-EXEMPT FIXED INCOME FUNDS The annual per account fee accrued daily and payable monthly, for the applicable classes is as follows:
Class A Class B Class C ------- ------- ------- $20.50 $21.50 $21.00
Statement of Additional Information - April 1, 2009 Page 139 MONEY MARKET FUNDS For Cash Management Fund and Tax-Exempt Money Market Fund, the annual per account fee accrued daily and payable monthly, for the applicable classes is as follows. The fee for Tax-Exempt Money Market Fund, which does not have separate classes of shares, is the same as that applicable to Class A:
Class A Class B Class C ------- ------- ------- $22.00 $23.00 $22.50
CLASS E, CLASS R2, CLASS R3, CLASS R4, CLASS R5, CLASS W AND CLASS Y. For Class E, Class R2, Class R3, Class R4, Class R5, Class W and Class Y, RiverSource Service Corporation will earn a fee from the fund, accrued daily and payable monthly, determined by multiplying the average daily net assets of the applicable class by the annual rate shown below:
Class E Class R2 Class R3 Class R4 Class R5 Class W Class Y - ------- -------- -------- -------- -------- ------- ------- 0.05% 0.05% 0.05% 0.05% 0.05% 0.20% 0.05%
In addition, an annual closed-account fee of $5.00 per inactive account is charged on a pro rata basis for 12 months from the date the account becomes inactive. The fees paid to RiverSource Service Corporation may be changed by the Board without shareholder approval. PLAN ADMINISTRATION SERVICES The funds* have a Plan Administration Services Agreement with the transfer agent. Under the agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set- up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). The fee for services is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class:
Class E Class R2 Class R3 Class R4 Class Y ------- -------- -------- -------- ------- 0.15% 0.25% 0.25% 0.25% 0.15%
The fees paid to the transfer agent may be changed by the Board without shareholder approval. * Currently, tax-exempt and state tax-exempt funds do not have classes of shares that are subject to this fee. DISTRIBUTION SERVICES RiverSource Distributors, Inc., a wholly-owned subsidiary of Ameriprise Financial, Inc., and RiverSource Fund Distributors, Inc., an indirect wholly- owned subsidiary of RiverSource Investments, LLC (collectively the "distributor") each at 50611 Ameriprise Financial Center, Minneapolis, MN 55474, serve as the funds' principal underwriters. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as principal underwriter and distributor to the funds. The fund's shares are offered on a continuous basis. Under a Distribution Agreement, sales charges deducted for distributing fund shares are paid to the distributor daily. The following table shows the sales charges paid to the distributor and the amount retained by the distributor after paying commissions and other expenses for each of the last three fiscal periods. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 22. SALES CHARGES PAID TO DISTRIBUTOR
- ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES - ----------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income $ 466,216 $ 688,587(a)$ 1,155,448 $ (21,562) $ (56,086)(a)$ 6,089 - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income 296,977 831,981(a) 1,678,918 (533) 176,661(a) 287,006 - ----------------------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income 654,937 1,279,681(a) 2,955,938 77,641 34,001(a) 435,561 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 2,081,242 2,848,037 3,260,693 552,795 799,417 1,029,231 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative 528,590 384,348 455,765 16,829 4,989 94,296 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 3,277,766 3,944,827 4,127,743 661,689 702,939 1,084,978 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 4,181,445 5,635,597 6,845,238 1,125,393 1,613,677 2,326,266 Aggressive - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 982,012 1,088,559 1,084,727 153,386 140,630 252,979 Conservative - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 1,561,130 2,257,735 2,414,356 319,114 471,536 594,766 - -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 140
- ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES - ----------------------------------------------------------------------------------------------------------------------------------- FUND 2009 2008 2007 2009 2008 2007 - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index N/A N/A N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------------------------------------- Small Company Index $ 365,094 $ 563,878 $ 973,579 $ 317,088 $ 117,897 $ 220,620 - ----------------------------------------------------------------------------------------------------------------------------------- 2008 2007 2006 2008 2007 2006 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ----------------------------------------------------------------------------------------------------------------------------------- Equity Value 496,313 928,630 645,442 16,594 86,064 116,536 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 174,193 265,315 401,382 25,734 52,127 127,479 - ----------------------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining 192,503 178,460 104,779 50,572 33,944 21,277 - ----------------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage 285,044 569,430 986,996 30,185 100,405 276,857 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ----------------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity 149,480(b) N/A N/A 46,196(b) N/A N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 32,694 2,283(c) N/A 11,266 (6,048)(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 70,298 35,493(c) N/A 50,360 27,942(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 41,850 35,121(c) N/A 21,519 23,828(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 49,187 38,880(c) N/A 25,003 25,335(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 51,530 29,205(c) N/A 28,063 15,221(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 31,469 21,303(c) N/A 19,162 13,718(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 39,332 14,822(c) N/A 21,208 7,670(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 23,890 10,606(c) N/A 12,087 5,832(c) N/A - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ----------------------------------------------------------------------------------------------------------------------------------- High Yield Bond 882,107 1,787,813 2,479,319 41,174 139,630 682,596 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 390,356 359,329 217,559 83,271 63,452 44,653 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value 766,263 1,266,023 1,915,417 58,252 158,689 406,545 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Select Value 314,511 518,110 945,839 25,291 61,797 213,839 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 184,740 309,112 604,021 48,448 95,646 190,699 - ----------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value 607,350 1,147,620 1,616,642 117,005 249,915 478,093 - ----------------------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Government 660,354 962,025 1,908,960 (152,827) (85,482) 482,228 - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 136,891 252,402 442,638 (116,397) (67,241) 61,137 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ----------------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity 1,648,530 2,653,148 1,665,096 206,622 266,495 207,486 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate 211,915 813,437 598,431 63,306 218,298 180,632 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ----------------------------------------------------------------------------------------------------------------------------------- Cash Management 339,219 437,392 718,247 339,111 423,832 714,638 - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Equity 412,821 661,751 322,731 85,890 140,529 67,609 - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap 26,228 55,865 1,760(d) 7,923 9,445 852(d) Equity - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 6,647 15,644 6,304(e) 1,943 1,960 1,708(e) - ----------------------------------------------------------------------------------------------------------------------------------- Floating Rate 380,143 1,282,342 364,914(e) (174,369) (554,729) (118,354)(e) - ----------------------------------------------------------------------------------------------------------------------------------- Growth 2,003,496 3,028,179 4,553,722 372,658 548,978 955,528 - ----------------------------------------------------------------------------------------------------------------------------------- Income Opportunities 135,655 320,351 486,593 (11,090) (6,952) 108,764 - ----------------------------------------------------------------------------------------------------------------------------------- Inflation Protected Securities 407,706 105,703 326,780 51,044 18,732 47,098 - ----------------------------------------------------------------------------------------------------------------------------------- Large Cap Equity 3,342,608 4,596,427 3,400,059 610,479 641,330 629,348 - ----------------------------------------------------------------------------------------------------------------------------------- Large Cap Value 64,134 102,472 123,212 20,999 26,452 37,908 - ----------------------------------------------------------------------------------------------------------------------------------- Limited Duration Bond 92,255 136,687 220,446 9,475 28,890 28,711 - -----------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 141
- ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT RETAINED AFTER PAYING SALES CHARGES PAID TO DISTRIBUTOR COMMISSIONS AND OTHER EXPENSES - ----------------------------------------------------------------------------------------------------------------------------------- FUND 2008 2007 2006 2008 2007 2006 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ----------------------------------------------------------------------------------------------------------------------------------- California Tax-Exempt $ 91,928 $ 150,760 $ 212,157(f) $ 5,945 $ 46,117 $ 77,373(f) - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Bond 1,992,222 2,340,251 2,757,988 176,513 419,415 788,192 - ----------------------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 463,447 338,160 480,402(f) 37,217 12,594 102,088(f) - ----------------------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt 29,401 43,518 89,560(f) 8,217 6,984 19,641(f) - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ----------------------------------------------------------------------------------------------------------------------------------- Balanced 287,586 474,702 400,884 36,359 32,524 59,347 - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 87,685 20,834(g) N/A 30,621 5,197(g) N/A - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 0(h) N/A N/A 0(h) N/A N/A - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Equity Income 6,331,545 9,553,810 12,904,884 1,204,186 1,407,616 2,114,315 - ----------------------------------------------------------------------------------------------------------------------------------- Mid Cap Value 2,444,490 3,538,910 4,477,119 898,395 862,120 1,010,224 - ----------------------------------------------------------------------------------------------------------------------------------- Strategic Allocation 5,371,458 8,570,846 3,667,041 1,321,113 1,738,063 739,852 - ----------------------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation 400,285 267,319(g) N/A 28,302 26,129(g) N/A - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ----------------------------------------------------------------------------------------------------------------------------------- Absolute Return Currency and 288,047 10,519 0(i) 52,383 3,448 0(i) Income - ----------------------------------------------------------------------------------------------------------------------------------- Disciplined International 168,692 130,761 4,700(j) 36,899 14,894 434(j) Equity - ----------------------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond 41,906 25,743 11,348(k) 10,486 1,421 2,036(k) - ----------------------------------------------------------------------------------------------------------------------------------- Global Bond 391,577 314,002 447,007 118,930 215,442 320,724 - ----------------------------------------------------------------------------------------------------------------------------------- Global Technology 190,722 212,774 242,177 39,408 16,670 29,861 - ----------------------------------------------------------------------------------------------------------------------------------- Partners International Select 560,302 885,940 810,514 118,125 226,007 234,619 Growth - ----------------------------------------------------------------------------------------------------------------------------------- Partners International Select 1,584,444 4,085,674 3,895,267 235,164 641,699 815,331 Value - ----------------------------------------------------------------------------------------------------------------------------------- Partners International Small 88,479 164,026 173,659 20,053 19,649 37,954 Cap - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 780,872 886,062 1,075,586 (4,109,358) (7,004,024) (9,848,080) - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 124,828 226,464 107,816 35,391 90,745 29,463 - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 800,774 896,578 1,272,084 114,011 99,098 218,974 - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 18,558(l) N/A N/A 4,340(l) N/A N/A Income - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 1,795(l) N/A N/A 307(l) N/A N/A Alpha - ----------------------------------------------------------------------------------------------------------------------------------- Threadneedle International 319,850 501,090 563,174 49,744 56,669 107,305 Opportunity - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ----------------------------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 59,348 62,985 115,280 (792) (10,183) 29,590 - ----------------------------------------------------------------------------------------------------------------------------------- Mid Cap Growth 360,393 608,683 1,388,577 59,123 115,052 346,497 - ----------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 319,831 313,115 346,932 64,831 (19,725) 79,024 - ----------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 1,042,555 1,182,244 1,485,792 151,444 181,059 389,650 - ----------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ----------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market N/A N/A N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------------------------------------
(a) The fund changed its fiscal year end effective Jan. 31, 2008 from May 31 to Jan. 31. For 2008, the information shown is for the period from June 1, 2007 through Jan. 31, 2008. For years prior to 2008, the fiscal period ended on May 31. (b) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (c) For the period from May 18, 2006 (when shares became publicly available) to April 30, 2007. (d) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (e) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (f) The fund changed its fiscal year end in 2006 from June 30 to Aug. 31. For 2006, the information shown is for the period from July 1, 2005 through Aug. 31, 2006. For years prior to 2006, the fiscal period ended on June 30. (g) For the period from May 17, 2007 (when shares became publicly available) to Sept. 30, 2007. (h) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (i) For the period from June 15, 2006 (when the Fund became available) to Oct. 31, 2006. (j) For the period from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006. (k) For the period from Feb. 16, 2006 (when shares became publicly available) to Oct. 31, 2006. (l) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 142 Part of the sales charge may be paid to selling dealers who have agreements with the distributor. The distributor will retain the balance of the sales charge. At times the entire sales charge may be paid to selling dealers. PLAN AND AGREEMENT OF DISTRIBUTION To help defray the cost of distribution and servicing not covered by the sales charges received under the Distribution Agreement, each fund listed in Table 24. 12b-1 Fees, approved a Plan of Distribution (the "Plan") and entered into an agreement under the Plan pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, the fund pays the distributor a fee up to actual expenses incurred at an annual rate as follows: FOR FUNDS OTHER THAN MONEY MARKET FUNDS: The fee is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class:
Class A Class B Class C Class D Class R2 Class R3 Class W - ------- ------- ------- ------- -------- -------- ------- 0.25% 1.00% 1.00% 0.25% 0.50% 0.25% 0.25%
For Class B and Class C, up to 0.75% of the fee is reimbursed for distribution expenses. Up to an additional 0.25% is paid to the distributor to reimburse certain expenses incurred in connection with providing services to fund shareholders. For Class R2, up to 0.50% and for Class R3, up to 0.25% shall be reimbursed for distribution expenses. Of that amount, for Class R2, up to 0.25% may be reimbursed for shareholder servicing expenses. FOR MONEY MARKET FUNDS: The fee for services is equal on an annual basis to the following percentage of the average daily net assets of the fund attributable to the applicable class. The fee for Tax-Exempt Money Market, which does not have separate classes of shares, is the same as that applicable to Class A:
Class A Class B Class C Class W - ------- ------- ------- ------- 0.10% 0.85% 0.75% 0.10%
For Class B, up to 0.75% of the fee is reimbursed for distribution expenses. Up to an additional 0.10% is paid to the distributor to reimburse certain expenses incurred in connection with providing services to fund shareholders. The distributor has currently agreed not to be reimbursed by the Fund for distribution (12b-1) fees equal to 0.10% of the stated amount for Class B. FOR ALL FUNDS: Distribution and shareholder servicing expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund. Financial institutions may compensate their financial advisors with the distribution and shareholder servicing fees paid to them by the distributor. Payments under the Plan are intended to result in an increase in fund assets and thus potentially result in economies of scale and lower costs for all shareholders. Each class has exclusive voting rights on the Plan as it applies to that class. In addition, because Class B shares convert to Class A shares, Class B shareholders have the right to vote on any material increase to expenses charged under the Class A plan. Distribution expenses covered under this Plan include commissions to financial intermediaries, printing prospectuses and reports used for sales purposes, the preparation, printing and distribution of advertising and sales literature, personnel, travel, office expense and equipment, and other distribution-related expenses. Shareholder service expenses include costs of establishing and maintaining shareholder accounts and records, assisting with purchase, redemption and exchange requests, arranging for bank wires, monitoring dividend payments from the funds on behalf of shareholders, forwarding certain shareholder communications from funds to shareholders, receiving and responding to inquiries and answering questions regarding the funds, aiding in maintaining the investment of shareholders in the funds and other service-related expenses. A substantial portion of the expenses are not specifically identified to any one of the funds. The fee is not allocated to any one service (such as advertising, compensation to financial intermediaries, or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. The Plan must be approved annually by the Board, including a majority of the disinterested Board members, if it is to continue for more than a year. At least quarterly, the Board reviews written reports concerning the amounts expended under Statement of Additional Information - April 1, 2009 Page 143 the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of Board members who are not interested persons of the fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the relevant class of shares or by the distributor. Any agreement related to the Plan will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the Board members, including a majority of the Board members who are not interested persons of the fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and nomination of disinterested Board members is the responsibility of the other disinterested Board members. No Board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. For its most recent fiscal period, each fund paid 12b-1 fees as shown in the following table. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 23. 12B-1 FEES
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - ------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income $ 593,211 $ 362,603 $ 112,193 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced 580,823 278,815 110,421 N/A N/A N/A N/A Income - ------------------------------------------------------------------------------------------------------------------- Income Builder Moderate 1,158,585 587,094 185,812 N/A N/A N/A N/A Income - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 969,765 809,179 142,465 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder 328,254 434,092 99,134 N/A N/A N/A N/A Conservative - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 1,870,904 1,818,537 374,530 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 2,048,240 1,742,740 319,656 N/A N/A N/A N/A Aggressive - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 687,072 724,001 168,921 N/A N/A N/A N/A Conservative - ------------------------------------------------------------------------------------------------------------------- Portfolio Builder Total 850,481 691,958 125,500 N/A N/A N/A N/A Equity - ------------------------------------------------------------------------------------------------------------------- S&P 500 Index N/A N/A N/A 91,928 N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Small Company Index 1,166,038 914,171 N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - ------------------------------------------------------------------------------------------------------------------- Equity Value 2,578,435 1,585,388 63,308 N/A $ 26 $ 13 $ 13 - ------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 262,998 382,183 44,120 N/A 24 12 N/A - ------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining 273,178 179,634 21,128 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Small Cap Advantage 891,269 920,220 70,397 N/A 19 10 N/A - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - ------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity(a) 27,941 6,806 2,020 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 4,890 N/A N/A N/A 24 12 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 8,361 N/A N/A N/A 24 13 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 7,167 N/A N/A N/A 24 13 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 5,406 N/A N/A N/A 25 13 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 5,279 N/A N/A N/A 25 15 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 2,921 N/A N/A N/A 24 13 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 2,156 N/A N/A N/A 24 13 N/A - ------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 2,037 N/A N/A N/A 25 13 N/A - -------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 144
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - ------------------------------------------------------------------------------------------------------------------- High Yield Bond $ 3,139,852 $2,195,630 $ 211,821 N/A $ 27 $ 11 $ 140,313 - ------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 989,015 834,358 23,191 N/A 190 15 N/A - ------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value 1,820,164 1,938,445 170,196 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Partners Select Value 944,904 936,623 75,555 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 557,309 310,825 26,458 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value 1,256,997 1,776,490 136,505 N/A 802 10 N/A - ------------------------------------------------------------------------------------------------------------------- Short Duration U.S. 1,342,344 1,762,259 97,004 N/A N/A N/A 12 Government - ------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 260,643 373,486 45,007 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - ------------------------------------------------------------------------------------------------------------------- Dividend Opportunity 3,563,045 2,220,149 257,746 N/A N/A N/A 13 - ------------------------------------------------------------------------------------------------------------------- Real Estate 276,727 189,408 17,500 N/A N/A N/A 9 - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - ------------------------------------------------------------------------------------------------------------------- Cash Management 4,969,177 714,712 45,638 N/A N/A N/A 154,441 - ------------------------------------------------------------------------------------------------------------------- Disciplined Equity 3,199,228 550,860 31,395 N/A 22 11 3,483,017 - ------------------------------------------------------------------------------------------------------------------- Disciplined Small and Mid 44,049 12,319 1,632 N/A N/A N/A 54,372 Cap Equity - ------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 31,837 4,226 546 N/A 20 11 N/A - ------------------------------------------------------------------------------------------------------------------- Floating Rate 795,373 357,536 206,462 N/A N/A N/A 11 - ------------------------------------------------------------------------------------------------------------------- Growth 5,186,203 3,166,050 179,547 N/A 24 12 12 - ------------------------------------------------------------------------------------------------------------------- Income Opportunities 389,032 363,715 41,252 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Inflation Protected 319,398 259,775 51,658 N/A N/A N/A 205,664 Securities - ------------------------------------------------------------------------------------------------------------------- Large Cap Equity 10,775,702 7,098,566 270,367 N/A 22 11 N/A - ------------------------------------------------------------------------------------------------------------------- Large Cap Value 123,733 118,887 8,842 N/A 19 9 N/A - ------------------------------------------------------------------------------------------------------------------- Limited Duration Bond 155,586 94,180 16,366 N/A N/A N/A 14 - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - ------------------------------------------------------------------------------------------------------------------- California Tax-Exempt 417,044 57,189 20,845 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Diversified Bond 4,896,633 3,027,276 237,190 N/A 36 18 1,101,584 - ------------------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 705,661 176,620 75,716 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt 135,961 41,064 7,302 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - ------------------------------------------------------------------------------------------------------------------- Balanced 1,987,290 415,034 46,083 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 35,017 16,268 10,920 N/A 47 24 2 - ------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap 32 29 16 N/A 8 4 4 Value(b) - ------------------------------------------------------------------------------------------------------------------- Diversified Equity Income 14,226,095 9,229,184 1,111,495 N/A 25,252 280,029 11 - ------------------------------------------------------------------------------------------------------------------- Mid Cap Value 4,837,635 2,497,777 514,655 N/A 27,209 40,679 11 - ------------------------------------------------------------------------------------------------------------------- Strategic Allocation 4,342,136 2,269,489 693,509 N/A 24 12 N/A - ------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation 362,627 149,282 45,011 N/A 5 2 N/A - -------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 145
FUND CLASS A CLASS B CLASS C CLASS D CLASS R2 CLASS R3 CLASS W - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - ------------------------------------------------------------------------------------------------------------------- Absolute Return Currency and $ 268,339 $ 11,267 $ 58,825 N/A N/A N/A $ 368,846 Income - ------------------------------------------------------------------------------------------------------------------- Disciplined International 188,884 135,656 14,024 N/A $ 6 $ 3 1,073,689 Equity - ------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond 21,289 14,432 2,267 N/A N/A N/A 125,465 - ------------------------------------------------------------------------------------------------------------------- Global Bond 704,343 522,781 40,466 N/A N/A N/A 442,005 - ------------------------------------------------------------------------------------------------------------------- Global Technology 266,728 297,356 31,112 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Partners International 850,640 586,365 55,865 N/A N/A N/A N/A Select Growth - ------------------------------------------------------------------------------------------------------------------- Partners International 3,573,831 2,701,274 272,384 N/A N/A N/A N/A Select Value - ------------------------------------------------------------------------------------------------------------------- Partners International Small 157,129 124,919 9,633 N/A N/A N/A N/A Cap - ------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging 1,283,814 701,567 62,513 N/A N/A N/A N/A Markets - ------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 239,284 225,941 17,814 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 1,507,084 814,247 73,244 N/A 25 13 13 - ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 1,812 818 157 N/A 11 6 N/A Income(c) - ------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 1,067 508 207 N/A 11 5 N/A Alpha(c) - ------------------------------------------------------------------------------------------------------------------- Threadneedle International 1,036,236 541,184 30,802 N/A 25 12 N/A Opportunity - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - ------------------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 166,850 57,473 23,235 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Mid Cap Growth 1,589,639 958,780 48,434 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 1,613,863 236,766 50,563 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 6,157,145 713,646 137,909 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - ------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market 140,660 N/A N/A N/A N/A N/A N/A - -------------------------------------------------------------------------------------------------------------------
(a) For the period from Oct. 18, 2007 (when shares became publicly available) to April 30, 2008. (b) For the period from Aug. 1, 2008 (when shares became publicly available) to Sept. 30, 2008. (c) For the period from Aug. 1, 2008 (when shares became publicly available) to Oct. 31, 2008. Statement of Additional Information - April 1, 2009 Page 146 FOR FUNDS WITH CLASS B AND CLASS C SHARES: The following table provides the amount of distribution expenses, as a dollar amount and as a percentage of net assets, incurred by the distributor and not yet reimbursed ("unreimbursed expense") for Class B and Class C shares. These amounts are based on the most recent information available as of Jan. 31, 2009 and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. TABLE 24. UNREIMBURSED DISTRIBUTION EXPENSES
PERCENTAGE OF PERCENTAGE OF CLASS B CLASS C FUND CLASS B NET ASSETS CLASS C NET ASSETS - ------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity $ 77,000 5.34% $ 16,000 1.54% - ------------------------------------------------------------------------------------------------------- Absolute Return Currency and Income 190,000 4.22% 46,000 0.43% - ------------------------------------------------------------------------------------------------------- Balanced 831,000 4.44% 29,000 1.04% - ------------------------------------------------------------------------------------------------------- California Tax-Exempt 97,000 2.46% 18,000 0.76% - ------------------------------------------------------------------------------------------------------- Cash Management 7,314,000 5.65% 82,000 0.68% - ------------------------------------------------------------------------------------------------------- Disciplined Equity 794,000 3.99% 24,000 1.32% - ------------------------------------------------------------------------------------------------------- Disciplined International Equity 438,000 5.77% 13,000 1.44% - ------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth 170,000 5.92% 13,000 0.85% - ------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value 6,000 8.50% -- 0.00% - ------------------------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity 55,000 6.56% 3,000 1.18% - ------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value 17,000 5.57% 1,000 1.64% - ------------------------------------------------------------------------------------------------------- Diversified Bond 7,196,000 3.17% 230,000 0.69% - ------------------------------------------------------------------------------------------------------- Diversified Equity Income 19,234,000 4.88% 677,000 1.12% - ------------------------------------------------------------------------------------------------------- Dividend Opportunity 3,686,000 4.32% 147,000 1.15% - ------------------------------------------------------------------------------------------------------- Emerging Markets Bond 60,000 4.84% 19,000 9.28% - ------------------------------------------------------------------------------------------------------- Equity Value 1,765,000 3.34% 46,000 1.42% - ------------------------------------------------------------------------------------------------------- Floating Rate 992,000 7.26% 89,000 0.71% - ------------------------------------------------------------------------------------------------------- Global Bond 1,310,000 3.22% 37,000 0.87% - ------------------------------------------------------------------------------------------------------- Global Technology 461,000 3.55% 25,000 1.46% - ------------------------------------------------------------------------------------------------------- Growth 4,680,000 4.79% 113,000 1.76% - ------------------------------------------------------------------------------------------------------- High Yield Bond 3,532,000 3.78% 142,000 1.03% - ------------------------------------------------------------------------------------------------------- Income Builder Basic Income 1,855,000 6.63% 56,000 0.61% - ------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income 1,327,000 6.98% 50,000 0.63% - ------------------------------------------------------------------------------------------------------- Income Builder Moderate Income 2,675,000 6.53% 74,000 0.53% - ------------------------------------------------------------------------------------------------------- Income Opportunities 852,000 4.27% 62,000 1.02% - ------------------------------------------------------------------------------------------------------- Inflation Protected Securities 1,325,000 3.79% 72,000 0.67% - ------------------------------------------------------------------------------------------------------- Intermediate Tax-Exempt 134,000 2.56% 26,000 0.91% - ------------------------------------------------------------------------------------------------------- Large Cap Equity 11,663,000 5.04% 169,000 1.50% - ------------------------------------------------------------------------------------------------------- Large Cap Value 204,000 4.89% 5,000 1.17% - ------------------------------------------------------------------------------------------------------- Limited Duration Bond 289,000 4.01% 14,000 0.81% - ------------------------------------------------------------------------------------------------------- Mid Cap Growth 1,789,000 4.07% 30,000 1.13% - ------------------------------------------------------------------------------------------------------- Mid Cap Value 5,299,000 5.33% 329,000 1.00% - ------------------------------------------------------------------------------------------------------- Minnesota Tax-Exempt 266,000 2.06% 66,000 0.79% - ------------------------------------------------------------------------------------------------------- New York Tax-Exempt 65,000 1.97% 6,000 0.85% - ------------------------------------------------------------------------------------------------------- Partners Aggressive Growth 985,000 3.46% 21,000 1.25% - ------------------------------------------------------------------------------------------------------- Partners Fundamental Value 2,943,000 4.53% 101,000 1.37% - ------------------------------------------------------------------------------------------------------- Partners International Select Growth 1,142,000 4.59% 36,000 1.36% - ------------------------------------------------------------------------------------------------------- Partners International Select Value 4,671,000 5.19% 147,000 1.45% - ------------------------------------------------------------------------------------------------------- Partners International Small Cap 250,000 5.81% 5,000 1.28% - ------------------------------------------------------------------------------------------------------- Partners Select Value 1,489,000 4.49% 39,000 1.13% - -------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 147
PERCENTAGE OF PERCENTAGE OF CLASS B CLASS C FUND CLASS B NET ASSETS CLASS C NET ASSETS - ------------------------------------------------------------------------------------------------------- Partners Small Cap Equity 531,000 4.56% 18,000 1.51% - ------------------------------------------------------------------------------------------------------- Partners Small Cap Growth 505,000 3.91% 24,000 1.38% - ------------------------------------------------------------------------------------------------------- Partners Small Cap Value 2,191,000 3.87% 72,000 1.40% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive 3,348,000 5.88% 118,000 1.04% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Conservative 2,103,000 5.04% 101,000 0.95% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate 7,972,000 5.51% 317,000 0.95% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Aggressive 7,254,000 5.58% 258,000 0.98% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Conservative 3,262,000 5.36% 140,000 0.89% - ------------------------------------------------------------------------------------------------------- Portfolio Builder Total Equity 2,857,000 6.28% 107,000 1.15% - ------------------------------------------------------------------------------------------------------- Precious Metals and Mining 391,000 3.30% 15,000 0.72% - ------------------------------------------------------------------------------------------------------- Real Estate 472,000 7.56% 11,000 1.47% - ------------------------------------------------------------------------------------------------------- Short Duration U.S. Government 4,363,000 3.53% 106,000 0.90% - ------------------------------------------------------------------------------------------------------- Small Cap Advantage 868,000 4.23% 29,000 1.20% - ------------------------------------------------------------------------------------------------------- Small Company Index 1,820,000 3.58% N/A N/A - ------------------------------------------------------------------------------------------------------- Strategic Allocation 7,451,000 5.92% 347,000 0.79% - ------------------------------------------------------------------------------------------------------- Strategic Income Allocation 749,000 4.62% 35,000 0.66% - ------------------------------------------------------------------------------------------------------- Tax-Exempt Bond 449,000 2.17% 49,000 0.75% - ------------------------------------------------------------------------------------------------------- Tax-Exempt High Income 1,208,000 2.23% 117,000 0.90% - ------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 1,010,000 4.25% 40,000 1.33% - ------------------------------------------------------------------------------------------------------- Threadneedle European Equity 208,000 2.41% 11,000 1.30% - ------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 1,638,000 4.51% 60,000 1.44% - ------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income 79,000 6.04% 3,000 1.57% - ------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha 27,000 10.46% 2,000 1.97% - ------------------------------------------------------------------------------------------------------- Threadneedle International Opportunity 933,000 4.06% 28,000 1.53% - ------------------------------------------------------------------------------------------------------- U.S. Government Mortgage 970,000 3.91% 34,000 0.87% - -------------------------------------------------------------------------------------------------------
PAYMENTS TO FINANCIAL INTERMEDIARIES The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the funds) to financial intermediaries, including inter-company allocation of resources or payment to affiliated broker-dealers, in connection with agreements between the distributor and financial intermediaries pursuant to which these financial intermediaries sell fund shares and provide services to their clients who are shareholders of the funds. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors and fund shareholders for the purchase or ownership of shares of the funds, and these payments are not reflected in the fees and expenses of the funds, as they are not paid by the funds. These payments are in addition to fees paid by the funds to the distributor under 12b-1 plans, which fees may be used to compensate financial intermediaries for the distribution of fund shares and the servicing of fund shareholders, or paid by the funds to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial intermediaries for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial intermediary to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the funds. These payments are typically made pursuant to an agreement between the distributor and the financial intermediary, and are typically made in support of marketing and sales support efforts or program and shareholder servicing, as further described below. These payments are usually calculated based on a percentage of fund assets owned through the financial intermediary and/or as a percentage of fund sales attributable to the financial intermediary. Certain financial intermediaries require flat fees instead of or in addition to these asset-based fees as compensation for including or maintaining funds on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial intermediary charges its representatives for effecting transactions in the funds. The amount of payment varies by financial intermediary, and often is significant. In addition, the amount of payments may differ based upon the type of fund sold or maintained; for instance, the amount of payments for an equity fund may differ from payments for a money-market or fixed income fund. Statement of Additional Information - April 1, 2009 Page 148 Asset-based payments generally will be made in a range of up to 0.25% of assets or 0.25% of sales or some combination thereof. Exceptions to these general ranges will be considered on a case-by-case basis. Flat fees or annual minimum fees required by a financial intermediary in addition to such asset-based fees, are considered on a case-by-case basis. MARKETING AND SALES SUPPORT Payments may be paid in support of retail, institutional, plan or other fee- based advisory program distribution efforts. These payments are typically made by the distributor in its efforts to advertise to and/or educate the financial intermediary's personnel, including its registered representatives, about the fund. As a result of these payments, the distributor may obtain a higher profile and greater visibility for the fund within the financial intermediary's organization, including placement of the fund on the financial intermediary's preferred or recommended list. The distributor may also obtain greater access to sales meetings, sales representatives, and management representatives of the financial intermediary, including potentially having increased opportunity for fund representatives to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and their clients and other events sponsored by the financial intermediary. PROGRAM AND SHAREHOLDER SERVICING Payments may be made in support of recordkeeping, reporting, transaction processing, and other plan administration services provided by a financial intermediary to or through retirement plans, 529 plans, Health Savings Account plans, or other plans or fee-based advisory programs but may also be made in support of certain retail advisory programs, including wrap programs. A financial intermediary may perform program services itself or may arrange with a third party to perform program services. These payments may also include services rendered in connection with fund selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. OTHER PAYMENTS The distributor and its affiliates may separately pay financial intermediaries in order to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other financial intermediary employees, client and investor events and other financial intermediary-sponsored events, and for travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, asset retention and due diligence trips. The amount of these payments varies depending upon the nature of the event. The distributor and its affiliates make payments for such events as they deem appropriate, subject to internal guidelines and applicable law. From time to time, to the extent permitted by SEC and NASD rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payment to financial intermediaries or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial intermediaries and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial intermediary to the extent the cost of such services was less than the actual expense of the service. FINANCIAL INTERMEDIARY ARRANGEMENTS The financial intermediary through which you are purchasing or own shares of funds has been authorized directly or indirectly by the distributor to sell funds and/or to provide services to you as a shareholder of funds. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial intermediary may receive from the distributor or its affiliates related to your purchase or ownership of funds, please contact your financial intermediary. CUSTODIAN SERVICES The funds' securities and cash are held pursuant to a custodian agreement with JPMorgan Chase Bank, N.A. (JPMorgan), 1 Chase Manhattan Plaza, 19th Floor, New York, NY 10005. The custodian is permitted to deposit some or all of their securities in central depository systems as allowed by federal law. For its services, each fund pays its custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan or in other financial institutions as permitted by law and by the fund's custodian agreement. Statement of Additional Information - April 1, 2009 Page 149 BOARD SERVICES CORPORATION The funds have an agreement with Board Services Corporation (Board Services) located at 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402. This agreement sets forth the terms of Board Services' responsibility to serve as an agent of the funds for purposes of administering the payment of compensation to each independent Board member, to provide office space for use by the funds and their boards, and to provide any other services to the boards or the independent members, as may be reasonably requested. ORGANIZATIONAL INFORMATION Each fund is an open-end management investment company. The fund's headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The shares of a fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of a fund would have the same rights to dividends and assets as every other share of that fund. VOTING RIGHTS As a shareholder in a fund, you have voting rights over the fund's management and fundamental policies. You are entitled to vote based on your total dollar interest in the fund. Each class, if applicable, has exclusive voting rights with respect to matters for which separate class voting is appropriate under applicable law. All shares have cumulative voting rights with respect to the election of Board members. This means that you have as many votes as the dollar amount you own, including the fractional amount, multiplied by the number of members to be elected. DIVIDEND RIGHTS Dividends paid by a fund, if any, with respect to each applicable class of shares will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except for differences resulting from differences in fee structures. SHAREHOLDER LIABILITY For funds organized as Massachusetts business trusts, under Massachusetts law, shareholders of a Massachusetts business trust may, under certain circumstances, be held personally liable as partners for its obligation. However, the Declaration of Trust that establishes a trust, a copy of which, together with all amendments thereto (the "Declaration of Trust"), is on file with the office of the Secretary of the Commonwealth of Massachusetts for each applicable fund, contains an express disclaimer of shareholder liability for acts or obligations of the Trust, or of any fund in the Trust. The Declaration of Trust provides that, if any shareholder (or former shareholder) of a fund in the Trust is charged or held to be personally liable for any obligation or liability of the Trust, or of any fund in the Trust, solely by reason of being or having been a shareholder and not because of such shareholder's acts or omissions or for some other reason, the Trust (upon request of the shareholder) shall assume the defense against such charge and satisfy any judgment thereon, and the shareholder or former shareholder (or the heirs, executors, administrators or other legal representatives thereof, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled (but solely out of the assets of the fund of which such shareholder or former shareholder is or was the holder of shares) to be held harmless from and indemnified against all loss and expense arising from such liability. The Declaration of Trust also provides that the Trust may maintain appropriate insurance (for example, fidelity bond and errors and omissions insurance) for the protection of the Trust, its shareholders, Trustees, officers, employees and agents covering possible tort and other liabilities. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust itself was unable to meet its obligations. The Declaration of Trust further provides that obligations of the Trust are not binding upon the Trustees individually, but only upon the assets and property of the Trust, and that the Trustees will not be liable for any action or failure to act, errors of judgment, or mistakes of fact or law, but nothing in the Declaration of Trust or other agreement with a Trustee protects a Trustee against any liability to which he or she would otherwise be subject by reason of his or her willful bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. By becoming a shareholder of the Statement of Additional Information - April 1, 2009 Page 150 fund, each shareholder shall be expressly held to have assented to and agreed to be bound by the provisions of the Declaration of Trust. TABLE 25. FUND HISTORY TABLE FOR RIVERSOURCE FAMILY OF FUNDS
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE BOND SERIES, 4/29/81, 6/13/86(1) Corporation NV/MN 7/31 INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Floating Rate 2/16/06 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Income 6/19/03 Yes Opportunities Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Inflation 3/4/04 No Protected Securities Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Limited Duration 6/19/03 Yes Bond Fund - ----------------------------------------------------------------------------------------------------------------------- CALIFORNIA TAX-EXEMPT TRUST 4/7/86 Business Trust MA 8/31(10) - ----------------------------------------------------------------------------------------------------------------------- RiverSource California Tax- 8/18/86 No Exempt Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIMENSIONS SERIES, 2/20/68, 6/13/86(1) Corporation NV/MN 7/31 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 5/18/06 Yes and Mid Cap Equity Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Small 2/16/06 Yes Cap Value Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE DIVERSIFIED INCOME 6/27/74, 6/31/86(1) Corporation NV/MN 8/31 SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Diversified Bond 10/3/74 Yes Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE EQUITY SERIES, 3/18/57, 6/13/86(1) Corporation NV/MN 11/30 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Growth 6/4/57 Yes Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GLOBAL SERIES, 10/28/88 Corporation MN 10/31 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Absolute Return 6/15/06 No Currency and Income Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Emerging Markets 2/16/06 No Bond Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Global Bond Fund 3/20/89 No - ----------------------------------------------------------------------------------------------------------------------- RiverSource Global Technology 11/13/96 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets 11/13/96 Yes Fund(4),(5),(11) - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 5/29/90 Yes Fund(5),(6),(11) - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity 8/1/08 Yes Income Fund - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended 8/1/08 Yes Alpha Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE GOVERNMENT INCOME 3/12/85 Corporation MN 5/31 SERIES, INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Short Duration 8/19/85 Yes U.S. Government Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RiverSource U.S. Government 2/14/02 Yes Mortgage Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE HIGH YIELD INCOME 8/17/83 Corporation MN 5/31 SERIES, INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource High Yield Bond 12/8/83 Yes Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INCOME SERIES, 2/10/45; 6/13/86(1) Corporation NV/MN 1/31 INC.(7) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Basic Income Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Enhanced Income Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Income Builder 2/16/06 No Moderate Income Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 5/9/01 Corporation MN 10/31 MANAGERS SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Growth Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners 9/28/01 Yes International Select Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners 10/3/02 Yes International Small Cap Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INTERNATIONAL 7/18/84 Corporation MN 10/31 SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 5/18/06 Yes International Equity Fund - ----------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity 6/26/00 Yes Fund(5),(11) - ----------------------------------------------------------------------------------------------------------------------- Threadneedle International 11/15/84 Yes Opportunity Fund(4),(5),(11) - -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 151
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE INVESTMENT SERIES, 1/18/40; 6/13/86(1) Corporation NV/MN 9/30 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Balanced Fund(4) 4/16/40 Yes - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 5/17/07 Yes Cap Growth Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined Large 8/1/08 Yes Cap Value Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Diversified 10/15/90 Yes Equity Income Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Mid Cap Value 2/14/02 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP SERIES, 5/21/70, 6/13/86(1) Corporation NV/MN 7/31 INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Disciplined 4/24/03 Yes Equity Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Growth Fund 3/1/72 Yes - ----------------------------------------------------------------------------------------------------------------------- RiverSource Large Cap Equity 3/28/02 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Large Cap Value 6/27/02 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MANAGERS SERIES, 3/20/01 Corporation MN 5/31 INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners 4/24/03 Yes Aggressive Growth Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners 6/18/01 Yes Fundamental Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Select 3/8/02 Yes Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 3/8/02 Yes Cap Equity Fund(4),(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 6/18/01 Yes Cap Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MARKET ADVANTAGE 8/25/89 Corporation MN 1/31 SERIES, INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Conservative Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Conservative Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Moderate Aggressive Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Aggressive Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Portfolio Builder 3/4/04 Yes Total Equity Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource S&P 500 Index 10/25/99 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Small Company 8/19/96 Yes Index Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE MONEY MARKET 8/22/75; 6/13/86(1) Corporation NV/MN 7/31 SERIES, INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Cash Management 10/6/75 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SECTOR SERIES, 3/25/88 Corporation MN 6/30 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Dividend 8/1/88 Yes Opportunity Fund(8) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Real Estate Fund 3/4/04 Yes - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SELECTED SERIES, 10/5/84 Corporation MN 3/31 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Precious Metals 4/22/85 No and Mining Fund(9) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SERIES TRUST(14) 1/27/06 Business Trust MA 4/30 - ----------------------------------------------------------------------------------------------------------------------- RiverSource 120/20 Contrarian 10/18/07 Yes Equity Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Recovery and 2/19/09 No Infrastructure Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2010 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2015 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2020 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2025 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2030 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2035 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2040 Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Retirement Plus 5/18/06 No 2045 Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SHORT TERM 4/23/68, 6/13/86(1) Corporation NV/MN 7/31 INVESTMENTS SERIES, INC.(15) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Short-Term Cash 9/26/06 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE SPECIAL TAX-EXEMPT 4/7/86 Business Trust MA 8/31(10) SERIES TRUST - -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 152
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** - ----------------------------------------------------------------------------------------------------------------------- RiverSource Minnesota Tax- 8/18/86 No Exempt Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource New York Tax- 8/18/86 No Exempt Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGIC 10/9/84 Corporation MN 9/30 ALLOCATION SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Strategic 1/23/85 Yes Allocation Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Strategic Income 5/17/07 Yes Allocation Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE STRATEGY SERIES, 1/24/84 Corporation MN 3/31 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Equity Value Fund 5/14/84 Yes - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Small 1/24/01 Yes Cap Growth Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Small Cap 5/4/99 Yes Advantage Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT INCOME 12/21/78; 6/13/86(1) Corporation NV/MN 11/30 SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt High 5/7/79 Yes Income Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT MONEY 2/29/80, 6/13/86(1) Corporation NV/MN 12/31 MARKET SERIES, INC.(2) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Money 8/5/80 Yes Market Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE TAX-EXEMPT SERIES, 9/30/76, 6/13/86(1) Corporation NV/MN 11/30 INC. - ----------------------------------------------------------------------------------------------------------------------- RiverSource Intermediate Tax- 11/13/96 Yes Exempt Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Tax-Exempt Bond 11/24/76 Yes Fund - ----------------------------------------------------------------------------------------------------------------------- RIVERSOURCE VARIABLE SERIES 9/07 Business Trust MA 12/31 TRUST(12) - ----------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Aggressive - ----------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Conservative - ----------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderate - ----------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderately Aggressive - ----------------------------------------------------------------------------------------------------------------------- Disciplined Asset Allocation 5/1/08 Yes Portfolios - Moderately Conservative - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 5/1/06 Yes Portfolio - Fundamental Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 2/4/04 Yes Portfolio - Select Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Partners Variable 8/14/01 Yes Portfolio - Small Cap Value Fund(11) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 4/30/86 Yes Portfolio - Balanced Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/31/81 Yes Portfolio - Cash Management Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/10/04 Yes Portfolio - Core Equity Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Diversified Bond Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Diversified Equity Income Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 No Portfolio - Global Bond Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/13/04 No Portfolio - Global Inflation Protected Securities Fund(13) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Growth Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/96 Yes Portfolio - High Yield Bond Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 6/1/04 Yes Portfolio - Income Opportunities Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 10/13/81 Yes Portfolio - Large Cap Equity Fund(5) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 02/4/04 Yes Portfolio - Large Cap Value Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/01 Yes Portfolio - Mid Cap Growth Fund(4) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/2/05 Yes Portfolio - Mid Cap Value Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 5/1/00 Yes Portfolio - S&P 500 Index Fund - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Short Duration U.S. Government Fund(3) - ----------------------------------------------------------------------------------------------------------------------- RiverSource Variable 9/15/99 Yes Portfolio - Small Cap Advantage Fund - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 5/1/00 Yes Portfolio - Emerging Markets Fund(4),(5),(11) - -----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 153
FISCAL DATE OF DATE BEGAN FORM OF STATE OF YEAR FUND* ORGANIZATION OPERATIONS ORGANIZATION ORGANIZATION END DIVERSIFIED** - ----------------------------------------------------------------------------------------------------------------------- Threadneedle Variable 1/13/92 Yes Portfolio - International Opportunity Fund(4),(5),(11) - -----------------------------------------------------------------------------------------------------------------------
* Effective Oct. 1, 2005 American Express Funds changed its name to RiverSource funds and the names Threadneedle and Partners were removed from fund names. ** If a Non-diversified fund is managed as if it were a diversified fund for a period of three years, its status under the 1940 Act will convert automatically from Non-diversified to diversified. A diversified fund may convert to Non-diversified status only with shareholder approval. (1) Date merged into a Minnesota corporation incorporated on April 7, 1986. (2) Effective April 21, 2006, AXP Discovery Series, Inc. changed its name to RiverSource Bond Series, Inc.; AXP Fixed Income Series, Inc. changed its name to RiverSource Diversified Income Series, Inc.; AXP Growth Series, Inc. changed its name to RiverSource Large Cap Series, Inc.; AXP High Yield Tax-Exempt Series, Inc. changed its name to RiverSource Tax-Exempt Income Series, Inc.; AXP Managed Series, Inc. changed its name to RiverSource Strategic Allocation Series, Inc.; AXP Partners International Series, Inc. changed its name to RiverSource International Managers Series, Inc.; AXP Partners Series, Inc. changed its name to RiverSource Managers Series, Inc.; AXP Tax-Free Money Series, Inc. changed its name to RiverSource Tax-Exempt Money Market Series, Inc.; and for all other corporations and business trusts, AXP was replaced with RiverSource in the registrant name. (3) Effective June 27, 2003, Bond Fund changed its name to Diversified Bond Fund, Federal Income Fund changed its name to Short Duration U.S. Government Fund and Extra Income Fund changed its name to High Yield Bond Fund, Variable Portfolio - Bond Fund changed its name to Variable Portfolio - Diversified Bond Fund, Variable Portfolio - Extra Income Fund changed its name to Variable Portfolio - High Yield Bond Fund and Variable Portfolio - Federal Income Fund changed its name to Variable Portfolio - Short Duration U.S. Government Fund. (4) Effective Oct. 1, 2005, Equity Select Fund changed its name to Mid Cap Growth Fund, High Yield Tax-Exempt Fund changed its name to Tax-Exempt High Income Fund, Managed Allocation Fund changed its name to Strategic Allocation Fund, Mutual changed its name to Balanced Fund, Partners Growth Fund changed its name to Fundamental Growth Fund, Partners International Core Fund changed its name to International Equity Fund, Partners Small Cap Core Fund changed its name to Small Cap Equity Fund, Quantitative Large Cap Equity Fund changed its name to Disciplined Equity Fund, Tax-Free Money Fund changed its name to Tax-Exempt Money Market Fund, and Threadneedle International Fund changed its name to International Opportunity Fund. Variable Portfolio - Equity Select Fund changed its name to Variable Portfolio - Mid Cap Growth Fund, Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to Variable Portfolio - Emerging Markets Fund, Variable Portfolio - Threadneedle International Fund changed its name to Variable Portfolio - International Opportunity Fund, and Variable Portfolio - Managed Fund changed its name to Variable Portfolio - Balanced Fund. (5) Effective July 9, 2004, Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund, European Equity Fund changed its name to Threadneedle European Equity Fund, Global Equity Fund changed its name to Threadneedle Global Equity Fund, and International Fund changed its name to Threadneedle International Fund, Variable Portfolio - Capital Resource Fund changed its name to Variable Portfolio - Large Cap Equity Fund, Variable Portfolio - Emerging Markets Fund changed its name to Variable Portfolio - Threadneedle Emerging Markets Fund and Variable Portfolio - International Fund changed its name to Variable Portfolio - Threadneedle International Fund. (6) Effective Oct. 20, 2003, Global Growth Fund changed its name to Global Equity Fund. (7) Effective Jan. 31, 2008, the fiscal year end was changed from May 31 to Jan. 31. (8) Effective Feb. 18, 2004, Utilities Fund changed its name to Dividend Opportunity Fund. (9) Effective Nov. 1, 2006, Precious Metals Fund changed its name to Precious Metals and Mining Fund. (10) Effective April 13, 2006, the fiscal year end was changed from June 30 to Aug. 31. (11) Effective March 31, 2008, RiverSource Emerging Markets Fund changed its name to Threadneedle Emerging Markets Fund; RiverSource Global Equity Fund changed its name to Threadneedle Global Equity Fund; RiverSource European Equity Fund changed its name to Threadneedle European Equity Fund; RiverSource International Opportunity Fund changed its name to Threadneedle International Opportunity Fund; RiverSource International Aggressive Growth Fund changed its name to RiverSource Partners International Select Growth Fund; RiverSource International Select Value Fund changed its name to RiverSource Partners International Select Value Fund; RiverSource International Small Cap Fund changed its name to RiverSource Partners International Small Cap Fund; RiverSource Aggressive Growth Fund changed its name to RiverSource Partners Aggressive Growth Fund; RiverSource Fundamental Value Fund changed its name to RiverSource Partners Fundamental Value Fund; RiverSource Select Value Fund changed its name to RiverSource Partners Select Value Fund; RiverSource Small Cap Equity Fund changed its name to RiverSource Partners Small Cap Equity Fund; RiverSource Small Cap Value Fund changed its name to RiverSource Partners Small Cap Value Fund; RiverSource Small Cap Growth Fund changed its name to RiverSource Partners Small Cap Growth Fund; RiverSource Variable Portfolio - Fundamental Value Fund changed its name to RiverSource Partners Variable Portfolio - Fundamental Value Fund; RiverSource Variable Portfolio - Select Value Fund changed its name to RiverSource Partners Variable Portfolio - Select Value Fund; and RiverSource Variable Portfolio - Small Cap Value Fund changed its name to RiverSource Partners Variable Portfolio - Small Cap Value Fund. (12) Prior to January 2008, the assets of the funds in RiverSource Variable Series Trust were held by funds organized under six separate Minnesota Corporations. (13) Effective June 8, 2005, Variable Portfolio - Inflation Protected Securities Fund changed its name to Variable Portfolio - Global Inflation Protected Securities Fund. (14) Prior to September 11, 2007, RiverSource Series Trust was known as RiverSource Retirement Series Trust. (15) Prior to April 21, 2006, RiverSource Short Term Investments Series, Inc. was known as AXP Stock Series, Inc. Statement of Additional Information - April 1, 2009 Page 154 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees a 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 each fund's Board members. The RiverSource Family of Funds each member oversees consists of 162 funds, which includes 104 RiverSource funds and 58 Seligman 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. TABLE 26. BOARD MEMBERS INDEPENDENT BOARD MEMBERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS - ---------------------------------------------------------------------------------------------------------------------- Kathleen Blatz 901 S. Board member Chief Justice, Minnesota None Board Governance, Marquette Ave. since 2006 Supreme Court, 1998-2006; Compliance, Minneapolis, MN 55402 Attorney Investment Review, Age 54 Joint Audit - ---------------------------------------------------------------------------------------------------------------------- Arne H. Carlson 901 S. Board member Chair, RiverSource Family of None Board Governance, Marquette Ave. since 1999 Funds, 1999-2006; former Compliance, Minneapolis, MN 55402 Governor of Minnesota Contracts, Age 74 Executive, Investment Review - ---------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton 901 Board member President, Springboard-Partners None Distribution, S. Marquette Ave. since 2007 in Cross Cultural Leadership Investment Review, Minneapolis, MN 55402 (consulting company) Joint Audit Age 54 - ---------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn 901 Board member Trustee Professor of Economics None Board Governance, S. Marquette Ave. since 2004 and Management, Bentley Contracts, Minneapolis, MN 55402 College; former Dean, McCallum Investment Review Age 58 Graduate School of Business, Bentley College - ---------------------------------------------------------------------------------------------------------------------- Anne P. Jones 901 S. Board member Attorney and Consultant None Board Governance, Marquette Ave. since 1985 Compliance, Minneapolis, MN 55402 Executive, Age 74 Investment Review, Joint Audit - ---------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, American Progressive Distribution, 901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance Executive, Minneapolis, MN 55402 Investment Review, Age 73 Joint Audit - ---------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Chair of the President Emeritus and Valmont Industries, Board Governance, 901 S. Marquette Ave. Board since Professor of Economics, Inc. (manufactures Compliance, Minneapolis, MN 55402 2007, Board Carleton College irrigation systems) Contracts, Age 70 member since Executive, 2002 Investment Review - ---------------------------------------------------------------------------------------------------------------------- John F. Maher Board member Retired President and Chief None Distribution, 901 S. Marquette Ave. since 2008 Executive Officer and former Investment Review, Minneapolis, MN 55402 Director, Great Western Joint Audit Age 64 Financial Corporation (financial services), 1986-1997 - ---------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None Board Governance, 901 S. Marquette Ave. since 2004 Management, Inc. (private real Compliance, Minneapolis, MN 55402 estate and asset management Contracts, Age 56 company) Executive, Investment Review - ----------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 155
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS - ---------------------------------------------------------------------------------------------------------------------- Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. Digital Ally, Inc. Contracts, 901 S. Marquette Ave. since 2008 since 1987; Vice President and (digital imaging); Distribution, Minneapolis, MN 55402 General Counsel, Automotive Infinity, Inc. (oil Investment Review Age 66 Legal Affairs, Chrysler and gas exploration Corporation, 1990-1997 and production); OGE Energy Corp. (energy and energy services) - ---------------------------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera Pharmaceuticals, Contracts, 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Inc. (biotechnology); Distribution, Minneapolis, MN 55402 2003 (biotechnology); former Healthways, Inc. Executive, Age 64 President, Forester Biotech (health management Investment Review programs) - ----------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION COMMITTEE NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS MEMBERSHIPS - -------------------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset Management and None None 53600 Ameriprise Financial since 2001, Vice Chief Investment Officer, Ameriprise Center President since Financial, Inc. since 2005; President, Minneapolis, MN 55474 2002 Chairman of the Board and Chief Age 48 Investment Officer, RiverSource Investments, LLC since 2001; Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; and Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 - --------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. 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: TABLE 27. FUND OFFICERS
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President - Asset 172 Ameriprise Financial Center 2006 Management, Products and Marketing, Minneapolis, MN 55474 RiverSource Investments, LLC and Director and Age 43 Vice President - Asset Management, Products and Marketing, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - -------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed 172 Ameriprise Financial Center since 2004 Income, Ameriprise Financial, Inc. and Minneapolis, MN 55474 RiverSource Investments, LLC since 2006; Vice Age 44 President - Investments, Ameriprise Certificate Company since 2003; Senior Vice President - Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - --------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 156
POSITION HELD WITH FUNDS AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President Vice President - Asset Management and Trust 5228 Ameriprise Financial Center since 2006 Company Services, RiverSource Investments, LLC Minneapolis, MN 55474 since 2006; Vice President - Operations and Age 43 Compliance, RiverSource Investments, LLC, 2004-2006; Director of Product Development - Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment Accounting, 105 Ameriprise Financial Center 2002 Ameriprise Financial, Inc. since 2002; Chief Minneapolis, MN 55474 Financial Officer, RiverSource Distributors, Age 53 Inc. since 2006 - -------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel - Asset 5228 Ameriprise Financial Center General Counsel Management, Ameriprise Financial, Inc. since Minneapolis, MN 55474 and Secretary 2005; Chief Counsel, RiverSource Distributors, Age 49 since 2006 Inc. and Chief Legal Officer and Assistant Secretary, RiverSource Investments, LLC since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President - Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - -------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource 100 Park Avenue Officer since Investments, LLC, Kenwood Capital Management New York, NY 10010 2009 LLC, Ameriprise Certificate Company, Age 57 RiverSource Service Corporation and Seligman Data Corp. since 2009; Chief Compliance Officer for each of the Seligman funds since 2004 and all funds in the RiverSource Family of Funds since 2009; Anti Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds since 2008; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008. - -------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering 2934 Ameriprise Financial Center Prevention Officer, Ameriprise Financial, Inc. since Minneapolis, MN 55474 Officer since 2004; Manager Anti-Money Laundering, Age 45 2004 Ameriprise Financial, Inc., 2003-2004; Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - --------------------------------------------------------------------------------------------------
RESPONSIBILITIES OF BOARD WITH RESPECT TO FUND MANAGEMENT The Board initially approves an Investment Management Services Agreement and other contracts with the investment manager and its affiliates, and other service providers. Once the contracts are approved, the Board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the Board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the Board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and the investment manager's profitability in order to determine whether to continue existing contracts or negotiate new contracts. SEVERAL COMMITTEES FACILITATE ITS WORK BOARD GOVERNANCE COMMITTEE -- Recommends to the Board the size, structure and composition of the Board and its committees; the compensation to be paid to members of the Board; and a process for evaluating the Board's performance. The committee also reviews candidates for Board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vitae and be mailed to the Chairman of the Board, RiverSource Family of Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee also makes recommendations to the Board regarding responsibilities and duties of the Board, oversees proxy voting and supports the work of the Board Chair in relation to furthering the interests of the Funds and their shareholders on external matters. Statement of Additional Information - April 1, 2009 Page 157 COMPLIANCE COMMITTEE -- Supports the Funds' maintenance of a strong compliance program by providing a forum for independent Board members to consider compliance matters impacting the Funds or their key service providers; developing and implementing, in coordination with the Funds' Chief Compliance Officer (CCO), a process for the review and consideration of compliance reports that are provided to the Boards; and providing a designated forum for the Funds' CCO to meet with independent Board members on a regular basis to discuss compliance matters. CONTRACTS COMMITTEE -- Reviews and oversees the contractual relationships with service providers. Receives and analyzes reports covering the level and quality of services provided under contracts with the fund and advises the Board regarding actions taken on these contracts during the annual review process. DISTRIBUTION COMMITTEE -- Reviews and supports product development, marketing, sales activity and practices related to the funds and will report to the Board as appropriate. EXECUTIVE COMMITTEE -- Acts for the Board between meetings of the Board. INVESTMENT REVIEW COMMITTEE -- Reviews and oversees the management of the Funds' assets. Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board. JOINT AUDIT COMMITTEE -- Oversees the accounting and financial reporting processes of the Funds and internal controls over financial reporting. Oversees the quality and integrity of the Funds' financial statements and independent audits as well as the Funds' compliance with legal and regulatory requirements relating to the Funds' accounting and financial reporting, internal controls over financial reporting and independent audits. The committee also makes recommendations regarding the selection of the Funds' independent auditor and reviews and evaluates the qualifications, independence and performance of the auditor. This table shows the number of times the committees met during each fund's most recent fiscal period. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 28. COMMITTEE MEETINGS
BOARD INVESTMENT JOINT GOVERNANCE COMPLIANCE CONTRACTS DISTRIBUTION EXECUTIVE REVIEW AUDIT FISCAL PERIOD COMMITTEE COMMITTEE COMMITTEE COMMITTEE* COMMITTEE COMMITTEE COMMITTEE - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 3 3 5 5 January 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 1 6 N/A 2 5 6 March 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 N/A 1 5 6 April 30 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 0 1 5 5 May 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 7 6 7 1 1 6 6 June 30 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 1 1 5 5 July 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 1 1 5 5 August 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 2 1 5 5 September 30 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 2 2 5 5 October 31 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 6 5 6 3 2 5 5 November 30 - ----------------------------------------------------------------------------------------------------------------------- For funds with fiscal period ending 5 5 6 3 3 5 5 December 31 - -----------------------------------------------------------------------------------------------------------------------
* Committee established April 2008. Statement of Additional Information - April 1, 2009 Page 158 BOARD MEMBER HOLDINGS The following table shows the Board members' dollar range of equity securities beneficially owned on Dec. 31, 2008 of each individual fund owned by a Board member, and the aggregate dollar range of equity securities of all funds overseen by the Board members. TABLE 29. BOARD MEMBER HOLDINGS Based on net asset values as of Dec. 31, 2008:
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BOARD MEMBER(A) FUND SECURITIES IN THE FUND BY BOARD MEMBER - --------------------------------------------------------------------------------------------------------------------------------- Kathleen Blatz Absolute Return Currency and Income $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ Dividend Opportunity Over $100,000 ------------------------------------------------------------------------ Partners Small Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ Partners Small Cap Value $10,001-$50,000 ------------------------------------------------------------------------ Precious Metals and Mining $10,001-$50,000 ------------------------------------------------------------------------ Real Estate $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation Over $100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - --------------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Cash Management $10,001-$50,000 Over $100, 000 ------------------------------------------------------------------------ Disciplined Equity $10,001-$50,000 ------------------------------------------------------------------------ Disciplined International Equity $10,001-$50,000 ------------------------------------------------------------------------ Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ Partners International Select Value $0-$10,000 ------------------------------------------------------------------------ Portfolio Builder Moderate $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - --------------------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton Absolute Return Currency and Income $0-$10,000 $50,001-$100,000 ------------------------------------------------------------------------ Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Short Duration U.S. Government $50,001-$100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 159
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BOARD MEMBER(A) FUND SECURITIES IN THE FUND BY BOARD MEMBER - --------------------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn Growth* $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive* $50,001-$100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation* Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $10,001-$50,000 - --------------------------------------------------------------------------------------------------------------------------------- Anne P. Jones Disciplined Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ Diversified Bond $10,001-$50,000 ------------------------------------------------------------------------ Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Global Bond Over $100,000 ------------------------------------------------------------------------ Growth $0-$10,000 ------------------------------------------------------------------------ High Yield Bond Over $100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Short Duration U.S. Government Over $100,000 ------------------------------------------------------------------------ Small Company Index Over $100,000 ------------------------------------------------------------------------ Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Threadneedle Global Equity $10,001-$50,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - --------------------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind Cash Management Over $100,000 Over $100,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - --------------------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 120/20 Contrarian Equity $10,001-$50,000 Over $100,000** ------------------------------------------------------------------------ Absolute Return Currency and Income $10,001-$50,000 ------------------------------------------------------------------------ Disciplined Large Cap Growth $10,001-$50,000 ------------------------------------------------------------------------ Diversified Equity Income Over $100,000 ------------------------------------------------------------------------ Dividend Opportunity $10,001-$50,000 ------------------------------------------------------------------------ Mid Cap Growth $0-$10,000 ------------------------------------------------------------------------ Portfolio Builder Total Equity $10,001-$50,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle Global Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Threadneedle International Opportunity $50,001-$100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 160
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BOARD MEMBER(A) FUND SECURITIES IN THE FUND BY BOARD MEMBER - --------------------------------------------------------------------------------------------------------------------------------- John F. Maher Equity Value $0-$10,000 Over $100,000** ------------------------------------------------------------------------ Seligman Capital $10,001-$50,000 ------------------------------------------------------------------------ Seligman Common Stock $0-$10,000 ------------------------------------------------------------------------ Seligman Communications and Information $10,001-$50,000 ------------------------------------------------------------------------ Seligman Core Fixed Income $0-$10,000 ------------------------------------------------------------------------ Seligman Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Seligman Frontier $10,001-$50,000 ------------------------------------------------------------------------ Seligman Global Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Global Smaller Companies $0-$10,000 ------------------------------------------------------------------------ Seligman Global Technology $0-$10,000 ------------------------------------------------------------------------ Seligman Growth $0-$10,000 ------------------------------------------------------------------------ Seligman High-Yield $0-$10,000 ------------------------------------------------------------------------ Seligman Income and Growth $0-$10,000 ------------------------------------------------------------------------ Seligman International Growth $10,001-$50,000 ------------------------------------------------------------------------ Seligman Large-Cap Value $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle Global Real Estate $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman LaSalle Monthly Dividend Real $0-$10,000 Estate ------------------------------------------------------------------------ Seligman National Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Smaller-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman U.S. Government Securities $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation $50,001-$100,000 - --------------------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Cash Management Over $100,000 Over $100,000** ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 161
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BOARD MEMBER(A) FUND SECURITIES IN THE FUND BY BOARD MEMBER - --------------------------------------------------------------------------------------------------------------------------------- Leroy C. Richie Seligman Capital $0-$10,000 Over $100,000 ------------------------------------------------------------------------ Seligman Common Stock $0-$10,000 ------------------------------------------------------------------------ Seligman Communications and Information $0-$10,000 ------------------------------------------------------------------------ Seligman Core Fixed Income $0-$10,000 ------------------------------------------------------------------------ Seligman Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Seligman Frontier $0-$10,000 ------------------------------------------------------------------------ Seligman Global Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Global Smaller Companies $0-$10,000 ------------------------------------------------------------------------ Seligman Global Technology $0-$10,000 ------------------------------------------------------------------------ Seligman Growth $0-$10,000 ------------------------------------------------------------------------ Seligman High-Yield $0-$10,000 ------------------------------------------------------------------------ Seligman Income and Growth $0-$10,000 ------------------------------------------------------------------------ Seligman International Growth $0-$10,000 ------------------------------------------------------------------------ Seligman Large-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Michigan Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Seligman Smaller-Cap Value $0-$10,000 ------------------------------------------------------------------------ Seligman U.S. Government Securities $0-$10,000 ------------------------------------------------------------------------ Tri-Continental Corporation Over $100,000 - --------------------------------------------------------------------------------------------------------------------------------- Alison Taunton Rigby 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ Absolute Return Currency and Income $50,001-$100,000 ------------------------------------------------------------------------ Cash Management Over $100,000 ------------------------------------------------------------------------ Diversified Equity Income $10,001-$50,000 ------------------------------------------------------------------------ Growth $50,001-$100,000 ------------------------------------------------------------------------ Income Builder Enhanced Income Over 100,000 ------------------------------------------------------------------------ Mid Cap Value $10,001-$50,000 ------------------------------------------------------------------------ Partners International Select Growth $50,001-$100,000 ------------------------------------------------------------------------ Partners Small Cap Value $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $1-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $1-$10,000 ------------------------------------------------------------------------ Strategic Allocation $50,001-$100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $50,001-$100,000 ------------------------------------------------------------------------ Tri Continental Corporation $1-$10,000 - ---------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 162
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BOARD MEMBER(A) FUND SECURITIES IN THE FUND BY BOARD MEMBER - --------------------------------------------------------------------------------------------------------------------------------- William F. Truscott 120/20 Contrarian Equity $10,001-$50,000 Over $100,000 ------------------------------------------------------------------------ Absolute Return Currency and Income $50,001-$100,000 ------------------------------------------------------------------------ Cash Management $0-$10,000 ------------------------------------------------------------------------ Disciplined Equity Over $100,000 ------------------------------------------------------------------------ Disciplined International Equity Over $100,000 ------------------------------------------------------------------------ Disciplined Small and Mid Cap Equity $10,001-$50,000 ------------------------------------------------------------------------ Diversified Bond Over $100,000 ------------------------------------------------------------------------ Dividend Opportunity Over $100,000 ------------------------------------------------------------------------ Emerging Markets Bond $10,001-$50,000 ------------------------------------------------------------------------ Floating Rate Over $100,000 ------------------------------------------------------------------------ Global Bond Over $100,000 ------------------------------------------------------------------------ Global Technology $10,001-$50,000 ------------------------------------------------------------------------ Growth $50,001- $100,000 ------------------------------------------------------------------------ High Yield Bond $10,001-$50,000 ------------------------------------------------------------------------ Income Opportunities $50,001- $100,000 ------------------------------------------------------------------------ Inflation Protected Securities $10,001-$50,000 ------------------------------------------------------------------------ Mid Cap Value $50,001-$100,000 ------------------------------------------------------------------------ Partners International Select Growth Over $100,000 ------------------------------------------------------------------------ Partners International Select Value $10,001-$50,000 ------------------------------------------------------------------------ Partners Small Cap Equity Over $100,000 ------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive $50,001-$100,000 ------------------------------------------------------------------------ Retirement Plus 2035 $10,001-$50,000 ------------------------------------------------------------------------ Seligman LaSalle International Real Estate $0-$10,000 ------------------------------------------------------------------------ Seligman Select Municipal $0-$10,000 ------------------------------------------------------------------------ Strategic Allocation Over $100,000 ------------------------------------------------------------------------ Strategic Income Allocation Over $100,000 ------------------------------------------------------------------------ Threadneedle Emerging Markets $0-$10,000 ------------------------------------------------------------------------ Threadneedle Global Equity Over $100,000 ------------------------------------------------------------------------ Tri-Continental Corporation $0-$10,000 - ---------------------------------------------------------------------------------------------------------------------------------
* Deferred compensation invested in share equivalents: A. Flynn Growth............................... $10,001-$50,000 Portfolio Builder Moderate $50,001-$100,000 Aggressive........................... Strategic Allocation................. Over $100,000 B. Lewis Absolute Return Currency and Income.. $10,001-$50,000 Disciplined Large Cap Growth......... $10,001-$50,000 Diversified Equity Income............ $50,001-$100,000 Portfolio Builder Total Equity....... $10,001-$50,000 Threadneedle Emerging Markets........ $10,001-$50,000 Threadneedle International $50,001-$100,000 Opportunity..........................
Statement of Additional Information - April 1, 2009 Page 163 C. Maher Equity Value......................... $0-$10,000 Seligman Capital..................... $0-$10,000 Seligman Communications & $10,001-$50,000 Information.......................... Seligman Frontier.................... $10,001-$50,000 Seligman International Growth........ $0-$10,000 Seligman Large-Cap Value............. $10,001-$50,000 Seligman LaSalle Global Real Estate.. $0-$10,000 Tri-Continental Corporation.......... $10,001-$50,000 D. Paglia Threadneedle Global Equity........... Over $100,000
** Total includes deferred compensation invested in share equivalents. As of 30 days prior to the date of this SAI, the Board members and officers as a group owned 1.54% of RiverSource Retirement Plus 2035 Fund Class A. The Board members and officers as a group owned less than 1% of the outstanding shares of any class of any other fund in the RiverSource Family of Funds. Statement of Additional Information - April 1, 2009 Page 164 COMPENSATION OF BOARD MEMBERS TOTAL COMPENSATION. The following table shows the total compensation paid to independent Board members from all the funds in the last fiscal period. TABLE 30. BOARD MEMBER COMPENSATION - ALL FUNDS
TOTAL CASH COMPENSATION FROM BOARD MEMBER(a) FUNDS PAID TO BOARD MEMBER - ---------------------------------------------------------------------------------------------- Kathleen Blatz $177,500 - ---------------------------------------------------------------------------------------------- Arne H. Carlson 180,000 - ---------------------------------------------------------------------------------------------- Pamela G. Carlton 165,000(b) - ---------------------------------------------------------------------------------------------- Patricia M. Flynn 167,500(b) - ---------------------------------------------------------------------------------------------- Anne P. Jones 177,500 - ---------------------------------------------------------------------------------------------- Jeffrey Laikind 165,000 - ---------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 400,000(b) - ---------------------------------------------------------------------------------------------- John F. Maher 30,833(c) - ---------------------------------------------------------------------------------------------- Catherine James Paglia 170,000(b) - ---------------------------------------------------------------------------------------------- Leroy Richie 48,750 - ---------------------------------------------------------------------------------------------- Alison Taunton-Rigby 167,500 - ----------------------------------------------------------------------------------------------
(a) Board member compensation is a combination of a base fee and meeting fees, with the exception of the Chair of the Board, who receives a base annual compensation. Payment of compensation is administered by a company providing limited administrative services to the funds and to the Board. (b) Ms. Carlson, Ms. Flynn, Mr. Lewis and Ms. Paglia elected to defer a portion of the total cash compensation payable during the period in the amount of $7,167, $78,625, $60,000, and $146,250 respectively. Amount deferred by fund is set forth in Table 31. Additional information regarding the deferred compensation plan is described below. (c) The total compensation shown for Mr. Maher through Jan. 31, 2009 is for both RiverSource and Seligman funds, however the portion he elected to defer, in the amount of $19,208 was for Seligman funds only. The independent Board members determine the amount of compensation that they receive, including the amount paid to the Chair of the Board. In determining compensation for the independent Board members, the independent Board members take into account a variety of factors including, among other things, their collective significant work experience (e.g., in business and finance, government or academia). The independent Board members also recognize that these individuals' advice and counsel are in demand by other organizations, that these individuals may reject other opportunities because the time demands of their duties as independent Board members, and that they undertake significant legal responsibilities. The independent Board members also consider the compensation paid to independent board members of other mutual fund complexes of comparable size. In determining the compensation paid to the Chair, the independent Board members take into account, among other things, the Chair's significant additional responsibilities (e.g., setting the agenda for Board meetings, communicating or meeting regularly with the Funds' Chief Compliance Officer, Counsel to the independent Board members, and the Funds' service providers) which result in a significantly greater time commitment required of the Board Chair. The Chair's compensation, therefore, has generally been set at a level between 2.5 and 3 times the level of compensation paid to other independent Board members. Effective Jan. 1, 2008, independent Board members will be paid an annual retainer of $95,000. Committee and sub- committee Chairs will each receive an additional annual retainer of $5,000. In addition, independent Board members will be paid the following fees for attending Board and committee meetings: $5,000 per day of in-person Board meetings and $2,500 per day of in-person committee or sub-committee meetings (if such meetings are not held on the same day as a Board meeting). Independent Board members are not paid for special telephonic meetings. In 2008, the Board's Chair will receive total annual cash compensation of $400,000. The independent Board members may elect to defer payment of up to 100% of the compensation they receive in accordance with a Deferred Compensation Plan (the Deferred Plan). Under the Deferred Plan, a Board member may elect to have his or her deferred compensation treated as if they had been invested in shares of one or more funds in the RiverSource Family of Funds and the amount paid to the Board member under the Deferred Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Deferred Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. It is anticipated that deferral of Board member compensation in accordance with the Deferred Plan will have, at most, a negligible impact on Fund assets and liabilities. Statement of Additional Information - April 1, 2009 Page 165 COMPENSATION FROM EACH FUND. The following table shows the compensation paid to independent Board members from each fund during its last fiscal period. TABLE 31. BOARD MEMBER(A) COMPENSATION -- INDIVIDUAL FUNDS
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - --------------------------------------------------------------------------------------- Income Builder Basic * * * * * * Income - --------------------------------------------------------------------------------------- Income Builder Enhanced * * * * * * Income - --------------------------------------------------------------------------------------- Income Builder Moderate * * * * * * Income - --------------------------------------------------------------------------------------- Portfolio Builder * * * * * * Aggressive - --------------------------------------------------------------------------------------- Portfolio Builder * * * * * * Conservative - --------------------------------------------------------------------------------------- Portfolio Builder * * * * * * Moderate - --------------------------------------------------------------------------------------- Portfolio Builder * * * * * * Moderate Aggressive - --------------------------------------------------------------------------------------- Portfolio Builder * * * * * * Moderate Conservative - --------------------------------------------------------------------------------------- Portfolio Builder Total * * * * * * Equity - --------------------------------------------------------------------------------------- S&P 500 Index -- total $ 391 $ 398 $ 366 $ 375 $ 391 $ 364 Amount deferred 0 0 14 180 0 0 - --------------------------------------------------------------------------------------- Small Company 1,310 1,331 1,225 1,254 1,310 1,220 Index -- total Amount deferred 0 0 44 604 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - --------------------------------------------------------------------------------------- Equity Value -- total 2,226 2,074 1,485 2,150 2,118 2,085 Amount deferred 0 0 0 906 0 0 - --------------------------------------------------------------------------------------- Partners Small Cap 365 340 244 352 347 341 Growth -- total Amount deferred 0 0 0 149 0 0 - --------------------------------------------------------------------------------------- Precious Metals and 238 225 167 231 228 223 Mining -- total Amount deferred 0 0 0 99 0 0 - --------------------------------------------------------------------------------------- Small Cap 826 760 515 793 783 773 Advantage -- total Amount deferred 0 0 0 331 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - --------------------------------------------------------------------------------------- 120/20 Contrarian 38 39 35 37 38 35 Equity -- total Amount deferred 0 0 0 17 0 0 - --------------------------------------------------------------------------------------- Retirement Plus 2010 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2015 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2020 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2025 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2030 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2035 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2040 * * * * * * - --------------------------------------------------------------------------------------- Retirement Plus 2045 * * * * * * - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - --------------------------------------------------------------------------------------- High Yield 3,058 2,945 2,563 2,957 2,957 2,867 Bond -- total Amount deferred 0 0 0 1,292 0 0 - --------------------------------------------------------------------------------------- Partners Aggressive 1,110 1,075 944 1,075 1,075 1,040 Growth -- total Amount deferred 0 0 0 474 0 0 - --------------------------------------------------------------------------------------- Partners Fundamental 1,939 1,870 1,629 1,875 1,876 1,817 Value -- total Amount deferred 0 0 0 822 0 0 - --------------------------------------------------------------------------------------- Partners Select 929 893 776 898 898 871 Value -- total Amount deferred 0 0 0 392 0 0 - --------------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - --------------------------------------------------------------------------------- Income Builder Basic * * * * * Income - --------------------------------------------------------------------------------- Income Builder Enhanced * * * * * Income - --------------------------------------------------------------------------------- Income Builder Moderate * * * * * Income - --------------------------------------------------------------------------------- Portfolio Builder * * * * * Aggressive - --------------------------------------------------------------------------------- Portfolio Builder * * * * * Conservative - --------------------------------------------------------------------------------- Portfolio Builder * * * * * Moderate - --------------------------------------------------------------------------------- Portfolio Builder * * * * * Moderate Aggressive - --------------------------------------------------------------------------------- Portfolio Builder * * * * * Moderate Conservative - --------------------------------------------------------------------------------- Portfolio Builder Total * * * * * Equity - --------------------------------------------------------------------------------- S&P 500 Index -- total $ 903 $ 58 $ 380 $ 90 $ 371 Amount deferred 138 36 337 0 0 - --------------------------------------------------------------------------------- Small Company 3,024 181 1,273 287 1,241 Index -- total Amount deferred 462 111 1,140 0 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - --------------------------------------------------------------------------------- Equity Value -- total 5,423 N/A 2,182 N/A 2,042 Amount deferred 1,436 N/A 2,182 N/A 0 - --------------------------------------------------------------------------------- Partners Small Cap 891 N/A 358 N/A 335 Growth -- total Amount deferred 235 N/A 358 N/A 0 - --------------------------------------------------------------------------------- Precious Metals and 590 N/A 235 N/A 221 Mining -- total Amount deferred 151 N/A 235 N/A 0 - --------------------------------------------------------------------------------- Small Cap 1,992 N/A 802 N/A 750 Advantage -- total Amount deferred 541 N/A 802 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - --------------------------------------------------------------------------------- 120/20 Contrarian 91 N/A 39 N/A 36 Equity -- total Amount deferred 17 N/A 39 N/A 0 - --------------------------------------------------------------------------------- Retirement Plus 2010 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2015 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2020 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2025 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2030 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2035 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2040 * * * * * - --------------------------------------------------------------------------------- Retirement Plus 2045 * * * * * - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING MAY 31 - --------------------------------------------------------------------------------- High Yield 7,494 N/A 3,047 N/A 2,856 Bond -- total Amount deferred 1,811 N/A 3,047 N/A 0 - --------------------------------------------------------------------------------- Partners Aggressive 2,740 N/A 1,110 N/A 1,040 Growth -- total Amount deferred 645 N/A 1,110 N/A 0 - --------------------------------------------------------------------------------- Partners Fundamental 4,759 N/A 1,933 N/A 1,811 Value -- total Amount deferred 1,139 N/A 1,933 N/A 0 - --------------------------------------------------------------------------------- Partners Select 2,278 N/A 925 N/A 867 Value -- total Amount deferred 554 N/A 925 N/A 0 - ---------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 166
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND - --------------------------------------------------------------------------------------- Partners Small Cap $ 479 $ 460 $ 399 $ 462 $ 462 $ 449 Equity -- total Amount deferred 0 0 0 202 0 0 - --------------------------------------------------------------------------------------- Partners Small Cap 1,311 1,254 1,079 1,267 1,265 1,231 Value -- total Amount deferred 0 0 0 548 0 0 - --------------------------------------------------------------------------------------- Short Duration U.S. Government -- total 1,483 1,441 1,262 1,437 1,438 1,389 Amount deferred 0 0 0 637 0 0 - --------------------------------------------------------------------------------------- U.S. Government Mortgage -- total 764 740 647 740 739 715 Amount deferred 0 0 0 326 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - --------------------------------------------------------------------------------------- Dividend Opportunity -- total 3,796 3,733 3,404 3,690 3,679 3,520 Amount deferred 0 0 0 1,647 0 0 - --------------------------------------------------------------------------------------- Real Estate -- total 441 433 394 428 428 409 Amount deferred 0 0 0 191 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - --------------------------------------------------------------------------------------- Cash 9,805 9,820 9,158 9,484 9,649 9,158 Management -- total Amount deferred 0 0 0 4,371 0 0 - --------------------------------------------------------------------------------------- Disciplined 6,153 6,157 5,746 5,947 6,054 5,746 Equity -- total Amount deferred 0 0 0 2,740 0 0 - --------------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity -- total 105 104 99 103 103 99 Amount deferred 0 0 0 45 0 0 - --------------------------------------------------------------------------------------- Disciplined Small Cap 70 70 65 68 69 65 Value -- total Amount deferred 0 0 0 31 0 0 - --------------------------------------------------------------------------------------- Floating Rate -- total 1,044 1,041 976 1,009 1,025 976 Amount deferred 0 0 0 461 0 0 - --------------------------------------------------------------------------------------- Growth -- total 5,085 5,077 4,763 4,936 4,995 4,763 Amount deferred 0 0 0 2,246 0 0 - --------------------------------------------------------------------------------------- Income 528 529 494 511 520 494 Opportunities -- total Amount deferred 0 0 0 234 0 0 - --------------------------------------------------------------------------------------- Inflation Protected 1,126 1,138 1,049 1,085 1,114 1,049 Securities -- total Amount deferred 0 0 0 515 0 0 - --------------------------------------------------------------------------------------- Large Cap 9,660 9,637 9,051 9,370 9,489 9,050 Equity -- total Amount deferred 0 0 0 4,259 0 0 - --------------------------------------------------------------------------------------- Large Cap 136 136 128 132 134 128 Value -- total Amount deferred 0 0 0 60 0 0 - --------------------------------------------------------------------------------------- Limited Duration 307 308 286 296 302 287 Bond -- total Amount deferred 0 0 0 137 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - --------------------------------------------------------------------------------------- California Tax- Exempt -- total 339 340 318 329 335 318 Amount deferred 0 0 0 154 0 0 - --------------------------------------------------------------------------------------- Diversified Bond -- total 6,444 6,465 6,040 6,237 6,356 6,040 Amount deferred 0 0 0 2,931 0 0 - --------------------------------------------------------------------------------------- Minnesota Tax- Exempt -- total 595 596 558 577 586 558 Amount deferred 0 0 0 269 0 0 - --------------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY - --------------------------------------------------------------------------------- Partners Small Cap $ 1,175 N/A $ 476 N/A $ 447 Equity -- total Amount deferred 286 N/A 476 N/A 0 - --------------------------------------------------------------------------------- Partners Small Cap 3,207 N/A 1,301 N/A 1,220 Value -- total Amount deferred 796 N/A 1,301 N/A 0 - --------------------------------------------------------------------------------- Short Duration U.S. Government -- total 3,670 N/A 1,486 N/A 1,392 Amount deferred 851 N/A 1,486 N/A 0 - --------------------------------------------------------------------------------- U.S. Government Mortgage -- total 1,879 N/A 764 N/A 716 Amount deferred 442 N/A 764 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - --------------------------------------------------------------------------------- Dividend Opportunity -- total 8,773 N/A 3,652 N/A 3,573 Amount deferred 1,990 N/A 3,652 N/A 0 - --------------------------------------------------------------------------------- Real Estate -- total 1,011 N/A 420 N/A 414 Amount deferred 230 N/A 420 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - --------------------------------------------------------------------------------- Cash 25,060 N/A 9,340 N/A 9,328 Management -- total Amount deferred 5,222 N/A 9,340 N/A 0 - --------------------------------------------------------------------------------- Disciplined 15,698 N/A 5,862 N/A 5,849 Equity -- total Amount deferred 3,272 N/A 5,862 N/A 0 - --------------------------------------------------------------------------------- Disciplined Small and Mid Cap Equity -- total 275 N/A 101 N/A 100 Amount deferred 65 N/A 101 N/A 0 - --------------------------------------------------------------------------------- Disciplined Small Cap 180 N/A 67 N/A 66 Value -- total Amount deferred 38 N/A 67 N/A 0 - --------------------------------------------------------------------------------- Floating Rate -- total 2,660 N/A 988 N/A 991 Amount deferred 572 N/A 988 N/A 0 - --------------------------------------------------------------------------------- Growth -- total 13,062 N/A 4,879 N/A 4,846 Amount deferred 2,836 N/A 4,879 N/A 0 - --------------------------------------------------------------------------------- Income 1,349 N/A 502 N/A 503 Opportunities -- total Amount deferred 286 N/A 502 N/A 0 - --------------------------------------------------------------------------------- Inflation Protected 2,926 N/A 1,043 N/A 1,073 Securities -- total Amount deferred 549 N/A 1,043 N/A 0 - --------------------------------------------------------------------------------- Large Cap 24,802 N/A 9,269 N/A 9,199 Equity -- total Amount deferred 5,411 N/A 9,269 N/A 0 - --------------------------------------------------------------------------------- Large Cap 351 N/A 131 N/A 130 Value -- total Amount deferred 78 N/A 131 N/A 0 - --------------------------------------------------------------------------------- Limited Duration 787 N/A 290 N/A 292 Bond -- total Amount deferred 161 N/A 290 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - --------------------------------------------------------------------------------- California Tax- Exempt -- total 839 N/A 322 N/A 324 Amount deferred 163 N/A 322 N/A 0 - --------------------------------------------------------------------------------- Diversified Bond -- total 16,009 N/A 6,093 N/A 6,149 Amount deferred 3,064 N/A 6,093 N/A 0 - --------------------------------------------------------------------------------- Minnesota Tax- Exempt -- total 1,470 N/A 566 N/A 568 Amount deferred 289 N/A 566 N/A 0 - ---------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 167
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND - --------------------------------------------------------------------------------------- New York Tax- $ 114 $ 114 $ 107 $ 110 $ 112 $ 107 Exempt -- total Amount deferred 0 0 0 51 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - --------------------------------------------------------------------------------------- Balanced -- total 1,763 1,761 1,628 1,684 1,734 1,628 Amount deferred 0 0 0 799 0 0 - --------------------------------------------------------------------------------------- Disciplined Large Cap 354 356 327 335 350 327 Growth -- total Amount deferred 0 0 0 162 0 0 - --------------------------------------------------------------------------------------- Disciplined Large Cap 4 3 3 3 4 3 Value -- total Amount deferred 0 0 0 2 0 0 - --------------------------------------------------------------------------------------- Diversified Equity 14,237 14,230 13,153 13,595 14,013 13,153 Income -- total Amount deferred 0 0 0 6,460 0 0 - --------------------------------------------------------------------------------------- Mid Cap Value -- total 5,051 5,051 4,667 4,811 4,979 4,666 Amount deferred 0 0 0 2,296 0 0 - --------------------------------------------------------------------------------------- Strategic 4,049 4,048 3,740 3,865 3,986 3,740 Allocation -- total Amount deferred 0 0 0 1,838 0 0 - --------------------------------------------------------------------------------------- Strategic Income 340 342 314 324 336 314 Allocation -- total Amount deferred 0 0 0 156 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - --------------------------------------------------------------------------------------- Absolute Return Currency and Income -- total 1,151 1,164 1,080 1,102 1,147 1,080 Amount deferred 0 0 0 544 0 0 - --------------------------------------------------------------------------------------- Disciplined International Equity -- total 1,523 1,530 1,413 1,457 1,504 1,413 Amount deferred 0 0 0 705 0 0 - --------------------------------------------------------------------------------------- Emerging Markets 386 385 360 369 381 360 Bond -- total Amount deferred 0 0 0 178 0 0 - --------------------------------------------------------------------------------------- Global Bond -- total 1,646 1,654 1,532 1,571 1,630 1,531 Amount deferred 0 0 0 765 0 0 - --------------------------------------------------------------------------------------- Global 299 299 278 287 294 278 Technology -- total Amount deferred 0 0 0 137 0 0 - --------------------------------------------------------------------------------------- Partners International Select Growth -- total 1,405 1,405 1,303 1,344 1,384 1,303 Amount deferred 0 0 0 646 0 0 - --------------------------------------------------------------------------------------- Partners International Select Value -- total 3,980 3,969 3,683 3,815 3,909 3,683 Amount deferred 0 0 0 1,821 0 0 - --------------------------------------------------------------------------------------- Partners International Small Cap -- total 210 209 194 201 206 194 Amount deferred 0 0 0 96 0 0 - --------------------------------------------------------------------------------------- Threadneedle Emerging Markets -- total 1,338 1,337 1,239 1,280 1,317 1,238 Amount deferred 0 0 0 0 0 0 - --------------------------------------------------------------------------------------- Threadneedle European Equity -- total 258 258 239 248 254 239 Amount deferred 0 0 0 119 0 0 - --------------------------------------------------------------------------------------- Threadneedle Global 1,514 1,514 1,404 1,450 1,491 1,404 Equity -- total Amount deferred 0 0 0 696 0 0 - --------------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY - --------------------------------------------------------------------------------- New York Tax- $ 281 N/A $ 109 N/A $ 109 Exempt -- total Amount deferred 56 N/A 109 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - --------------------------------------------------------------------------------- Balanced -- total 4,277 N/A 1,688 N/A 1,656 Amount deferred 806 N/A 1,688 N/A 0 - --------------------------------------------------------------------------------- Disciplined Large Cap 848 N/A 334 N/A 332 Growth -- total Amount deferred 147 N/A 334 N/A 0 - --------------------------------------------------------------------------------- Disciplined Large Cap 7 N/A 3 N/A 3 Value -- total Amount deferred 1 N/A 3 N/A 0 - --------------------------------------------------------------------------------- Diversified Equity 34,529 N/A 13,599 N/A 13,370 Income -- total Amount deferred 6,484 N/A 13,599 N/A 0 - --------------------------------------------------------------------------------- Mid Cap Value -- total 12,194 N/A 4,804 N/A 4,739 Amount deferred 2,251 N/A 4,804 N/A 0 - --------------------------------------------------------------------------------- Strategic 9,812 N/A 3,866 N/A 3,802 Allocation -- total Amount deferred 1,836 N/A 3,866 N/A 0 - --------------------------------------------------------------------------------- Strategic Income 817 N/A 324 N/A 320 Allocation -- total Amount deferred 147 N/A 324 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - --------------------------------------------------------------------------------- Absolute Return Currency and Income -- total 2,634 N/A 1,104 N/A 1,097 Amount deferred 417 N/A 1,104 N/A 0 - --------------------------------------------------------------------------------- Disciplined International Equity -- total 3,511 N/A 1,447 N/A 1,439 Amount deferred 599 N/A 1,447 N/A 0 - --------------------------------------------------------------------------------- Emerging Markets 856 N/A 374 N/A 364 Bond -- total Amount deferred 149 N/A 374 N/A 0 - --------------------------------------------------------------------------------- Global Bond -- total 3,754 N/A 1,563 N/A 1,555 Amount deferred 626 N/A 1,563 N/A 0 - --------------------------------------------------------------------------------- Global 682 N/A 286 N/A 282 Technology -- total Amount deferred 121 N/A 286 N/A 0 - --------------------------------------------------------------------------------- Partners International Select Growth -- total 3,222 N/A 1,338 N/A 1,323 Amount deferred 564 N/A 1,338 N/A 0 - --------------------------------------------------------------------------------- Partners International Select Value -- total 9,121 N/A 3,815 N/A 3,744 Amount deferred 1,637 N/A 3,815 N/A 0 - --------------------------------------------------------------------------------- Partners International Small Cap -- total 482 N/A 201 N/A 198 Amount deferred 86 N/A 201 N/A 0 - --------------------------------------------------------------------------------- Threadneedle Emerging Markets -- total 3,080 N/A 1,271 N/A 1,259 Amount deferred 545 N/A 1,271 N/A 0 - --------------------------------------------------------------------------------- Threadneedle European Equity -- total 592 N/A 247 N/A 243 Amount deferred 104 N/A 247 N/A 0 - --------------------------------------------------------------------------------- Threadneedle Global 3,461 N/A 1,448 N/A 1,427 Equity -- total Amount deferred 608 N/A 1,448 N/A 0 - ---------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 168
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND - --------------------------------------------------------------------------------------- Threadneedle Global Equity Income -- total $ 7 $ 7 $ 7 $ 6 $ 7 $ 6 Amount deferred 0 0 0 3 0 0 - --------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha -- total 5 5 5 5 5 5 Amount deferred 0 0 0 2 0 0 - --------------------------------------------------------------------------------------- Threadneedle International Opportunity -- total 1,258 1,256 1,166 1,204 1,238 1,166 Amount deferred 0 0 0 578 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - --------------------------------------------------------------------------------------- Intermediate Tax- 176 179 164 166 176 164 Exempt -- total Amount deferred 0 0 0 81 0 0 - --------------------------------------------------------------------------------------- Mid Cap Growth -- total 1,781 1,807 1,657 1,683 1,781 1,657 Amount deferred 0 0 0 822 0 0 - --------------------------------------------------------------------------------------- Tax-Exempt 1,561 1,582 1,451 1,472 1,561 1,451 Bond -- total Amount deferred 0 0 0 718 0 0 - --------------------------------------------------------------------------------------- Tax-Exempt High 5,855 5,939 5,442 5,525 5,855 5,442 Income -- total Amount deferred 0 0 0 2,696 0 0 - --------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - --------------------------------------------------------------------------------------- Tax-Exempt Money 340 344 317 325 340 317 Market -- total Amount deferred 0 0 0 161 0 0 - --------------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY - --------------------------------------------------------------------------------- Threadneedle Global Equity Income -- total $ 13 N/A $ 7 N/A $ 6 Amount deferred 2 N/A 7 N/A 0 - --------------------------------------------------------------------------------- Threadneedle Global Extended Alpha -- total 10 N/A 5 N/A 4 Amount deferred 1 N/A 5 N/A 0 - --------------------------------------------------------------------------------- Threadneedle International Opportunity -- total 2,874 N/A 1,202 N/A 1,184 Amount deferred 507 N/A 1,202 N/A 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - --------------------------------------------------------------------------------- Intermediate Tax- 393 N/A 169 $ 21 166 Exempt -- total Amount deferred 63 N/A 167 0 0 - --------------------------------------------------------------------------------- Mid Cap Growth -- total 4,103 N/A 1,702 128 1,683 Amount deferred 672 N/A 1,687 0 0 - --------------------------------------------------------------------------------- Tax-Exempt 3,497 N/A 1,497 172 1,472 Bond -- total Amount deferred 564 N/A 1,477 0 0 - --------------------------------------------------------------------------------- Tax-Exempt High 13,163 N/A 5,610 623 5,525 Income -- total Amount deferred 2,121 N/A 5,539 0 0 - --------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - --------------------------------------------------------------------------------- Tax-Exempt Money 757 25 333 69 321 Market -- total Amount deferred 116 0 326 0 0 - ---------------------------------------------------------------------------------
(a) Mr. Richie and Mr. Maher were not Board members as of the last fiscal period, and therefore are not included in the table. * Funds-of-Funds do not pay additional compensation to the Board members for attending meetings. Compensation is paid directly from the underlying funds in which each Fund-of-Funds invests. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES The following table identifies those investors who, as of 30 days after the end of the fund's fiscal period, owned 5% or more of any class of a fund's shares and those investors who owned 25% or more of a fund's shares (all share classes taken together). Investors who own more than 25% of a fund's shares are presumed to control the fund and would be able to determine the outcome of most issues that are submitted to shareholders for vote. The table is organized by fiscal year end. You can find your fund's fiscal year end in Table 1. TABLE 32. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of 30 days after the end of the fund's fiscal period:
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING JANUARY 31 - -------------------------------------------------------------------------------------------------------------------------------- Income Builder Basic Income Charles Schwab & Co., Inc. (Charles Class A 29.57% -- Schwab) a brokerage firm in San Francisco, CA ------------------------------------------------------------------------------------------ RiverSource Investments, LLC Class R4 100.00% -- (RiverSource Investments), Minneapolis, MN - -------------------------------------------------------------------------------------------------------------------------------- Income Builder Enhanced Income Charles Schwab Class A 34.70% 29.83% Class R4 92.71% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 7.29% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 169
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Income Builder Moderate Income Charles Schwab Class A 35.06% 30.11% Class R4 47.05% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 52.95% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Aggressive Charles Schwab Class R4 90.68% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 9.32% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Charles Schwab Class A 6.23% -- Conservative Class R4 59.37% ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 40.63% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Moderate Charles Schwab Class R4 90.34% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 9.66% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Charles Schwab Class R4 84.07% -- Moderate Aggressive ------------------------------------------------------------------------------------------ Fifth Third Bank TTEE, Cincinnati, OH Class R4 14.67% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Charles Schwab Class R4 64.94% -- Moderate Conservative ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 35.06% -- - -------------------------------------------------------------------------------------------------------------------------------- Portfolio Builder Charles Schwab Class R4 91.86% -- Total Equity ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 8.14% -- - -------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index Charles Schwab Class D 100.00% -- Class E 19.56% ------------------------------------------------------------------------------------------ Wachovia Bank NA (Wachovia Bank), Class E 80.41% 65.12% Charlotte, NC - -------------------------------------------------------------------------------------------------------------------------------- Small Company Index Charles Schwab Class A 6.62% -- Class R4 6.67% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 90.66% -- - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING MARCH 31 - -------------------------------------------------------------------------------------------------------------------------------- Equity Value Charles Schwab Class A 8.14% -- ------------------------------------------------------------------------------------------ John C. Mullarkey, Willowbrook, IL Class C 5.00% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R2 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class R3 96.77% -- Class R4 98.43% - -------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Growth Charles Schwab Class A 9.73% -- Class R4 98.42% ------------------------------------------------------------------------------------------ RiverSource Investments Class R2 100.00% 30.92%(a) Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.83% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 21.96% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.92% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.78% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.96% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 170
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Precious Metals and Mining Charles Schwab Class A 14.27% -- Class R4 98.39% ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- ------------------------------------------------------------------------------------------ John E. Bridgman, Minneapolis, MN Class C 6.51% -- ------------------------------------------------------------------------------------------ Richard L. Venable and Susan Angela Class C 7.76% -- Venable, Argyle, TX - -------------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage Charles Schwab Class A 9.73% -- Class R4 97.75% ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R2 100.00% Class R3 100.00% Class R5 100.00% - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING APRIL 30 - -------------------------------------------------------------------------------------------------------------------------------- 120/20 Contrarian Equity Charles Schwab Class A 52.74% -- ------------------------------------------------------------------------------------------ Donald W. and Donna M. Hardeman, Miami, Class B 4.51% -- FL ------------------------------------------------------------------------------------------ Jeffrey and Karen E. Leopardi, Boca Class C 6.00% -- Raton, FL ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R5 100.00% - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2010 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.40% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 98.55% -- ------------------------------------------------------------------------------------------ In-Core, Decatur, GA Class A 12.42% -- ------------------------------------------------------------------------------------------ Jagdish N. and Madhuri J. Sheth, Class A 12.19% -- Atlanta, GA - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2015 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ In-Core, Decatur, GA Class A 7.58% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.31% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.20% -- - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2020 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.37% -- - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2025 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.43% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 171
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2030 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 99.37% -- ------------------------------------------------------------------------------------------ John C. Bukowski, Suffern, NY Class A 17.47% -- ------------------------------------------------------------------------------------------ Stephen T. and Teresa T. Bockian, Class A 5.27% -- Orlando, FL - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2035 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 98.51% -- ------------------------------------------------------------------------------------------ Gary L. and Karen L. Fournier, Class A 11.08% -- Vicksburg, MS ------------------------------------------------------------------------------------------ Richard and Stefanie A. Nelson, Hot Class A 7.93% -- Springs, SD ------------------------------------------------------------------------------------------ William Crossen, Tuckahoe, NY Class A 6.53% -- - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2040 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 97.06% -- - -------------------------------------------------------------------------------------------------------------------------------- Retirement Plus 2045 RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 97.29% -- ------------------------------------------------------------------------------------------ Anthony D. And Rebecca H. Marken, Class A 5.96% -- Lexington, MA - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING MAY 31 - -------------------------------------------------------------------------------------------------------------------------------- High Yield Bond RiverSource Investments Class R2 52.98% -- Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.94% -- Inc. (American Enterprise Investment Services) Minneapolis, MN ------------------------------------------------------------------------------------------ Charles Schwab Class A 9.51% -- Class R4 79.90% ------------------------------------------------------------------------------------------ GWFS Equities Inc. Class R4 20.05% -- ------------------------------------------------------------------------------------------ ING Life Insurance and Annuity (ING), Class R2 47.02% -- Hartford, CT ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 11.04% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 42.91% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 42.52% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 172
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Partners Aggressive Growth RiverSource Investments Class R2 5.96% -- Class R3 100.00% Class R4 12.33% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class R4 82.97% -- ------------------------------------------------------------------------------------------ GWFS Equities (GWFS Equities), Greenwood Class R2 94.04% -- Village, CO ------------------------------------------------------------------------------------------ MLP Fenner & Smith, Inc. (MLP Fenner & Class C 11.01% -- Smith), Jacksonville, FL ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.74% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.22% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.86% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.83% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.77% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners Fundamental Value Charles Schwab Class A 14.29% -- Class R4 98.39% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.73% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.30% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.87% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.86% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.69% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners Select Value RiverSource Investments Class R4 14.56% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.07% -- Class R4 85.44% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.74% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.22% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.84% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.86% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.76% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Equity RiverSource Investments Class I 100.00% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.52% -- Class R4 8.69% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 90.97% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners Small Cap Value Charles Schwab Class A 14.80% -- Class R4 93.84% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.62% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.13% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 32.04% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.78% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.79% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R3 56.42% -- ------------------------------------------------------------------------------------------ Hartford Life Insurance Company Class R2 99.11% -- (Hartford Life), Weatogue, CT Class R3 43.58% ------------------------------------------------------------------------------------------ JPMorgan Chase Bank, Kansas City, MO Class R5 99.96% -- - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Short Duration U.S. Charles Schwab Class A 11.76% -- ------------------------------------------------------------------------------------------ Government GWFS Equities Class R4 17.39% -- ------------------------------------------------------------------------------------------ Portfolio Builder Conservative Fund Class I 29.71% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 15.82% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate aggressive Class I 22.71% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 31.76% -- Fund ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 81.54% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class W 100.00% -- - -------------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage Charles Schwab Class A 18.44% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 38.42% 56.31%(a) ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 12.55% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 49.03% -- ------------------------------------------------------------------------------------------ Wells Fargo Bank, Minneapolis, MN Class R4 99.88% -- - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING JUNE 30 - -------------------------------------------------------------------------------------------------------------------------------- Dividend Opportunity RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 23.09% -- Class R4 100.00% ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 13.95% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 14.25% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 34.77% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 6.91% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 8.28% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 11.66% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 7.46% -- - -------------------------------------------------------------------------------------------------------------------------------- Real Estate RiverSource Investments Class R4 10.36% 53.84%(a) Class W 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.17% -- Class R4 89.64% ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 7.92% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 13.20% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 25.18% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 27.58% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.33% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 11.69% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 174
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- FOR FUNDS WITH FISCAL PERIOD ENDING JULY 31 - -------------------------------------------------------------------------------------------------------------------------------- Cash Management Charles Schwab Class A 5.96% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R5 100.00% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.94% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 33.15% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 27.47% -- ------------------------------------------------------------------------------------------ Portfolio Builder Conservative Fund Class I 12.00% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 11.40% -- Fund ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 5.65% -- ------------------------------------------------------------------------------------------ Russell P. and Janice K. Costanza, Class C 6.42% -- Sodus, MI ------------------------------------------------------------------------------------------ Wachovia Bank Class Y 94.86% -- ------------------------------------------------------------------------------------------ GWFS Equities Class Y 5.14% -- - -------------------------------------------------------------------------------------------------------------------------------- Disciplined Equity RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.99% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 7.06% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 10.50% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 9.53% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 11.43% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 16.15% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 10.23% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 99.44% -- - -------------------------------------------------------------------------------------------------------------------------------- Disciplined Small and RiverSource Investments Class A 45.76% 57.55%(a) Mid Cap Equity Class R4 83.04% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 11.38% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 13.93% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 19.04% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 12.18% -- ------------------------------------------------------------------------------------------ Retirement Plus Fund 2025 Class I 6.06% -- ------------------------------------------------------------------------------------------ Retirement Plus Fund 2030 Class I 5.69% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.79% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.42% -- Class R4 16.96% ------------------------------------------------------------------------------------------ Deanna L. Rose, Punta Gorda, Fl Class C 8.49% -- ------------------------------------------------------------------------------------------ William E. and MaryLou K. Carroll, Punta Class C 11.48% -- Gorda, Fl ------------------------------------------------------------------------------------------ Mary Ruth Neal, Sacramento, CA Class C 5.38% -- ------------------------------------------------------------------------------------------ Don M. and Barbara A. Warner, Fair Oaks, Class C 5.06% -- CA ------------------------------------------------------------------------------------------ Antim G. and Sonal A Shah, Springfield, Class C 5.01% -- VA - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Disciplined Small Cap Value RiverSource Investments Class A 67.37% 86.60% Class C 9.20% Class R2 100.00% Class R3 100.00% Class R4 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Joanne and David J. Thorpe, Lakeville, Class B 8.77% -- MA ------------------------------------------------------------------------------------------ John A. and Dawn M. Gettman, Beaumont, Class B 7.50% -- CA ------------------------------------------------------------------------------------------ Neil Van Slyke, Rochester, NY Class B 5.08% -- ------------------------------------------------------------------------------------------ Sanford A. Greentree, Westlake VLG, CA Class C 28.37% -- ------------------------------------------------------------------------------------------ Keith and Sandra Crowell, Huntersville, Class C 19.41% -- NC ------------------------------------------------------------------------------------------ Bea Vande Merwe, Salt Lake City, UT Class C 12.96% -- ------------------------------------------------------------------------------------------ Richard T. Castiano, Fort Myers, FL Class C 11.18% -- ------------------------------------------------------------------------------------------ Matthew M. Harrison, Richmond, IN Class C 6.92% -- ------------------------------------------------------------------------------------------ Timothy E. Releford, New York, NY Class C 6.06% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 34.91% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 26.71% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 38.34% -- - -------------------------------------------------------------------------------------------------------------------------------- Floating Rate RiverSource Investments Class W 100.00% 37.41%(a) Class R5 100.00% ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 11.75% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 29.59% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 47.73% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 46.63% -- Class R4 95.13% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 6.46% -- - -------------------------------------------------------------------------------------------------------------------------------- Growth RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 5.99% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.62% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.40% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.53% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.78% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 20.08% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 42.87% -- ------------------------------------------------------------------------------------------ Ameriprise Trust Company Class R4 51.99% -- - -------------------------------------------------------------------------------------------------------------------------------- Income Opportunities Charles Schwab Class A 14.09% -- Class R4 93.46% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 14.67% 25.94%(a) ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 41.16% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 35.94% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 8.21% -- Fund ------------------------------------------------------------------------------------------ RiverSource Life Insurance Company Class R4 6.54% -- - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Inflation Protected Securities RiverSource Life Insurance Company Class R4 26.67% 42.88%(a) ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 11.24% -- ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 5.50% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 6.68% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 26.84% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 29.28% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 8.17% -- Fund ------------------------------------------------------------------------------------------ Charles Schwab Class A 35.37% -- Class R4 26.55% ------------------------------------------------------------------------------------------ GWFS Equities Class R4 5.02% -- ------------------------------------------------------------------------------------------ Matrix Capital Bank MSCS (Matrix Class R4 41.76% -- Capital), Denver, Co ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.98% -- - -------------------------------------------------------------------------------------------------------------------------------- Large Cap Equity RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.58% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.41% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.61% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.77% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 20.03% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 99.85% -- - -------------------------------------------------------------------------------------------------------------------------------- Large Cap Value RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 39.10% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.18% -- Class R4 60.90% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.52% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.76% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.69% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.77% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.56% -- ------------------------------------------------------------------------------------------ Patricia J. King Graham, Lakeview, AR Class C 5.11% -- ------------------------------------------------------------------------------------------ Columbia 529 Plan, Boston, MA Class A 5.07% -- - -------------------------------------------------------------------------------------------------------------------------------- Limited Duration Bond RiverSource Investments Class R4 100.00% 60.07%(a) Class W 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 56.50% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Conservative Fund Class I 43.50% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 18.86% -- ------------------------------------------------------------------------------------------ John W. and Cecelia E. Kramar, Hacienda Class C 17.03% -- Heights, CA ------------------------------------------------------------------------------------------ Mary Loretta Jacobsmeyer, Riverside, CA Class C 7.78% -- ------------------------------------------------------------------------------------------ Michael N. Stanley, Palm Springs, CA Class C 8.16% -- ------------------------------------------------------------------------------------------ Rita R. and Lawrence E. Dale, Barstow, Class C 6.50% -- CA ------------------------------------------------------------------------------------------ Bernard C. and Denise M. Asbell, Class C 5.70% -- Riverside, CA - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING AUGUST 31 - -------------------------------------------------------------------------------------------------------------------------------- California Tax-Exempt Linda A. Wochnik, Sierra Madre, CA Class B 5.01% -- - -------------------------------------------------------------------------------------------------------------------------------- Diversified Bond RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ American Enterprise Investment Services Class W 99.97% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 7.72% -- ------------------------------------------------------------------------------------------ Citigroup Global Markets, Owings Mills, Class C 26.98% -- MD ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 5.92% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 40.79% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 21.02% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 12.46% -- Fund ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 96.96% -- Minnesota Tax-Exempt None None N/A -- - -------------------------------------------------------------------------------------------------------------------------------- New York Tax-Exempt Charles Schwab Class A 8.47% -- ------------------------------------------------------------------------------------------ Joan Sabbatini, E. Northport, NY Class B 8.19% -- ------------------------------------------------------------------------------------------ Ena S. Ryan, Brooklyn, NY Class C 8.64% -- ------------------------------------------------------------------------------------------ Ottoviano Asarese, Buffalo, NY Class C 6.00% -- - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING SEPTEMBER 30 - -------------------------------------------------------------------------------------------------------------------------------- Balanced MLP Fenner & Smith Class C 9.91% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 99.96% -- - -------------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Growth RiverSource Investments Class R2 100.00% 84.96%(a) Class R3 100.00% Class R4 34.24% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 16.76% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 20.85% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 27.61% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.59% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.18% -- ------------------------------------------------------------------------------------------ Matrix Capital Class R4 65.76% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 8.85% -- ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 66.35% -- - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Disciplined Large Cap Value RiverSource Investments Class B 36.84% 98.09(a) Class C 100.00% Class I 17.75% Class R2 100.00% Class R3 100.00% Class R4 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 30.20% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 29.87% -- ------------------------------------------------------------------------------------------ Disciplined Asset Allocation Portfolios Class I 6.06% -- Moderate ------------------------------------------------------------------------------------------ Paul W. Eastman, Dublin, OH Class A 25.80% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 23.18% -- ------------------------------------------------------------------------------------------ Ronald E. and Patricia S. Leithe, Cary, Class A 12.12% -- NC ------------------------------------------------------------------------------------------ Josph E. and Sonya M. Landholm, Sedona, Class A 10.08% -- AZ ------------------------------------------------------------------------------------------ Ralph and Carol Sievert, Appleton, WI Class A 7.62% -- ------------------------------------------------------------------------------------------ Tseng-Yen Yen, Fullerton, CA Class B 42.60% -- ------------------------------------------------------------------------------------------ Rita S. Mall, Wyncote, PA Class B 20.56% -- - -------------------------------------------------------------------------------------------------------------------------------- Diversified Equity Income Charles Schwab Class A 25.97% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.19% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 23.08% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.33% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.07% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.37% -- ------------------------------------------------------------------------------------------ Hartford Life Class R2 74.50% -- ------------------------------------------------------------------------------------------ Hartford Securities Distribution Company Class R2 6.00% -- Inc., Hartford, CT ------------------------------------------------------------------------------------------ GWFS Equities Class R3 84.53% -- Class R4 11.39% ------------------------------------------------------------------------------------------ Wachovia Bank Class R2 13.87% -- Class R3 8.11% Class R4 35.07% Class R5 22.97% ------------------------------------------------------------------------------------------ Wells Fargo Bank Class R4 27.91% -- ------------------------------------------------------------------------------------------ American Century Investments, Kansas Class R4 6.24% -- City, MO ------------------------------------------------------------------------------------------ ING Class R4 13.19% -- Class R5 39.87% ------------------------------------------------------------------------------------------ Ameriprise Trust Company Class R5 11.76% -- ------------------------------------------------------------------------------------------ Taynik & Co., Boston, MA Class R5 9.07% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class W 100.00% -- - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Mid Cap Value Charles Schwab Class A 34.32% -- Class R5 8.42% ------------------------------------------------------------------------------------------ Prudential Investment Management Class A 12.85% -- Services LLC, Newark, NJ ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 18.24% -- ------------------------------------------------------------------------------------------ Citigroup Global Markets, Owings Mills, Class C 5.56% -- MD ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.10% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 23.36% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.01% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.14% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.35% -- ------------------------------------------------------------------------------------------ Hartford Life Class R2 81.55% -- Class R3 12.83% ------------------------------------------------------------------------------------------ JP Morgan Chase Bank, New York NY Class R3 15.80% -- ------------------------------------------------------------------------------------------ GWFS Equities Class R3 34.97% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R3 9.90% -- Class R4 18.81% ------------------------------------------------------------------------------------------ ING Class R3 8.27% -- Class R4 20.24% Class R5 17.33% ------------------------------------------------------------------------------------------ John Hancock Life Insurance Company, Class R4 25.79% -- Buffalo, NY ------------------------------------------------------------------------------------------ NFS LLC FEBO, Chicago, IL Class R5 28.65% -- ------------------------------------------------------------------------------------------ PIMS/Prudential Retirement, Greenville, Class R5 16.80% -- SC ------------------------------------------------------------------------------------------ Standard Insurance Company, Portland, OR Class R5 10.61% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class W 100.00% -- - -------------------------------------------------------------------------------------------------------------------------------- Strategic Allocation Charles Schwab Class A 11.51% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R2 100.00% Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 59.42% -- ------------------------------------------------------------------------------------------ Charles Schwab Class R4 39.07% -- - -------------------------------------------------------------------------------------------------------------------------------- Strategic Income Allocation Charles Schwab Class A 26.98% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class A 14.28% -- Class R2 100.00% Class R3 100.00% Class R4 100.00% Class R5 100.00% - --------------------------------------------------------------------------------------------------------------------------------
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FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING OCTOBER 31 - -------------------------------------------------------------------------------------------------------------------------------- Absolute Return Currency Income RiverSource Investments Class R4 46.97% 28.54%(a) Class R5 100.00% ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 8.72% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 9.93% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 21.85% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 21.69% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 8.43% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 8.61% -- Fund ------------------------------------------------------------------------------------------ American Enterprise Class W 99.96% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 70.04% -- Class R4 53.03% ------------------------------------------------------------------------------------------ MLP Fenner & Smith Class C 5.79% -- - -------------------------------------------------------------------------------------------------------------------------------- Disciplined International Equity RiverSource Investments Class R2 100.00% -- Class R3 100.00% Class R4 8.27% Class R5 100.00% ------------------------------------------------------------------------------------------ Income Builder Enhanced Income Class I 9.01% -- ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 10.16% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 9.80% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 11.96% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 16.42% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 10.56% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.96% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 12.93% -- Class R4 91.73% ------------------------------------------------------------------------------------------ Daniel and Linda Miklovic, St. Louis, MO Class C 5.17% -- - -------------------------------------------------------------------------------------------------------------------------------- Emerging Markets Bond Income Builder Enhanced Income Class I 34.35% 35.11%(a) ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 35.29% -- ------------------------------------------------------------------------------------------ Income Builder Basic Income Class I 9.81% -- ------------------------------------------------------------------------------------------ RiverSource Investments Class R4 46.85% -- ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.98% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.44% -- Class R4 27.12% ------------------------------------------------------------------------------------------ Matrix Capital Class R4 26.03% -- ------------------------------------------------------------------------------------------ Muhammad A. Ali, Twn and Cntry, MO Class C 6.62% -- ------------------------------------------------------------------------------------------ Brenda L. Ruiz, Lake Mary, FL Class C 5.77% -- - -------------------------------------------------------------------------------------------------------------------------------- Global Bond Income Builder Enhanced Income Class I 5.55% 32.63%(a) ------------------------------------------------------------------------------------------ Income Builder Moderate Income Class I 5.64% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 34.08% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 30.07% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 9.23% -- Fund ------------------------------------------------------------------------------------------ American Enterprise Investment Services, Class W 99.94% -- Inc. ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.23% -- Class R4 100.00% - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 181
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Global Technology RiverSource Investments Class I 100.00% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 12.08% -- Class R4 99.65% - -------------------------------------------------------------------------------------------------------------------------------- Partners International Select Growth Charles Schwab Class A 15.31% 41.23% Class R4 82.82% ------------------------------------------------------------------------------------------ New York Life Trust Company Class R4 13.64% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.58% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.88% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.47% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.57% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.79% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners International Select Value Charles Schwab Class A 17.27% -- Class R4 99.14% ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.71% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.73% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.10% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.64% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 20.12% -- - -------------------------------------------------------------------------------------------------------------------------------- Partners International Small Cap Portfolio Builder Aggressive Fund Class I 19.06% 30.16%(a) ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 23.14% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.63% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.81% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 18.64% -- ------------------------------------------------------------------------------------------ Charles Schwab Class A 13.66% ------------------------------------------------------------------------------------------ Massachusetts Mutual Life Insurance Co. Class R4 96.79% -- Springfield, MA - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Emerging Markets Charles Schwab Class A 13.95% -- Class R4 87.24% ------------------------------------------------------------------------------------------ RiverSource Investments Class I 100.00% -- Class R5 100.00% ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 12.76% -- - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle European Equity RiverSource Investments Class I 100.00% -- Class R4 17.97% ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.98% -- Class R4 82.03% ------------------------------------------------------------------------------------------ Marilyn O. Matthews, Pasadena, CA Class C 5.31% -- - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity RiverSource Investments Class I 100.00% -- Class R2 98.46% Class R3 100.00% Class R5 100.00% Class W 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 12.95% -- ------------------------------------------------------------------------------------------ GWFS Equities Inc. Class R4 5.35% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 90.82% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 182
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Equity Income RiverSource Investments Class C 6.40% 29.58%(a) Class I 100.00% Class R2 100.00% Class R3 100.00% Class R4 83.38% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 20.16% -- Class R4 16.62% ------------------------------------------------------------------------------------------ Janet K. Zimmer, Warsaw, IN Class C 24.03% -- ------------------------------------------------------------------------------------------ Michael A. Streiber, Mount Airy, MD Class C 11.24% -- ------------------------------------------------------------------------------------------ Alfred T. Hockenmaier, North Hills, CA Class C 9.72% -- ------------------------------------------------------------------------------------------ Sandra H. Norene, Rio Oso, CA Class C 7.99% -- ------------------------------------------------------------------------------------------ Steven A. and Melissa D. Stiles, Class C 7.05% -- Roanoke, VA ------------------------------------------------------------------------------------------ Louis M. and Shirli A. Nagy, Ventura, CA Class C 5.93% -- - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle Global Extended Alpha RiverSource Investments Class C 7.38% 57.92%(a) Class I 100.00% Class R2 100.00% Class R3 100.00% Class R4 30.07% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 66.08% -- Class R4 69.93% ------------------------------------------------------------------------------------------ Michael and Marissa Jenkinson, Burke, VA Class C 17.59% -- ------------------------------------------------------------------------------------------ Michael Selig, Arlington, VA Class C 11.38% -- ------------------------------------------------------------------------------------------ Poonam and Pradeep Singh, McLean, VA Class C 10.72% -- ------------------------------------------------------------------------------------------ Michael and Kristin L. Elder, Class C 9.76% -- Alexandria, VA ------------------------------------------------------------------------------------------ Steven R. and Wendy L. Person, Atlanta, Class C 9.53% -- GA ------------------------------------------------------------------------------------------ Jennifer S. Carter, Washington, D.C. Class C 8.76% -- - -------------------------------------------------------------------------------------------------------------------------------- Threadneedle International RiverSource Investments Class R2 100.00% -- Opportunity Class R3 100.00% Class R5 100.00% ------------------------------------------------------------------------------------------ Charles Schwab Class A 10.09% -- Class R4 84.55% ------------------------------------------------------------------------------------------ Matrix Capital Class R4 14.22% -- ------------------------------------------------------------------------------------------ Portfolio Builder Aggressive Fund Class I 18.90% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 22.66% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 31.25% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 5.81% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.70% -- - --------------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information - April 1, 2009 Page 183
FUND SHARES --------------------- SHARE PERCENT OF FUND FUND SHAREHOLDER NAME, CITY AND STATE CLASS PERCENTAGE (if greater than 25%) - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING NOVEMBER 30 - -------------------------------------------------------------------------------------------------------------------------------- Intermediate Tax Exempt Charles Schwab Class A 7.21% -- - -------------------------------------------------------------------------------------------------------------------------------- Mid Cap Growth Portfolio Builder Aggressive Fund Class I 18.26% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Fund Class I 23.37% -- ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Aggressive Class I 30.84% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Moderate Conservative Class I 6.00% -- Fund ------------------------------------------------------------------------------------------ Portfolio Builder Total Equity Fund Class I 19.56% -- ------------------------------------------------------------------------------------------ Wachovia Bank Class R4 78.73% -- ------------------------------------------------------------------------------------------ GWFS Equities Class R4 12.28% -- - -------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Bond None N/A N/A N/A - -------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt High Income None N/A N/A N/A - -------------------------------------------------------------------------------------------------------------------------------- FUNDS WITH FISCAL PERIOD ENDING DECEMBER 31 - -------------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market Lawrence Garner, Woodstock, GA and Class A 6.67% -- Ronald J. Garner, Wyckoff, NJ ------------------------------------------------------------------------------------------ Charles Schwab Class A 6.25% -- - --------------------------------------------------------------------------------------------------------------------------------
(a) Combination of all share classes of RiverSource Investments initial capital and affiliated funds-of-funds' investments in Class I shares. A fund may serve as an underlying investment of funds-of-funds that principally invest in shares of other funds in the RiverSource Family of Funds (the underlying funds). The underlying funds and the funds-of-funds share the same officers, Board members, and investment manager, RiverSource Investments. The funds-of-funds do not invest in an underlying fund for the purpose of exercising management or control; however, from time to time, investments by the funds-of- funds in a fund may represent a significant portion of a fund. Because the funds-of-funds may own a substantial portion of the shares of a fund, procedures have been put into place to assure that public shareholders will determine the outcome of all actions taken at underlying fund shareholder meetings. In proxy voting, the funds-of-funds will vote on each proposal in the same proportion that other shareholders vote on the proposal. In addition, RiverSource Investments or an affiliate may own shares of a fund as a result of an initial capital investment at the inception of the fund or class. To the extent RiverSource Investments, as manager of the funds-of-funds, may be deemed a beneficial owner of the shares of an underlying fund held by the funds- of-funds, and such shares, together with any initial capital investment by RiverSource Investments or an affiliate, represent more than 25% of a fund, RiverSource Investments and its affiliated companies may be deemed to control the fund. 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 defendant's motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on Aug. 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions Statement of Additional Information - April 1, 2009 Page 184 of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Family of Fund's Board of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J.&W. Seligman & Co., Inc. ("Seligman"). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the "Seligman Funds"); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York ("NYAG"). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman Advisors, Inc., (which is now known as RiverSource Fund Distributor Inc.,) relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. 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. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements for the fiscal years ended July 31, 2007 or later contained in a fund's Annual Report were audited by the independent registered public accounting firm, Ernst & Young LLP, 220 South 6th Street, Suite 1400, Minneapolis, Statement of Additional Information - April 1, 2009 Page 185 MN 55402. The information for periods ended on or before June 30, 2007 was audited by other auditors. The independent registered public accounting firm also provides other accounting and tax-related services as requested by the funds. Statement of Additional Information - April 1, 2009 Page 186 APPENDIX A DESCRIPTION OF RATINGS STANDARD & POOR'S LONG-TERM DEBT RATINGS. A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: - Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. - Nature of and provisions of the obligation. - Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. INVESTMENT GRADE Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. SPECULATIVE GRADE Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Statement of Additional Information - April 1, 2009 A-1 Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. MOODY'S LONG-TERM DEBT RATINGS Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A - Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds that are rated Ba are judged to have speculative elements - their future cannot be considered as well- assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. FITCH'S LONG-TERM DEBT RATINGS Fitch's bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. INVESTMENT GRADE AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. Statement of Additional Information - April 1, 2009 A-2 AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. SPECULATIVE GRADE BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. SHORT-TERM RATINGS STANDARD & POOR'S COMMERCIAL PAPER RATINGS A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. STANDARD & POOR'S MUNI BOND AND NOTE RATINGS An S&P municipal bond or note rating reflects the liquidity factors and market- access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Statement of Additional Information - April 1, 2009 A-3 Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. MOODY'S SHORT-TERM RATINGS Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. MOODY'S SHORT-TERM MUNI BONDS AND NOTES Short-term municipal bonds and notes are rated by Moody's. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. FITCH'S SHORT-TERM RATINGS Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The Statement of Additional Information - April 1, 2009 A-4 short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. Statement of Additional Information - April 1, 2009 A-5 APPENDIX B STATE TAX-EXEMPT FUNDS STATE RISK FACTORS California Tax-Exempt Fund, Minnesota Tax-Exempt Fund and New York Tax-Exempt Fund invest primarily in the municipal securities issued by a single state and political sub-divisions that state. Each Fund will be particularly affected by political and economic conditions and developments in the state in which it invests. This vulnerability to factors affecting the state's tax- exempt investments will be significantly greater than that of more geographically diversified funds, which may result in greater losses and volatility. Because of the relatively small number of issuers of tax-exempt securities, the Fund may invest a higher percentage of assets in a single issuer and, therefore, be more exposed to the risk of loss by investing in a few issuers than a fund that invests more broadly. At times, the Fund and other accounts managed by the investment manager may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments. In addition, a Fund may concentrate in a segment of the tax-exempt debt market, such as revenue bonds for health care facilities, housing or airports. These investments may cause the value of a fund's shares to change more than the values of funds' shares that invest in more diversified investments. The yields on the securities in which the Fund invests generally are dependent on a variety of factors, including the financial condition of the issuer or other obligor, the revenue source from which the debt service is payable, general economic and monetary conditions, conditions in the relevant market, the size of a particular issue, the maturity of the obligation, and the rating of the issue. In addition to such factors, geographically concentrated securities will experience particular sensitivity to local conditions, including political and economic changes, adverse conditions to an industry significant to the area, and other developments within a particular locality. Because many tax-exempt bonds may be revenue or general obligations of local governments or authorities, ratings on tax-exempt bonds may be different from the ratings given to the general obligation bonds of a particular state. Certain events may adversely affect all investments within a particular market segment of the market. Examples include litigation, legislation or court decisions, concerns about pending or contemplated litigation, legislation or court decisions, or lower demand for the services or products provided by a particular market segment. Investing mostly in state-specific tax-exempt investments makes the Fund more vulnerable to that state's economy and to factors affecting tax-exempt issuers in that state than would be true for more geographically diversified funds. These risks include, among others: - the inability or perceived inability of a government authority to collect sufficient tax or other revenues to meet its payment obligations; - natural disasters and ecological or environmental concerns; - the introduction of constitutional or statutory limits on a tax-exempt issuer's ability to raise revenues or increase taxes; - the inability of an issuer to pay interest on or repay principal or securities in which the funds invest during recessionary periods; and - economic or demographic factors that may cause a decrease in tax or other revenues for a government authority or for private operators of publicly financed facilities. More information about state specific risks may be available from official state resources. Statement of Additional Information - April 1, 2009 B-1 APPENDIX C S&P 500 INDEX FUND ADDITIONAL INFORMATION ABOUT THE S&P 500 INDEX The fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Fund is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which are determined, composed and calculated by S&P without regard to the Fund. S&P has no obligation to take the needs of the Fund or its shareholders into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Fund or the timing of the issuance or sale of the Fund or in the determination or calculation of the equation by which the Fund's shares are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of Fund shares. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN (THE S&P INDEX) AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, ITS SHAREHOLDERS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. Statement of Additional Information - April 1, 2009 C-1 APPENDIX D SELIGMAN FUNDS SELIGMAN CAPITAL FUND, INC. SELIGMAN CASH MANAGEMENT FUND, INC. SELIGMAN COMMON STOCK FUND, INC. SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. SELIGMAN CORE FIXED INCOME FUND, INC. SELIGMAN FRONTIER FUND, INC. SELIGMAN GLOBAL FUND SERIES, INC. Seligman Emerging Markets Fund Seligman Global Smaller Companies Fund Seligman Global Growth Fund Seligman Global Technology Fund Seligman International Growth Fund SELIGMAN GROWTH FUND, INC. SELIGMAN HIGH INCOME FUND SERIES Seligman U.S. Government Securities Fund Seligman High-Yield Fund SELIGMAN INCOME AND GROWTH FUND, INC. SELIGMAN LASALLE REAL ESTATE FUND SERIES, INC. Seligman LaSalle Global Real Estate Fund Seligman LaSalle Monthly Dividend Real Estate Fund SELIGMAN MUNICIPAL FUND SERIES, INC. Seligman National Municipal Class Seligman Colorado Municipal Class Seligman Georgia Municipal Class Seligman Louisiana Municipal Class Seligman Maryland Municipal Class Seligman Massachusetts Municipal Class Seligman Michigan Municipal Class Seligman Minnesota Municipal Class Seligman Missouri Municipal Class Seligman New York Municipal Class Seligman Ohio Municipal Class Seligman Oregon Municipal Class Seligman South Carolina Municipal Class SELIGMAN MUNICIPAL SERIES TRUST Seligman California Municipal High Yield Series Seligman California Municipal Quality Series Seligman Florida Municipal Series Seligman North Carolina Municipal Series SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES SELIGMAN PORTFOLIOS, INC. Seligman Capital Portfolio Seligman Cash Management Portfolio Seligman Common Stock Portfolio Seligman Communications and Information Portfolio Seligman Global Technology Portfolio Seligman International Growth Portfolio Seligman Investment Grade Fixed Income Portfolio Seligman Large-Cap Value Portfolio Seligman Smaller-Cap Value Portfolio SELIGMAN TARGETHORIZON ETF PORTFOLIOS, INC. Seligman TargETFund 2045 Seligman TargETFund 2035 Seligman TargETFund 2025 Seligman TargETFund 2015 Seligman TargETFund Core SELIGMAN ASSET ALLOCATION SERIES, INC. Seligman Asset Allocation Aggressive Growth Fund Seligman Asset Allocation Balanced Fund Seligman Asset Allocation Growth Fund Seligman Asset Allocation Moderate Growth Fund SELIGMAN VALUE FUND SERIES, INC. Seligman Large-Cap Value Fund Seligman Smaller-Cap Value Fund SELIGMAN LASALLE INTERNATIONAL REAL ESTATE FUND, INC. SELIGMAN SELECT MUNICIPAL FUND, INC. TRI-CONTINENTAL CORPORATION
S-6500 AW (4/09) Statement of Additional Information - April 1, 2009 D-1 EX-99.17.N 6 c49443a1exv99w17wn.txt EX-99.17.N SUPPLEMENT DATED APRIL 3, 2009 TO THE PROSPECTUSES DATED MAY 1, 2008 OF SELIGMAN COMMON STOCK FUND, INC. (THE "SELIGMAN FUND") At a Special Meeting of Shareholders scheduled to be held on June 2, 2009, shareholders who owned shares of the Seligman Fund on April 3, 2009 will vote on the merger of the Seligman Fund into RiverSource Disciplined Equity Fund (the "RiverSource Fund"), a fund that seeks to provide shareholders with long-term capital growth. For more information about the RiverSource Fund, please call 1-888-791-3380 for a prospectus. EX-99.17.O 7 c49443a1exv99w17wo.txt EX-99.17.O (RIVERSOURCE(R) INVESTMENTS LOGO) PROSPECTUS SUPPLEMENT -- APRIL 3, 2009 RIVERSOURCE LARGE CAP EQUITY FUND (PROSPECTUS DATED SEPT. 29, 2008) S-6244-99 J At a Special Meeting of Shareholders scheduled to be held on June 2, 2009, shareholders who owned shares of RiverSource Large Cap Equity Fund on April 3, 2009 will vote on the merger of RiverSource Large Cap Equity Fund into RiverSource Disciplined Equity Fund, a fund that seeks to provide shareholders with long-term capital growth. For more information about RiverSource Disciplined Equity Fund, please call 1-888-791-3380 for a prospectus. S-6244-3 A (4/09) EX-99.17(D) 10 dex9917dcsfpro08.txt SUPPLEMENT DATED MARCH 16, 2009 TO THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION OF EACH OF THE FOLLOWING FUNDS: Prospectuses, each dated February 2, 2009, for Seligman Core Fixed Income Fund, Inc., Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series and Seligman TargetHorizon ETF Portfolios, Inc. Prospectuses, each dated May 1, 2008, for Seligman Asset Allocation Series, Inc., Seligman Cash Management Fund, Inc., Seligman Capital Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman Portfolios, Inc., Seligman Value Fund Series, Inc. and Tri-Continental Corporation (each, a "Fund", and collectively, the "Funds") On March 13, 2009, without admitting or denying any violations of law or wrongdoing, J. & W. Seligman & Co. Incorporated (Seligman), Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the "Seligman Parties") entered into a stipulation of settlement with the Office of the Attorney General of the State of New York ("NYAG") and settled the claims made by the NYAG in September 2006 relating to allegations of frequent trading in certain Seligman Funds. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds as follows: $150,000 to Seligman Global Growth Fund, $550,000 to Seligman Global Smaller Companies Fund, $7.7 million to Seligman Communications and Information Fund and $2.9 million to Seligman Global Technology Fund. These settlement payments are reflected in the net asset values of these four Seligman Funds. This settlement resolves all outstanding matters between the Seligman Parties and the NYAG. SUPPLEMENT DATED FEBRUARY 4, 2009 TO THE PROSPECTUSES OF EACH OF THE FOLLOWING FUNDS: Prospectuses, each dated March 3, 2008, for Seligman Frontier Fund, Inc. and Seligman Global Fund Series, Inc. Prospectuses, each dated May 1, 2008, for Seligman Asset Allocation Series, Inc., Seligman Cash Management Fund, Inc., Seligman Capital Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High Yield Fund, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman U.S. Government Securities Fund, and Seligman Value Fund Series, Inc. (collectively, the "Funds"). The following change to the Funds' Prospectuses (not applicable to a Fund's Class I Prospectus) is effective February 4, 2009. The section entitled "Reinstatement Privilege" under "Shareholder Information - -- Important Policies That May Affect Your Account" in each Fund's Prospectus is hereby superseded and replaced with the following information (the section is renamed "Repurchases"): Repurchases. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of the Fund or any other Seligman mutual fund. The following applies to shareholders who sold Fund shares on or after February 4, 2009 and wish to repurchase shares (the "New Repurchase Policy"): If your original purchase was in Class A or Class B shares, you may use all or part of the sale proceeds to purchase new Class A shares in any Seligman fund account linked together for Rights of Accumulation purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. Repurchases of Class B shares will also be made in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C shares, you will be allowed to reinvest in the same Class C account and fund you originally purchased. In a Class C share repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. The following applies to shareholders who sold Fund shares on or before February 3, 2009 and wish to repurchase shares: You have the option of taking advantage of the New Repurchase Policy described above, or you may use all or part of the sale proceeds to purchase shares of the Fund or any other Seligman mutual fund without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC (the "Former Repurchase Policy"). If you sold Fund shares on or after February 4, 2009 and wish to take advantage of the New Repurchase Policy, you must notify your financial advisor or SDC within 90 days of the date your sale request was processed. If you sold Fund shares on or before February 3, 2009 and wish to take advantage of either the New Repurchase Policy or the Former Repurchase Policy, you must notify your financial advisor or SDC within 120 days of the date your sale request was processed (e.g., if you sold Fund shares on February 3, 2009, you must notify your financial advisor or SDC by June 3, 2009). Contact your financial advisor or SDC for information on required documentation. The repurchase privileges may be modified or discontinued at any time and use of this option may have tax consequences. SUPPLEMENT DATED JANUARY 28, 2009 TO THE PROSPECTUS (OTHER THAN THE CLASS I PROSPECTUS) OF EACH OF THE FOLLOWING FUNDS: Prospectus, each dated March 3, 2008, for Seligman Frontier Fund, Inc. and Seligman Global Fund Series, Inc. Prospectus, each dated May 1, 2008, for Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High-Yield Fund, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman U.S. Government Securities Fund, Seligman Value Fund Series, Inc., and Tri-Continental Corporation (each, together with any series thereof, a "Fund" and all Funds collectively, the "Funds") The Board of Directors/Trustees of each Fund has approved RiverSource Service Corporation ("RSC") as the Fund's new transfer and shareholder service agent, and the termination of each Fund's relationship with Seligman Data Corp. ("SDC"), the current transfer and shareholder service agent for the Funds, effective on or about May 9, 2009. RSC is an affiliate of the Funds' investment manager, RiverSource Investments, LLC. The fees and expenses expected to be charged to each Fund by RSC are generally lower than the fees and expenses charged to each Fund by SDC. Nevertheless, as a result of the termination of the relationship with SDC, each Fund will incur non-recurring charges that would in the aggregate approximate 0.16% of that Fund's net assets as of January 23, 2009 (the "Non-Recurring Charges"). These Non-Recurring Charges will be incurred over the next several months in accordance with generally accepted accounting principles. RSC's relatively lower fees and expenses are expected, in the long run, to offset the Non-Recurring Charges. Fund shareholders would bear their proportionate share of a Fund's expenses, including the Non-Recurring Charges, up to any contractual limit agreed upon by RiverSource Investments (if applicable) on a Fund's "other expenses." Supplement dated January 13, 2009 to the prospectuses dated May 1, 2008 of Seligman Common Stock Fund, Inc. (the "Seligman Fund") On January 8, 2009, the Seligman Fund's Board of Directors approved in principle the merger of the Seligman Fund into RiverSource Disciplined Equity Fund (the "RiverSource Fund"), a fund that seeks to provide shareholders with long-term capital growth. More information about the RiverSource Fund and the proposed merger will be included in proxy materials. Completion of the merger is subject to approval by shareholders of the Seligman Fund. It is currently anticipated that proxy materials regarding the merger will be distributed to shareholders during the first or second quarter of 2009, and that a meeting of shareholders to consider the merger will be scheduled for the second quarter of 2009. Supplement, dated November 11, 2008 to the Prospectuses, dated May 1, 2008, for Seligman Common Stock Fund, Inc. (the "Fund") Effective November 11, 2008, this prospectus supplement dated November 11, 2008 supersedes and replaces the prospectus supplement dated November 7, 2008. On November 7, 2008, RiverSource Investments, LLC ("RiverSource Investments"), a wholly owned subsidiary of Ameriprise Financial, Inc., announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("Seligman"). With the Acquisition completed and shareholders of the Fund having previously approved (at a Special Meeting held on November 3, 2008) a new investment management services agreement between the Fund and RiverSource Investments, RiverSource Investments is the new investment manager of the Fund effective November 7, 2008. In connection with the Acquisition, the Fund's portfolio managers have been changed. This change also results in modification to the investment process used for the Fund. The foregoing changes are reflected in the revised Principal Investment Strategies, Principal Risks and Management sections of the prospectus as set forth below. Effective November 7, 2008, the following changes are hereby made to the Fund's prospectuses: The information under the caption "Principal Investment Strategies" is hereby superseded and replaced with the following information: The Fund uses the following principal investment strategies to seek its investment objective: Generally, the Fund invests at least 80% of its net assets in common stocks that are broadly diversified among a number of industries. The Fund usually invests in the common stock of larger US companies (e.g., companies with market capitalizations over $3 billion at the time of initial investment); however, it may invest in companies of any size. The Fund may also invest in fixed-income securities and cash equivalents. The Fund seeks to produce a level of current income consistent with its primary benchmark, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). This allows for variations over time in the level of current income produced by the Fund. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) will choose equity investments by employing proprietary, disciplined quantitative methods. The investment manager's disciplined quantitative approach is designed to identify companies with: . Attractive valuations, based on factors such as price-to-earnings ratios; . Sound balance sheets; or . Improving outlooks, based on an analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: . The security is overvalued relative to other potential investments. . The company does not meet the investment manager's performance expectations. The universe of stocks from which the investment manager selects the Fund's investments primarily will be those included in the Fund's benchmark, the S&P 500 Index. In selecting stocks for the Fund to purchase or to sell, the investment manager employs a rigorous process for evaluating the relationship between the risk associated with each security and its potential for positive returns. This process includes factors such as: . Limits on positions relative to weightings in the benchmark index. . Limits on sector and industry allocations relative to the benchmark index. . Limits on size of holdings relative to market liquidity. The Fund may purchase American Depositary Receipts ("ADRs"), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may invest up to 15% of its net assets in illiquid securities (i.e., securities that cannot be readily sold) and may invest up to 10% of its total assets directly in foreign securities. The limit on foreign securities does not include ADRs, or commercial paper and certificates of deposit issued by foreign banks. The Fund may also invest up to 10% of its assets in exchange-traded funds ("ETFs"). ETFs are traded, like individual stocks, on an exchange, but they represent baskets of securities that seek to track the performance of certain indices. The indices include not only broad-market indexes but more specific indices as well, including those relating to particular sectors, countries and regions. The Fund may invest in ETFs for short-term cash management purposes or as part of its overall investment strategy. The Fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The Fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the Fund may invest in futures contracts without registering with the CFTC. The Fund may, from time to time, take temporary defensive positions that are inconsistent with its principal strategies in seeking to minimize extreme volatility caused by adverse market, economic, political or other conditions. This could prevent the Fund from achieving its investment objectives. The Fund's investment objectives may be changed only with shareholder approval. The principal investment strategies may be changed without shareholder approval. Any changes to these strategies, however, must be approved by the Fund's Board of Directors. Shareholders will be provided with at least 60 days prior written notice of any change to the "80%" investment policy described in the second paragraph under "Principal Investment Strategies." There is no guarantee that the Fund will achieve its objectives. The information under the caption "Principal Risks" is hereby revised to include the following: Quantitative Model Risk. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. The information under the caption "Management" (including the sub-caption "Portfolio Management" and the information thereunder) is hereby superseded and replaced with the following information: On November 7, 2008, RiverSource Investments, LLC ("RiverSource Investments") announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("Seligman"), 100 Park Avenue, New York, New York 10017. With the Acquisition completed and shareholders having previously approved (at a Special Meeting held on November 3, 2008) a new investment management services agreement between the Fund and RiverSource Investments (the "Agreement"), RiverSource Investments is the new investment manager of the Fund effective November 7, 2008. RiverSource Investments, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is also the investment manager of the other funds in the Seligman Group of Funds, and is a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the Seligman Group of Funds, RiverSource Investments manages investments for the RiverSource funds, itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. Effective November 7, 2008, the Fund will pay RiverSource Investments a fee for managing its assets (Seligman will no longer receive a management fee effective November 7, 2008). The Fund will pay RiverSource under the same fee structure that it paid Seligman, which is as follows. The fee rate declines as the Fund's net assets increase. It is equal to an annual rate of 0.65% of the Fund's average daily net assets on the first $1 billion of net assets, 0.60% of the Fund's average daily net assets on the next $1 billion of net assets and 0.55% of the Fund's average daily net assets in excess of $2 billion. For the year ended December 31, 2007, the management fee paid by the Fund to Seligman (the Fund's manager prior to November 7, 2008) was equal to an annual rate of 0.65% of the Fund's average daily net assets. On July 29, 2008, the Fund's Board met to discuss, prior to shareholder approval, the Agreement between the Fund and RiverSource Investments. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated August 27, 2008, and will be made available in the Fund's upcoming annual shareholder report. Portfolio Manager(s). Effective November 7, 2008, the portfolio managers responsible for the Fund's day-to-day management are: Dimitris J. Bertsimas, Ph.D., Senior Portfolio Manager . Joined RiverSource Investments as a portfolio manager and leader of the Disciplined Equity and Asset Allocation Team in 2002. . Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. . Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. . MS and Ph.D., MIT. Gina K. Mourtzinou, Ph.D., Portfolio Manager . Joined RiverSource Investments as a portfolio manager and member of the Disciplined Equity and Asset Allocation Team in 2002. . Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where she served as Vice President of Research and Analytics, 1999 to 2002. . Began investment career as a consultant to asset managers in 1996; became portfolio manager in 2002. . Ph.D., MIT. The Fund's Statement of Additional Information provides additional information about the compensation of the individuals named above (the "Portfolio Managers"), other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of the securities of the Fund. The following information is added to the section under the caption "Shareholder Information" under the sub-caption "How to Exchange Shares Among the Seligman Mutual Funds": The Seligman Mutual Funds are part of the RiverSource complex of funds which, in addition to RiverSource funds, includes RiverSource Partners funds and Threadneedle funds. Each of the funds in the RiverSource complex shares the same Board of Directors/Trustees. However, the Seligman Mutual Funds do not share the same policies and procedures, as set forth in the Shareholder Information section of this prospectus, as the other funds in the RiverSource complex and may not be exchanged for shares of RiverSource funds, RiverSource Partners funds or Threadneedle funds. PROSPECTUS May 1, 2008 Seligman Common Stock Fund, Inc. Seeking Total Return Through a Combination of Capital Appreciation and Current Income The Securities and Exchange Commission has neither approved nor disapproved this Fund, and it has not determined this Prospectus to be accurate or adequate. Any representation to the contrary is a criminal offense. An investment in this Fund or any other fund cannot provide a complete investment program. The suitability of an investment in the Fund should be considered based on the investment objectives, strategies and risks described in this Prospectus, considered in light of all of the other investments in your portfolio, as well as your risk tolerance, financial goals and time horizons. We recommend that you consult an authorized dealer or your financial advisor to determine if this Fund is suitable for you. EQCS1 5/2008 [LOGO] SELIGMAN INVESTMENTS - -------------------------------- EXPERIENCE . INSIGHT . SOLUTIONS Table of Contents THE FUND Investment Objective........................................ 1 Principal Investment Strategies............................. 1 Principal Risks............................................. 2 Portfolio Holdings.......................................... 3 Past Performance............................................ 3 Fees and Expenses........................................... 5 Management.................................................. 6 SHAREHOLDER INFORMATION Deciding Which Class of Shares to Buy....................... 9 Pricing of Fund Shares...................................... 14 Opening Your Account........................................ 15 How to Buy Additional Shares................................ 16 How to Exchange Shares Among the Seligman Mutual Funds...... 17 How to Sell Shares.......................................... 17 Important Policies That May Affect Your Account............. 18 Frequent Trading of Fund Shares............................. 19 Dividends and Capital Gain Distributions.................... 21 Taxes....................................................... 21 The Seligman Mutual Funds................................... 23 FINANCIAL HIGHLIGHTS.............................................. 26 HOW TO CONTACT US................................................. 30
FOR MORE INFORMATION. back cover
The Fund Investment Objective The Fund's investment objective is total return through a combination of capital appreciation and current income. Principal Investment Strategies The Fund uses the following principal investment strategies to seek its investment objective: Generally, the Fund invests at least 80% of its net assets in common stocks that are broadly diversified among a number of industries. The Fund usually invests in the common stock of larger US companies (e.g., companies with market capitalizations over $3 billion at the time of initial investment); however, it may invest in companies of any size. The Fund may also invest in fixed-income securities and cash equivalents. The Fund seeks to produce a level of current income consistent with its primary benchmark, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). This allows for variations over time in the level of current income produced by the Fund. Securities are chosen using an investment strategy, consisting of: analytical security evaluation, including fundamental research; and portfolio construction. The final portfolio composition, therefore, is a reflection of these analytical and qualitative techniques. SECURITY EVALUATION. The investment manager applies analytical techniques to evaluate a broad universe of stocks based on a number of factors. The factors may include projected earnings, earnings surprise forecasts, projected cash flow, price momentum, historical income and balance sheet items, and other factors. In addition to evaluating analytical measures, the investment manager applies traditional fundamental research to gather qualitative information. This means the investment manager concentrates on individual company fundamentals, focusing on companies that the investment manager believes are well managed and possess the opportunity for earnings growth. PORTFOLIO CONSTRUCTION. During the course of the security evaluation and fundamental analysis discussed above, the investment manager assigns weightings to the stocks being considered for investment. The investment manager considers the risk and expected return of each individual stock as well as the overall portfolio. The manager also evaluates exposure by sector, industry, market capitalization and other categories. The Fund generally sells a security if the investment manager believes its target price has been reached, its fundamentals have deteriorated, or ongoing evaluation reveals that there are more attractive investment opportunities available. The Fund may purchase American Depositary Receipts ("ADRs"), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may invest up to 15% of its net assets in illiquid securities (i.e., securities that cannot be readily sold) and may invest up to 10% of its total assets directly in foreign securities. The limit on foreign securities does not include ADRs, or commercial paper and certificates of deposit issued by foreign banks. The Fund may also invest up to 10% of its assets in exchange-traded funds ("ETFs"). ETFs are traded, like individual stocks, on an exchange, but they represent baskets of securities that seek to track the performance of certain indices. The indices include not only broad-market indexes but more specific indices as well, including those relating to particular sectors, countries and regions. The Fund may invest in ETFs for short-term cash management purposes or as part of its overall investment strategy. The Fund may also invest up to 10% of its assets in equity-linked securities (each, an "ELS") as part of its overall investment strategy. An ELS is a debt instrument whose value is based on the value of a single equity security, basket of equity securities or an index of equity securities (each, an "Underlying Equity"). An ELS typically provides interest income, thereby offering a yield advantage over investing directly in an 1 Underlying Equity. However, the holder of an ELS may have limited or no benefit from any appreciation in the Underlying Equity, but is exposed to downside market risk. The Fund may purchase ELSs that trade on a securities exchange or those that trade on the over-the-counter markets, including securities offered and sold under Rule 144A of the Securities Act of 1933. The Fund may also purchase an ELS in a privately negotiated transaction with the issuer of the ELS (or its broker-dealer affiliate). The Fund may, from time to time, take temporary defensive positions that are inconsistent with its principal strategies in seeking to minimize extreme volatility caused by adverse market, economic, political or other conditions. This could prevent the Fund from achieving its investment objectives. The Fund's investment objectives may be changed only with shareholder approval. The principal investment strategies may be changed without shareholder approval. Any changes to these strategies, however, must be approved by the Fund's Board of Directors. Shareholders will be provided with at least 60 days prior written notice of any change to the "80%" investment policy described in the second paragraph under "Principal Investment Strategies." There is no guarantee that the Fund will achieve its objectives. Principal Risks Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the Fund's net asset value will fluctuate, especially in the short term. You may experience a decline in the value of your investment and you could lose money if you sell your shares at a price lower than you paid for them. The Fund may not invest 25% or more of its total assets in securities of companies in any one industry. The Fund may, however, invest a substantial percentage of its assets in certain industries or economic sectors believed to offer good investment opportunities. If an industry or economic sector in which the Fund is invested falls out of favor, the Fund's performance may be negatively affected. The Fund's performance may be affected by the broad investment environment in the US or international securities markets, which is influenced by, among other things, interest rates, inflation, politics, fiscal policy, and current events. Stocks of large US companies, like those in which the Fund usually invests, periodically experience periods of volatility. During these volatile periods the value of large company stocks have periodically declined. To the extent large company stocks were to experience similar declines in the future, the Fund's performance would be adversely impacted. Foreign securities, illiquid securities and derivatives (including options, rights and warrants) in the Fund's portfolio involve higher risk and may subject the Fund to higher price volatility. Investing in securities of foreign issuers involves risks not associated with US investments, including settlement risks, currency fluctuations, local withholding and other taxes, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation, investment and repatriation restrictions, and settlement and custody risks. Option transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested or more. When options are purchased in the over-the-counter markets, there are additional risks, such as counterparty and liquidity risks. If the Fund invests in ETFs, shareholders would bear not only the Fund's expenses (including operating expenses and management fees), but also similar expenses of the ETFs, and the Fund's return will therefore be lower. To the extent the Fund invests in ETFs, the Fund is exposed to the risks associated with the underlying investments of the ETFs and the Fund's performance may be negatively affected if the value of those underlying investments declines. The Fund's investments in ELSs would subject it to the downside market risk associated with the Underlying Equity, and to additional risks not typically associated with investments in listed equity securities, such as liquidity risk, credit risk of the issuer, and concentration risk. The liquidity of unlisted ELSs is normally determined by the willingness of the issuer to make a market in the ELS. While the 2 Fund will seek to purchase ELSs only from issuers that it believes to be willing to, and capable of, repurchasing the ELS at a reasonable price, there can be no assurance that the Fund will be able to sell any ELS at such a price or at all. This may impair the Fund's ability to enter into other transactions at a time when doing so might be advantageous. In addition, because ELSs are senior unsecured notes of the issuer, the Fund would be subject to the risk that the issuer may default on its obligations under the ELS, and the potential risk of being too concentrated in the securities (including ELSs) of that issuer. The Fund may invest a portion of its net assets in debt securities, which may be subject to changes in interest rates, the creditworthiness of the issuers, unanticipated prepayment, and the decline of the bond market in general. Although the Fund seeks current income consistent with its primary benchmark, the S&P 500 Index, the Fund can only distribute its "net" current income (i.e., current income minus all applicable Fund expenses) to shareholders. Therefore, this amount may be lower than the current income produced by the S&P 500 Index. The Fund may actively and frequently trade securities in its portfolio to carry out its principal strategies. A high portfolio turnover rate increases transaction costs which may increase the Fund's expenses. Frequent and active trading may cause adverse tax consequences for investors in the Fund due to an increase in short-term capital gains. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. WEBSITE REFERENCES The website references in this Prospectus are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this Prospectus. Portfolio Holdings A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's Statement of Additional Information. Past Performance The performance information on page 4 provides some indication of the risks of investing in the Fund by showing how the performance of Class A shares has varied from year to year, as well as how the performance of certain of the Fund's Classes compares to two measures of performance. The following performance information is designed to assist you in comparing the returns of the Fund with the returns of other mutual funds. How the Fund has performed in the past (before and after taxes), however, is not necessarily an indication of how the Fund will perform in the future. Total returns will vary between each Class of shares due to differing fees and expenses. The Class A annual total returns presented in the bar chart on the following page do not reflect the effect of any sales charges. If sales charges were included, the returns would be lower. The Fund's average annual total returns presented in the table below the chart on the following page do reflect the effect of the applicable sales charges. Effective January 7, 2008, the maximum initial sales charge on investments in Class A shares of less than $50,000 is 5.75%. Effective June 4, 2007, there is no initial sales charge on purchases of Class C shares. Although for all periods presented in the table the Fund's Class C share returns do not reflect an initial sales charge, the actual returns for periods prior to June 4, 2007 would have been lower if a 1.00% maximum initial sales charge then in effect was incurred. Both the bar chart and table assume that all dividends and capital gain distributions, if any, were reinvested. Effective at the close of business on May 16, 2008, the Fund will no longer offer Class D shares. For additional information, see "Deciding Which Class of Shares to Buy--Class C or Class D." After-tax returns presented in the table are for Class A shares only. After-tax returns for Class B, Class C, Class D and Class R shares will vary due to differing fees and expenses. After-tax returns are 3 calculated using the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax- deferred arrangements, such as 401(k) plans or individual retirement accounts (IRAs). The returns after taxes on distributions and sale of Fund shares may be greater than other returns presented for the same periods due to tax benefits from losses realized on the sales of Fund shares. CLASS A ANNUAL TOTAL RETURNS - CALENDAR YEARS [CHART] Best quarter return: 13.04% - quarter ended 6/30/03. Worst quarter return: (17.40)% - quarter ended 9/30/02. AVERAGE ANNUAL TOTAL RETURNS - PERIODS ENDED 12/31/07
CLASS C CLASS R SINCE SINCE ONE FIVE TEN INCEPTION INCEPTION YEAR YEARS YEARS 5/27/99 4/30/03 - ----------------------------------------------------------------------------------------------------------- CLASS A - ----------------------------------------------------------------------------------------------------------- Return before taxes (7.50)% 8.43% 0.66% n/a n/a - ----------------------------------------------------------------------------------------------------------- Return after taxes on distributions (10.20) 7.63 (0.37) n/a n/a - ----------------------------------------------------------------------------------------------------------- Return after taxes on distributions and sale of Fund shares (3.79) 7.06 0.23 n/a n/a - ----------------------------------------------------------------------------------------------------------- CLASS B (6.91) 8.62 0.64/(1)/ n/a n/a - ----------------------------------------------------------------------------------------------------------- CLASS C (3.42) 8.92 n/a (1.46)% n/a - ----------------------------------------------------------------------------------------------------------- CLASS D (3.42) 8.90 0.49 n/a n/a - ----------------------------------------------------------------------------------------------------------- CLASS R (3.03) n/a n/a n/a 9.70% - ----------------------------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS AVERAGE* 5.73 11.70 5.04 3.01 11.68 - ----------------------------------------------------------------------------------------------------------- S&P 500 INDEX* 5.50 12.81 5.90 3.26 12.63 - -----------------------------------------------------------------------------------------------------------
- ------------- * The S&P 500 Index and the Lipper Large-Cap Core Funds Average are unmanaged benchmarks that assume the reinvestment of all distributions, if any. The Lipper Large-Cap Core Funds Average excludes the effect of fees, sales charges or taxes, and the S&P 500 Index excludes the effect of expenses, fees, sales charges or taxes. The S&P 500 Index measures the performance of 500 of the largest US companies based on market capitalization. The Lipper Large-Cap Core Funds Average measures the performance of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index ($16.0 billion as of December 31, 2007). Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. Investors cannot invest directly in an average or an index. (1)The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. 4 Fees and Expenses The table below summarizes the fees and expenses that you may pay as a shareholder of the Fund. Each Class of shares has its own sales charge schedule and is subject to different ongoing 12b-1 fees. Shareholder fees are charged directly to your account. Annual fund operating expenses are deducted from Fund assets and are therefore paid indirectly by you and other shareholders of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A CLASS B CLASS C CLASS D* - --------------------------------------------------------------------------------------------------------------------------- Total Maximum Sales Charge (Load) 5.75% 5% 1% 1% - --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) on Purchases (as a % of offering price) 5.75%/(1)/ none none none - --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (CDSC) on Redemptions (as a % of original purchase price or current net asset value, whichever is less) none/(1)/ 5% 1% 1% - --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) - --------------------------------------------------------------------------------------------------------------------------- (as a percentage of average net assets) - --------------------------------------------------------------------------------------------------------------------------- Management Fees 0.65% 0.65% 0.65% 0.65% - --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees 0.25% 1.00% 1.00% 1.00% - --------------------------------------------------------------------------------------------------------------------------- Other Expenses 0.43% 0.43% 0.43% 0.43% - --------------------------------------------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.33% 2.08% 2.08% 2.08% - ---------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS R - --------------------------------------------------------------------------------------------- Total Maximum Sales Charge (Load) 1% - --------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) on Purchases (as a % of offering price) none - --------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (CDSC) on Redemptions (as a % of original purchase price or current net asset value, whichever is less) 1% - --------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) - ----------------------------------------------------------------------------------------------------------------- (as a percentage of average net assets) - --------------------------------------------------------------------------------------------- Management Fees 0.65% - --------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees 0.50% - --------------------------------------------------------------------------------------------- Other Expenses 0.43% - --------------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 1.58% - ---------------------------------------------------------------------------------------------
- ------------- (1)Certain investors who do not pay an initial sales charge (e.g., purchases of $1,000,000 or more, and purchases through certain retirement plans) may be subject to a 1% CDSC if shares are sold within 18 months of purchase. *Effective at the close of business on May 16, 2008, Class D shares will no longer be available. For more details, please see "Deciding Which Class of Shares to Buy--Class C or Class D". EXAMPLE This example is intended to help you compare the costs of investing in the Fund with the costs of investing in other mutual funds. It assumes (1) you invest $10,000 in the Fund for each period and then sell all of your shares at the end of that period, (2) your investment has a 5% return each year, and (3) the Fund's total annual operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------------------------------- Class A $703 $972 $1,262 $2,084 ---------------------------------------------------------------------- Class B 711 952 1,319 2,219+ ---------------------------------------------------------------------- Class C 311 652 1,119 2,410 ---------------------------------------------------------------------- Class D 311 652 1,119 2,410 ---------------------------------------------------------------------- Class R 261 499 860 1,878 ---------------------------------------------------------------------- If you did not sell your shares at the end of each period, your costs would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------------------------------- Class A $703 $972 $1,262 $2,084 ---------------------------------------------------------------------- Class B 211 652 1,119 2,219+ ---------------------------------------------------------------------- Class C 211 652 1,119 2,410 ---------------------------------------------------------------------- Class D 211 652 1,119 2,410 ---------------------------------------------------------------------- Class R 161 499 860 1,878 ----------------------------------------------------------------------
- ------------- + Class B shares will automatically convert to Class A shares approximately eight years after purchase. MANAGEMENT FEES: Fees paid out of Fund assets to the investment manager to compensate it for managing the Fund. 12B-1 FEES: Fees paid by each Class, pursuant to a plan adopted by the Fund under Rule 12b-1 of the Investment Company Act of 1940. The plan allows each Class to pay distribution and/or service fees for the sale and distribution of its shares and for providing services to shareholders. OTHER EXPENSES: Miscellaneous expenses of running the Fund, including such things as shareholder account services, registration, custody, auditing and legal fees. 5 Management The Fund's Board of Directors provides broad supervision over the affairs of the Fund. J. & W. Seligman & Co. Incorporated ("Seligman"), 100 Park Avenue, New York, New York 10017, is the investment manager of the Fund. Seligman manages the investment of the Fund's assets, including making purchases and sales of portfolio securities consistent with the Fund's investment objectives and strategies, and administers the Fund's business and other affairs. Established in 1864, Seligman currently serves as manager to 22 US registered investment companies, which offer 59 investment portfolios with approximately $10.1 billion in assets as of March 31, 2008. Seligman also provides investment management or advice to institutional or other accounts having an aggregate value at March 31, 2008 of approximately $7.8 billion. The Fund pays Seligman a fee for its management services. The fee rate declines as the Fund's net assets increase. It is equal to an annual rate of 0.65% of the Fund's average daily net assets on the first $1 billion of net assets, 0.60% of the Fund's average daily net assets on the next $1 billion of net assets and 0.55% of the Fund's average daily net assets in excess of $2 billion. For the year ended December 31, 2007, the management fee paid by the Fund to Seligman was equal to an annual rate of 0.65% of the Fund's average daily net assets. A discussion regarding the basis for the Fund's Board of Directors' approval of the continuance of the investment management agreement between the Fund and Seligman is available in the Fund's Annual Report, dated December 31, 2007. PORTFOLIO MANAGEMENT The Fund is managed by Seligman's Core/Growth Investment Team, of which John B. Cunningham is co-head. Mr. Cunningham, a Managing Director and Chief Investment Officer of Seligman, is Vice President and Portfolio Manager of the Fund. He is also Vice President and Portfolio Manager of Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation (a closed-end investment company), Vice President and Co-Portfolio Manager of Seligman TargetHorizon ETF Portfolios, Inc. and Vice President of Seligman Portfolios, Inc. ("SPI") and Portfolio Manager of its Seligman Common Stock Portfolio. Prior to joining Seligman in 2004, Mr. Cunningham was, beginning in 2001, a Managing Director, Senior Portfolio Manager of Salomon Brothers Asset Management ("SBAM") and Group Head of SBAM's Equity Team. Erik J. Voss, a Managing Director of Seligman and co-head of Seligman's Core/Growth Investment Team, is Vice President and Co-Portfolio Manager of the Fund. In addition to his responsibilities in respect of the Fund, Mr. Voss is Vice President and Portfolio Manager of Seligman Capital Fund, Inc. and Seligman Growth Fund, Inc., Vice President of SPI and Portfolio Manager of its Seligman Capital Portfolio and Co-Portfolio Manager of its Seligman Common Stock Portfolio, Vice President and Co-Portfolio Manager of Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation, and portfolio manager of one other registered investment company. Prior to joining Seligman in 2006, Mr. Voss was a portfolio manager at Wells Capital Management Incorporated from January 2005 through March 2006, and prior thereto, Strong Capital Management, Inc. from October 2000 through January 2005. 6 Mr. Cunningham is the lead Portfolio Manager of the Fund and primarily responsible for the composition of the Fund's portfolio. Mr. Voss provides advice, analysis and recommendations to Mr. Cunningham and may also make investment decisions for the Fund. The Fund's Statement of Additional Information provides additional information about the compensation of the individuals named above (the "Portfolio Managers"), other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of the securities of the Fund. AFFILIATES OF SELIGMAN: Seligman Advisors, Inc. ("Seligman Advisors"): The Fund's distributor; responsible for accepting orders for purchases and sales of Fund shares. Seligman Services, Inc.: A limited purpose broker/dealer; acts as the broker/dealer of record for shareholder accounts that do not have a designated broker or financial advisor. Seligman Data Corp. ("SDC"): The Fund's shareholder service agent; provides shareholder account services to the Fund at cost. 7 REGULATORY MATTERS In late 2003, J. & W. Seligman & Co. Incorporated (Seligman) conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the "Seligman Funds"); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the Securities and Exchange Commission (the "SEC") and the Office of the Attorney General of the State of New York ("NYAG"). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, SDC and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains injunctive relief, Seligman and its affiliates could, in the absence of the SEC in its discretion granting exemptive relief, be enjoined from providing advisory and underwriting services to the Seligman Funds and other registered investment companies. Seligman does not believe that the foregoing legal action or other possible actions will have a material adverse impact on Seligman or its clients, including the Seligman Funds and other investment companies managed by it; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences. 8 Shareholder Information Deciding Which Class of Shares to Buy Each of the Fund's Classes represent an interest in the same portfolio of investments. However, each Class has its own sales charge schedule, and its ongoing 12b-1 fees may differ from other Classes. When deciding which Class of shares to buy, you should consider, among other things: .. The amount you plan to invest. .. How long you intend to remain invested in the Fund, or another Seligman mutual fund. .. If you would prefer to pay an initial sales charge and lower ongoing 12b-1 fees, or be subject to a CDSC (i.e., a contingent deferred sales charge) and pay higher ongoing 12b-1 fees, or in the case of employee benefit plans eligible to purchase Class R shares, be subject to a CDSC for a shorter period of time and pay higher ongoing 12b-1 fees. .. Whether you may be eligible for reduced or no sales charges when you buy or sell shares. An authorized dealer or your financial advisor will be able to help you decide which Class of shares best meets your needs. CLASS A - -------------------------------------------------------------------------------- .. Initial sales charge on Fund purchases, as set forth below:
SALES CHARGE AS A % OF SALES CHARGE AS A % OF REGULAR DEALER DISCOUNT AMOUNT OF YOUR INVESTMENT OFFERING PRICE/(1)/ NET AMOUNT INVESTED AS A % OF OFFERING PRICE - ------------------------------------------------------------------------------------------------- Less than $50,000 5.75% 6.10% 5.00% - ------------------------------------------------------------------------------------------------- $50,000 - $99,999 4.50 4.71 4.00 - ------------------------------------------------------------------------------------------------- $100,000 - $249,999 3.50 3.63 3.00 - ------------------------------------------------------------------------------------------------- $250,000 - $499,999 2.50 2.56 2.25 - ------------------------------------------------------------------------------------------------- $500,000 - $999,999 2.00 2.04 1.75 - ------------------------------------------------------------------------------------------------- $1,000,000 and over/(2)/ 0.00 0.00 0.00 - -------------------------------------------------------------------------------------------------
- ------------- (1)"Offering Price" is the amount that you actually pay for Fund shares; it includes the initial sales charge. (2)You will not pay an initial sales charge on purchases of $1 million or more, but you will be subject to a 1% CDSC if you sell your shares within 18 months. .. Annual 12b-1 fee (for shareholder services) of up to 0.25%. .. No initial sales charge on reinvested dividends or capital gain distributions. Please consult your financial advisor for assistance in selecting the appropriate class of shares. INFORMATION REGARDING BREAKPOINT DISCOUNTS FOR CLASS A SHARES Purchases of Class A shares by a "single person" may be eligible for the reduced initial sales charges ("Breakpoint Discounts") that are described above. For the purpose of the Breakpoint Discount thresholds described above, "single persons" includes individuals and immediate family members (i.e., husband, wife, and minor children), as well as designated fiduciaries, certain employee benefit plans and certain tax-exempt organizations. For more information about what constitutes a "single person", please consult the 9 Fund's Statement of Additional Information. "Single persons" may be eligible for Breakpoint Discounts under the following circumstances: Discounts and Rights of Accumulation. Breakpoint Discounts contemplated above are also available under a Seligman Group of Funds program referred to as "Rights of Accumulation." Under this program, reduced sales charges will apply if the sum of (i) the current amount being invested by a "single person" in Class A shares of the Fund and in Class A shares of other Seligman mutual funds (excluding Seligman Cash Management Fund), (ii) the current net asset value of the Class A shares and Class B shares of other Seligman mutual funds already owned by the "single person" other than Seligman Cash Management Fund (except as provided in (iii)) and (iii) the current net asset value of Class A shares of Seligman Cash Management Fund which were acquired by a "single person" through an exchange of Class A shares of another Seligman mutual fund, exceeds the Breakpoint Discount thresholds described for Class A shares above. The value of the shares contemplated by items (ii) and (iii) above (collectively, the "Prior Owned Shares") will be taken into account only if SDC or the financial intermediary (if you are purchasing through a financial intermediary) is notified that there are holdings eligible for aggregation to meet the applicable Breakpoint Discount thresholds. If you are purchasing shares through a financial intermediary, you should consult with your intermediary to determine what information you will need to provide them in order to receive the Breakpoint Discounts to which you may be entitled. This information may include account records regarding shares eligible for aggregation that are held at any financial intermediary, as well as a social security or tax identification number. You may need to provide this information each time you purchase shares. In addition, certain financial intermediaries may prohibit you from aggregating investments in the Seligman Group of mutual funds if those investments are held in your accounts with a different intermediary or with SDC. If you are dealing directly with SDC, you should provide SDC with account information for any shares eligible for aggregation. This information includes account records and a social security or tax identification number. You may need to provide this information each time you purchase shares. Letter of Intent. A letter of intent allows you to purchase Class A shares over a 13-month period with the benefit of the Breakpoint Discounts discussed above, based on the total amount of Class A shares of the Fund that the letter states that you intend to purchase plus the current net asset value of the Prior Owned Shares. Reduced sales charges may be applied to purchases made within a 13-month period starting from the date of receipt from you of a letter of intent. In connection with such arrangement, a portion of the shares you initially purchase will be held in escrow to provide for any sales charges that might result if you fail to purchase the amount of shares contemplated by the letter of intent assuming your purchases would not otherwise be eligible for Breakpoint Discounts. These shares will be released upon completion of the purchases contemplated by the letter of intent. Eligible Employee Benefit Plans. Eligible employee benefit plans which have at least $2 million in plan assets at the time of investment in the Fund may purchase Class A shares at net asset value, but, in the event of plan termination, will be subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. Ascensus (formerly, BISYS) Plans. Plans that (i) own Class B shares of any Seligman mutual fund and (ii) participate in Seligman Growth 401(k) through Ascensus' third-party administration platform may, with new contributions, purchase Class A shares at net asset value. Class A shares purchased at net asset value are subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. CDSCs. Purchases of Class A shares of $1 million or more under any of the programs discussed above are subject to a CDSC of 1% on redemptions made within 18 months of purchase, subject to certain limited exceptions set forth in the Fund's Statement of Additional Information. 10 Additional Information. For more information regarding Breakpoint Discounts, please consult the Fund's Statement of Additional Information. This information can also be found at www.seligman.com via a hyperlink that is designed to facilitate access to the information. INFORMATION REGARDING SALES OF CLASS A SHARES AT NET ASSET VALUE Class A shares of the Fund may be issued without a sales charge to present and former directors, trustees, officers, employees (and their respective family members) of the Fund, the other investment companies in the Seligman Group of mutual funds, Seligman, SDC and Seligman's affiliates. Class A shares may also be issued without an initial sales charge to the following entities as further described in the Fund's Statement of Additional Information: certain registered unit investment trusts; separate accounts established and maintained by certain insurance companies; registered representatives and employees (and their spouses and minor children) of any dealer or bank that has a sales agreement with the Fund's distributor; financial institution trust departments; certain registered investment advisers; accounts of certain financial institutions, authorized dealers or investment advisors that charge account management fees; pursuant to certain sponsored arrangements with organizations that make recommendations or permit solicitations of its employees, members or participants; other investment companies in the Seligman Group in connection with a deferred fee arrangement for outside Directors, or pursuant to a "fund of funds" arrangement; certain "eligible employee benefit plans"; those partners and employees of outside counsel to the Fund or its directors or trustees who regularly provide advice and services to the Fund, to other funds managed by Seligman, or to their directors or trustees; in connection with sales pursuant to retirement plan alliance programs that have a written agreement with the Fund's distributor; and to participants in certain retirement and deferred compensation plans and trusts for which certain entities act as broker-dealer, trustee, or recordkeeper. For more information about those who can purchase shares of the Fund without a sales charge, and other relevant information, please consult the Fund's Statement of Additional Information. In addition, this information can be found at www.seligman.com via a hyperlink that is designed to facilitate access to the information. If you are eligible to purchase Class A shares without a sales charge, you should inform your financial intermediary or SDC of such eligibility and be prepared to provide proof thereof. CLASS B - -------------------------------------------------------------------------------- .. No initial sales charge on purchases. .. A declining CDSC on shares sold within 6 years of purchase:
YEARS SINCE PURCHASE CDSC ------------------------------------------- Less than 1 year 5% ------------------------------------------- 1 year or more but less than 2 years 4 ------------------------------------------- 2 years or more but less than 3 years 3 ------------------------------------------- 3 years or more but less than 4 years 3 ------------------------------------------- 4 years or more but less than 5 years 2 ------------------------------------------- 5 years or more but less than 6 years 1 ------------------------------------------- 6 years or more 0 -------------------------------------------
.. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%. Your purchase of Class B shares must be for less than $250,000, because if you invest $250,000 or more, you will pay less in fees and charges if you buy another Class of shares. Please consult your financial advisor for assistance in selecting the appropriate class of shares. 11 .. Automatic conversion to Class A shares approximately eight years after purchase, resulting in lower ongoing 12b-1 fees. If you intend to hold your Class B shares for less than six years, you should consider purchasing Class C or Class D shares due to the shorter CDSC typically applicable to Class C and Class D shares. Additionally, if you are eligible to purchase Class R shares, you should consider purchasing that Class, which has lower ongoing fees and typically a shorter CDSC. .. No CDSC when you sell shares purchased with reinvested dividends or capital gain distributions. CLASS C OR CLASS D* - -------------------------------------------------------------------------------- Effective at the close of business (4:00 p.m. EST) on May 16, 2008, the Fund's Class D shares will be combined with Class C shares. This will be effected by the automatic conversion of Class D shares into Class C shares. Class D shares will no longer be available. Purchase orders for Class D shares to be effective on or after May 9, 2008 through May 16, 2008 may, in the Fund's discretion, be rejected due to operational reasons relating to the combination; if you are considering purchasing Class D shares during such period, you should consider Class C shares instead (consult your financial advisor as necessary). Any orders for exchange or redemption of the Fund's Class D shares to be effective through May 16, 2008 will continue to be accepted in accordance with this Prospectus. All orders (i.e., purchases, exchanges and redemptions) for Class D shares to be effective after the close of business on May 16, 2008 cannot be processed because no Class D shares will be outstanding or offered. Class D shares are identical in their terms to Class C shares (which are described below), and the value of your investment in the Fund will not change as a result of a Class D shareholder becoming a Class C shareholder. After Class D shares are combined with Class C shares, former Class D shareholders of the Fund will receive a confirmation detailing the change. The change described above will take place automatically. Shareholders need not take any action. ..No initial sales charge on purchases. Your purchase of Class C or Class D shares must be for less than $1,000,000 because if you invest ..A 1% CDSC on shares sold within one year of $1,000,000 or more you will pay less in fees and purchase. charges if you buy Class A shares. Please consult your financial advisor for assistance in selecting ..Annual 12b-1 fee (for distribution and the appropriate class of shares. shareholder services) of 1.00%.
.. No CDSC when you sell shares purchased with reinvested dividends or capital gain distributions. .. No automatic conversion to Class A shares, so you will be subject to higher ongoing 12b-1 fees indefinitely. - ------------- *Class D shares are not available to all investors. You may purchase Class D shares only (1) if you already own Class D shares of the Fund or another Seligman mutual fund, (2) if your financial advisor of record maintains an omnibus account at SDC, or (3) pursuant to a 401(k) or other retirement plan program for which Class D shares are already available or for which the sponsor requests Class D shares because the sales charge structure of Class D shares is comparable to the sales charge structure of the other funds offered under the program. 12 CLASS R** - -------------------------------------------------------------------------------- .. No initial sales charge on purchases. .. A 1% CDSC on shares sold within one year of the plan's initial purchase of Class R shares of the Fund. .. Annual 12b-1 fee (for distribution and shareholder services) of 0.50%. .. No automatic conversion to Class A shares, so you will be subject to higher ongoing 12b-1 fees indefinitely. .. No CDSC when you sell shares purchased with reinvested dividends or capital gain distributions. Please consult your financial advisor for assistance in selecting the appropriate class of shares. - ------------- **Class R shares are not available to all investors. You may purchase Class R shares only if you are a qualified or non-qualified employee benefit plan or arrangement (other than a Section 403(b) plan sponsored by public educational institutions) that provides for the purchase of Fund shares and has (1) less than $20 million in assets (determined at the time of initial investment in the Seligman Group of mutual funds); and (2) at least (a) $500,000 invested in the Seligman Group of mutual funds or (b) 50 eligible employees to whom such plan is made available. Seligman Advisors may waive the requirements described in (2) above in connection with sales pursuant to a retirement plan alliance program which has a written agreement with Seligman Advisors. Seligman (as well as the Fund's distributor) may provide cash payments out of its own resources to financial intermediaries that sell shares of the Fund or otherwise provide services to the Fund. For more details regarding such payments, please consult the Fund's Statement of Additional Information. The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940 that allows each Class of the Fund to pay 12b-1 fees for the sale and distribution of its shares and/or for providing services to shareholders. Because the Fund's 12b-1 fees are paid out of each Class's assets on an ongoing basis, over time these fees will increase your investment expenses and may cost you more than other types of charges. The Fund's Board of Directors believes that no conflict of interest currently exists between the Funds' Classes of shares. On an ongoing basis, the Directors, in the exercise of their fiduciary duties under the Investment Company Act of 1940 and Maryland law, will seek to ensure that no such conflict arises. 13 HOW CDSCS ARE CALCULATED To minimize the amount of the CDSC you may pay when you sell your shares, the Fund assumes that shares acquired through reinvested dividends and capital gain distributions (which are not subject to a CDSC) are sold first. Shares that have been in your account long enough so they are not subject to a CDSC are sold next. After these shares are exhausted, shares will be sold in the order they were purchased (earliest to latest). The amount of any CDSC that you pay will be based on the shares' original purchase price or current net asset value, whichever is less. You will not pay a CDSC when you exchange shares of the Fund to buy the same class of shares of any other Seligman mutual fund or when you exchange shares of another Seligman mutual fund to buy the same class of shares of the Fund. For the purpose of calculating the CDSC, when you exchange shares of the Fund for the same class of another Seligman mutual fund, it will be assumed that you held the shares of the other Seligman mutual fund since the date you originally purchased the shares of the Fund. Similarly, when you exchange shares of another Seligman mutual fund for shares of the Fund, it will be assumed that you held the shares of the Fund since the date you originally purchased shares of the other Seligman mutual fund. The CSDC on Class A, Class B, Class C, Class D and Class R shares may be waived or reduced in the following instances: on redemptions following death or disability; in connection with certain distributions from certain retirement plans, 403(b) plans, 401(k) plans and IRAs; in connection with shares sold to current and retired Directors of the Fund; in connection with shares sold to a governmental entity which is prohibited by applicable laws from paying sales charges and related fees; in connection with systematic withdrawals; in connection with participation in certain 401(k) and retirement programs; on incidental redemptions to cover administrative expenses; on redemptions of shares initially purchased by an eligible employee benefit plan that are not in connection with a plan-level termination; and in the case of Class A shares purchased by certain institutional investors. The CDSC may also be waived on any redemption of Class A shares that are purchased by an eligible employee benefit plan that is a separate account client of Seligman at the time of initial investment (or within the prior 30 days) in a Seligman mutual fund. For more information, please consult the Fund's Statement of Additional Information or www.seligman.com. Pricing of Fund Shares When you buy or sell shares, you do so at the Class's net asset value ("NAV") next calculated after Seligman Advisors or SDC, as the case may be, accepts your request. However, in some cases, the Fund has authorized certain financial intermediaries (and other persons designated by such financial intermediaries) to receive purchase and redemption orders on behalf of the Fund. In such instances, customer orders will be priced at the Class's NAV next calculated after the authorized financial intermediary (or other persons designated by such financial intermediary) receives the request. Any applicable sales charge will be added to the purchase price for Class A shares. However, Seligman Advisors may reject any request to purchase Fund shares under the circumstances discussed later in this Prospectus under the captions "Important Policies That May Affect Your Account" and "Frequent Trading of Fund Shares." Authorized financial intermediaries or their designees are responsible for forwarding your order in a timely manner. NAV: Computed separately for each Class by dividing that Class's share of the net assets of the Fund (i.e., its assets less liabilities) by the total number of outstanding shares of the Class. If your buy or sell order is received by an authorized financial intermediary or its designee after the close of regular trading on the New York Stock Exchange ("NYSE"), the order will be executed at the Class's NAV calculated as of the close of regular 14 trading on the next NYSE trading day, subject to any applicable sales charge. When you sell shares, you receive the Class's per share NAV, less any applicable CDSC. The NAV of the Fund's shares is determined each day, Monday through Friday, on days that the NYSE is open for trading. Because of their higher 12b-1 fees, the NAV of Class B, Class C, Class D and Class R shares will generally be lower than the NAV of Class A shares of the Fund. Securities owned by the Fund are valued at current market prices. If Seligman concludes that the most recently reported (or closing) price of a security held by the Fund is no longer valid or reliable, or such price is otherwise unavailable, Seligman will value the security at its fair value as determined in accordance with policies and procedures approved by the Fund's Board of Directors. The value of a security held by the Fund could be so determined in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts or extreme market volatility. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. Opening Your Account The Fund's shares are sold through authorized dealers or financial advisors who have sales agreements with Seligman Advisors. There are several programs under which you may be eligible for reduced sales charges. Ask an authorized dealer or your financial advisor if any of these programs apply to you. Class D (not available after May 16, 2008) and Class R shares are not available to all investors. For more information, see "Deciding Which Class of Shares to Buy--Class C or Class D" and--"Class R." To make your initial investment in the Fund, contact an authorized dealer or your financial advisor or complete an account application and send it with your check made payable to the Fund directly to SDC at the address provided on the account application. Your check must be in US dollars and be drawn on a US bank. You may not use cash, checks made payable to cash, third party checks, traveler's checks or credit card convenience checks for investment. If you do not choose a Class, your investment will automatically be made in Class A shares. The required minimum initial investments are: .. Regular (non-retirement) accounts: None (but certain Fund accounts are subject to a $1,000 minimum Fund account balance; for details, see "Important Policies That May Affect Your Account") .. For accounts opened concurrently with Invest-A-Check(R): . $100 to open if you will be making monthly investments . $250 to open if you will be making quarterly investments You may buy shares of the Fund for all types of tax-deferred retirement plans. Contact Retirement Plan Services at the address or phone number listed on the inside back cover of this Prospectus for information and to receive the proper forms. If you buy shares by check and subsequently sell the shares, SDC will not send your proceeds until your check clears, which could take up to 15 calendar days from the date of your purchase. You will be sent a statement confirming your purchase and any subsequent transactions in your account. You will also be sent quarterly and annual statements detailing your transactions in the Fund and the other Seligman funds you own under the same account number. Duplicate quarterly account statements for the current year and duplicate annual statements for the most recent prior calendar year will be sent to you free of charge. Copies of year-end statements for prior years are available for a fee of $10 per year, per account, with a maximum charge of $150 per account. Send your request and a check for the fee to SDC at: Seligman Data Corp. P.O. Box 9759 Providence, RI 02940-9759 15 Share certificates representing shares of the Fund are no longer issued. Any further purchases of shares (whether by further subscription or in connection with the exercise of exchange privileges) will be recorded in book-entry form only. However, if a share certificate has been previously issued to a shareholder, the shareholder will be required to deliver the share certificate to SDC, as shareholder servicing agent, before a request for redemption or exchange of shares evidenced by that share certificate will be processed. If you want to be able to buy, sell, or exchange shares by telephone, you should elect telephone services on the account application when you open your account. This will prevent you from having to complete a supplemental election form (which may require a medallion signature guarantee) at a later date. How to Buy Additional Shares After you have made your initial investment, there are many options available to make additional purchases of Fund shares. Shares may be purchased through an authorized dealer or your financial advisor, or you may send a check directly to SDC. Please provide either an investment slip or a note that provides your name(s), Fund name, and account number. Unless you indicate otherwise, your investment will be made in the Class you already own. Send investment checks to: Seligman Data Corp. P.O. Box 9766 Providence, RI 02940-9766 Your check must be in US dollars and be drawn on a US bank. You may not use cash, checks made payable to cash, third party checks, traveler's checks or credit card convenience checks for investment. You may also use the following account services to make additional investments: Invest-A-Check(R). You may buy Fund shares electronically from a savings or checking account of an Automated Clearing House ("ACH") member bank. If your bank is not a member of ACH, the Fund will debit your checking account by preauthorized checks. For accounts opened concurrently with Invest-A-Check(R), you must buy Fund shares at regular monthly intervals in fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts of $250 or more. If you use Invest-A-Check(R), you must continue to make automatic investments until the Fund's minimum account balance of $1,000 is met or your account may be closed. For accounts opened with $1,000 or more, Invest-A-Check(R) investments may be made for any amount. Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash Management Fund, you may exchange uncertificated shares of that fund to buy shares of the same class of another Seligman mutual fund at regular monthly intervals in fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts of $250 or more. If you exchange Class A shares, you may pay an initial sales charge to buy Fund shares. Automatic CD Transfer. You may instruct your bank to invest the proceeds of a maturing bank certificate of deposit (CD) in shares of the Fund. If you wish to use this service, contact SDC, an authorized dealer or your financial advisor to obtain the necessary forms. Because your bank may charge you a penalty, it is not normally advisable to withdraw CD assets before maturity. Dividends From Other Investments. You may have your dividends from other companies invested in the Fund. (Dividend checks must include your name, account number, Fund name and class of shares.) Direct Deposit. You may buy Fund shares electronically with funds from your employer, the IRS, or any other institution that provides direct deposit. Call SDC for more information. 16 How to Exchange Shares Among the Seligman Mutual Funds You may sell this Fund's shares to buy shares of the same Class of another Seligman mutual fund, or you may sell shares of another Seligman mutual fund to buy this Fund's shares. Exchanges will be made at each fund's respective NAV. You will not pay an initial sales charge when you exchange, unless you exchange Class A shares of Seligman Cash Management Fund to buy shares of the same Class of the Fund or another Seligman mutual fund. If you are exchanging shares subject to a CDSC, for purposes of determining CDSC holding periods, such shares will be exchanged pro rata based on the different times of purchase. Only your dividend and capital gain distribution options and telephone services will be automatically carried over to any new fund. If you wish to carry over any other account options (for example, Invest-A-Check(R) or Systematic Withdrawals) to the new fund, you must specifically request so at the time of your exchange. See "The Seligman Mutual Funds" for a list of the funds available for exchange. Before making an exchange, contact an authorized dealer, your financial advisor or SDC to obtain the applicable fund prospectus(es). You should read and understand a fund's prospectus before investing. Some funds may not offer all Classes of shares. How to Sell Shares The easiest way to sell Fund shares is by phone. If you have telephone services, you may be able to use this service to sell Fund shares. Restrictions apply to certain types of accounts. Please see "Important Policies That May Affect Your Account." When you sell Fund shares by phone, a check for the proceeds is sent to your address of record. If you have current ACH bank information on file, you may have the proceeds of the sale of your Fund shares directly deposited into your bank account (typically, within 2 business days after your shares are sold). You may sell shares to the Fund through an authorized dealer or your financial advisor. The Fund does not charge any fees or expenses, other than any applicable CDSC for this transaction; however, the authorized dealer or financial advisor may charge a service fee. Contact an authorized dealer or your financial advisor for more information. You may always send a written request to sell Fund shares; however, it may take longer to get your money. To protect you and the Fund, if your written redemption request is for $25,000 or more, SDC will seek telephone confirmation from you, an authorized dealer or your financial advisor before sending any money. If the proceeds are: (1) $50,000 or more; (2) to be paid to someone other than the account owner; (3) to be mailed to other than your address of record; (4) requested in connection with an address change; or (5) requested within 30 days of an address change on the account, then before sending any money, the Fund will require: .. A signed, written redemption request; .. Telephone confirmation; and .. A medallion signature guarantee. MEDALLION SIGNATURE GUARANTEE: Protects you and each Seligman mutual fund from fraud. It is an assurance that the signature is genuine. A Medallion Signature Guarantee from The New York Stock Exchange, Inc. Medallion Signature Guarantee Program, The Securities Transfer Agents Medallion Program or The Stock Exchanges Medallion Program are acceptable. These guarantees are the leading signature guarantee programs recognized by most major financial services associations throughout the United States and Canada, and are endorsed by the Securities Transfer Association. Non-medallion signature guarantees or notarization by a notary public are not acceptable forms of signature guarantees. 17 Telephone confirmations will not affect the date on which your redemption request is actually processed, but may delay the payment of proceeds. If your Fund shares are represented by certificates, you will need to surrender the certificates to SDC before you sell your shares. You may need to provide additional documents to sell Fund shares if you are: .. a corporation; .. an executor or administrator; .. a trustee or custodian; or .. in a retirement plan. Contact an authorized dealer, your financial advisor or SDC's Shareholder Services Department for information on selling your shares under any of the above circumstances. You may also use the following account service to sell Fund shares: Systematic Withdrawal Plan. If you have at least $5,000 in the Fund, you may withdraw (sell) a fixed dollar amount (minimum of $50) of uncertificated shares at regular intervals. A check will be sent to you at your address of record or, if you have current ACH bank information on file, you may have your payments directly deposited to your predesignated bank account, typically within 2 business days after your shares are sold. If you bought $1,000,000 or more of Class A shares without an initial sales charge, your withdrawals may be subject to a 1% CDSC if they occur within 18 months of purchase. If you own Class B, Class C, Class D or Class R shares and reinvest your dividends and capital gain distributions, you may annually withdraw 12%, 10%, 10% or 10%, respectively, of the value of your account (at the time of election) without a CDSC. Important Policies That May Affect Your Account To protect you and other shareholders, the Fund reserves the right to: .. Refuse an exchange request if the amount you wish to exchange equals or exceeds the lesser of $1,000,000 or 1% of the Fund's net assets; .. Refuse any request to buy Fund shares; .. Reject any request received by telephone; .. Suspend or terminate telephone services; .. Reject a medallion signature guarantee that SDC believes may be fraudulent; .. Close your Fund account if its value is below $1,000, provided, however, that this policy does not apply to direct accounts held at SDC that are retirement accounts (i.e., IRAs), unclaimed property accounts and Fund shareholder accounts in the process of automatic conversion from the Fund's Class B shares to Class A shares that aggregate to more than $1,000. The Fund will notify you in writing at least 30 days before closing your Fund account and anticipates permitting shareholders owning Fund shares directly with SDC a period of one year to reach the $1,000 Fund minimum balance. If you hold your shares through a financial intermediary, you should contact that financial intermediary for their policies relating to minimum investment requirements (which could be different from the Fund's requirements); .. Close your account if it does not have a certified taxpayer identification number (this is your social security number for individuals); and .. Request additional information or close your account to the extent required or permitted by applicable law or regulations, including those relating to the prevention of money laundering. Telephone Services You, an authorized dealer or your financial advisor will be able to place the following requests by telephone, unless you indicate on your account application that you do not want telephone services: .. Sell uncertificated shares (up to $50,000 per day, payable to account owner(s) and mailed to 18 the address of record or if you have current ACH bank information on file, you may have your redemption proceeds directly deposited to your bank account); .. Exchange shares between Seligman mutual funds; .. Change dividend and/or capital gain distribution options; .. Change your address; and .. Establish systematic withdrawals to address of record. If you do not elect telephone services on your account application when you open your account, or opened your account through an authorized dealer or your financial advisor, telephone services must be elected on a supplemental election form (which may require a medallion signature guarantee). Restrictions apply to certain types of accounts: .. Trust accounts on which the current trustee is not listed may not sell Fund shares by phone; .. Corporations may not sell Fund shares by phone; .. IRAs may only exchange Fund shares or request address changes by phone; and .. Group retirement plans may not sell Fund shares by phone; plans that allow participants to exchange by phone must provide a letter of authorization signed by the plan custodian or trustee and provide a supplemental election form signed by all plan participants. Unless you have current ACH bank information on file, you will not be able to sell Fund shares by phone within 30 days following an address change. Your telephone request must be communicated to an SDC representative. You may not request any phone transactions via the automated access line. You may cancel telephone services at any time by sending a written request to SDC. Each account owner, by accepting or adding telephone services, authorizes each of the other owners to make requests by phone. An authorized dealer or your financial advisor may not establish telephone services without your written authorization. SDC will send written confirmation to the address of record when telephone services are added or terminated. During times of heavy call volume, you may not be able to get through to SDC by phone to request a sale or exchange of Fund shares. In this case, you may need to send written instructions, and it may take longer for your request to be processed. The Fund's NAV may fluctuate during this time. The Fund and SDC will not be liable for processing requests received by phone as long as it was reasonable to believe that the request was genuine. The Fund and SDC will employ reasonable procedures to confirm whether instructions received by telephone are genuine, and, if they do not, they may be liable for any losses due to unauthorized or fraudulent instructions. Reinstatement Privilege If you sell Fund shares, you may elect, within 120 calendar days, to use part or all of the proceeds to buy shares of the Fund or another Seligman mutual fund (reinstate your investment) without paying an initial sales charge or, if you paid a CDSC when you sold your shares, receiving a credit for the applicable CDSC paid. This privilege may be exercised only once each calendar year. Contact an authorized dealer or your financial advisor for more information. You should consult your tax advisor concerning possible tax consequences of exercising this privilege. Frequent Trading of Fund Shares As a matter of policy, the Fund discourages frequent trading of Fund shares. In this regard, the Fund's Board of Directors has adopted written policies and procedures that, subject to the limitations set forth below, are designed to deter frequent trading that may be disruptive to the 19 management of the Fund's portfolio. If the Fund, Seligman Advisors (the Fund's distributor) or SDC (the Fund's shareholder service agent) (referred to collectively below as the "Seligman Entities") determine that you have exchanged more than twice to and from the Fund in any three-month period, you will not be permitted to engage in further exchange activity in the Fund for 90 days. The Seligman Entities may under certain circumstances also refuse initial or additional purchases of Fund shares by any person for any reason, including if that person is believed to be engaging, or suspected of engaging, in trading of fund shares in excess of the guidelines noted above (excluding purchases via a direct deposit through an automatic payroll deduction program or purchases by the funds of Seligman Asset Allocation Series, Inc. in the ordinary course of implementing their asset allocation strategies). In addition, the Seligman Entities may under certain circumstances refuse to accept exchange requests for accounts of any person that has had a previous pattern (even if involving a different fund in the Seligman Group) of trading in excess of the guidelines noted above. Furthermore, if you purchase shares of the Fund through a financial intermediary, your ability to purchase or exchange shares of the Fund could be limited if your account is associated with a person (e.g., broker or financial advisor) previously identified by the Seligman Entities as engaging in trading activity in excess of the guidelines noted above. The Fund's policies do not permit exceptions to be granted, and the policies are, to the extent possible, applied uniformly to all accounts where beneficial ownership has been ascertained. Shareholders and their financial intermediaries seeking to engage in excessive trading practices may deploy a variety of strategies to avoid detection, and, despite the efforts of the Seligman Entities to prevent excessive trading, there is no guarantee that the Seligman Entities will be able to identify such shareholders or curtail their trading practices. The ability of the Seligman Entities to detect and curtail excessive trading practices may also be limited by operational systems and technological limitations and hindered by financial intermediaries purposefully or unwittingly facilitating these practices. In addition, the Fund receives purchase, exchange and redemption orders through financial intermediaries, some of whom hold shares through omnibus accounts, and the Seligman Entities will not, under most circumstances, know of or be able to reasonably detect excessive trading which may occur through these financial intermediaries. Omnibus account arrangements and their equivalents (e.g., bank trust accounts and retirement plans) are a common form of holding shares of funds by many brokers, banks and retirement plan administrators. These arrangements often permit the financial intermediary to aggregate many client transactions and ownership positions and provide the Fund with combined purchase and redemption orders. In these circumstances, the Seligman Entities may not know the identity of particular shareholders or beneficial owners or whether particular purchase or sale orders were placed by the same shareholder or beneficial owner. A substantial percentage of shares of the Fund may be held through omnibus accounts and their equivalents. To the extent that the efforts of the Seligman Entities are unable to eliminate excessive trading practices in the Fund, these practices may interfere with the efficient management of the Fund's portfolio, hinder the Fund's ability to pursue its investment objective and may reduce the returns of long-term shareholders. Additionally, these practices may result in the Fund engaging in certain activities to a greater extent than it otherwise would, such as maintaining higher cash balances, using its line of credit to a greater extent and engaging in additional portfolio transactions. Increased portfolio transactions and use of the line of credit could correspondingly increase the Fund's operating costs and decrease the Fund's investment performance. Maintenance of a higher level of cash balances necessary to meet frequent redemptions could likewise result in lower Fund investment performance during periods of rising markets. 20 Dividends and Capital Gain Distributions The Fund generally pays any dividends from its net investment income quarterly and distributes any net capital gains realized on investments annually. You may elect to: (1)reinvest both dividends and capital gain distributions; (2)receive dividends in cash and reinvest capital gain distributions; or (3)receive both dividends and capital gain distributions in cash. Your dividends and capital gain distributions, if any, will be reinvested if you do not instruct otherwise or if you own Fund shares in a Seligman tax-deferred retirement plan. If you want to change your election, you may send written instructions to SDC at P.O. Box 9759, Providence, RI 02940-9759, or, if you have telephone services, you, an authorized dealer or your financial advisor may call SDC. Your request must be received by SDC before the record date to be effective for that dividend or capital gain distribution. DIVIDEND: A payment by a mutual fund, usually derived from the fund's net investment income (dividends and interest earned on portfolio securities less expenses). CAPITAL GAIN DISTRIBUTION: A payment to mutual fund shareholders which represents profits realized on the sale of securities in a fund's portfolio. EX-DIVIDEND DATE: The day on which any declared distributions (dividends or capital gains) are deducted from a fund's assets before it calculates its NAV. Dividends or capital gain distributions that are not reinvested will be sent by check to your address of record or, if you have current ACH bank information on file, directly deposited into your predesignated bank account, typically within 2 business days from the payable date. Dividends and capital gain distributions are reinvested to buy additional Fund shares on the payable date using the NAV of the ex-dividend date. Dividends, if any, on Class B, Class C, Class D and Class R shares will be lower than the dividends on Class A shares as a result of their higher 12b-1 fees. Capital gain distributions will be paid in the same amount for each Class. Taxes The tax treatment of dividends and capital gain distributions is the same whether you take them in cash or reinvest them to buy additional Fund shares. Dividends paid by the Fund, other than "qualified dividend income," are generally taxable to you as ordinary income. Tax-deferred retirement plans are not taxed currently on dividends or capital gain distributions or on gains resulting from the sale or exchange of Fund shares. You may be taxed at different rates on capital gains distributed by the Fund depending on the length of time the Fund holds its assets. When you sell Fund shares, any gain or loss you realize will generally be treated as a long-term capital gain or loss if you held your shares for more than one year, or as a short-term capital gain or loss if you held your shares for one year or less. However, if you sell Fund shares on which a long-term capital gain distribution has been received and you held the shares for six months or less, any loss you realize will be treated as a long-term capital loss to the extent that it offsets the long-term capital gain distribution. 21 An exchange of Fund shares is a sale and may result in a gain or loss for federal income tax purposes. Each January, you will be sent information on the tax status of any distributions made during the previous calendar year. Because each shareholder's situation is unique, you should always consult your tax advisor concerning the effect income taxes may have on your individual investment. For further information, please see the Fund's Statement of Additional Information under the section entitled "Taxation of the Fund." 22 The Seligman Mutual Funds EQUITY - -------------------------------------------------------------------------------- SPECIALTY - -------------------------------------------------------------------------------- Seligman Communications and Information Fund Seeks capital appreciation by investing in companies operating in the communications, information and related industries. Seligman Emerging Markets Fund Seeks long-term capital appreciation by investing primarily in equity securities of companies in emerging markets. Seligman Global Technology Fund Seeks long-term capital appreciation by investing primarily in global securities (US and non-US) of companies in the technology and technology-related industries. SMALL COMPANY - -------------------------------------------------------------------------------- Seligman Frontier Fund Seeks growth of capital by investing primarily in small company growth stocks. Seligman Global Smaller Companies Fund Seeks long-term capital appreciation by investing in securities of smaller companies around the world, including the US. Seligman Smaller-Cap Value Fund Seeks long-term capital appreciation by investing in common stocks of smaller companies, deemed to be "value" companies by the investment manager. MEDIUM COMPANY - -------------------------------------------------------------------------------- Seligman Capital Fund Seeks capital appreciation by investing in the common stocks of medium-sized companies. LARGE COMPANY - -------------------------------------------------------------------------------- Seligman Common Stock Fund Seeks total return through a combination of capital appreciation and current income. Seligman Global Growth Fund Seeks capital appreciation by investing primarily in equity securities of companies that have the potential to benefit from global economic or social trends. Seligman Growth Fund Seeks long-term capital appreciation. Seligman International Growth Fund Seeks long-term capital appreciation by generally investing in securities of large- and mid-capitalization growth companies in international markets. Seligman Large-Cap Value Fund Seeks long-term capital appreciation by investing in common stocks of large companies, deemed to be "value" companies by the investment manager. BALANCED - -------------------------------------------------------------------------------- Seligman Income and Growth Fund Seeks total return through a combination of capital appreciation and income consistent with what is believed to be a prudent allocation between equity and fixed-income securities. REAL ESTATE SECURITIES - -------------------------------------------------------------------------------- Seligman LaSalle Global Real Estate Fund Seeks total return through a combination of current income and long-term capital appreciation by investing in equity and equity-related securities issued by global real estate companies such as US real estate investment trusts (REITs) and similar entities outside the US. 23 Seligman LaSalle Monthly Dividend Real Estate Fund Seeks to produce a high level of current income with capital appreciation as a secondary objective by investing in equity and equity-related securities issued by real estate companies, such as real estate investment trusts (REITs). FIXED-INCOME - -------------------------------------------------------------------------------- INCOME - -------------------------------------------------------------------------------- Seligman High-Yield Fund Seeks a high level of current income and may also consider the potential for capital appreciation consistent with prudent investment management. The Fund invests primarily in non-investment grade, high-yield securities. Seligman Core Fixed Income Fund Seeks to produce a high level of current income consistent with prudent exposure to risk. Capital appreciation is a secondary objective. The Fund invests a significant portion of its assets in investment grade fixed-income securities. Seligman U.S. Government Securities Fund Seeks a high level of current income consistent with prudent investment risk primarily by investing in a diversified portfolio of securities issued or guaranteed by the US government, its agencies or instrumentalities, or government sponsored enterprises. MUNICIPAL - -------------------------------------------------------------------------------- Seligman Municipal Funds: National Fund Seeks maximum income, exempt from regular federal income taxes. State-specific funds:* Seek to maximize income exempt from regular federal income taxes and from regular income taxes in the designated state. California Louisiana New Jersey .. High-Yield Maryland New York .. Quality Massachusetts North Carolina Colorado Michigan Ohio Florida Minnesota Oregon Georgia Missouri Pennsylvania South Carolina
* A small portion of income may be subject to state and local taxes. MONEY MARKET - -------------------------------------------------------------------------------- Seligman Cash Management Fund Seeks to preserve capital and to maximize liquidity and current income by investing only in high-quality money market securities. The fund seeks to maintain a constant net asset value of $1.00 per share. ASSET ALLOCATION - -------------------------------------------------------------------------------- SELIGMAN ASSET ALLOCATION SERIES, INC. offers four different asset-allocation funds that pursue their investment objectives by allocating their assets among other mutual funds in the Seligman Group. Seligman Asset Allocation Aggressive Growth Fund Seeks long-term capital appreciation by creating a portfolio of mutual funds that invests in aggressive growth-oriented domestic and international equity securities weighted toward small- and medium-capitalization companies. Seligman Asset Allocation Growth Fund Seeks long-term capital appreciation by creating a portfolio of mutual funds that invests in growth-oriented domestic and international equity securities, with a more even weighting among small-, medium- and large-capitalization companies than Seligman Asset Allocation Aggressive Growth Fund. 24 Seligman Asset Allocation Moderate Growth Fund Seeks capital appreciation by creating a portfolio of mutual funds that invests in small-, medium- and large-capitalization domestic and international equity securities as well as real estate securities and domestic fixed-income securities. Seligman Asset Allocation Balanced Fund Seeks capital appreciation and preservation of capital with current income and growth of income by creating a portfolio of mutual funds that invests in medium- and large-capitalization and dividend producing domestic and international equity securities supplemented by a larger allocation to real estate securities as well as domestic fixed-income securities, cash and cash equivalents than Seligman Asset Allocation Moderate Growth Fund. SELIGMAN TARGETHorizon ETF PORTFOLIOS, INC. offers five asset-allocation mutual funds that seek to achieve their respective investment objectives by allocating their assets among exchange-traded funds (ETFs). Seligman TargETFund 2045 Seeks capital appreciation until migration, and thereafter capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2045 approaches. Seligman TargETFund 2035 Seeks capital appreciation until migration, and thereafter capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as 2035 approaches. Seligman TargETFund 2025 Seeks capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2025 approaches. Seligman TargETFund 2015 Seeks capital appreciation and current income consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2015 approaches. Seligman TargETFund Core Seeks capital appreciation and preservation of capital with current income. 25 Financial Highlights The tables below are intended to help you understand the financial performance of certain of the Fund's Classes for the periods presented. Certain information reflects financial results for a single share of a Class that was held throughout the periods shown. Per share amounts are calculated using average shares outstanding during the period. Total return shows the rate that you would have earned (or lost) on an investment in each Class, assuming you reinvested all your dividends and capital gain distributions, if any. Total returns do not reflect any sales charges or transaction costs on your investment or taxes. If such charges, costs or taxes were included, total returns would have been lower. Deloitte & Touche LLP, Independent Registered Public Accounting Firm, has audited this information. Their report, along with the Fund's financial statements, is included in the Fund's Annual Report, which is available upon request.
CLASS A - ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, --------------------------------------------- 2007 2006 2005 2004 2003 - ------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA: - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $13.08 $11.67 $11.58 $10.42 $ 8.49 - ------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 0.33 0.09 0.06 0.07 0.03 - ------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (0.49) 1.80 0.09 1.16 1.93 - ------------------------------------------------------------------------------------------------------------------------- Total from investment operations (0.16) 1.89 0.15 1.23 1.96 - ------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.33) (0.09) (0.06) (0.07) (0.03) - ------------------------------------------------------------------------------------------------------------------------- Distributions from net realized capital gain (1.15) (0.39) -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Total Distributions (1.48) (0.48) (0.06) (0.07) (0.03) - ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year $11.44 $13.08 $11.67 $11.58 $10.42 - ------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (1.84)% 16.23% 1.26% 11.82%# 23.11% - ------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000s omitted) $183,449 $220,152 $223,800 $264,142 $271,692 - ------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.33% 1.33% 1.29% 1.28% 1.31% - ------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 2.47% 0.71% 0.50% 0.66% 0.38% - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33% - -------------------------------------------------------------------------------------------------------------------------
- ------------- See footnotes on page 29. 26
CLASS B - --------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 2007 2006 2005 2004 2003 - --------------------------------------------------------------------------------------------------------------- PER SHARE DATA: - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $12.79 $11.43 $11.37 $10.25 $ 8.39 - --------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.22 (0.01) (0.03) (0.01) (0.03) - --------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.46) 1.76 0.09 1.13 1.89 - --------------------------------------------------------------------------------------------------------------- Total from investment operations (0.24) 1.75 0.06 1.12 1.86 - --------------------------------------------------------------------------------------------------------------- Less Distributions: Dividends from net investment income (0.22) - --------------------------------------------------------------------------------------------------------------- Dividends in excess of net investment income (0.01) - --------------------------------------------------------------------------------------------------------------- Distributions from net realized capital gain (1.15) (0.39) -- -- -- - --------------------------------------------------------------------------------------------------------------- Total Distributions (1.38) (0.39) -- -- -- - --------------------------------------------------------------------------------------------------------------- Net asset value, end of year $11.17 $12.79 $11.43 $11.37 $10.25 - --------------------------------------------------------------------------------------------------------------- TOTAL RETURN (2.54)% 15.38% 0.53% 10.93%# 22.17% - --------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - --------------------------------------------------------------------------------------------------------------- Net assets, end of year (000s omitted) $3,784 $6,068 $9,049 $13,581 $16,312 - --------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 2.08% 2.08% 2.05% 2.04% 2.07% - --------------------------------------------------------------------------------------------------------------- Ratio of net investment loss to average net assets 1.72% (0.04)% (0.26)% (0.10)% (0.38)% - --------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33% - --------------------------------------------------------------------------------------------------------------- CLASS C - --------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 2007 2006 2005 2004 2003 - --------------------------------------------------------------------------------------------------------------- PER SHARE DATA: - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $12.80 $11.44 $11.38 $10.26 $ 8.39 - --------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.22 (0.01) (0.03) (0.01) (0.03) - --------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.46) 1.76 0.09 1.13 1.90 - --------------------------------------------------------------------------------------------------------------- Total from investment operations (0.24) 1.75 0.06 1.12 1.87 - --------------------------------------------------------------------------------------------------------------- Less Distributions: Dividends from net investment income (0.22) -- -- -- -- - --------------------------------------------------------------------------------------------------------------- Dividends in excess of net investment income (0.01) -- -- -- -- - --------------------------------------------------------------------------------------------------------------- Distributions from net realized capital gain (1.15) (0.39) -- -- -- - --------------------------------------------------------------------------------------------------------------- Total Distributions (1.38) (0.39) -- -- -- - --------------------------------------------------------------------------------------------------------------- Net asset value, end of year $11.18 $12.80 $11.44 $11.38 $10.26 - --------------------------------------------------------------------------------------------------------------- TOTAL RETURN (2.54)% 15.37% 0.53% 10.92%# 22.29% - --------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - --------------------------------------------------------------------------------------------------------------- Net assets, end of year (000s omitted) $3,412 $4,381 $4,674 $5,227 $6,671 - --------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 2.08% 2.08% 2.05% 2.04% 2.07% - --------------------------------------------------------------------------------------------------------------- Ratio of net investment loss to average net assets 1.72% (0.04)% (0.26)% (0.10)% (0.38)% - --------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33% - ---------------------------------------------------------------------------------------------------------------
- ------------- See footnotes on page 29. 27
CLASS D - ------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------- 2007 2006 2005 2004 2003 - ------------------------------------------------------------------------------------------------------- PER SHARE DATA: - ------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.79 $11.43 $11.37 $10.25 $ 8.39 - ------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) 0.22 (0.01) (0.03) (0.01) (0.03) - ------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.46) 1.76 0.09 1.13 1.89 - ------------------------------------------------------------------------------------------------------- Total from investment operations (0.24) 1.75 0.06 1.12 1.86 - ------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.22) -- -- -- -- - ------------------------------------------------------------------------------------------------------- Dividends in excess of net investment income (0.01) -- -- -- -- - ------------------------------------------------------------------------------------------------------- Distributions from net realized capital gain (1.15) (0.39) -- -- -- - ------------------------------------------------------------------------------------------------------- Total distributions (1.38) (0.39) -- -- -- - ------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.17 $12.79 $11.43 $11.37 $10.25 - ------------------------------------------------------------------------------------------------------- TOTAL RETURN (2.54)% 15.38% 0.53% 10.93%# 22.17% - ------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------------- Net assets, end of period (000s omitted) $11,189 $13,578 $13,704 $16,370 $17,800 - ------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 2.08% 2.08% 2.05% 2.04% 2.07% - ------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 1.72% (0.04)% (0.26)% (0.10)% (0.38)% - ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33% - -------------------------------------------------------------------------------------------------------
- ------------- See footnotes on page 29. 28
CLASS R - ------------------------------------------------------------------------------------------------------ 4/30/03* YEAR ENDED DECEMBER 31, TO ----------------------------- 12/31/03 2007 2006 2005 2004 --------- - --------------------------------------------------------------------------------------------- PER SHARE DATA: - ------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $13.09 $11.67 $11.58 $10.42 $ 8.66 - ------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) 0.29 0.06 0.03 0.04 0.01 - ------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.49) 1.80 0.09 1.17 1.77 - ------------------------------------------------------------------------------------------------------ Total from investment operations (0.20) 1.86 0.12 1.21 1.78 - ------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.27) (0.05) (0.03) (0.05) (0.02) - ------------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- -- -- -- -- - ------------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (1.15) (0.39) -- -- -- - ------------------------------------------------------------------------------------------------------ Total distributions (1.42) (0.44) (0.03) (0.05) (0.02) - ------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.47 $13.09 $11.67 $11.58 $10.42 - ------------------------------------------------------------------------------------------------------ TOTAL RETURN (2.15)% 15.99% 1.01% 11.57%# 20.50% - ------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------------ Net assets, end of period (000s omitted) $2,133 $600 $385 $321 $2 - ------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 1.58% 1.58% 1.55% 1.54% 1.58%+ - ------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 2.22% 0.46% 0.24% 0.40% 0.09%+ - ------------------------------------------------------------------------------------------------------ Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33%o - ------------------------------------------------------------------------------------------------------
- ------------- * Commencement of offering of shares. + Annualized. o Computed at the Fund level for the year ended December 31, 2003. # Excluding the effect of certain payments received from Seligman in 2004, total return would have been as follows: Class A 11.79%; Class B 10.90%; Class C 10.89%; Class D 10.90%; and Class R 11.54%. 29 How to Contact Us The Fund Write to Corporate Communications/Investor Relations Department J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 Phone Toll-free in the US (800) 221-7844 Outside the US (212) 850-1864 Your Regular (Non-Retirement) Account Write to Shareholder Service Agent/Seligman Group of Funds Seligman Data Corp. For investments P.O. Box 9766 into an account Providence, RI 02940-9766 For non-investment P.O. Box 9759 inquiries Providence, RI 02940-9759 For matters requiring 101 Sabin St. overnight delivery Pawtucket, RI 02860 Phone Toll-free in the US (800) 221-2450 Outside the US (212) 682-7600 Your Retirement Account Write to Retirement Plan Services Seligman Data Corp. 100 Park Avenue New York, NY 10017 Phone Toll-free (800) 445-1777
24-hour automated telephone access is available by calling (800) 622-4597 on a touchtone telephone. You will have instant access to price, yield, account balance, most recent transaction, and other information. SELIGMAN ADVISORS, INC. an affiliate of [LOGO] J&WS J. & W. SELIGMAN & CO. INCORPORATED ESTABLISHED 1864 100 Park Avenue, New York, NY 10017 30 For More Information The following information is available, without charge, upon request by calling toll-free (800) 221-2450 in the US or (212) 682-7600 outside the US. You may also call these numbers to request other information about the Fund or to make shareholder inquiries. The Statement of Additional Information ("SAI") contains additional information about the Fund. It is on file with the Securities and Exchange Commission, or SEC, and is incorporated by reference into (is legally part of) this Prospectus. Annual/Semi-Annual Reports contain additional information about the Fund's investments. In the Fund's Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The Fund's SAI and most recent Annual/Semi-Annual Reports are also available, free of charge, at www.seligman.com. Information about the Fund, including the Prospectus and SAI, can be viewed and copied at the SEC's Public Reference Room in Washington, DC. For more information about the operation of the Public Reference Room, call (202) 551-8090. The Prospectus, SAI, Annual/Semi- Annual Reports and other information about the Fund are also available on the EDGAR Database on the SEC's internet site: www.sec.gov. Copies of this information may also be obtained, upon payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing: Securities and Exchange Commission, Public Reference Section, Washington, D.C. 20549-0102. The website references in this Prospectus are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this Prospectus. SEC File Number: 811-234 [GRAPHIC] SUPPLEMENT DATED JULY 17, 2008 TO THE CLASS I PROSPECTUSES OF EACH OF THE FOLLOWING SELIGMAN FUNDS: Class I Prospectuses, each dated February 1, 2008, for Seligman Core Fixed Income Fund, Inc. and Seligman TargetHorizon ETF Portfolios, Inc. Class I Prospectuses, each dated March 3, 2008, for Seligman Frontier Fund, Inc. and Seligman Global Fund Series, Inc. Class I Prospectuses, each dated May 1, 2008, for Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High-Yield Fund, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc. and Seligman Value Fund Series, Inc. (collectively, the "Funds") Effective immediately, the following new type of Class I investor is hereby added to the Class I prospectuses of the Funds under the section entitled "How to Buy Fund Shares": (vi) any investor approved by Seligman Advisors that makes an initial, combined investment of at least $5 million in the Class I shares of two or more Seligman mutual funds. Page 1 PROSPECTUS May 1, 2008 Class I Shares Seligman Common Stock Fund, Inc. Seeking Total Return Through a Combination of Capital Appreciation and Current Income The Securities and Exchange Commission has neither approved nor disapproved this Fund, and it has not determined this Prospectus to be accurate or adequate. Any representation to the contrary is a criminal offense. An investment in this Fund or any other fund cannot provide a complete investment program. The suitability of an investment in the Fund should be considered based on the investment objectives, strategies and risks described in this Prospectus, considered in light of all of the other investments in your portfolio, as well as your risk tolerance, financial goals, and time horizons. We recommend that you consult an authorized dealer or your financial advisor to determine if this Fund is suitable for you. EQCS1 5/2008 CI [LOGO] SELIGMAN INVESTMENTS - -------------------------------- EXPERIENCE . INSIGHT . SOLUTIONS Table of Contents THE FUND Investment Objective........................................ 1 Principal Investment Strategies............................. 1 Principal Risks............................................. 2 Portfolio Holdings.......................................... 3 Past Performance............................................ 3 Fees and Expenses........................................... 5 Management.................................................. 6 SHAREHOLDER INFORMATION Pricing of Fund Shares...................................... 9 How to Buy Fund Shares...................................... 9 How to Exchange Shares Among the Seligman Mutual Funds...... 10 How to Sell Shares.......................................... 10 Important Policies That May Affect Your Account............. 10 Frequent Trading of Fund Shares............................. 10 Dividends and Capital Gain Distributions.................... 12 Taxes....................................................... 12 The Seligman Mutual Funds................................... 13 FINANCIAL HIGHLIGHTS.............................................. 16 HOW TO CONTACT US................................................. 17
FOR MORE INFORMATION..................................... back cover The Fund Investment Objective The Fund's investment objective is total return through a combination of capital appreciation and current income. Principal Investment Strategies The Fund uses the following principal investment strategies to seek its investment objective: Generally, the Fund invests at least 80% of its net assets in common stocks that are broadly diversified among a number of industries. The Fund usually invests in the common stock of larger US companies (e.g., companies with market capitalizations over $3 billion at the time of initial investment); however, it may invest in companies of any size. The Fund may also invest in fixed-income securities and cash equivalents. The Fund seeks to produce a level of current income consistent with its primary benchmark, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"). This allows for variations over time in the level of current income produced by the Fund. Securities are chosen using an investment strategy, consisting of: analytical security evaluation, including fundamental research; and portfolio construction. The final portfolio composition, therefore, is a reflection of these analytical and qualitative techniques. Security Evaluation. The investment manager applies analytical techniques to evaluate a broad universe of stocks based on a number of factors. The factors may include projected earnings, earnings surprise forecasts, projected cash flow, price momentum, historical income and balance sheet items, and other factors. In addition to evaluating analytical measures, the investment manager applies traditional fundamental research to gather qualitative information. This means the investment manager concentrates on individual company fundamentals, focusing on companies that the investment manager believes are well managed and possess the opportunity for earnings growth. Portfolio Construction. During the course of the security evaluation and fundamental analysis discussed above, the investment manager assigns weightings to the stocks being considered for investment. The investment manager considers the risk and expected return of each individual stock as well as the overall portfolio. The manager also evaluates exposure by sector, industry, market capitalization and other categories. The Fund generally sells a security if the investment manager believes its target price has been reached, its fundamentals have deteriorated, or ongoing evaluation reveals that there are more attractive investment opportunities available. The Fund may purchase American Depository Receipts ("ADRs"), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may invest up to 15% of its net assets in illiquid securities (i.e., securities that cannot be readily sold) and may invest up to 10% of its total assets directly in foreign securities. The limit on foreign securities does not include ADRs, or commercial paper and certificates of deposit issued by foreign banks. The Fund may also invest up to 10% of its assets in exchange-traded funds ("ETFs"). ETFs are traded, like individual stocks, on an exchange, but they represent baskets of securities that seek to track the performance of certain indices. The indices include not only broad-market indexes but more specific indices as well, including those relating to particular sectors, countries and regions. The Fund may invest in ETFs for short-term cash management purposes or as part of its overall investment strategy. 1 The Fund may also invest up to 10% of its assets in equity-linked securities (each, an "ELS") as part of its overall investment strategy. An ELS is a debt instrument whose value is based on the value of a single equity security, basket of equity securities or an index of equity securities (each, an "Underlying Equity"). An ELS typically provides interest income, thereby offering a yield advantage over investing directly in an Underlying Equity. However, the holder of an ELS may have limited or no benefit from any appreciation in the Underlying Equity, but is exposed to downside market risk. The Fund may purchase ELSs that trade on a securities exchange or those that trade on the over-the-counter markets, including securities offered and sold under Rule 144A of the Securities Act of 1933. The Fund may also purchase an ELS in a privately negotiated transaction with the issuer of the ELS (or its broker-dealer affiliate). The Fund may, from time to time, take temporary defensive positions that are inconsistent with its principal strategies in seeking to minimize extreme volatility caused by adverse market, economic, political or other conditions. This could prevent the Fund from achieving its investment objectives. The Fund's investment objectives may be changed only with shareholder approval. The principal investment strategies may be changed without shareholder approval. Any changes to these strategies, however, must be approved by the Fund's Board of Directors. Shareholders will be provided with at least 60 days prior written notice of any change to the "80%" investment policy described in the second paragraph under "Principal Investment Strategies." There is no guarantee that the Fund will achieve its objectives. Principal Risks Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the Fund's net asset value will fluctuate, especially in the short term. You may experience a decline in the value of your investment and you could lose money if you sell your shares at a price lower than you paid for them. The Fund may not invest 25% or more of its total assets in securities of companies in any one industry. The Fund may, however, invest a substantial percentage of its assets in certain industries or economic sectors believed to offer good investment opportunities. If an industry or economic sectors in which the Fund is invested falls out of favor, the Fund's performance may be negatively affected. The Fund's performance may be affected by the broad investment environment in the US or international securities markets, which is influenced by, among other things, interest rates, inflation, politics, fiscal policy, and current events. Stocks of large US companies, like those in which the Fund usually invests, periodically experience periods of volatility. During these volatile periods the value of large company stocks have periodically declined. To the extent large company stocks were to experience similar declines in the future, the Fund's performance would be adversely impacted. Foreign securities, illiquid securities and derivatives (including options, rights and warrants) in the Fund's portfolio involve higher risk and may subject the Fund to higher price volatility. Investing in securities of foreign issuers involves risks not associated with US investments, including settlement risks, currency fluctuations, local withholding and other taxes, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation, investment and repatriation restrictions, and settlement and custody risks. Option transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested or more. When options are purchased in the over-the-counter markets, there are additional risks, such as counterparty and liquidity risks. If the Fund invests in ETFs, shareholders would bear not only the Fund's expenses (including operating expenses and management fees), but also 2 similar expenses of the ETFs, and the Fund's return will therefore be lower. To the extent the Fund invests in ETFs, the Fund is exposed to the risks associated with the underlying investments of the ETFs and the Fund's performance may be negatively affected if the value of those underlying investments declines. The Fund's investments in ELSs would subject it to the downside market risk associated with the Underlying Equity, and to additional risks not typically associated with investments in listed equity securities, such as liquidity risk, credit risk of the issuer, and concentration risk. The liquidity of unlisted ELSs is normally determined by the willingness of the issuer to make a market in the ELS. While the Fund will seek to purchase ELSs only from issuers that it believes to be willing to, and capable of, repurchasing the ELS at a reasonable price, there can be no assurance that the Fund will be able to sell any ELS at such a price or at all. This may impair the Fund's ability to enter into other transactions at a time when doing so might be advantageous. In addition, because ELSs are senior unsecured notes of the issuer, the Fund would be subject to the risk that the issuer may default on its obligations under the ELS, and the potential risk of being too concentrated in the securities (including ELSs) of that issuer. The Fund may invest a portion of its net assets in debt securities, which may be subject to changes in interest rates, the creditworthiness of the issuers, unanticipated prepayment, and the decline of the bond market in general. Although the Fund seeks current income consistent with its primary benchmark, the S&P 500 Index, the Fund can only distribute its "net" current income (i.e., current income minus all applicable Fund expenses) to shareholders. Therefore, this amount may be lower than the current income produced by the S&P 500 Index. The Fund may actively and frequently trade securities in its portfolio to carry out its principal strategies. A high portfolio turnover rate increases transaction costs which may increase the Fund's expenses. Frequent and active trading may cause adverse tax consequences for investors in the Fund due to an increase in short-term capital gains. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Website References The website references in this Prospectus are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this Prospectus. Portfolio Holdings A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's Statement of Additional Information. Past Performance The performance information on the following page provides some indication of the risks of investing in the Fund by showing how the performance of Class I shares has varied from year to year, as well as how the performance of Class I shares compares with two measures of performance. The performance information on the following page is designed to assist you in comparing the returns of the Fund with the returns of other mutual funds. How the Fund has performed in the past (before and after taxes), however, is not necessarily an indication of how the Fund will perform in the future. Both the bar chart and table on the following page assume that all dividends and capital gain distributions, if any, were reinvested. Class I shares are not subject to any sales charges. From the Fund's inception until December 31, 2002, the investment manager, at its discretion, reimbursed certain expenses of Class I shares. Absent such reimbursement, returns that include this period would have been lower. 3 After-tax returns are calculated using the highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts (IRAs). The returns after taxes on distributions and sale of Fund shares may be greater than other returns presented for the same periods due to tax benefits from losses realized on the sale of Fund shares. CLASS I ANNUAL TOTAL RETURNS - CALENDAR YEARS [CHART] Best quarter return: 13.13% - quarter ended 6/30/03. Worst quarter return: (17.18)% - quarter ended 9/30/02. CLASS I AVERAGE ANNUAL TOTAL RETURNS - PERIODS ENDED 12/31/07
SINCE ONE FIVE INCEPTION YEAR YEARS 11/30/01 - ------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------- Return before taxes (1.42)% 10.20% 3.15% - ------------------------------------------------------------------------------------- Return after taxes on distributions (4.39) 9.27 2.36 - ------------------------------------------------------------------------------------- Return after taxes on distributions and sale of Fund shares 0.23 8.55 2.42 - ------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS AVERAGE* 5.73 11.70 5.28 - ------------------------------------------------------------------------------------- S&P 500 INDEX* 5.50 12.81 6.13 - -------------------------------------------------------------------------------------
- ------------- * The S&P 500 Index and the Lipper Large-Cap Core Funds Average are unmanaged benchmarks that assume the reinvestment of all distributions, if any. The Lipper Large-Cap Core Funds Average does not reflect any fees, sales charges or taxes, and the S&P 500 Index does not reflect any expenses, fees, sales charges or taxes. The S&P 500 Index measures the performance of 500 of the largest US companies based on market capitalization. The Lipper Large-Cap Core Funds Average measures the performance of funds, that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index ($16.0 billion as of December 31, 2007). Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. Investors cannot invest directly in an average or an index. 4 Fees and Expenses The table below summarizes the fees and expenses that you may pay as a shareholder of the Fund. Annual fund operating expenses are deducted from Fund assets and are therefore paid indirectly by you and other shareholders of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) - ----------------------------------------------------------------------------------- Maximum Sales Charge (Load) on Purchases none - ----------------------------------------------------------------------------------- Maximum Contingent Deferred Sales Charge (Load) (CDSC) on Redemptions none - ----------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) - ----------------------------------------------------------------------------------- (as a percentage of average net assets) - ----------------------------------------------------------------------------------- Management Fees 0.65% - ----------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees none - ----------------------------------------------------------------------------------- Other Expenses 0.23% - ----------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.88% - -----------------------------------------------------------------------------------
EXAMPLE This example is intended to help you compare the costs of investing in the Fund with the costs of investing in other mutual funds. It assumes (1) you invest $10,000 in the Fund for each period and then sell all of your shares at the end of that period, (2) your investment has a 5% return each year, and (3) the Fund's total annual operating expenses (including the management fee) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------- Class I $90 $281 $488 $1,084 ----------------------------------------
MANAGEMENT FEES: Fees paid out of Fund assets to the investment manager to compensate it for managing the Fund. OTHER EXPENSES: Miscellaneous expenses of running the Fund, including such things as shareholder account services, registration, custody, auditing and legal fees. 5 Management The Fund's Board of Directors provides broad supervision over the affairs of the Fund. J. & W. Seligman & Co. Incorporated ("Seligman"), 100 Park Avenue, New York, New York 10017, is the investment manager of the Fund. Seligman manages the investment of the Fund's assets, including making purchases and sales of portfolio securities consistent with the Fund's investment objectives and strategies, and administers the Fund's business and other affairs. Established in 1864, Seligman currently serves as manager to 22 US registered investment companies, which offer 59 investment portfolios with approximately $10.1 billion in assets as of March 31, 2008. Seligman also provides investment management or advice to institutional or other accounts having an aggregate value at March 31, 2008 of approximately $7.8 billion. The Fund pays Seligman a management fee for its services. The management fee rate declines as the Fund's net assets increase. It is equal to an annual rate of 0.65% of the Fund's average daily net assets on the first $1 billion of net assets, 0.60% of the Fund's average daily net assets on the next $1 billion of net assets and 0.55% of the Fund's average daily net assets in excess of $2 billion. For the year ended December 31, 2007, the management fee paid by the Fund to Seligman was equal to an annual rate of 0.65% of the Fund's average daily net assets. A discussion regarding the basis for the Fund's Board of Directors' approval of the continuance of the investment management agreement between the Fund and Seligman is available in the Fund's Annual Report, dated December 31, 2007. PORTFOLIO MANAGEMENT The Fund is managed by Seligman's Core/Growth Investment Team, of which John B. Cunningham is co-head. Mr. Cunningham, a Managing Director and Chief Investment Officer of Seligman, is Vice President and Portfolio Manager of the Fund. He is also Vice President and Portfolio Manager of Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation (a closed-end investment company), Vice President and Co-Portfolio Manager of Seligman TargetHorizon ETF Portfolios, Inc. and Vice President of Seligman Portfolios, Inc. ("SPI") and Portfolio Manager of its Seligman Common Stock Portfolio. Prior to joining Seligman in 2004, Mr. Cunningham was, beginning in 2001, a Managing Director, Senior Portfolio Manager of Salomon Brothers Asset Management ("SBAM") and Group Head of SBAM's Equity Team. Erik J. Voss, a Managing Director of Seligman and co-head of Seligman's Core/Growth Investment Team, is Vice President and Co-Portfolio Manager of the Fund. In addition to his responsibilities in respect of the Fund, Mr. Voss is Vice President and Portfolio Manager of Seligman Capital Fund, Inc. and Seligman Growth Fund, Inc., Vice President of SPI and Portfolio Manager of its Seligman Capital Portfolio and Co-Portfolio Manager of Seligman Common Stock Portfolio, Vice President and Co-Portfolio Manager of Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation, and portfolio manager of one other registered investment company. Prior to joining Seligman in 2006, Mr. Voss was a portfolio manager at Wells Capital Management Incorporated from January 2005 through March 2006, and prior thereto, Strong Capital Management, Inc. from October 2000 through January 2005. 6 Mr. Cunningham is the lead Portfolio Manager of the Fund and primarily responsible for the composition of the Fund's portfolio. Mr. Voss provides advice, analysis and recommendations to Mr. Cunningham and may also make investment decisions for the Fund. The Fund's Statement of Additional Information provides additional information about the compensation of the individuals named above (the "Portfolio Managers"), other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of the securities of the Fund. AFFILIATES OF SELIGMAN: Seligman Advisors, Inc. (Seligman Advisors"): The Fund's distributor; responsible for accepting orders for purchases and sales of Fund shares. Seligman Services, Inc.: A limited purpose broker/dealer; acts as the broker/dealer of record for shareholder accounts that do not have a designated broker or financial advisor. Seligman Data Corp. ("SDC"): The Fund's shareholder service agent; provides shareholder account services to the Fund at cost. 7 REGULATORY MATTERS In late 2003, J. & W. Seligman & Co. Incorporated (Seligman) conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the "Seligman Funds"); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the Securities and Exchange Commission (the "SEC") and the Office of the Attorney General of the State of New York ("NYAG"). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, SDC and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by Seligman and not by the Seligman Funds. If the NYAG obtains injunctive relief, Seligman and its affiliates could, in the absence of the SEC in its discretion granting exemptive relief, been joined from providing advisory and under writing services to the Seligman Funds and other registered investment companies. Seligman does not believe that the foregoing legal action or other possible actions will have a material adverse impact on Seligman or its clients, including the Seligman Funds and other investment companies managed by it; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences. 8 Shareholder Information After the close of business on May 16, 2008, the Fund will offer five Classes of shares. Only Class I shares are offered by this Prospectus. The Fund's Board of Directors believes that no conflict of interest currently exists among the Fund's Classes of shares. On an ongoing basis, the Directors, in the exercise of their fiduciary duties under the Investment Company Act of 1940 and applicable state law, will seek to ensure that no such conflict arises. Seligman (as well as the Fund's distributor) may provide cash payments out of its own resources to financial intermediaries that sell shares of the Fund or otherwise provide services to the Fund. For more details regarding such payments, please consult the Fund's Statement of Additional Information. Pricing of Fund Shares When you buy or sell shares, you do so at the Class's net asset value ("NAV") next calculated after Seligman Advisors or SDC, as the case may be, accepts your request. However, in some cases, the Fund has authorized certain financial intermediaries (and other persons designated by such financial intermediaries) to receive purchase and redemption orders on behalf of the Fund. In such instances, customer orders will be priced at the Class's NAV next calculated after the authorized financial intermediary (or other persons designated by such financial intermediary) receives the request. However, Seligman Advisors may reject any request to purchase shares under the circumstances discussed later under the captions "Important Policies That May Affect Your Account" and "Frequent Trading of Fund Shares." Authorized financial intermediaries or their designees are responsible for forwarding your order in a timely manner. NAV: Computed separately for each Class by dividing that Class's share of the net assets of the Fund (i.e., its assets less liabilities) by the total number of outstanding shares of the Class. If your buy or sell order is received by an authorized financial intermediary or its designee after the close of regular trading on the New York Stock Exchange ("NYSE"), the order will be executed at the Class's NAV calculated as of the close of regular trading on the next NYSE trading day. When you sell shares, you receive the Class's per share NAV. The NAV of the Fund's shares is determined each day, Monday through Friday, on days that the NYSE is open for trading. Securities owned by the Fund are valued at current market prices. If Seligman concludes that the most recently reported (or closing) price of a security held by the Fund is no longer valid or reliable, or such price is otherwise unavailable, Seligman will value the security at its fair value as determined in accordance with policies and procedures approved by the Fund's Board of Directors. The value of a security held by the Fund could be so determined in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts or extreme market volatility. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. How to Buy Fund Shares Class I shares are not subject to any initial or contingent deferred sales charges or distribution expenses. This Class, however, is only offered to certain types of investors. Class I shares may be purchased only by (i) a "qualified tuition program" (within the meaning of Section 529 of the Internal Revenue Code) approved by Seligman Advisors, 9 (ii) certain qualified employee benefit plans offered to employees of Seligman and its affiliates and SDC, (iii) any qualified or non-qualified employee benefit plan or arrangement ("Benefit Plan") with over $200 million in assets that is approved by Seligman Advisors, (iv) with respect to a specific Seligman fund in the Seligman Group of Funds, any Benefit Plan or other investor that makes an initial investment of $3,000,000 or more in Class I shares of that Seligman fund and (v) any Benefit Plan with at least $25 million in assets purchasing Class I shares through a financial intermediary that has been authorized by Seligman Advisors to offer Class I shares pursuant to a written agreement. Each eligible investor is required to have a single account and trade electronically with SDC either through the electronic trading platform operated by the National Securities Clearing Corporation (NSCC) or other electronic means acceptable to SDC. Benefit Plans that have the same sponsor (or sponsors affiliated with one another) ("Affiliated Benefit Plans") may aggregate their investments for determining eligibility to invest in Class I shares. However, any Benefit Plan not otherwise eligible on its own to invest in Class I shares must place orders for shares of a Seligman fund through a single account maintained for the benefit of its Affiliated Benefit Plans. To make your initial investment in the Fund, an account must be established with SDC. How to Exchange Shares Among the Seligman Mutual Funds You may sell Fund shares to buy shares of the same class of another Seligman mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund shares. Class I shares may not be offered by every Seligman mutual fund. Please consult the relevant fund's current prospectus to determine if it offers Class I shares. Exchanges will be made at each fund's respective NAV. Exchanges generally must be requested in writing and received by Seligman Advisors or SDC by 4:00 p.m. Eastern time to receive that day's NAV. How to Sell Shares Shares of the Fund can be redeemed in the same manner that shares can be purchased, as described under the heading "How to Buy Fund Shares." SDC will send proceeds from a sale by means agreed on between each institutional shareholder and SDC. Sales handled by an authorized dealer or financial advisor generally must follow the same procedure. The Fund does not charge any fees or expenses for a sale handled by an authorized dealer or financial advisor, but the dealer or financial advisor may charge a service fee. SDC may require additional documents to sell Fund shares. Under unusual circumstances, the Fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. Important Policies That May Affect Your Account To protect you and other shareholders, the Fund reserves the right to: .. Refuse any request to buy Fund shares; .. Reject any request received by telephone; .. Close your account if it does not have a certified taxpayer identification number (this is your social security number for individuals); .. Request additional information or close your account to the extent required or permitted by applicable law or regulations, including those relating to the prevention of money laundering; and .. Close your account if your account remains below $250,000 for a period of at least six months. Frequent Trading of Fund Shares As a matter of policy, the Fund discourages frequent trading of Fund shares. In this regard, the Fund's Board of Directors has adopted written policies and procedures that, subject to the limitations set forth below, are designed to deter 10 frequent trading that may be disruptive to the management of the Fund's portfolio. If the Fund, Seligman Advisors (the Fund's distributor) or SDC (the Fund's shareholder service agent) (referred to collectively below as the "Seligman Entities") determine that you have exchanged more than twice to and from the Fund in any three-month period, you will not be permitted to engage in further exchange activity in the Fund for 90 days. The Seligman Entities may under certain circumstances also refuse initial or additional purchases of Fund shares by any person for any reason, including if that person is believed to be engaging, or suspected of engaging, in trading of fund shares in excess of the guidelines noted above (excluding purchases via a direct deposit through an automatic payroll deduction program or purchases by the funds of Seligman Asset Allocation Series, Inc. in the ordinary course of implementing their asset allocation strategies). In addition, the Seligman Entities may under certain circumstances refuse to accept exchange requests for accounts of any person that has had a previous pattern (even if involving a different fund in the Seligman Group) of trading in excess of the guidelines noted above. Furthermore, if you purchase shares of the Fund through a financial intermediary, your ability to purchase or exchange shares of the Fund could be limited if your account is associated with a person (e.g., broker or financial advisor) previously identified by the Seligman Entities as engaging in trading activity in excess of the guidelines noted above. The Fund's policies do not permit exceptions to be granted, and the policies are, to the extent possible, applied uniformly to all accounts where beneficial ownership has been ascertained. Shareholders and their financial intermediaries seeking to engage in excessive trading practices may deploy a variety of strategies to avoid detection, and, despite the efforts of the Seligman Entities to prevent excessive trading, there is no guarantee that the Seligman Entities will be able to identify such shareholders or curtail their trading practices. The ability of the Seligman Entities to detect and curtail excessive trading practices may also be limited by operational systems and technological limitations and hindered by financial intermediaries purposefully or unwittingly facilitating these practices. In addition, the Fund receives purchase, exchange and redemption orders through financial intermediaries, some of whom hold shares through omnibus accounts, and the Seligman Entities will not, under most circumstances, know of or be able to reasonably detect excessive trading which may occur through these financial intermediaries. Omnibus account arrangements and their equivalents (e.g., bank trust accounts and retirement plans) are a common form of holding shares of funds by many brokers, banks and retirement plan administrators. These arrangements often permit the financial intermediary to aggregate many client transactions and ownership positions and provide the Fund with combined purchase and redemption orders. In these circumstances, the Seligman Entities may not know the identity of particular shareholders or beneficial owners or whether particular purchase or sale orders were placed by the same shareholder or beneficial owner. A substantial percentage of shares of the Fund may be held through omnibus accounts and their equivalents. To the extent that the efforts of the Seligman Entities are unable to eliminate excessive trading practices in the Fund, these practices may interfere with the efficient management of the Fund's portfolio, hinder the Fund's ability to pursue its investment objective and may reduce the returns of long-term shareholders. Additionally, these practices may result in the Fund engaging in certain activities to a greater extent than it otherwise would, such as maintaining higher cash balances, using its line of credit to a greater extent and engaging in additional portfolio transactions. Increased portfolio transactions and use of the line of credit could correspondingly increase the Fund's operating costs and decrease the Fund's investment performance. Maintenance of a higher level of cash balances necessary to meet frequent redemptions could likewise result in lower Fund investment performance during periods of rising markets. 11 Dividends and Capital Gain Distributions The Fund generally pays any dividends from its net investment income quarterly and distributes any net capital gains realized on investments annually. DIVIDEND: A payment by a mutual fund, usually derived from the fund's net investment income (dividends and interest earned on portfolio securities less expenses). CAPITAL GAIN DISTRIBUTION: A payment to mutual fund shareholders which represents profits realized on the sale of securities in a fund's portfolio. EX-DIVIDEND DATE: The day on which any declared distributions (dividends or capital gains) are deducted from a fund's assets before it calculates its NAV. Institutional shareholders such as tax-deferred retirement plans and qualified tuition programs generally will have dividend and capital gain distributions reinvested in additional Fund shares. Other institutional shareholders may elect to: (1)reinvest both dividends and capital gain distributions; (2)receive dividends in cash and reinvest capital gain distributions; or (3)receive both dividends and capital gain distributions in cash. If you want to change your election, you may send written instructions to SDC at P.O. Box 9759, Providence, RI 02940-9759, or, an authorized dealer or financial advisor may call SDC. Your request must be received by SDC before the record date to be effective for that dividend or capital gain distribution. Dividends or capital gain distributions that are not reinvested will be sent by means agreed on between SDC and each shareholder. Such distributions can be sent by check or by wire transfer, or, if you have current ACH bank information on file, directly deposited into a predesignated bank account, typically within 2 business days from the payable date. Dividends and capital gain distributions are reinvested to buy additional Fund shares on the payable date using the NAV of the ex-dividend date. Taxes The tax treatment of dividends and capital gain distributions is the same whether you take them in cash or reinvest them to buy additional Fund shares. Dividends paid by the Fund, other than "qualified dividend income," are generally taxable to you as ordinary income. Tax-deferred retirement plans and qualified tuition programs are not taxed currently on dividends or capital gain distributions or on gains resulting from the sale or exchange of Fund shares. You may be taxed at different rates on capital gains distributed by the Fund depending on the length of time the Fund holds its assets. When you sell Fund shares, any gain or loss you realize will generally be treated as a long-term capital gain or loss if you held your shares for more than one year, or as a short-term capital gain or loss if you held your shares for one year or less. However, if you sell Fund shares on which a long-term capital gain distribution has been received and you held the shares for six months or less, any loss you realize will be treated as a long-term capital loss to the extent that it offsets the long-term capital gain distribution. An exchange of Fund shares is a sale and may result in a gain or loss for federal income tax purposes. Each January, you will be sent information on the tax status of any distributions made during the previous calendar year. Because each shareholder's situation is unique, you should always consult your tax advisor concerning the effect income taxes may have on your individual investment. For further information, please see the Fund's Statement of Additional Information under the section entitled "Taxation of the Fund." 12 The Seligman Mutual Funds EQUITY - -------------------------------------------------------------------------------- SPECIALTY - -------------------------------------------------------------------------------- Seligman Communications and Information Fund+ Seeks capital appreciation by investing in companies operating in the communications, information and related industries. Seligman Emerging Markets Fund+ Seeks long-term capital appreciation by investing primarily in equity securities of companies in emerging markets. Seligman Global Technology Fund Seeks long-term capital appreciation by investing primarily in global securities (US and non-US) of companies in the technology and technology-related industries. SMALL COMPANY - -------------------------------------------------------------------------------- Seligman Frontier Fund+ Seeks growth of capital by investing primarily in small company growth stocks. Seligman Global Smaller Companies Fund+ Seeks long-term capital appreciation by investing in securities of smaller companies around the world, including the US. Seligman Smaller Cap Value Fund+ Seeks long-term capital appreciation by investing in common stocks of smaller companies, deemed to be "value" companies by the investment manager. MEDIUM COMPANY - -------------------------------------------------------------------------------- Seligman Capital Fund+ Seeks capital appreciation by investing in the common stocks of medium-sized companies. LARGE COMPANY - -------------------------------------------------------------------------------- Seligman Common Stock Fund+ Seeks total return through a combination of capital appreciation and current income. Seligman Global Growth Fund+ Seeks capital appreciation by investing primarily in equity securities of companies that have the potential to benefit from global economic or social trends. Seligman Growth Fund+ Seeks long-term capital appreciation. Seligman International Growth Fund+ Seeks long-term capital appreciation by generally investing in securities of large- and mid-capitalization growth companies in international markets. Seligman Large-Cap Value Fund+ Seeks long-term capital appreciation by investing in common stocks of large companies, deemed to be "value" companies by the investment manager. BALANCED - -------------------------------------------------------------------------------- Seligman Income and Growth Fund+ Seeks total return through a combination of capital appreciation and income consistent with what is believed to be a prudent allocation between equity and fixed-income securities. REAL ESTATE SECURITIES - -------------------------------------------------------------------------------- Seligman LaSalle Global Real Estate Fund+ Seeks total return through a combination of current income and long-term capital appreciation by - ------------- + Offers Class I shares. 13 investing in equity and equity-related securities issued by global real estate companies, such as US real estate investment trusts (REITs) and similar entities outside the US. Seligman LaSalle Monthly Dividend Real Estate Fund+ Seeks to produce a high level of current income with capital appreciation as a secondary objective by investing in equity and equity-related securities issued by real estate companies, such as real estate investment trusts (REITs). FIXED-INCOME - -------------------------------------------------------------------------------- INCOME - -------------------------------------------------------------------------------- Seligman High-Yield Fund+ Seeks a high level of current income and may also consider the potential for capital appreciation consistent with prudent investment management. The Fund invests primarily in non-investment grade, high-yield securities. Seligman Core Fixed Income Fund+ Seeks to produce a high level of current income consistent with prudent exposure to risk. Capital appreciation is a secondary objective. The Fund invests a significant portion of its assets in investment grade fixed-income securities. Seligman U.S. Government Securities Fund Seeks a high level of current income consistent with prudent investment risk primarily by investing in a diversified portfolio of securities issued or guaranteed by the US government, its agencies or instrumentalities, or government sponsored enterprises. MUNICIPAL - -------------------------------------------------------------------------------- Seligman Municipal Funds: National Fund Seeks maximum income, exempt from regular federal income taxes. State-specific funds:* Seek to maximize income exempt from regular federal income taxes and from regular income taxes in the designated state. California Louisiana New Jersey .. High-Yield Maryland New York .. Quality Massachusetts North Carolina Colorado Michigan Ohio Florida Minnesota Oregon Georgia Missouri Pennsylvania South Carolina
* A small portion of income may be subject to state and local taxes. MONEY MARKET - -------------------------------------------------------------------------------- Seligman Cash Management Fund+ Seeks to preserve capital and to maximize liquidity and current income by investing only in high- quality money market securities. The fund seeks to maintain a constant net asset value of $1.00 per share. ASSET ALLOCATION - -------------------------------------------------------------------------------- SELIGMAN ASSET ALLOCATION SERIES, INC. offers four different asset allocation funds that pursue their investment objectives by allocating their assets among other mutual funds in the Seligman Group. Seligman Asset Allocation Aggressive Growth Fund Seeks long-term capital appreciation by creating a portfolio of mutual funds that invests in aggressive growth-oriented domestic and international equity securities weighted toward small- and medium-capitalization companies. Seligman Asset Allocation Growth Fund Seeks long-term capital appreciation by creating a portfolio of mutual funds that invests in growth-oriented domestic and international equity secu- - ------------- + Offers Class I shares. 14 rities, with a more even weighting among small-, medium- and large-capitalization companies than Seligman Asset Allocation Aggressive Growth Fund. Seligman Asset Allocation Moderate Growth Fund Seeks capital appreciation by creating a portfolio of mutual funds that invests in small-, medium- and large-capitalization domestic and international equity securities as well as real estate securities and domestic fixed-income securities. Seligman Asset Allocation Balanced Fund Seeks capital appreciation and preservation of capital with current income and growth of income by creating a portfolio of mutual funds that invests in medium- and large-capitalization and dividend producing domestic and international equity securities supplemented by a larger allocation to real estate securities as well as domestic fixed-income securities, cash and cash equivalents than Seligman Asset Allocation Moderate Growth Fund. SELIGMAN TARGETHorizon ETF PORTFOLIOS, INC. offers five asset-allocation mutual funds that seek to achieve their respective investment objectives by allocating their assets among exchange-traded funds (ETFs). Seligman TargETFund 2045+ Seeks capital appreciation until migration, and thereafter capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2045 approaches. Seligman TargETFund 2035+ Seeks capital appreciation until migration, and thereafter capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as 2035 approaches. Seligman TargETFund 2025+ Seeks capital appreciation consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2025 approaches. Seligman TargETFund 2015+ Seeks capital appreciation and current income consistent with a strategy of steadily decreasing emphasis on capital appreciation and steadily increasing emphasis on capital preservation and current income as the year 2015 approaches. Seligman TargETFund Core+ Seeks capital appreciation and preservation of capital with current income. - ------------- + Offers Class I shares. 15 Financial Highlights The table below is intended to help you understand the financial performance of the Fund's Class I shares for the five years presented. Certain information reflects financial results for a single share of Class I shares held throughout the periods shown. Per share amounts are calculated using average shares outstanding during the period. Total return shows the rate that you would have earned (or lost) on an investment in the Fund, assuming you reinvested all your dividends and capital gain distributions, if any. Total returns do not reflect any transaction costs on your investment or taxes. If such costs or taxes were reflected, total returns would have been lower. Deloitte & Touche LLP, Independent Registered Public Accounting Firm, has audited this information. Their report, along with the Fund's financial statements, is included in the Fund's Annual Report, which is available upon request.
CLASS I - ------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------- 2007 2006 2005 2004 2003 - ------------------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of year $13.16 $11.71 $11.61 $10.44 $ 8.49 - ------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income 0.39 0.14 0.10 0.11 0.07 - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.49) 1.81 0.10 1.17 1.94 - ------------------------------------------------------------------------------------------------------------ Total from investment operations (0.10) 1.95 0.20 1.28 2.01 - ------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.38) (0.11) (0.10) (0.11) (0.06) - ------------------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (1.15) (0.39) -- -- -- - ------------------------------------------------------------------------------------------------------------ Total Distributions (1.53) (0.50) (0.10) (0.11) (0.06) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of year $11.53 $13.16 $11.71 $11.61 $10.44 - ------------------------------------------------------------------------------------------------------------ TOTAL RETURN (1.42)% 16.74% 1.69% 12.23%# 23.72% - ------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $6,818 $5,923 $4,134 $4,005 $3,265 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 0.88% 0.91% 0.93% 0.90% 0.98% - ------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 2.92% 1.13% 0.86% 1.04% 0.71% - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 119.23% 93.45% 68.31% 43.50% 140.33% - ------------------------------------------------------------------------------------------------------------
- ------------- # Excluding the effect of the payment received from Seligman, total return would have been 12.20%. 16 How to Contact Us The Fund Write Corporate Communications/Investor Relations Department J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 Phone Toll-free in the US (800) 221-7844 Outside the US (212) 850-1864 Account Services Write Shareholder Service Agent/Seligman Group of Funds Seligman Data Corp. For investments P.O. Box 9766 into an account Providence, RI 02940-9766 For non-investment P.O. Box 9759 inquiries Providence, RI 02940-9759 For matters requiring 101 Sabin St. overnight delivery Pawtucket, RI 02860 Phone Non-Retirement Accounts Toll-free in the US (800) 221-2450 Outside the US (212) 682-7600 Retirement Plan Services Toll-free (800) 445-1777
24-hour automated telephone access is available by calling (800) 622-4597 on a touchtone telephone. You will have instant access to price, yield, account balance, most recent transaction, and other information. SELIGMAN ADVISORS, INC. an affiliate of [LOGO] J&WS J. & W. SELIGMAN & CO. INCORPORATED ESTABLISHED 1864 100 Park Avenue, New York, NY 10017 17 For More Information The information below is available, without charge, upon request by calling toll-free (800) 221-2450 in the US or (212) 682-7600 outside the US. You may also call these numbers to request other information about the Fund or to make shareholder inquiries. The Statement of Additional Information ("SAI") contains additional information about the Fund. It is on file with the Securities and Exchange Commission, or SEC, and is incorporated by reference into (is legally part of) this Prospectus. Annual/Semi-Annual Reports contain additional information about the Fund's investments. In the Fund's Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The Fund's SAI and most recent Annual/Semi-Annual Reports are also available, free of charge, at www.seligman.com. This Prospectus is intended for use in connection with certain tax-deferred investment programs and other investors. Information about the Fund, including the Prospectus and SAI, can be viewed and copied at the SEC's Public Reference Room in Washington, DC. For more information about the operation of the Public Reference Room, call (202) 551-8090. The Prospectus, SAI, Annual/Semi-Annual reports and other information about the Fund are also available on the EDGAR Database on the SEC's internet site: www.sec.gov. Copies of this information may also be obtained, upon payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing: Securities and Exchange Commission, Public Reference Section, Washington, D.C. 20549-0102. The website references in this Prospectus are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this Prospectus. SEC File Number: 811-234 EX-99.17(F) 11 c50349a.txt (RIVERSOURCE INVESTMENTS LOGO) (THREADNEEDLE LOGO) PROSPECTUS SUPPLEMENT -- JAN. 22, 2009*
FUND PROSPECTUS DATE FORM # - -------------------------------------------------------------- RiverSource 120/20 Contrarian Equity Fund June 27, 2008 S-6519-99 C RiverSource Absolute Return Currency and Income Fund Dec. 30, 2008 S-6502-99 G RiverSource Balanced Fund Nov. 28, 2008 S-6326-99 AD RiverSource California Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource Disciplined Equity Fund Sept. 29, 2008 S-6263-99 H RiverSource Disciplined International Equity Fund Dec. 30, 2008 S-6506-99 E RiverSource Disciplined Large Cap Growth Fund Nov. 28, 2008 S-6285-99 D RiverSource Disciplined Large Cap Value Fund Nov. 28, 2008 S-6523-99 C RiverSource Disciplined Small and Mid Cap Equity Fund Sept. 29, 2008 S-6505-99 E RiverSource Disciplined Small Cap Value Fund Sept. 29, 2008 S-6397-99 E RiverSource Diversified Bond Fund Oct. 30, 2008 S-6495-99 AC RiverSource Diversified Equity Income Fund Nov. 28, 200 S-6475-99 AD RiverSource Dividend Opportunity Fund Aug. 29, 2008 S-6341-99 AD RiverSource Emerging Markets Bond Fund Dec. 30, 2008 S-6398-99 E RiverSource Equity Value Fund May 30, 2008 S-6382-99 W RiverSource Floating Rate Fund Sept. 29, 2008 S-6501-99 E RiverSource Global Bond Fund Dec. 30, 2008 S-6309-99 AE RiverSource Global Technology Fund Dec. 30, 2008 S-6395-99 N RiverSource Growth Fund Sept. 29, 2008 S-6455-99 AD RiverSource High Yield Bond Fund July 30, 2008 S-6370-99 AD RiverSource Income Builder Basic Income Fund March 31, 2008 S-6394-99 E RiverSource Income Builder Enhanced Income Fund March 31, 2008 S-6394-99 E RiverSource Income Builder Moderate Income Fund March 31, 2008 S-6394-99 E RiverSource Income Opportunities Fund Sept. 29, 2008 S-6266-99 H RiverSource Inflation Protected Securities Fund Sept. 29, 2008 S-6280-99 G RiverSource Intermediate Tax- Exempt Fund Jan. 29, 2008 S-6355-99 T RiverSource Large Cap Equity Fund Sept. 29, 2008 S-6244-99 J RiverSource Large Cap Value Fund Sept. 29, 2008 S-6246-99 J RiverSource Limited Duration Bond Fund Sept. 29, 2008 S-6265-99 H RiverSource Mid Cap Growth Fund Jan. 29, 2008 S-6426-99 AD RiverSource Mid Cap Value Fund Nov. 28, 2008 S-6241-99 K RiverSource Minnesota Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource New York Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource Partners Aggressive Growth Fund July 30, 2008 S-6260-99 J RiverSource Partners Fundamental Value Fund July 30, 2008 S-6236-99 L RiverSource Partners International Select Growth Fund Dec. 30, 2008 S-6243-99 M RiverSource Partners International Select Value Fund Dec. 30, 2008 S-6242-99 M RiverSource Partners International Small Cap Fund Dec. 30, 2008 S-6258-99 K RiverSource Partners Select Value Fund July 30, 2008 S-6240-99 K RiverSource Partners Small Cap Equity Fund July 30, 2008 S-6237-99 L RiverSource Partners Small Cap Growth Fund May 30, 2008 S-6301-99 L RiverSource Partners Small Cap Value Fund July 30, 2008 S-6239-99 L RiverSource Portfolio Builder Aggressive Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Conservative Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Aggressive Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Conservative Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Total Equity Fund March 31, 2008 S-6282-99 G RiverSource Precious Metals and Mining Fund May 30, 2008 S-6142-99 AE RiverSource Real Estate Fund Aug. 29, 2008 S-6281-99 G RiverSource Retirement Plus 2010 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2015 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2020 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2025 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2030 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2035 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2040 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2045 Fund June 27, 2008 S-6507-99 E RiverSource Short Duration U.S. Government Fund July 30, 2008 S-6042-99 AE RiverSource Small Cap Advantage Fund May 30, 2008 S-6427-99 N RiverSource Small Company Index Fund March 31, 2008 S-6357-99 U RiverSource Strategic Allocation Fund Nov. 28, 2008 S-6141-99 AE RiverSource Strategic Income Allocation Fund Nov. 28, 2008 S-6287-99 D RiverSource Tax-Exempt Bond Fund Jan. 29, 2008 S-6310-99 AE RiverSource Tax-Exempt High Income Fund Jan. 29, 2008 S-6430-99 AE RiverSource U.S. Government Mortgage Fund July 30, 2008 S-6245-99 K Threadneedle Emerging Markets Fund Dec. 30, 2008 S-6354-99 V Threadneedle European Equity Fund Dec. 30, 2008 S-6006-99 N Threadneedle Global Equity Fund Dec. 30, 2008 S-6334-99 AG Threadneedle Global Equity Income Fund Dec. 30, 2008 S-6334-99 AG Threadneedle Global Extended Alpha Fund Dec. 30, 2008 S-6334-99 AG Threadneedle International Opportunity Fund Dec. 30, 2008 S-6140-99 AG
- -------------------------------------------------------------------------------- S-6141-10 A (1/09) * Valid until Dec. 30, 2009 Effective February 9, 2009, the section of prospectus "Initial Sales Charge -- Waiver of the sales charge for Class A shares" is replaced with the following: INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - registered representatives and other employees of financial institutions having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource complex of funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or clears trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; - through bank trust departments. - purchases made through "eligible employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charges for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional purchases or categories of purchases. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website at riversource.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. S-6141-10 A (1/09) * Valid until Dec. 30, 2009 (RIVERSOURCE INVESTMENTS LOGO) (THREADNEEDLE LOGO) PROSPECTUS SUPPLEMENT -- NOV. 7, 2008
FUND (Prospectus Date) FORM # - ---------------------------------------------------- RIVERSOURCE 120/20 CONTRARIAN EQUITY FUND (6/27/08) S-6502-99 F RIVERSOURCE 130/30 U.S. EQUITY FUND (6/27/08) S-6502-99 F RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND (6/27/08) S-6502-99 F RIVERSOURCE BALANCED FUND (11/29/07) S-6326-99 AC RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE CASH MANAGEMENT FUND (9/29/08) S-6320-99 AF RIVERSOURCE DISCIPLINED EQUITY FUND (9/29/08) S-6263-99 H RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND (12/28/07) S-6506-99 D RIVERSOURCE DISCIPLINED LARGE CAP GROWTH FUND (11/29/07) S-6285-99 C RIVERSOURCE DISCIPLINED LARGE CAP VALUE FUND (8/1/08) S-6523-99 A RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND (9/29/08) S-6505-99 E RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND (9/29/08) S-6397-99 E RIVERSOURCE DIVERSIFIED BOND FUND (10/30/08) S-6495-99 AC RIVERSOURCE DIVERSIFIED EQUITY INCOME FUND (11/29/07) S-6475-99 AC RIVERSOURCE DIVIDEND OPPORTUNITY FUND (8/29/08) S-6341-99 AD RIVERSOURCE EMERGING MARKETS BOND FUND (12/28/07) S-6398-99 D RIVERSOURCE EQUITY VALUE FUND (5/30/08) S-6382-99 W RIVERSOURCE FLOATING RATE FUND (9/29/08) S-6501-99 E RIVERSOURCE GLOBAL BOND FUND (12/28/07) S-6309-99 AD RIVERSOURCE GLOBAL TECHNOLOGY FUND (12/28/07) S-6395-99 M RIVERSOURCE GROWTH FUND (9/29/08) S-6455-99 AD RIVERSOURCE HIGH YIELD BOND FUND (7/30/08) S-6370-99 AD RIVERSOURCE INCOME BUILDER BASIC INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME OPPORTUNITIES FUND (9/29/08) S-6266-99 H RIVERSOURCE INFLATION PROTECTED SECURITIES FUND (9/29/08) S-6280-99 G RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND (1/29/08) S-6355-99 T RIVERSOURCE LARGE CAP EQUITY FUND (9/29/08) S-6244-99 J RIVERSOURCE LARGE CAP VALUE FUND (9/29/08) S-6246-99 J RIVERSOURCE LIMITED DURATION BOND FUND (9/29/08) S-6265-99 H RIVERSOURCE MID CAP GROWTH FUND (1/29/08) S-6426-99 AD RIVERSOURCE MID CAP VALUE FUND (11/29/07) S-6241-99 J RIVERSOURCE MINNESOTA TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE NEW YORK TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE PARTNERS AGGRESSIVE GROWTH FUND (7/30/08) S-6260-99 J RIVERSOURCE PARTNERS FUNDAMENTAL VALUE FUND (7/30/08) S-6236-99 L RIVERSOURCE PARTNERS INTERNATIONAL SELECT GROWTH FUND (12/28/07) S-6243-99 L RIVERSOURCE PARTNERS INTERNATIONAL SELECT VALUE FUND (12/28/07) S-6242-99 L RIVERSOURCE PARTNERS INTERNATIONAL SMALL CAP FUND (12/28/07) S-6258-99 J RIVERSOURCE PARTNERS SELECT VALUE FUND (7/30/08) S-6240-99 K RIVERSOURCE PARTNERS SMALL CAP EQUITY FUND (7/30/08) S-6237-99 L RIVERSOURCE PARTNERS SMALL CAP GROWTH FUND (5/30/08) S-6301-99 L RIVERSOURCE PARTNERS SMALL CAP VALUE FUND (7/30/08) S-6239-99 L RIVERSOURCE PORTFOLIO BUILDER AGGRESSIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER CONSERVATIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE AGGRESSIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE CONSERVATIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER TOTAL EQUITY FUND (3/31/08) S-6282-99 G RIVERSOURCE PRECIOUS METALS AND MINING FUND (5/30/08) S-6142-99 AE RIVERSOURCE REAL ESTATE FUND (8/29/08) S-6281-99 G RIVERSOURCE RETIREMENT PLUS 2010 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2015 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2020 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2025 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2030 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2035 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2040 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2045 FUND (6/27/08) S-6507-99 E RIVERSOURCE S&P 500 INDEX FUND (3/31/08) S-6434-99 N RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND (7/30/08) S-6042-99 AE RIVERSOURCE SMALL CAP ADVANTAGE FUND (5/30/08) S-6427-99 N RIVERSOURCE SMALL COMPANY INDEX FUND (3/31/08) S-6357-99 U RIVERSOURCE STRATEGIC ALLOCATION FUND (11/29/07) S-6141-99 AD RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND (11/29/07) S-6287-99 C RIVERSOURCE TAX-EXEMPT BOND FUND (1/29/08) S-6310-99 AE RIVERSOURCE TAX-EXEMPT HIGH INCOME FUND (1/29/08) S-6430-99 AE RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND (2/29/08) S-6433-99 AE RIVERSOURCE U.S. GOVERNMENT MORTGAGE FUND (7/30/08) S-6245-99 K THREADNEEDLE EMERGING MARKETS FUND (12/28/07, amended 3/31/08) S-6354-99 U THREADNEEDLE EUROPEAN EQUITY FUND (12/28/07, amended 3/31/08) S-6006-99 M THREADNEEDLE GLOBAL EQUITY FUND (8/1/08) S-6334-99 AF THREADNEEDLE GLOBAL EQUITY INCOME FUND (8/1/08) S-6334-99 AF THREADNEEDLE GLOBAL EXTENDED ALPHA FUND (8/1/08) S-6334-99 AF THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND (12/28/07, amended 3/31/08) S-6140-99 AF
Effective November 7, 2008, RiverSource Investments, LLC, investment manager to the RiverSource complex of funds, and a wholly owned subsidiary of Ameriprise Financial, Inc., announced the closing of its acquisition of J. & W. Seligman & Co. Incorporated ("Seligman Investments"). Seligman Investments served as investment manager to the Seligman group of funds. The RiverSource Complex of Funds disclosure on the Table of Contents page is revised as follows: RIVERSOURCE COMPLEX OF FUNDS The RiverSource complex of funds includes a comprehensive array of funds from RiverSource Investments, including several Seligman funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource complex. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource complex of funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. The first paragraph in the "Investment Manager" section is revised as follows: RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds (including the RiverSource Partners funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Complex of Funds disclosure in the "Buying and Selling Shares" section is revised as follows: RIVERSOURCE COMPLEX OF FUNDS THE RIVERSOURCE COMPLEX OF FUNDS INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, AND "THREADNEEDLE" FUNDS (EACH INDIVIDUALLY A "FUND" OR A "RIVERSOURCE FUND" AND COLLECTIVELY THE "FUNDS" OR THE "RIVERSOURCE FUNDS"). THE RIVERSOURCE COMPLEX OF FUNDS ALSO INCLUDES "SELIGMAN" FUNDS. THE RIVERSOURCE FUNDS AND THE SELIGMAN FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD"), BUT INVESTORS MAY NOT CURRENTLY MAKE EXCHANGES BETWEEN THE SELIGMAN FUNDS AND THE RIVERSOURCE FUNDS. SELIGMAN FUNDS GENERALLY HAVE SEPARATE AND DISTINCT POLICIES AND PROCEDURES FROM THE RIVERSOURCE FUNDS. THE RIVERSOURCE FUNDS SHARE THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THIS SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A RIVERSOURCE FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL RIVERSOURCE FUNDS (INCLUDING "THREADNEEDLE" OR "RIVERSOURCE PARTNERS" FUNDS), OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." AN INVESTOR OR FINANCIAL ADVISOR MAY NOT INCLUDE THE MARKET VALUE OF ANY SELIGMAN FUNDS OWNED BY THE INVESTOR IN THIS CALCULATION. FOR ALL FUNDS EXCEPT RIVERSOURCE CASH MANAGEMENT FUND, RIVERSOURCE S&P 500 INDEX FUND AND RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND: Effective Dec. 1, 2008, the "Investment Options Summary" table in the "Buying and Selling Shares" section is revised as follows: INVESTMENT OPTIONS SUMMARY
CONTINGENT PLAN INITIAL SALES DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(a) CHARGE CHARGE (CDSC) SERVICE FEE(b) FEE - ---------------------------------------------------------------------------------------------------------------------------------- Class A Available to all Yes. Payable at time of No.(c) Yes. No. investors. purchase. Lower or no 0.25% sales charge for larger investments. - ---------------------------------------------------------------------------------------------------------------------------------- Class B(d),(e) Available to all No. Entire purchase price Maximum 5% CDSC during Yes. No. investors. is invested in shares of the first year decreasing 1.00% the fund. to 0% after six years. - ---------------------------------------------------------------------------------------------------------------------------------- Class C Available to all No. Entire purchase price 1% CSDC may apply if you Yes. No. investors. is invested in shares of sell shares within one 1.00% the fund. year after purchase. - ----------------------------------------------------------------------------------------------------------------------------------
CONTINGENT PLAN INITIAL SALES DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(a) CHARGE CHARGE (CDSC) SERVICE FEE(b) FEE - ---------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25% discretionary managed accounts. - ----------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be accessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. (d) See "Buying and Selling Shares, Sales Charges, Class B and Class C -- contingent deferred sales charge alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax- Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another RiverSource fund. FOR ALL FUNDS EXCEPT RIVERSOURCE CASH MANAGEMENT FUND, RIVERSOURCE S&P 500 INDEX FUND AND RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND: Effective Dec. 1, 2008, the following information is added after the section "Sales Charges -- Initial Sales Charge -- Waivers of the sales charge for Class A shares": CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased after Dec. 1, 2008 without a sales charge, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - To which no sales commission or transaction fee was paid to an authorized financial institution at the time of purchase. - Purchased through reinvestment of dividends and capital gain distributions. - In the event of the shareholder's death. - From a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - In an account that has been closed because it falls below the minimum account balance. - That result in mandatory withdrawals from an ERISA plan of a shareholder who is at least 70 1/2 years old. - That result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - Purchased prior to Dec. 1, 2008. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional purchases or categories of purchases. Policies relating to waiving the CDSC may be modified or withdrawn at any time. The following information is added to the section "Exchanges -- Other exchange policies": - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to. FOR ALL FUNDS EXCEPT RIVERSOURCE S&P 500 INDEX FUND: Effective Nov. 21, 2008, the Repurchases paragraph in the "Selling Shares" section is revised as follows: REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of RiverSource funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any RiverSource fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial institution within 90 days of the date your sale request was processed. Contact your financial institution for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. The following paragraph in the "Additional Services and Compensation" section is revised as follows: Distribution and Shareholder Services. RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, and Seligman Advisors, Inc., 100 Park Avenue, New York, New York 10017, (collectively, the distributor), provide underwriting and distribution services to the RiverSource funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial institutions that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the RiverSource funds' policy regarding directed brokerage. S-6495-10 A (11/08) Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED EQUITY FUND PROSPECTUS SEPT. 29, 2008 RIVERSOURCE DISCIPLINED EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. Classes A, B, C, I, R2, R3, R4, R5 and W As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. You may qualify for sales charge discounts on purchases of Class A shares. Please notify your financial institution if you have other accounts holding shares of RiverSource funds to determine whether you qualify for a sales charge discount. See "Buying and Selling Shares" for more information. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.................................................... 3P Objective................................................... 3p Principal Investment Strategies............................. 3p Principal Risks............................................. 4p Past Performance............................................ 6p Fees and Expenses........................................... 10p Other Investment Strategies and Risks....................... 13p Fund Management and Compensation............................ 14p FINANCIAL HIGHLIGHTS........................................ 16P BUYING AND SELLING SHARES................................... S.1 Description of Share Classes................................ S.2 Investment Options -- Classes of Shares ................. S.2 Sales Charges............................................ S.5 Opening an Account....................................... S.11 Exchanging or Selling Shares................................ S.14 Exchanges................................................ S.16 Selling Shares........................................... S.18 VALUING FUND SHARES......................................... S.19 DISTRIBUTIONS AND TAXES..................................... S.19 GENERAL INFORMATION......................................... S.22
RIVERSOURCE COMPLEX OF FUNDS The RiverSource complex of funds includes funds branded "RiverSource," "RiverSource Partners," and "Threadneedle." These funds share the same Board of Directors/Trustees, and the same policies and procedures including those set forth in the service section. RiverSource Variable Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated insurance companies. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource complex of funds. - -------------------------------------------------------------------------------- 2P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS THE FUND OBJECTIVE RiverSource Disciplined Equity Fund (the Fund) seeks to provide shareholders with long-term capital growth. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) will choose equity investments by employing proprietary, disciplined quantitative methods. The investment manager's disciplined quantitative approach is designed to identify companies with: - - Attractive valuations, based on factors such as price-to-earnings ratios; - - Sound balance sheets; or - - Improving outlooks, based on an analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - - The security is overvalued relative to other potential investments. - - The company does not meet the investment manager's performance expectations. The universe of stocks from which the investment manager selects the Fund's investments primarily will be those included in the Fund's benchmark, the S&P 500 Index. In selecting stocks for the Fund to purchase or to sell, the investment manager employs a rigorous process for evaluating the relationship between the risk associated with each security and its potential for positive returns. This process includes factors such as: - - Limits on positions relative to weightings in the benchmark index. - - Limits on sector and industry allocations relative to the benchmark index. - - Limits on size of holdings relative to market liquidity. The investment manager may use derivatives such as futures, options, swaps and forward contracts, to produce incremental earnings, to hedge existing positions, maintain investment efficiency or to increase flexibility. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 3P PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Gains or losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial gain or loss for the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. - -------------------------------------------------------------------------------- 4P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - - the maximum sales charge for Class A shares; - - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - - no sales charge for Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares; and - - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. - -------------------------------------------------------------------------------- 6P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. - -------------------------------------------------------------------------------- CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) (BAR CHART) +9.96% +6.20% +16.47% +5.26% 2004 2005 2006 2007
During the periods shown in the bar chart, the highest return for a calendar quarter was +9.77% (quarter ended Dec. 31, 2004) and the lowest return for a calendar quarter was -3.05% (quarter ended Sept. 30, 2004). 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 Fund's Class A year-to-date return at June 30, 2008 was -13.60%. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 7P AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2007)
SINCE SINCE INCEPTION SINCE INCEPTION SINCE (CLASSES A, INCEPTION (CLASSES R2, INCEPTION 1 YEAR B, C & R4) (CLASS I) R3 & R5) (CLASS W) RiverSource Disciplined Equity Fund: Class A Return before taxes -0.84% +11.52%(a) N/A N/A N/A Return after taxes on distributions -2.16% +10.05%(a) N/A N/A N/A Return after taxes on distributions and sale of fund shares +0.17% +9.34%(a) N/A N/A N/A Class B Return before taxes -0.53% +11.81%(a) N/A N/A N/A Class C Return before taxes +3.59% +12.11%(a) N/A N/A N/A Class I Return before taxes +5.62% N/A +11.65%(b) N/A N/A Class R2 Return before taxes +4.99% N/A N/A +4.89%(c) N/A Class R3 Return before taxes +5.27% N/A N/A +5.15%(c) N/A Class R4 Return before taxes +5.35% +13.17%(a) N/A N/A N/A Class R5 Return before taxes +5.58% N/A N/A +5.46%(c) N/A Class W Return before taxes +5.17% N/A N/A N/A +6.38%(d) S&P 500 Index (reflects no deduction for fees, expenses or taxes) +5.49% +12.66%(e) +10.83%(f) +6.42%(g) +6.42%(g) Lipper Large-Cap Core Funds Index +6.63% +11.48%(e) +10.43%(f) +7.10%(g) +7.10%(g)
(a) Inception date is April 24, 2003. (b) Inception date is July 15, 2004. (c) Inception date is Dec. 11, 2006. (d) Inception date is Dec. 1, 2006. (e) Measurement period started May 1, 2003. (f) Measurement period started Aug. 1, 2004. (g) Measurement period started Dec. 1, 2006. - -------------------------------------------------------------------------------- 8P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. See "Fund Management and Compensation" for more information. Past performance for Class R2 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class B. Past performance for Class R3 and Class W for the period prior to the beginning of operations for that class may be calculated based on the performance of Class A. Past performance for Class R5 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class R4. In each case, the blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 9P FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Expenses are based on the Fund's most recent fiscal year, adjusted to reflect current fees. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 CLASS A CLASS B CLASS C CLASS W Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None 5% 1% None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C CLASS W Management fees(b) 0.53% 0.53% 0.53% 0.53% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% 0.25% Other expenses(c) 0.18% 0.19% 0.19% 0.28% Total annual fund operating expenses 0.96% 1.72% 1.72% 1.06% Fee waiver/expense reimbursement 0.00% 0.00% 0.00% 0.00% Total annual (net) fund operating expenses(d) 0.96% 1.72% 1.72% 1.06%
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(b) 0.53% 0.53% 0.53% 0.53% 0.53% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(c) 0.08% 0.38% 0.37% 0.38% 0.13% Total annual fund operating expenses 0.61% 1.41% 1.15% 0.91% 0.66% Fee waiver/expense reimbursement 0.00% 0.00% 0.00% 0.07% 0.00% Total annual (net) fund operating expenses(d) 0.61% 1.41% 1.15% 0.84% 0.66%
(a) This charge may be reduced depending on the value of your total investments in RiverSource Funds. See "Sales Charges." (b) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.04% for the most recent fiscal year. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. See "Fund Management and Compensation" for more information. (c) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). Other expenses may also include fees and expenses of affiliated and unaffiliated funds (acquired funds) which the Fund indirectly bears when it invests in the acquired funds. The impact of these acquired funds fees and expenses for the most recent fiscal period was less than 0.01%. Because acquired funds will 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 by the Fund with respect to such investments will vary. - -------------------------------------------------------------------------------- 10P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS (d) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.72% for Class I, 1.52% for Class R2, 1.27% for Class R3, 0.88% for Class R4, 0.77% for Class R5 and 1.17% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 11P EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $ 667 $ 863 $1,076 $1,690 Class B $ 675(b) $ 942(b) $1,134(b) $1,833(c) Class C $ 275(b) $ 542 $ 934 $2,035 Class I $ 62 $ 196 $ 341 $ 766 Class R2 $ 144 $ 447 $ 772 $1,696 Class R3 $ 117 $ 366 $ 634 $1,402 Class R4 $ 86 $ 283 $ 498 $1,118 Class R5 $ 67 $ 211 $ 368 $ 826 Class W $ 108 $ 337 $ 586 $1,299
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $ 667 $ 863 $1,076 $1,690 Class B $ 175 $ 542 $ 934 $1,833(b) Class C $ 175 $ 542 $ 934 $2,035 Class I $ 62 $ 196 $ 341 $ 766 Class R2 $ 144 $ 447 $ 772 $1,696 Class R3 $ 117 $ 366 $ 634 $1,402 Class R4 $ 86 $ 283 $ 498 $1,118 Class R5 $ 67 $ 211 $ 368 $ 826 Class W $ 108 $ 337 $ 586 $1,299
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. - -------------------------------------------------------------------------------- 12P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses. Although ETFs are designed to replicate the price and yield of a specified market index, there is no guarantee that an ETF will track its specified market index, which may result in a loss. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated money market fund. See "Cash Reserves" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 13P Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds, and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. - -------------------------------------------------------------------------------- 14P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.53% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. The index against which the Fund's performance is currently measured for purposes of the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. In certain circumstances, the Fund's Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. Portfolio Manager(s). The portfolio managers responsible for the Fund's day-to- day management are: Dimitris J. Bertsimas, Ph.D., Senior Portfolio Manager - - Managed the Fund since 2003. - - Joined RiverSource Investments as a portfolio manager and leader of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. - - Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. - - MS and Ph.D., MIT. Gina K. Mourtzinou, Ph.D., Portfolio Manager - - Managed the Fund since 2003. - - Joined RiverSource Investments as a portfolio manager and member of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where she served as Vice President of Research and Analytics, 1999 to 2002. - - Began investment career as a consultant to asset managers in 1996; became portfolio manager in 2002. - - Ph.D., MIT. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 15P FINANCIAL HIGHLIGHTS THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND THE FUND'S FINANCIAL PERFORMANCE. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THE INFORMATION FOR THE FISCAL YEARS ENDED ON OR AFTER JULY 31, 2007 HAS BEEN DERIVED FROM THE FINANCIAL STATEMENTS AUDITED BY ERNST & YOUNG LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS, IS INCLUDED IN THE ANNUAL REPORT WHICH, IF NOT INCLUDED WITH THIS PROSPECTUS, IS AVAILABLE UPON REQUEST. THE INFORMATION FOR THE PERIODS ENDED ON OR BEFORE JULY 31, 2006 HAS BEEN AUDITED BY OTHER AUDITORS. - -------------------------------------------------------------------------------- 16P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.22 $6.74 $6.70 $5.95 $5.44 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(b) .08(b) .06 .04 .02 Net gains (losses) (both realized and unrealized) (1.00) .97 .35 .90 .63 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.91) 1.05 .41 .94 .65 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.06) (.03) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.43) (.57) (.37) (.19) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.22 $6.74 $6.70 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,067 $1,410 $1,368 $28 $13 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .96% 1.05% 1.05% 1.35% 1.91% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .96% 1.03% 1.02% 1.25% 1.13% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.35% 1.13% .95% .84% .65% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- Total return(g) (13.40%) 15.92% 6.25% 15.95% 11.99% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 17P CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.12 $6.65 $6.62 $5.90 $5.43 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .02 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .34 .86 .61 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .35 .88 .59 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) (.01) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - ----------------------------------------------------------------------------------------------------------- Total distributions (.37) (.52) (.32) (.16) (.12) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.80 $7.12 $6.65 $6.62 $5.90 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $35 $62 $73 $9 $3 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.82% 1.85% 2.13% 2.73% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.82% 2.04% 1.95% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .37% .20% .06% (.16%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - ----------------------------------------------------------------------------------------------------------- Total return(g) (14.07%) 15.18% 5.42% 15.03% 10.95% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 18P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.11 $6.65 $6.62 $5.90 $5.43 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .01 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .35 .87 .61 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .36 .88 .59 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.02) (.02) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - ----------------------------------------------------------------------------------------------------------- Total distributions (.38) (.53) (.33) (.16) (.12) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.78 $7.11 $6.65 $6.62 $5.90 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $3 $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.81% 1.84% 2.13% 2.73% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.81% 2.06% 1.95% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .36% .20% .02% (.17%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - ----------------------------------------------------------------------------------------------------------- Total return(g) (14.11%) 15.14% 5.51% 15.03% 10.96% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 19P CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $7.27 $6.78 $6.73 $5.96 $5.99 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(c) .11(c) .08 .04 .02 Net gains (losses) (both realized and unrealized) (.99) .97 .36 .92 (.05) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.88) 1.08 .44 .96 (.03) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.08) (.08) (.03) -- Distributions from realized gains (.37) (.51) (.31) (.16) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.46) (.59) (.39) (.19) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.93 $7.27 $6.78 $6.73 $5.96 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $391 $441 $252 $82 $9 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .61% .70% .72% .91% 1.27%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .61% .67% .70% .91% .93%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.69% 1.47% 1.41% 1.19% 5.35%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - ----------------------------------------------------------------------------------------------------------- Total return (12.98%) 16.29% 6.73% 16.29% (.50%)(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from July 15, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 20P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $7.21 $7.57 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .20 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .23 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.37) (.51) - ----------------------------------------------------------------------------------------------------------- Total distributions (.41) (.59) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.21 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.41% 1.49%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.16% 1.48%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .55%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - ----------------------------------------------------------------------------------------------------------- Total return (13.51%) 3.31%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 21P CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(A) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $7.22 $7.57 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .04 Net gains (losses) (both realized and unrealized) (.99) .20 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.90) .24 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.37) (.51) - --------------------------------------------------------------------------------------------------------- Total distributions (.43) (.59) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.89 $7.22 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.15% 1.24%(f) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .90% 1.22%(f) - --------------------------------------------------------------------------------------------------------- Net investment income (loss)(f) 1.41% .81%(f) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - --------------------------------------------------------------------------------------------------------- Total return (13.26%) 3.46%(i) - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 22P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(A) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.25 $6.76 $6.71 $5.95 $5.45 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .09(b) .07 .05 .03 Net gains (losses) (both realized and unrealized) (1.00) .98 .36 .91 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.90) 1.07 .43 .96 .64 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.07) (.04) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.44) (.58) (.38) (.20) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.91 $7.25 $6.76 $6.71 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $126 $158 $224 $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .91% .95% .87% 1.18% 1.76% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .84% .87% .84% 1.06% .98% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.47% 1.29% 1.10% 1.03% .78% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- Total return (13.26%) 16.15% 6.48% 16.25% 11.87% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 23P CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(A) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $7.24 $7.57 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .06 Net gains (losses) (both realized and unrealized) (1.00) .20 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.89) .26 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) Distributions from realized gains (.37) (.51) - --------------------------------------------------------------------------------------------------------- Total distributions (.45) (.59) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.90 $7.24 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .66% .75%(f) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .66% .74%(f) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.66% 1.28%(f) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - --------------------------------------------------------------------------------------------------------- Total return (13.09%) 3.76%(i) - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 24P RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(A) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $7.22 $7.46 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .32 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .35 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.08) Distributions from realized gains (.37) (.51) - --------------------------------------------------------------------------------------------------------- Total distributions (.44) (.59) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.86 $7.22 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,355 $745 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.06% 1.18%(f) - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.06% 1.13%(f) - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.22% .59%(f) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - --------------------------------------------------------------------------------------------------------- Total return (13.52%) 5.01%(i) - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 PROSPECTUS 25P RIVERSOURCE COMPLEX OF FUNDS THE RIVERSOURCE COMPLEX OF FUNDS INCLUDES FUNDS BRANDED "RIVERSOURCE," "RIVERSOURCE PARTNERS," AND "THREADNEEDLE" (EACH INDIVIDUALLY, A "FUND" OR A "RIVERSOURCE FUND" AND COLLECTIVELY, THE "FUNDS" OR THE "RIVERSOURCE FUNDS"). THESE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD"), AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THIS SERVICE SECTION. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL RIVERSOURCE FUNDS (INCLUDING "THREADNEEDLE" OR "RIVERSOURCE PARTNERS" BRANDED FUNDS), OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The RiverSource funds are generally available directly and through broker-dealers, banks, and other financial intermediaries or institutions (financial institutions), including certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial institutions. THESE FINANCIAL INSTITUTIONS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial institutions through which your shares of the fund(s) are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial institution through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial institutions to carry out its obligations to its customers. - -------------------------------------------------------------------------------- S.1 S-6400-4 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The RiverSource funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial institution can help you with this decision. The following table shows the key features of each share class. (THE COVER OF THIS PROSPECTUS INDICATES WHICH SHARE CLASSES ARE CURRENTLY OFFERED FOR THIS FUND.) INVESTMENT OPTIONS SUMMARY
CONTINGENT PLAN INITIAL DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(A) SALES CHARGE CHARGE (CDSC) SERVICE FEE(B) FEE - ------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No. Yes. No. all investors. time of purchase. 0.25% Lower or no sales charge for larger investments. - ------------------------------------------------------------------------------------------------------------- Class Available to No. Entire Maximum 5% CDSC during Yes. No. B(c) all investors. purchase price is the first year decreasing 1.00% invested in to 0% after six years. shares of the fund. - ------------------------------------------------------------------------------------------------------------- Class C Available to No. Entire 1% CDSC may apply if you Yes. No. all investors. purchase price is sell shares within one 1.00% invested in year after purchase. shares of the fund. - ------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. - -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- S.2
INVESTMENT OPTIONS SUMMARY (CONTINUED) CONTINGENT PLAN INITIAL DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(A) SALES CHARGE CHARGE (CDSC) SERVICE FEE(B) FEE - ------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25% discretionary managed accounts. - -------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) See "Buying and Selling Shares, Sales Charges, Class B and Class C -- contingent deferred sales charge alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing a fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25% of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial institutions also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial institutions that sell Class B shares, and to pay for other distribution related expenses. Financial institutions may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INSTITUTION OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES WILL BE RETAINED BY THE DISTRIBUTOR. - -------------------------------------------------------------------------------- S.3 PLAN ADMINISTRATION FEE Class R2, Class R3 and Class R4 shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE CLASS A, CLASS B AND CLASS C SHARES New purchases of Class B shares will not be permitted if your Rights of Accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your Rights of Accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation (ROA)" for information on Rights of Accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares in the ninth year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial institution. CLASS I SHARES. The following eligible investors may purchase Class I shares: - - Any fund distributed by RiverSource Distributors, Inc., if the fund seeks to achieve its investment objective by investing primarily in shares of the fund and other RiverSource funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. CLASS R SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4 and Class R5 shares: - - Qualified employee benefit plans. - - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - -------------------------------------------------------------------------------- S.4 - - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - - Health Savings Accounts (HSAs) created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds). - - Bank Trust departments. Class R shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SAR- SEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. CLASS W SHARES. The following eligible investors may purchase Class W shares: - - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INSTITUTIONS TO ACCEPT INVESTMENTS FROM OTHER PURCHASERS NOT LISTED ABOVE. For more information, see the SAI. SALES CHARGES CLASS A -- INITIAL SALES CHARGE ALTERNATIVE Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re-allows a portion of the sales charge to the financial institution through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly (not through a separately authorized financial institution). Sales charges vary depending on the amount of your purchase. - -------------------------------------------------------------------------------- S.5 SALES CHARGE* FOR CLASS A SHARES:
MAXIMUM AS A % OF AS A % OF NET RE-ALLOWANCE AS A % TOTAL MARKET VALUE PURCHASE PRICE** AMOUNT INVESTED OF PURCHASE PRICE - ---------------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000 -- $99,999 4.75 4.99 4.00 $100,000 -- $249,999 3.50 3.63 3.00 $250,000 -- $499,999 2.50 2.56 2.15 $500,000 -- $999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00***
* Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. ** Purchase price includes the sales charge. ***Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial institution the following: a sales commission of up to 1.00% for a sale with a total market value of $1,000,000 to $2,999,999; a sales commission up to 0.50% for a sale of $3,000,000 to $9,999,999; and a sales commission up to 0.25% for a sale of $10,000,000 or more. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group, as described below. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: - - Your current investment in a fund; and - - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other RiverSource funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21 sharing a mailing address. The following accounts are eligible to be included in determining the sales charge on your purchase: - - Individual or joint accounts; - - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - -------------------------------------------------------------------------------- S.6 - - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in determining the sales charge on your purchase: - - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - - Investments in Class D, Class E, Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - - Charitable and irrevocable trust accounts. If you purchase RiverSource fund shares through different financial institutions, and you want to include those assets toward a reduced sales charge, you must inform your financial institution in writing about the other accounts when placing your purchase order. Contact your financial institution to determine what information is required. Unless you provide your financial institution in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial institution provide this information to the fund when placing your purchase order. For more information on rights of accumulation, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial institution. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. - -------------------------------------------------------------------------------- S.7 Existing ROA Example. Shareholder currently has $60,000 ROA in RiverSource funds. Shareholder completes an LOI to invest $100,000 in RiverSource funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in RiverSource funds' Class A shares in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial institution provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial institution or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - - current or retired Board members, officers or employees of RiverSource funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - current or retired Ameriprise Financial Services, Inc. (Ameriprise Financial Services) financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - registered representatives and other employees of financial institutions having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - - portfolio managers employed by subadvisers of the RiverSource funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - retirement plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code, if those purchases are made through a broker, agent, or other financial institution. - - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another RiverSource fund; - through or under a wrap fee product or other investment product sponsored by a financial institution having a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; - through bank trust departments. - - shareholders whose original purchase was in a Strategist fund merged into a RiverSource fund in 2000. - -------------------------------------------------------------------------------- S.8 The distributor may, in its sole discretion, authorize the waiver of sales charges for additional purchases or categories of purchases. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide your financial institution with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial institution provide this information to the fund when placing your purchase order. Because the current prospectus is available on riversource.com free of charge, RiverSource Investments does not separately disclose information regarding breakpoint discounts on the website. CLASS B AND CLASS C -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial institutions that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Purchases made prior to May 21, 2005 age on a calendar year basis. Purchases made beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. - -------------------------------------------------------------------------------- S.9 Class B shares purchased prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased beginning May 21, 2005 will convert to Class A shares one month after the completion of the eighth year of ownership. FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial institutions that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C, if the amount you sell causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC will be based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - - in the event of the shareholder's death; - - held in trust for an employee benefit plan; or - - held in IRAs or certain qualified plans, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: - at least 59 1/2 years old AND - taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR - selling under an approved substantially equal periodic payment arrangement. - -------------------------------------------------------------------------------- S.10 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares in the event of the shareholder's death. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5 AND CLASS W -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W, there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the financial institution through which you are investing in the fund may not be able to open an account for you. If the financial institution through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial institution. You may establish and maintain your account with an authorized financial institution or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts maintained by the fund will be supported by the fund's transfer agent. METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION ALL REQUESTS The financial institution through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial institution through which you buy shares may establish an account directly with the fund. To establish an account in this fashion, complete a RiverSource funds account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained at riversource.com or may be requested by calling - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.11 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) (888) 791-3380. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FUNDS P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FUNDS C/O BFDS 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. - -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (888) 791-3380 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial institution may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY EXCHANGE Call (888) 791-3380 or send signed written instructions to the address above. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.12 MINIMUM INVESTMENT AND ACCOUNT BALANCE
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT RIVERSOURCE THREADNEEDLE THOSE LISTED TO DISCIPLINED GLOBAL THE RIGHT TAX QUALIFIED SMALL CAP EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W - ------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $5,000 $10,000 $500 - ------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None - ------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $300 None $2,500 $5,000 $500
* If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. - -------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT RIVERSOURCE THREADNEEDLE THOSE LISTED TO DISCIPLINED GLOBAL THE RIGHT TAX QUALIFIED SMALL CAP EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W - ------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100 $100 $5,000 $10,000 $500 - ------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None - ------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None None $2,500 $5,000 $500
** If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. - -------------------------------------------------------------------------------- These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial institution for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 10 days to clear. If you request a sale within 10 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. - -------------------------------------------------------------------------------- S.13 EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial institution process your transaction. If your account is maintained directly with your financial institution, you must contact that financial institution to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION ALL REQUESTS You can exchange or sell shares by having your financial institution process your transaction. The financial institution through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FUNDS P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FUNDS C/O BFDS 30 DAN ROAD CANTON, MA 02021-2809 Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.14 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than yourself. - Your address has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial institution providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. - -------------------------------------------------------------------------------- BY TELEPHONE Call (888) 791-3380. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $100,000 per day. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.15 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (888) 791-3380 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: $100 Your bank or financial institution may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY SCHEDULED PAYOUT PLAN You may elect to receive regular periodic payments through an automatic sale of shares. See the SAI for more information. - -------------------------------------------------------------------------------- EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered RiverSource fund without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. FUNDS THAT INVEST IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND - -------------------------------------------------------------------------------- S.16 THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "VALUING FUND SHARES" FOR A DISCUSSION OF THE RIVERSOURCE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE RIVERSOURCE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial institution for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial institutions in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - - The fund may rely on the monitoring policy of a financial institution, for example, a retirement plan administrator or similar authorized financial institution authorized to distribute the funds, if it determines the policy and procedures of such financial institutions are sufficient to protect the fund and its shareholders. - - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial institution. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - -------------------------------------------------------------------------------- S.17 - - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial institutions where market timing activity may not always be successfully detected. Other exchange policies: - - Exchanges must be made into the same class of shares of the new fund. - - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - - Once the fund receives your exchange request, you cannot cancel it. - - Shares of the new fund may not be used on the same day for another exchange or sale. - - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale and use all or part of the sale proceeds to purchase new shares in the same account, fund and class from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV, up to the amount of the sale proceeds, instead of paying a sales charge on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. In order for you to take advantage of this repurchase waiver, you must notify your financial institution within 90 days of the date your sale request was processed. Contact your financial institution for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. - -------------------------------------------------------------------------------- S.18 VALUING FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, contact your financial institution. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations. Market quotations are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund has significant holdings of foreign securities or small cap stocks that may trade infrequently, fair valuation may be used more frequently than for other funds. The RiverSource funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's shares may change on days when shareholders will not be able to purchase or sell the fund's shares. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. - -------------------------------------------------------------------------------- S.19 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund, unless you request distributions in cash. The financial institution through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. - -------------------------------------------------------------------------------- S.20 For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91(st) day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91(st) day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- S.21 GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial institution to determine the availability of the RiverSource funds. RiverSource funds may only be purchased or sold directly or through financial institutions authorized by the distributor to offer the RiverSource funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE FUNDS. If you set up an account at a financial institution that does not have, and is unable to obtain, a selling agreement with the distributor of the RiverSource funds, you will not be able to transfer RiverSource fund holdings to that account. In that event, you must either maintain your RiverSource fund holdings with your current financial institution, find another financial institution with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the RiverSource funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Custody Services. Ameriprise Trust Company, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides custody services to all but a limited number of the RiverSource funds, for which U.S. Bank National Association, The Bank of New York or JP Morgan Chase Bank, N.A. provide custody services. In addition to paying the custodian for these services, the RiverSource funds pay for certain transaction fees and out-of-pocket expenses incurred while providing custody services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." - -------------------------------------------------------------------------------- S.22 Distribution and Shareholder Services. RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the distributor or RiverSource Distributors), provides underwriting and distribution services to the RiverSource funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor re-allows the remainder of these fees (or the full fee) to the financial institutions that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the RiverSource funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the RiverSource funds. The RiverSource funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial institutions that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. Plan Administration Services. Under a Plan Administration Services Agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INSTITUTIONS The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial institutions, including inter-company allocation of resources or - -------------------------------------------------------------------------------- S.23 payments to affiliated broker-dealers, in connection with agreements between the distributor and financial institutions pursuant to which these financial institutions sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial institution may elevate the prominence or profile of the fund within the financial institution's organization, and may provide the distributor and its affiliates with preferred access to the financial institution's registered representatives or preferred access to the financial institution's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial institution's pecuniary interest and its duties to its customers, for example, if the financial institution receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial institution or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial institution, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial institution, and the access the distributor or other representatives of the fund may have within the financial institution for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial institution and its customers. - -------------------------------------------------------------------------------- S.24 These payments are usually calculated based on a percentage of fund assets owned through the financial institution and/or as a percentage of fund sales attributable to the financial institution. Certain financial institutions require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial institution charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial institution (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial institutions and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of RiverSource fund assets (in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker-dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial institutions or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial institutions and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial institution to the extent the cost of such services was less than the actual expense of the service. - -------------------------------------------------------------------------------- S.25 The financial institution through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial institution may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial institution. The SAI contains additional detail regarding payments made by the distributor to financial institutions. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial institutions for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial institutions for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial institution to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION MANAGER OF MANAGERS EXEMPTION. The RiverSource funds have received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. - -------------------------------------------------------------------------------- S.26 AFFILIATED PRODUCTS. RiverSource Investments also serves as investment manager to RiverSource funds which are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other RiverSource funds (Funds of Funds) and to discretionary managed accounts that invest exclusively in RiverSource funds (collectively referred to as "affiliated products"). These affiliated products, individually or collectively, may own a significant percentage of the fund's outstanding shares. The fund may experience relatively large purchases or redemptions from the affiliated products. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, the fund may experience increased expenses as it buys and sells securities to manage transactions for the affiliated products. In addition, because the affiliated products may own a substantial portion of the fund, a redemption by one or more affiliated products could cause the fund's expense ratio to increase as the fund's fixed costs would be spread over a smaller asset base. RiverSource Investments monitors expense levels and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in RiverSource Short- Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. - -------------------------------------------------------------------------------- S.27 LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. - -------------------------------------------------------------------------------- S.28 THIS PAGE LEFT BLANK INTENTIONALLY PRIVACY POLICY RiverSource funds are committed to respecting shareholders' rights of privacy and we have adopted the following policy to maintain the confidentiality of the information you share with us: INFORMATION WE COLLECT We know that you expect us to conduct and process your business in a manner that is both accurate and efficient. To do so, we may collect information about you, such as your name, address, Social Security number and the names of your beneficiaries. This information is collected from applications or other forms that you provide to us or the financial institutions that distribute the RiverSource funds. We also collect information about your transactions in the RiverSource funds. Financial institutions which distribute the RiverSource funds and service your account, whether or not affiliated with us, may have a customer relationship with you and may independently collect information from you. This Privacy Policy does not apply to their independent collection or use of information about you. INFORMATION WE DISCLOSE We do not disclose any nonpublic personal information about our customers or former customers to anyone, except in two circumstances. We disclose information to companies, whether or not affiliated with us, that help us by providing services to you, including companies that market funds on our behalf. We also disclose information when we are permitted or required by law to do so, such as when information is provided to the IRS for tax purposes. SECURITY To safeguard your personal information, we insist that the distributors and other companies that perform services for us limit access to your personal information to authorized employees and agents, and maintain appropriate physical, electronic, and procedural safeguards. This privacy policy applies to each fund in the RiverSource family of mutual funds and to RiverSource Investments, LLC, RiverSource Distributors, Inc. and RiverSource Service Corporation, with respect to the investment advisory, distribution, and shareholder services each may provide to the RiverSource funds. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE PROSPECTUS RiverSource Funds can be purchased from authorized financial institutions. The fund can be found under the "RiverSource" banner in most mutual fund quotations. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Funds or your financial institution. To make a shareholder inquiry, contact the financial institution through whom you purchased the fund. RiverSource Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (888) 791-3380 RiverSource Funds information available at RiverSource Investments website address: riversource.com/funds You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-0102. Investment Company Act File #811-2111 TICKER SYMBOL Class A: AQEAX Class B: AQEBX Class C: RDCEX Class I: ALEIX Class R2: -- Class R3: RSDEX Class R4: RQEYX Class R5: RSIPX Class W: RDEWX
(RIVERSOURCE INVESTMENTS LOGO) S-6263-99 H (9/08) EX-99.17(G) 12 dex9917gcsfsai08.txt SUPPLEMENT DATED MARCH 16, 2009 TO THE PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION OF EACH OF THE FOLLOWING FUNDS: Prospectuses, each dated February 2, 2009, for Seligman Core Fixed Income Fund, Inc., Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series and Seligman TargetHorizon ETF Portfolios, Inc. Prospectuses, each dated May 1, 2008, for Seligman Asset Allocation Series, Inc., Seligman Cash Management Fund, Inc., Seligman Capital Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman Portfolios, Inc., Seligman Value Fund Series, Inc. and Tri-Continental Corporation (each, a "Fund", and collectively, the "Funds") On March 13, 2009, without admitting or denying any violations of law or wrongdoing, J. & W. Seligman & Co. Incorporated (Seligman), Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the "Seligman Parties") entered into a stipulation of settlement with the Office of the Attorney General of the State of New York ("NYAG") and settled the claims made by the NYAG in September 2006 relating to allegations of frequent trading in certain Seligman Funds. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds as follows: $150,000 to Seligman Global Growth Fund, $550,000 to Seligman Global Smaller Companies Fund, $7.7 million to Seligman Communications and Information Fund and $2.9 million to Seligman Global Technology Fund. These settlement payments are reflected in the net asset values of these four Seligman Funds. This settlement resolves all outstanding matters between the Seligman Parties and the NYAG. Supplement, dated November 7, 2008 to the Statement of Additional Information, dated May 1, 2008, of Seligman Common Stock Fund, Inc. (the "Fund") Today, November 7, 2008, RiverSource Investments, LLC ("RiverSource Investments"), a wholly owned subsidiary of Ameriprise Financial, Inc., announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated. With the Acquisition completed and shareholders of the Fund having previously approved (at a Special Meeting held on November 3, 2008) a new investment management services agreement between the Fund and RiverSource Investments, RiverSource Investments is the new investment manager of the Fund effective November 7, 2008. In connection with the Acquisition, the Fund's portfolio managers have been changed. This change also results in modification to the investment process used for the Fund. The foregoing changes are reflected in a Supplement to the Fund's prospectuses dated November 7, 2008. Effective November 7, 2008, the following changes are hereby made to the Fund's Statement of Additional Information ("SAI"). Capitalized terms used but not defined in this Supplement shall have the meanings given to such terms in the Fund's SAI. The following information is hereby added under the caption "Fund History": As of November 7, 2008, the Fund is part of the RiverSource complex of funds. The RiverSource complex of funds includes a comprehensive array of funds managed by RiverSource Investments, LLC ("RiverSource Investments"), including the Fund and the other Seligman Mutual Funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments ("Threadneedle"), to expand the array of funds offered in the RiverSource complex. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board) and the same policies and procedures. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, as set forth in the Fund's prospectus, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds. The first sentence under the caption "Description of the Fund and its Investments and Risks - Investment Strategies and Risks - Equity-Linked Securities" is hereby replaced with the following: The Fund may invest up to 10% of its assets in equity-linked securities (each, an "ELS") as part of its overall investment strategy. The following information is added under the caption "Description of the Fund and its Investments and Risks - Investment Strategies and Risks": Futures Contracts. The Fund may utilize index futures contracts. Futures contracts, which trade on a securities exchange, are standardized as to quantity, delivery date and settlement conditions, including specific securities acceptable for delivery against the futures contract. In the case of index futures, settlement is made in cash based on the value of a specified underlying index. More commonly, futures contracts are closed out prior to expiration by an offsetting purchase or sale. Since the counterparty to every futures contact is a securities exchange, offsetting transactions are netted to close out positions. The Fund may incur a loss if the closing transaction occurs at an unfavorable price as compared with that of the opening trade (including transaction costs). There can be no assurance that the Fund will be able to enter into an offsetting transaction with respect to a particular contract at a particular time. If the Funds are not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the position, including the maintenance of margins, which could result in the Fund incurring substantial losses. Margin deposits must be made at the time a futures contract position is acquired. The Fund is required to deposit in a segregated account, typically with its custodian, in the name of the futures broker through whom the transaction was effected, "initial margin" consisting of cash and/or other appropriate liquid assets in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Initial margin on futures contracts is returned to the Fund at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, the Fund may be required by a securities exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action. Subsequent "variation margin" payments are made daily to and from the futures broker as the value of the futures position varies, a process known as "marking-to-market." When the Fund purchases or sells futures contracts, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If the Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Under certain circumstances, exchanges upon which futures contracts trade may establish daily limits on the amount that the price of a future contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions. If the Fund were unable to liquidate a futures contract position, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the futures contract or to designate liquid assets on its books and records. Certain characteristics of the futures markets might increase the risk that movements in the prices of futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, since initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the futures markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions. The Fund would deal only in standardized contracts on recognized exchanges. Each exchange guarantees performance under contract provisions through a clearing corporation, a nonprofit organization managed by the exchange membership. Options on Futures. The Fund may utilize options on index futures ("options on futures"). Options on futures are effectively options on the instrument that underlies a futures contract. A call option on a futures contract gives the holder the right to enter into a long futures contract at a fixed futures price. A put option on a futures contract gives the holder the right to enter into a short futures contract at a fixed futures price. Purchasers and sellers of options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an offsetting option on the same futures contract. There is also risk that the Fund may have difficulty in closing out positions in options on futures. Although the Fund intends to close out any positions on a securities market, there can be no assurance that such a market will exist for a particular contract at a particular time. Under certain circumstances, exchanges upon which futures are traded may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price. Once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions held by the Fund. Options on futures held by the Fund, to the extent not exercised, will expire and the Fund would experience a loss to the extent of any premium paid for the option. If the Fund were unable to liquidate an option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. Certain characteristics of the futures market might increase the risk that movements in the prices of options on futures contracts might not correlate perfectly with movements in the prices of any exposure being hedged. For example, all participants in the options on futures markets are subject to daily variation margin calls and might be compelled to liquidate options on futures positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the futures markets. This participation also might cause temporary price distortions. In addition, activities of traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions. Quantitative Model Risk. Securities selected using quantitative methods may perform differently from the market as a whole as a result of the factors used in the quantitative method, the weight placed on each factor, and changes in the factors historical trends. The quantitative methodology employed by the investment manager has been extensively tested using historical securities market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the fund to achieve its objective. The information under the caption "Management of the Fund - Management Information" is hereby superseded and replaced with the following information: 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. On November 7, 2008, RiverSource Investments, a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise"), announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("Seligman"), 100 Park Avenue, New York, New York 10017. With the Acquisition completed and shareholders having previously elected (at a Special Meeting held on November 3, 2008) ten new directors (collectively, the "New Board Members"), the New Board Members took office on November 7, 2008. The New Board Members are: Kathleen Blatz, Arne H. Carlson, Pamela G. Carlton, Patricia M. Flynn, Anne P. Jones, Jeffrey Laikind, Stephen R. Lewis, Jr., Catherine James Paglia, Alison Taunton-Rigby and William F. Truscott. Messrs. Leroy C. Richie and John F. Maher, who were members of the Board prior to November 7, 2008, will continue to serve on the Board after the Acquisition, which would result in an overall increase from ten directors to 12 directors. Information with respect to the members of the Board is shown below. Each member oversees 163 portfolios in the fund complex managed by RiverSource Investments, which includes 59 Seligman Funds and 104 RiverSource Funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. Independent Board Members
Position with Fund and Length of Time Principal Occupation Name, Address, Age Served During Last Five Years Other Directorships Committee Memberships - ------------------ ------------------- ----------------------------- ------------------- ------------------------ Kathleen Blatz Board member since Attorney; Chief Justice, None Board Governance, 901 S. Marquette Ave. November 7, 2008 Minnesota Supreme Court, Compliance, Investment Minneapolis, MN 55402 1998-2006 Review, Joint Audit Age 54 Arne H. Carlson Board member since Chair, RiverSource Funds, None Board Governance, 901 S. Marquette Ave. November 7, 2008 1999-2006; former Governor of Compliance, Contracts, Minneapolis, MN 55402 Minnesota Executive, Investment Age 73 Review Pamela G. Carlton Board member since President, Springboard- None Distribution, Investment 901 S. Marquette Ave. November 7, 2008 Partners in Cross Cultural Review, Joint Audit Minneapolis, MN 55402 Leadership (consulting Age 53 company) Patricia M. Flynn Board member since Trustee Professor of None Board Governance, 901 S. Marquette Ave. November 7, 2008 Economics and Management, Contracts, Investment Minneapolis, MN 55402 Bentley College; Former Dean, Review Age 57 McCallum Graduate School of Business, Bentley College Anne P. Jones Board member since Attorney and Consultant None Board Governance, 901 S. Marquette Ave. November 7, 2008 Compliance, Executive, Minneapolis, MN 55402 Investment Review, Joint Age 73 Audit Jeffrey Laikind, CFA Board member since Former Managing Director, American Distribution, Investment 901 S. Marquette Ave. November 7, 2008 Shikiar Asset Management Progressive Review, Joint Audit Minneapolis, MN 55402 Insurance Age 72
Independent Board Members
Position with Fund and Length of Time Principal Occupation Name, Address, Age Served During Last Five Years Other Directorships Committee Memberships - ------------------ ------------------- ----------------------------- ------------------- ------------------------ Stephen R. Lewis, Jr. Board member since President Emeritus and Valmont Industries, Board Governance, 901 S. Marquette Ave. November 7, 2008 Professor of Economics, Inc. (manufactures Compliance, Contracts, Minneapolis, MN 55402 Carleton College irrigation systems) Executive, Investment Age 69 Review John F. Maher Board member since Retired President and Chief None Distribution, Investment 901 S. Marquette Ave. 2006 Executive Officer and former Review, Joint Audit Minneapolis, MN 55402 Director, Great Western Age 64 Financial Corporation (bank holding company) and its principal subsidiary, Great Western Bank (federal savings bank) Catherine James Paglia Board member since Director, Enterprise Asset None Compliance, Contracts, 901 S. Marquette Ave. November 7, 2008 Management, Inc. (private Distribution, Executive, Minneapolis, MN 55402 real estate and asset Investment Review Age 55 management company) Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. Lead Outside Contracts, Distribution, 901 S. Marquette Ave. 2000 (law firm); Director, Director, Digital Investment Review Minneapolis, MN 55402 Vibration Control Ally, Inc. (digital Age 66 Technologies, LLC (auto imaging); and vibration technology); Infinity, Inc. (oil Director and Chairman, and gas exploration Highland Park Michigan and production); Economic Development Corp; Director, OGE and Chairman, Detroit Public Energy Corp. Schools Foundation. Formerly, (energy and energy Chairman and Chief Executive services provider Officer, Q Standards offering physical Worldwide, Inc. (library of delivery and technical standards); related services Director, Kerr- McGee for both Corporation (diversified electricity and energy and chemical company); natural gas). Trustee, New York University Law Center Foundation; Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. Alison Taunton-Rigby Board member since Chief Executive Officer and Idera Contracts, Distribution, 901 S. Marquette Ave. November 7, 2008 Director, RiboNovix, Inc. Pharmaceuticals, Executive, Investment Minneapolis, MN 55402 since 2003 (biotechnology); Inc. Review Age 64 former President, Forester (biotechnology); Biotech Healthways, Inc. (health management programs)
Board Member Affiliated With RiverSource Investments*
Position with Fund and Length of Time Principal Occupation Name, Address, Age Served During Last Five Years Other Directorships Committee Memberships - ------------------ ------------------- ----------------------------- ------------------- ------------------------ William F. Truscott Board member and President - U.S. Asset None Investment Review 53600 Ameriprise Vice President Management and Chief Financial Center since November 7, Investment Officer, Minneapolis, MN 55474 2008 Ameriprise Financial, Inc. Age 47 and President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; Director, President and Chief Executive Officer, Ameriprise Certificate Company and; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc.; and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The 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 other officers are: Fund Officers
Position held with the Name, address, age Fund and length of service Principal occupation during past five years - ------------------ ----------------------------- ---------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President - Asset Management, Products 172 Ameriprise Financial November 7, 2008 and Marketing, RiverSource Investments, LLC and; Director and Center Vice President - Asset Management, Products and Marketing, Minneapolis, MN 55474 RiverSource Distributors, Inc. since 2006; Managing Director and Age 42 Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 Michelle M. Keeley Vice President since Executive Vice President - Equity and Fixed Income, Ameriprise 172 Ameriprise Financial November 7, 2008 Financial, Inc. and RiverSource Investments, LLC since 2006; Center Vice President - Investments, Ameriprise Certificate Company Minneapolis, MN 55474 since 2003; Senior Vice President - Fixed Income, Ameriprise Age 44 Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 Amy K. Johnson Vice President since Vice President - Asset Management and Trust Company Services, 5228 Ameriprise Financial November 7, 2008 RiverSource Investments, LLC since 2006; Vice President - Center Operations and Compliance, RiverSource Investments, LLC, 2004- Minneapolis, MN 55474 2006; Director of Product Development - Mutual Funds, Ameriprise Age 42 Financial, Inc., 2001-2004 Scott R. Plummer Vice President, General Vice President and Chief Counsel - Asset Management, Ameriprise 5228 Ameriprise Financial Counsel and Secretary since Financial, Inc. since 2005; Chief Counsel, RiverSource Center November 7, 2008 Distributors, Inc. and Chief Legal Officer and Assistant Minneapolis, MN 55474 Secretary, RiverSource Investments, LLC since 2006; Vice Age 49 President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President - Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004
Fund Officers
Position held with the Name, address, age Fund and length of service Principal occupation during past five years - ------------------ ----------------------------- ---------------------------------------------------------------- Lawrence P. Vogel Treasurer since 2000 Treasurer, RiverSource Investments, LLC (J. & W. Seligman & Co. 100 Park Avenue, Incorporated prior to Nov. 2008), of each of the investment New York, NY 10017 companies of the Seligman Group of Funds since 2000; and Age 51 Treasurer, Seligman Data Corp. since 2000. Senior Vice President, Investment Companies, J. & W. Seligman & Co. Incorporated of each of the investment companies of the Seligman group of funds 1992 to 2008. Eleanor T.M. Hoagland Chief Compliance Officer Chief Compliance Officer, RiverSource Investments, LLC (J. & W. 100 Park Avenue, since 2004; Money Laundering Seligman & Co. Incorporated prior to Nov. 2008), for each of the New York, NY 10017 Prevention Officer and investment companies of the Seligman group of funds since 2004; Age 56 Identity Theft Prevention Money Laundering Prevention Officer and Identity Theft Officer since 2008. Prevention Officer, RiverSource Investments, LLC for each of the investment companies of the Seligman group of funds since November 2008. Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the investment companies of the Seligman group of funds 2004 to 2008.
As of November 7, 2008, the Board has organized the following committees (accordingly, no committee meetings have been held prior to such date): Board Governance Committee. Recommends to the Board the size, structure and composition of the Board and its committees; the compensation to be paid to members of the Board; and a process for evaluating the Board's performance. The committee also reviews candidates for Board membership including candidates recommended by shareholders. The committee also makes recommendations to the Board regarding responsibilities and duties of the Board, oversees proxy voting and supports the work of the chairperson of the Board in relation to furthering the interests of the Fund and their shareholders on external matters. Compliance Committee. This committee supports the Fund's maintenance of a strong compliance program by providing a forum for independent Board members to consider compliance matters impacting the Fund or its key service providers; developing and implementing, in coordination with the Fund's Chief Compliance Officer (CCO), a process for the review and consideration of compliance reports that are provided to the Board; and providing a designated forum for the Fund's CCO to meet with independent Board members on a regular basis to discuss compliance matters. Contracts Committee. This committee reviews and oversees the contractual relationships with service providers and receives and analyzes reports covering the level and quality of services provided under contracts with the Fund. It also advises the Board regarding actions taken on these contracts during the annual review process. Distribution Committee. This committee reviews and supports product development, marketing, sales activity and practices related to the Fund, and reports to the Board as appropriate. Executive Committee. This committee acts for the Board between meetings of the Board. Investment Review Committee. This committee reviews and oversees the management of the Fund's assets and considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board. Joint Audit Committee. This committee oversees the accounting and financial reporting processes of the Fund and internal controls over financial reporting and oversees the quality and integrity of the Fund's financial statements and independent audits as well as the Fund's compliance with legal and regulatory requirements relating to the Fund's accounting and financial reporting, internal controls over financial reporting and independent audits. The committee also makes recommendations regarding the selection of the Fund's independent auditor and reviews and evaluates the qualifications, independence and performance of the auditor. The information under the caption "Management of the Fund - Beneficial Ownership" is hereby superseded and replaced with the following information: The Directors beneficially owned shares in the Fund and the RiverSource complex of funds (which includes the Seligman Funds) as follows (information as of June 30, 2008 unless otherwise indicated):
Aggregate Dollar Range of Shares Dollar Range of Shares Owned By Owned by Director in the Name Director in the Fund RiverSource Complex of Funds* - ---- ------------------------------------- -------------------------------- INDEPENDENT BOARD MEMBERS Kathleen Blatz........................ None Over $100,000 Arne H. Carlson....................... None Over $100,000 Pamela G. Carlton..................... None $1-$10,000 Patricia M. Flynn..................... None Over $100,000** Anne P. Jones......................... None Over $100,000 Jeffrey Laikind....................... None Over $100,000 Stephen R. Lewis, Jr.................. None Over $100,000** John F. Maher......................... $1-$10,000 Over $100,000 Catherine James Paglia................ None Over $100,000** Leroy C. Richie....................... $1-$10,000 Over $100,000 Alison Taunton-Rigby.................. None Over $100,000 AFFILIATED BOARD MEMBERS William F. Truscott................... None Over $100,000
* Each new Board Member, other than Ms. Flynn, owns between $1 and $10,000 of shares in the Seligman Funds. Ms. Flynn owns between $10,001 and $50,000 of shares in the Seligman Funds. Each New Board Member acquired their shares in the Seligman Funds after June 30, 2008. Neither of Messrs. Maher or Richie owns any shares of the RiverSource Funds. ** Total includes deferred compensation invested in share equivalents. The following information is added to the table under the caption "Management of the Fund - Compensation": None of the New Board Members received any compensation from the Fund prior to their election to the Board. The information beneath the compensation table under the caption "Management of the Fund - Compensation" is hereby superseded and replaced with the following information: The independent Board members determine the amount of compensation that they receive, including the amount paid to the Chair of the Board. In determining compensation for the independent Board members, the independent Board members take into account a variety of factors including, among other things, their collective significant work experience (e.g., in business and finance, government or academia). The independent Board members also recognize that these individuals' advice and counsel are in demand by other organizations, that these individuals may reject other opportunities because the time demands of their duties as independent Board members, and that they undertake significant legal responsibilities. The independent Board members also consider the compensation paid to independent board members of other mutual fund complexes of comparable size. In determining the compensation paid to the Chair, the independent Board members take into account, among other things, the Chair's significant additional responsibilities (e.g., setting the agenda for Board meetings, communicating or meeting regularly with the Fund's Chief Compliance Officer, Counsel to the independent Board members, and the Funds' service providers) which result in a significantly greater time commitment required of the Board Chair. The Chair's compensation, therefore, has generally been set at a level between 2.5 and 3 times the level of compensation paid to other independent Board members. The independent Board members are paid an annual retainer of $95,000. Committee and sub-committee Chairs each receive an additional annual retainer of $5,000. In addition, independent Board members are paid the following fees for attending Board and committee meetings: $5,000 per day of in-person Board meetings and $2,500 per day of in-person committee or sub-committee meetings (if such meetings are not held on the same day as a Board meeting). Independent Board members are not paid for special telephonic meetings. The Board's Chair will receive total annual cash compensation of $400,000. The independent Board members may elect to defer payment of up to 100% of the compensation they receive in accordance with a Deferred Compensation Plan (the "Deferred Plan"). Under the Deferred Plan, a Board member may elect to have his or her deferred compensation treated as if they had been invested in shares of one or more RiverSource funds and the amount paid to the Board member under the Deferred Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Deferred Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. It is anticipated that deferral of Board member compensation in accordance with the Deferred Plan will have, at most, a negligible impact on Fund assets and liabilities. The information under the caption "Management of the Fund - Code of Ethics" is hereby superseded and replaced with the following information: The funds in the RiverSource complex of funds (which includes the Seligman Funds), RiverSource Investments, the investment manager for the Seligman Funds, and Seligman Advisors, the distributor for the Seligman Funds, have each adopted a Code of Ethics (collectively, the "Codes") and related procedures reasonably designed to prevent violations of Rule 204A-1 under the Investment Advisers Act of 1940 and Rule 17j-1 under the 1940 Act. The Codes contain provisions reasonably necessary to prevent a fund's access persons from engaging in any conduct prohibited by paragraph (b) of Rule 17j-1, which indicates that it is unlawful for any affiliated person of or principal underwriter for a fund, or any affiliated person of an investment adviser of or principal underwriter for a fund, in connection with the purchase or sale, directly or indirectly, by the person of a security held or to be acquired by a fund (i) to employ any device, scheme or artifice to defraud a fund; (ii) to make any untrue statement of a material fact to a fund or omit to state a material fact necessary in order to make the statements made to a fund, in light of the circumstances under which they are made, not misleading; (iii) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on a fund; or (iv) to engage in any manipulative practice with respect to a fund. The Codes prohibit affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the fund. All references to "Seligman" under the caption "Management of the Fund - Proxy Voting Policies" are hereby replaced with "RiverSource Investments." In addition, the following information is added as the first full paragraph under that caption: The following are interim proxy voting policies, procedures and guidelines that apply only to the Fund and the other Seligman Funds. The Seligman Funds will adopt the same proxy voting policies, procedures and guidelines as the other funds managed by RiverSource Investments in 2009. The seventh and eight paragraphs under the caption "Management of the Fund - Proxy Voting Policies" are hereby superseded and replaced with the following: Deviations from Guidelines and Special Situations. RiverSource Investments recognizes that it may not always be in the best interest of the shareholders of the Fund to vote in accordance with the Guidelines on a particular issue. In such circumstances, RiverSource Investments may request permission from the Board to deviate from the Guidelines. The Board must approve any deviation from the Guidelines, and similarly, must approve the voting decision for proposals of a unique nature requiring a case-by-case analysis. In making requests to the Board regarding deviations from the Guidelines or proposals requiring a case-by-case analysis, RiverSource Investments may rely on views of the management of a portfolio company, the views of its own investment professionals and information obtained from an independent research firm. The second item under the caption "Management of the Fund - Proxy Voting Policies - Guidelines Summary" is hereby superseded and replaced with the following: 2. RiverSource Investments generally opposes, and supports the elimination of, anti-takeover proposals, including those relating to classified Boards, supermajority votes, issuance of blank check preferred and establishment of classes with disparate voting rights. However, RiverSource Investments will vote in support of proposals to adopt poison pills. The first three paragraphs under the caption "Investment Advisory and Other Services - Investment Manager" are hereby superseded and replaced with the following: With the completion of the Acquisition of Seligman by RiverSource Investments and with shareholders having previously approved (at a special meeting held on November 3, 2008) a new investment management services agreement between the Fund and RiverSource Investments (the "Management Agreement"), RiverSource Investments is the new investment manager effective November 7, 2008. RiverSource Investments, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is also the investment manager of the other funds in the Seligman Group of Funds, and is a wholly-owned subsidiary of Ameriprise Financial. Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the Seligman Group of Funds, RiverSource Investments manages investments for the RiverSource funds, itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. Effective November 7, 2008, the Fund will pay RiverSource Investments a fee for managing its assets. The fee paid to RiverSource Investments will be the same annual fee rate that was paid to Seligman prior to November 7, 2008. The information contained under the caption "Portfolio Managers" is superseded and replaced with the following: For purposes of this discussion, each member of the portfolio team is referred to as a "portfolio manager." The following tables set forth certain additional information from that discussed in the Prospectuses with respect to the portfolio managers of the Fund. Unless noted otherwise, all information is provided as of September 30, 2008. Other Accounts Managed by Portfolio Managers. Table A below identifies, for each of the portfolio managers, the number of accounts managed (other than the Fund) and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. Table B identifies those accounts that have an advisory fee based on the performance of the account. For purposes of the tables below, each series or portfolio of a registered investment company is treated as a separate registered investment company. Table A
Registered Investment Other Pooled Investment Portfolio Manager Companies Vehicles Other Accounts - ----------------- ----------------------------- ----------------------------- ----------------------------- Dimitris J. Bertsimas 27 Registered Investment 2 Other Pooled Investment 15 Other Accounts with Companies with approximately Vehicles with approximately $ approximately $ 3.31 billion $ 7.66 billion in net assets 21.1 million in net assets in net assets under under management. under management. management. Gina K. Mourtzinou 9 Registered Investment None 5 Other Accounts with Companies with approximately approximately $ 118.9 million $ 5.11 billion in net assets in net assets under under management. management.
Table B
Registered Investment Other Pooled Investment Portfolio Manager Companies Vehicles Other Accounts - ----------------- ----------------------------- ----------------------------- ----------------------------- Dimitris J. Bertsimas 7 Registered Investment None None Companies with approximately $ 4.62 billion in net assets under management. Gina K. Mourtzinou 6 Registered Investment None None Companies with approximately $ 4.04 billion in net assets under management.
Compensation/Material Conflicts of Interest. Set forth below is an explanation of the structure of, and method(s) used to determine portfolio manager compensation. Also set forth below is an explanation of material conflicts of interest that may arise between the portfolio manager's management of the Fund's investments and investments in other accounts. Compensation: Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the Fund, and by the short term (typically one-year) and long-term (typically three-year) performance of those accounts in relation to the relevant peer group universe. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. In addition, where portfolio managers invest in a hedge fund managed by the investment manager, they receive a cash reimbursement for the investment management fees charged on their hedge fund investments. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. Conflicts of Interest: RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage another account whose fees may be materially greater than the management fees paid by the Fund and may include a performance based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, competing investment decisions made for different accounts and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm's Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager's Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. Securities Ownership. As of September 30, 2008, neither Mr. Bertsimas nor Ms. Mourtzinou owned shares of the Fund. The information under the caption "Investment Advisory and Other Services - Service Agreements" is hereby deleted and replaced with the following information: Administrative Services Under an Administrative Services Agreement, effective November 7, 2008 Ameriprise administers certain aspects of the Fund's business and other affairs at no cost. Ameriprise provides the Fund with such office space, and certain administrative and other services and executive and other personnel as are necessary for Fund operations. Ameriprise pays all of the compensation of Board members of the Fund who are employees or consultants of RiverSource and of the officers and employees of the Fund. Ameriprise reserves the right to seek Board approval to increase the fees payable by the Fund under the Administrative Services Agreement. However, Ameriprise anticipates that any such increase in fees would be offset by corresponding decreases in advisory fees under the Management Agreement. If an increase in fees under the Administrative Services Agreement would not be offset by corresponding decreases in advisory fees, the affected Fund will inform shareholders prior to the effectiveness of such increase. The following information is hereby added to the end of the section entitled "Investment Advisory and Other Services - Other Service Providers": The funds in the Seligman Group of Funds will enter into an agreement with Board Services Corporation (Board Services) located at 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402. This agreement sets forth the terms of Board Services' responsibility to serve as an agent of the funds for purposes of administering the payment of compensation to each independent Board member, to provide office space for use by the funds and their boards, and to provide any other services to the boards or the independent members, as may be reasonably requested. The following information is hereby added after the section entitled "Financial Statements": 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 defendant's motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on Aug. 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Board 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. Supplement, dated May 15, 2008, to the following Statements of Additional Information: Statements of Additional Information, each dated February 1, 2008, for: Seligman Core Fixed Income Fund, Inc., Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series and Seligman TargetHorizon ETF Portfolios, Inc. Statements of Additional Information, each dated March 3, 2008, for: Seligman Frontier Fund, Inc. and Seligman Global Fund Series, Inc. Statements of Additional Information, each dated May 1, 2008, for: Seligman Asset Allocation Series, Inc., Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman LaSalle Real Estate Fund Series, Inc. and Seligman Value Fund Series, Inc. (each, a "Fund") Capitalized terms used but not defined in this Supplement shall have the meanings given to such terms in each Fund's Statement of Additional Information. The following information supersedes and replaces item (6) under the heading "Purchase, Redemption and Pricing of Shares - Purchase of Shares - CDSC Waivers" in each Fund's Statement of Additional Information: (6) in connection with participation in the Merrill Lynch Small Market 401(k) Program, retirement programs administered or serviced by the Princeton Retirement Group, Paychex, ADP Retirement Services, Hartford Securities Distribution Company, Inc., or NYLIM Service Company LLC, retirement programs or accounts administered or serviced by Mercer HR Services, LLC or its affiliates, or retirement programs or accounts administered or serviced by firms that have a written agreement with Seligman Advisors that contemplates a waiver of CDSCs. SELIGMAN COMMON STOCK FUND, INC. Statement of Additional Information May 1, 2008 100 Park Avenue New York, New York 10017 (212) 850-1864 Toll Free Telephone: (800) 221-2450 For Retirement Plan Information--Toll-Free Telephone: (800) 445-1777 This Statement of Additional Information ("SAI") expands upon and supplements the information contained in the current Prospectus of Seligman Common Stock Fund, Inc. (the "Fund"), dated May 1, 2008, offering Class A shares, Class B shares, Class C shares, Class D shares (Class D shares are not offered after the close of business on May 16, 2008) and Class R shares, and the current Prospectus, dated May 1, 2007, offering Class I shares (together, "the Prospectuses"). This SAI, although not in itself a Prospectus, is incorporated by reference into the Prospectuses in its entirety. It should be read in conjunction with the Prospectuses, which you may obtain by writing or calling the Fund at the above address or telephone numbers, respectively. The financial statements and notes included in the Fund's Annual Report, which includes the Report of Independent Registered Public Accounting Firm thereon, are incorporated herein by reference. The Annual Report will be furnished to you without charge if you request a copy of this SAI. The website references in this SAI are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this SAI. Table of Contents Fund History.......................................... 2 Description of the Fund and its Investments and Risks. 2 Management of the Fund................................ 10 Control Persons and Principal Holders of Securities... 17 Investment Advisory and Other Services................ 17 Portfolio Managers.................................... 24 Brokerage Allocation and Other Practices.............. 25 Capital Stock and Other Securities.................... 26 Purchase, Redemption, and Pricing of Shares........... 27 Taxation of the Fund.................................. 33 Underwriters.......................................... 35 Calculation of Performance Data....................... 38 Financial Statements.................................. 40 General Information................................... 40
Fund History The Fund was incorporated under the laws of the state of Maryland in 1930. Description of the Fund and its Investments and Risks Classification The Fund is a diversified open-end management investment company, or mutual fund. Investment Strategies and Risks The following information regarding the Fund's investments and risks supplements the information contained in the Fund's Prospectuses. Foreign Securities. The Fund may invest in commercial paper and certificates of deposit issued by foreign banks and may invest either directly or through American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or Global Depositary Receipts ("GDRs") (collectively, "Depositary Receipts") in other securities of foreign issuers. Foreign investments may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. There may be less information available about a foreign company than about a US company and foreign companies may not be subject to reporting standards and requirements comparable to those applicable to US companies. Foreign securities may not be as liquid as US securities and there may be delays and risks attendant in local settlement procedures. Securities of foreign companies may involve greater market risk than securities of US companies, and foreign brokerage commissions and custody fees are generally higher than those in the United States. Investments in foreign securities may also be subject to local economic or political risks, political instability, the possible nationalization of issuers and the risk of expropriation or restrictions on the repatriation of proceeds of sale. In addition, foreign investments may be subject to withholding and other taxes. Depositary Receipts are instruments generally issued by domestic banks or trust companies that represent the deposits of a security of a foreign issuer. ADRs, which are traded in dollars on US exchanges or the over-the-counter market, are issued by domestic banks and evidence ownership of securities issued by foreign corporations. EDRs are typically traded in Europe. GDRs are typically traded in both Europe and the United States. Depositary Receipts may be issued under sponsored or unsponsored programs. In sponsored programs, the issuer has made arrangements to have its securities traded in the form of a Depositary Receipt. In unsponsored programs, the issuers may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored Depositary Receipt programs are generally similar, the issuers of securities represented by unsponsored Depositary Receipts are not obligated to disclose material information in the United States, and therefore, the import of such information may not be reflected in the market value of such receipts. The Fund may invest up to 10% of its total assets in foreign securities that it holds directly, but this 10% limit does not apply to foreign securities held through Depositary Receipts which are traded in the United States or to commercial paper and certificates of deposit issued by foreign banks. Investment income received by the Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Fund to a reduced rate of such taxes or exemption from taxes on such income. It is impossible to determine the effective rate of foreign tax in advance since the amounts of the Fund's assets to be invested within various countries is not known. Forward Foreign Currency Exchange Contracts. The investment manager will consider changes in exchange rates in making investment decisions. As one way of managing exchange rate risk, the Fund may enter into forward currency exchange contracts. A forward foreign currency exchange contract is an agreement to purchase or sell a specific currency at a future date and at a price set at the time the contract is entered into. The Fund will generally enter into these contracts to fix the US dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. The Fund may enter into a forward contract to sell or buy the amount of a foreign currency it believes may experience a substantial movement against the US dollar. In this case the contract would approximate the value of some or all of the Fund's portfolio securities denominated in such foreign currency. Under normal circumstances, the investment manager will limit forward currency contracts to not greater than 75% of the Fund's portfolio position in any one country as of the date the contract is entered into. This limitation will be measured at the point 2 the hedging transaction is entered into by the Fund. Under extraordinary circumstances, the investment manager may enter into forward currency contracts in excess of 75% of the Fund's portfolio position in any one country as of the date the contract is entered into. The precise matching of the forward contract amounts and the value of securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market involvement in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under certain circumstances, the Fund may commit up to the entire value of its assets which are denominated in foreign currencies to the consummation of these contracts. The investment manager will consider the effect a substantial commitment of its assets to forward contracts would have on the investment program of the Fund and its ability to purchase additional securities. Except as set forth above and immediately below, the Fund will not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would oblige the Fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio securities or other assets denominated in that currency. The Fund, in order to avoid excess transactions and transaction costs, may nonetheless maintain a net exposure to forward contracts in excess of the value of the Fund's portfolio securities or other assets denominated in that currency provided the excess amount is "covered" by cash or liquid, high-grade debt securities, denominated in any currency, having a value at least equal at all times to the amount of such excess. Under normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer term investment decisions made with regard to overall diversification strategies. However, the investment manager believes that it is important to have the flexibility to enter into such forward contracts when it determines that the best interests of the Fund will be served. At the maturity of a forward contract, the Fund may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency. As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for the Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency the Fund is obligated to deliver. However, the Fund may use liquid, high-grade debt securities, denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to which it relates. If the Fund retains the portfolio security and engages in an offsetting transaction, the Fund will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the Fund's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the Fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. The Fund's dealing in forward foreign currency exchange contracts will be limited to the transactions described above. Of course, the Fund is not required to enter into forward contracts with regard to its foreign currency-denominated securities and will not do so unless deemed appropriate by the investment manager. Although the Fund will seek to benefit by using forward contracts, anticipated currency movements may not be accurately predicted and the Fund may therefore incur a gain or loss on a forward contract. A forward contract may help reduce the Fund's losses on securities denominated in a hedged currency, but it may also reduce the potential gain on the securities which might result from an increase in the value of that currency. Investors should be aware of the costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit or "spread" based on the difference between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. 3 Repurchase Agreements. The Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a security, generally a US government obligation, subject to resale at an agreed upon price and date. The resale price reflects an agreed upon interest rate effective for the period of time the Fund holds the security and is unrelated to the interest rate on the security. The Fund's repurchase agreements will at all times be fully collateralized. Repurchase agreements could involve certain risks in the event of bankruptcy or other default by the seller, including possible delays and expenses in liquidating the securities underlying the agreement, a decline in value of the underlying securities and a loss of interest. Repurchase agreements are typically entered into for periods of one week or less. As a matter of fundamental policy, the Fund will not enter into repurchase agreements of more than one week's duration if more than 10% of its net assets would be so invested. Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid securities, including restricted securities (i.e., securities not readily marketable without registration under the Securities Act of 1933 ("1933 Act")) and other securities that are not readily marketable. These may include restricted securities that can be offered and sold to "qualified institutional buyers" under Rule 144A of the 1933 Act. The Fund's Board of Directors may adopt procedures pursuant to which the investment manager may determine, when appropriate, that specific Rule 144A securities are liquid and not subject to the 15% limitation on illiquid securities. Should the Fund's Board of Directors or the investment manager (as the case may be) make this determination, it will carefully monitor the security (focusing on such factors, among others, as trading activity and availability of information) to determine that the Rule 144A security continues to be liquid. It is not possible to predict with assurance exactly how the market for Rule 144A securities will further evolve. This investment practice could have the effect of increasing the level of illiquidity in the Fund, if and to the extent that qualified institutional buyers become for a time uninterested in purchasing Rule 144A securities. Borrowing. The Fund may from time to time borrow money to increase its portfolio of securities or for other purchases. Under the Investment Company Act of 1940 as amended (the "1940 Act"), the Fund is generally permitted to borrow from banks in amounts not exceeding one-third of the value of its total assets, less liabilities, other than such borrowings. The Fund's Board of Directors has adopted a non-fundamental restriction under which the Fund may not borrow more than 15% of the value of its assets. Borrowings may be secured by a mortgage or pledge of the Fund's assets. Borrowed money creates an opportunity for greater capital appreciation, but at the same time increase exposure to capital risk. The net cost of any money borrowed would be an expense that otherwise would not be incurred, and this expense will limit the Fund's net investment income in any given period. Any gain in the value of securities purchased with money borrowed in excess of the cost of amounts borrowed would cause the net asset value of the Fund's shares to increase more than otherwise would be the case. Conversely, any decline in the value of securities purchased with money borrowed or any gain in value less than the cost of amounts borrowed would cause net asset value to decline more than would otherwise be the case. Commodities and Commodity Contracts. The Fund may purchase and sell commodities and commodity contracts only to the extent that such activities do not result in the Fund being a "commodity pool" as defined in the Commodity Exchange Act and the Commodity Futures Trading Commission's regulations and interpretations thereunder. The investment manager must seek approval of the Fund's Board of Directors to invest in any new type of commodity if it is of a type the Fund has not previously utilized. Use of these instruments can involve substantial risks. For example, derivative instruments can present investment risk to the Fund if the investment manager does not accurately predict the fluctuations in interest rates, currency values or the market to which the financial instrument is tied. Certain derivative instruments may involve the use of leverage and, as a result, there is the risk that the Fund could lose more than the amount of its original investment. For example, a fund may purchase futures contracts by making a relatively small "margin deposit" and, if such contract is thereafter sold at a loss, that fund could lose substantially more than the original margin deposit. Although the Fund will only utilize exchange-traded futures and options thereon, there can be no assurance that they will be able to close out positions when they wish to. In addition, a futures or options strategy may not provide an exact hedge to a position. 4 Short Sales. The Fund may not sell "short" or maintain a "short position". Rights and Warrants. The Fund may invest in common stock rights and warrants believed by the investment manager to provide capital appreciation opportunities. The investment manager must seek the Fund Board's approval to invest in any warrant if it is of a type the Fund has not previously utilized. Common stock rights and warrants received as part of a unit or attached to securities purchased (i.e., not separately purchased) are not included in the Fund's investment restrictions regarding such securities. The Fund may not invest in rights and warrants if, at the time of acquisition, the investment in rights and warrants would exceed 5% of the Fund's net assets, valued at the lower of cost or market. In addition, no more than 2% of net assets may be invested in warrants not listed on the New York or American Stock Exchanges. For purposes of this restriction, rights and warrants acquired by the Fund in units or attached to securities may be deemed to have been purchased without cost. Options. The investment manager must seek approval of the Board of Directors to invest in any option if it is of a type the Fund has not previously utilized. Pursuant to this policy, the Board has approved the investment manager's request that the Fund be permitted to purchase put options, call options, put spreads, call spreads and collars, and to sell covered call options (i.e., where the Fund owns the underlying security) and covered put options (i.e., where the Fund maintains the cash or collateral to cover the obligation created by the put). These instruments are described below. An option is a contract that gives the holder the right to purchase ("call") or sell ("put") a specified security for an agreed upon price at any time before the contract's expiration date. The amount paid for an option is known as the premium, and the exercise price is known as the strike price. The purchaser of an option has the right, but not the obligation, to purchase or sell a security. The seller (or "writer") of an option, conversely, has an obligation to sell or purchase a security if the option is exercised. Some options have standardized terms and are traded on securities exchanges. Others are privately negotiated and have no or only a limited trading market. Options may be used individually or in combinations (e.g., put spreads and collars) to hedge securities positions or to seek increased investment returns. Put spreads and collars are designed to protect against a decline in value of a security an investor owns. A collar involves the purchase of a put and the simultaneous writing of a call on the same security at a higher strike price. The put protects the investor from a decline in the price of the security below the put's strike price. The call means that the investor will not benefit from increases in the price of the stock beyond the call's strike price. In a put spread, an investor purchases a put and simultaneously writes a put on the same security at a lower strike price. This combination protects the investor against a decline in the stock price down to the lower strike price. The premium received for writing the call (in the case of a collar) or writing the put (in the case of a put spread) offsets, in whole or in part, the premium paid to purchase the put. In a call spread, an investor purchases a call and simultaneously sells a call on the same security, with the call sold having a higher strike price than the call purchased. The purchased call is designed to provide exposure to a potential increase in the value of a security an investor owns. The premium received for writing the call offsets, in part, the premium paid to purchase the corresponding call, but it also means that the investor will not benefit from increases in the price of the security beyond the sold call's strike price. Options offer large amounts of leverage, which will result in the Fund's net asset value being more sensitive to changes in the value of the underlying security. The successful use of options depends in part on the ability of the investment manager to manage future price fluctuations, and the degree of correlation between the options and the prices of the underlying securities. If the investment manager is incorrect in its expectation of changes in market prices or the correlation between the instruments or indices on which such options may be written and purchased and the instruments in the Fund's investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase the Fund's transaction costs. Options transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested. The purchaser of an option runs the risk of losing the entire premium paid if the option expires "out of the money" (i.e., if the strike price for a call option is higher than the market price, or the strike price for a put option is lower than the market price). The seller of an option earns premium income but is subject to the risk of having to sell the underlying security at significantly less than its market price (or buy a security at significantly more than its market price). When options are purchased on the over-the-counter market, there is a risk that the counterparty that wrote the option will be unable to perform its obligations under the option contract. Such over-the-counter options may also be illiquid and, in such cases, the Fund may have difficulty closing out its position, in which case the Fund could lose money in the event of adverse price movements. 5 Equity-Linked Securities. The Fund may invest in equity-linked securities (each, an "ELS") as part of its overall investment strategy. An ELS is a debt instrument whose value is based on the value of a single equity security, basket of equity securities or an index of equity securities (each, an "Underlying Equity"). An ELS typically provides interest income, thereby offering a yield advantage over investing directly in an Underlying Equity. However, the holder of an ELS may have limited or no benefit from any appreciation in the Underlying Equity, but is exposed to downside market risk. The Fund may purchase ELSs that trade on a securities exchange or those that trade on the over-the-counter markets, including Rule 144A securities. The Fund may also purchase ELSs in a privately negotiated transaction with the issuer of the ELSs (or its broker-dealer affiliate, collectively referred to in this section as the "issuer"). The Fund may or may not hold an ELS until its maturity. Investments in ELSs subject the Fund to risks, primarily to the downside market risk associated with the Underlying Equity, and to additional risks not typically associated with investments in listed equity securities, such as liquidity risk, credit risk of the issuer, and concentration risk. Most ELSs do not have any downside protection (though some ELSs provide for a floor on the downside). In general, an investor in an ELS has the same downside risk as an investor in the Underlying Equity. The liquidity of an ELS that is not actively traded on an exchange is linked to the liquidity of the Underlying Equity. The issuer of an ELS generally purchases the Underlying Equity as a hedge. If the Fund wants to sell an ELS back to the issuer prior to its maturity, the issuer may sell the Underlying Equity to unwind the hedge and, therefore, must take into account the liquidity of the Underlying Equity in negotiating the purchase price the issuer will pay to the Fund to acquire the ELS. The liquidity of unlisted ELSs is normally determined by the willingness of the issuer to make a market in the ELS. While the Fund will seek to purchase ELSs only from issuers that it believes to be willing to, and capable of, repurchasing the ELS at a reasonable price, there can be no assurance that the Fund will be able to sell any ELS at such a price or at all. This may impair the Fund's ability to enter into other transactions at a time when doing so might be advantageous. In addition, because ELSs are senior unsecured notes of the issuer, the Fund would be subject to the credit risk of the issuer and the potential risk of being too concentrated in the securities (including ELSs) of that issuer. The Fund bears the risk that the issuer may default on its obligations under the ELS. In the event of insolvency of the issuer, the Fund will be unable to obtain the intended benefits of the ELS. Moreover, it may be difficult to obtain market quotations for purposes of valuing the Fund's ELSs and computing the Fund's net asset value. Price movements of an ELS will likely differ significantly from price movements of the Underlying Equity, resulting in the risk of loss if the investment manager is incorrect in its expectation of fluctuations in securities prices, interest rates or currency prices or other relevant features of an ELS. Access Trades. The Fund may participate in access trades with a global securities broker as counterparty. Access trades are over-the-counter transactions that provide access to a designated security, group of securities or market index without directly investing in the reference security/index. For a commission, the counterparty agrees to provide a return based on the return of the reference security/index. Access trades are typically used in foreign markets where limits on direct foreign ownership can affect prices and/or where there are significant complexities in directly purchasing or selling shares in the reference security/index. Since access trades are over-the-counter transactions, the Fund bears the risk that the counterparty will be unable or unwilling to meet its obligations. In addition, since over-the-country markets are generally less liquid than exchanges, the Fund may not be able to sell when the investment manager deems it advantageous to do so. The investment manager will attempt to mitigate these risks by limiting access trade exposure by the Fund to 5% of total assets at the time of purchase and dealing with counterparties believed to be reputable. Lending of Portfolio Securities. The Fund may lend portfolio securities to broker/dealers or other institutions, if the investment manager believes such loans will be beneficial to the Fund. The borrower must maintain with the Fund cash or equivalent collateral equal to at least 100% of the market value of the securities loaned. During the time portfolio securities are on loan, the borrower pays the Fund any dividends or interest paid on the securities. The Fund may invest the collateral and earn additional income or receive an agreed upon amount of interest income from the borrower. Loans made by the Fund will generally be short-term. Loans are subject to termination at the option of the Fund or the borrower. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the collateral to the borrower or placing broker. The Fund does not have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered important with respect to the investment. The Fund may lose money if a borrower defaults on its obligation to return securities and the value of the collateral held by the Fund is insufficient to replace the loaned securities. In addition, the Fund is responsible for any loss that might result from its investment of the borrower's collateral. 6 Other Investment Companies. The Fund may invest in securities issued by other investment companies. Such investments are subject to the limitations on investments in other investment companies imposed by the 1940 Act, which generally prohibits the Fund from holding more than 3% of the outstanding voting securities of another investment company, and from investing more than 5% of its total assets in any one investment company, or more than 10% of its total assets in other investment companies overall. The Fund's investments in other investment companies may include investment in exchange-traded funds ("ETFs") if appropriate investment opportunities arise. ETFs are registered funds that trade on a stock exchange or otherwise traded in the over-the-counter market and generally seek to track the performance of a specified securities index or a basket of securities. Securities traded in the over-the-counter market present additional risks, such as counterparty and liquidity risks. If the Fund invests in other investment companies, shareholders would bear not only the Fund's expenses (including operating expenses and management fees), but also similar expenses of the underlying investment companies, and the Fund's returns will therefore be lower. To the extent the Fund invests in ETFs, the Fund is exposed to the risks associated with the underlying investments of the ETFs and the Fund's performance may be negatively affected if the value of those underlying investments declines. Investments to Control. The Fund may not invest for the purpose of controlling or managing any company. If a fund acquires a large percentage of the securities of a single issuer, it could be deemed to have invested in such issuer for the purpose of exercising control. If the Fund were to make such acquisitions, there is a risk that the Fund would become less diversified, which could increase the volatility of the Fund and increase the Fund's exposure to market, credit and other risks associated with certain issuers' financial condition and business operations. Except as otherwise specifically noted above, the Fund's investment strategies are not fundamental and the Fund, with the approval of the Fund's Board of Directors, may change such strategies without the vote of shareholders. Fundamental Restrictions The Fund is subject to fundamental policies that place restrictions on certain types of investments. These policies cannot be changed except by vote of a majority of the Fund's outstanding voting securities. Under these policies, the Fund may not: .. Purchase or sell commodities or commodity contracts, except to the extent permissible under applicable law and interpretations, as they may be amended from time to time; .. Purchase securities on margin except as permitted by the 1940 Act or any rule thereunder, any Securities and Exchange Commission ("SEC") or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; .. Issue senior securities or borrow money, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; .. Make loans, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; .. Underwrite the securities of other issuers, except insofar as the Fund may be deemed an underwriter under the 1933 Act in disposing of a portfolio security or in connection with investments in other investment companies; .. Purchase or hold any real estate, except the Fund may invest in securities secured by real estate or interests therein or issued by persons (including real estate investment trusts) which deal in real estate or interests therein; .. Make any investment inconsistent with the Fund's classification as a diversified company under the 1940 Act; .. Invest 25% or more of its total assets, at market value, in the securities of issuers in any particular industry, provided that this limitation shall exclude securities issued or guaranteed by the US Government or any of its agencies or instrumentalities; 7 .. Purchase or hold the securities of any issuer, if to its knowledge, directors or officers of the Fund individually owning beneficially more than 0.5% of the securities of that issuer own in the aggregate more than 5% of such securities; or .. Deal with its directors or officers, or firms they are associated with, in the purchase or sale of securities of other issuers, except as broker. The Fund's fundamental policies set forth above prohibit transactions "except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC." The following discussion explains the flexibility that the Fund gains from these exceptions. Purchase of securities on margin - A purchase on margin involves a loan from the broker-dealer arranging the transaction. The "margin" is the cash or securities that the borrower places with the broker-dealer as collateral against the loan. However, the purchase of securities on margin is effectively prohibited by the 1940 Act because the Fund generally may borrow only from banks. Thus, under current law, this exception does not provide any additional flexibility to the Fund. Issuing senior securities - A "senior security" is an obligation with respect to the earnings or assets of a company that takes precedence over the claims of that company's common stock with respect to the same earnings or assets. The 1940 Act prohibits a mutual fund from issuing senior securities other than certain borrowings, but SEC staff interpretations allow a fund to engage in certain types of transactions that otherwise might raise senior security concerns (such as short sales, buying and selling financial futures contracts and selling put and call options), provided that the fund maintains segregated deposits or portfolio securities, or otherwise covers the transaction with offsetting portfolio securities, in amounts sufficient to offset any liability associated with the transaction. The exception in the fundamental policy allows the Fund to operate in reliance upon these staff interpretations. Borrowing money - The 1940 Act permits a fund to borrow up to 33 1/3% of its total assets (including the amounts borrowed) from banks, plus an additional 5% of its total assets for temporary purposes, which may be borrowed from banks or other sources. Making loans - The 1940 Act generally prohibits the Fund from making loans to affiliated persons but does not otherwise restrict the Fund's ability to make loans. The Fund also may not change its investment objective without shareholder approval. Under the 1940 Act, a "vote of a majority of the outstanding voting securities" of the Fund means the affirmative vote of the lesser of (l) more than 50% of the outstanding shares of the Fund; or (2) 67% or more of the shares present at a shareholders' meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. The Fund also may not acquire any securities of a registered open-end investment company or a registered unit investment trust in reliance on subparagraph (F) or subparagraph (G) of Section 12(d)(1) of the 1940 Act. This policy is not fundamental. The Fund will provide shareholders with at least 60 days prior notice of any change in the Fund's "80%" investment policy as described in the Prospectuses. Such notice will be provided in plain English in a separate written document and will contain the following prominent statement, in bold-face type: "Important Notice Regarding Change in Investment Policy". This prominent statement will also appear on the envelope in which the notice is delivered or, if the notice is delivered separately from other communications to shareholders, such statement will appear either on the notice or on the envelope in which the notice is delivered. This policy is not fundamental. Temporary Defensive Position In an attempt to respond to adverse market, economic, political, or other conditions, the Fund may invest up to 100% of its assets in cash or cash equivalents, including, but not limited to, prime commercial paper, bank certificates of deposit, bankers' acceptances, or repurchase agreements for such securities, and securities of the US Government and its agencies and instrumentalities, as well as cash and cash equivalents denominated in foreign currencies. The Fund's investments in foreign cash equivalents will be limited to those that, in the opinion of the investment manager, equate generally to the standards established for US cash equivalents. Investments in bank obligations will be limited at the time of investment to the obligations of the 100 largest domestic banks in terms of assets which are subject to regulatory supervision by the US Government or state governments, and the obligations of the 100 largest foreign banks in terms of assets with branches or agencies in the United States. 8 Portfolio Turnover The Fund's portfolio turnover rate is calculated by dividing the lesser of purchases or sales of portfolio securities for the year by the monthly average of the value of the portfolio securities owned during the year. Securities whose maturity or expiration date at the time of acquisition were one year or less are excluded from the calculation. The Fund's portfolio turnover rates for the years ended December 31, 2007 and 2006 were 119.23% and 93.45%, respectively. Disclosure of Portfolio Holdings The Fund's full portfolio holdings, as well as portfolio weightings, are published quarterly, generally no sooner than 15 calendar days after the end of each calendar quarter on the website of the Fund's distributor, Seligman Advisors, Inc. ("Seligman Advisors") (www.seligman.com). In addition, the Fund's top 10 holdings and the aggregate weighting of the top 10 holdings are published monthly, generally no sooner than 5 business days after the end of each month. Seligman employees may freely distribute the Fund's portfolio holdings information described above to third parties the day after such information appears on Seligman Advisors' website. The foregoing monthly and quarterly information will remain available on Seligman Advisors' website for at least 5 months from the end of the period shown. In accordance with the policies and procedures approved by the Fund's Board of Directors, the Fund's portfolio holdings may be disclosed to certain parties prior to its public release if the disclosure is intended for research or other legitimate business purposes and the recipient is subject to a duty of confidentiality. Disclosures of portfolio holdings for such purposes (which may be on-going) are considered on a case-by-case basis, and the Fund's procedures require the prior written approval of the Chief Investment Officer of J. & W. Seligman & Co. Incorporated ("Seligman") (or its designee) and the Fund's Chief Compliance Officer ("CCO") with respect to disclosures intended for research purposes, and the President of Seligman or Seligman Advisors (or their respective designees) and the Fund's CCO with respect to disclosures intended for other legitimate business purposes. In connection with the CCO's review and approval, the CCO considers whether such disclosure is in the best interests of the Fund. If prior approval is granted, the recipient must enter into a written agreement prior to the release of the Fund's portfolio holdings information that includes, among other things, a requirement that the holdings be kept confidential and places limits on the use of the information for trading purposes. The CCO, who reports directly to the Fund's Board of Directors regarding compliance with the Fund's policies, and Seligman's Chief Compliance Officer monitor compliance with this policy. In addition, the Fund's policies expressly permit Seligman's employees to release the Fund's holdings information without a confidentiality agreement as necessary to facilitate the execution of securities transactions or to respond to questions about Seligman's views on individual securities or whether the Fund owns or does not own a particular security, provided that individual securities weightings will not be disclosed unless such weightings are otherwise provided in the quarterly disclosure noted above. Portfolio managers (or their designees) may also disclose certain information about individual securities or information about a particular investment style on an occasional basis to third parties for research purposes, provided that the information does not include the name of the Fund or the weightings of particular securities unless otherwise provided in the quarterly disclosure noted above. The Fund may also permit its auditors to have access to the Fund's portfolio holdings as necessary in connection with their auditing services. Currently, Seligman has entered into ongoing arrangements to disclose the Fund's portfolio holdings prior to the public disclosure of such information with the following third party research providers: FactSet Research Systems, Inc. and Vestek Systems, Inc. The portfolio holdings are released to these research providers on an as-needed basis (including daily, if necessary). In addition, Seligman discloses the Fund's portfolio holdings to State Street Bank and Trust Company ("SSBT") in connection with back-office, custodial and/or administrative services provided by SSBT, and to Institutional Shareholder Services ("ISS"), in connection with proxy voting services provided. Seligman discloses portfolio holdings to the third parties listed above, other than ISS, on a daily basis. Accordingly, the time elapsed between the date of such information and the date of its disclosure is generally less than 24 hours. Seligman discloses portfolio holdings to ISS on an as-requested basis, and the time elapsed between the date of the information and the date of its disclosure will vary based upon the date specified by the ISS request. All of the above mentioned disclosures have been approved, as applicable, by the President of Seligman or Seligman Advisors, Seligman's Chief Investment Officer and/or the Fund's CCO and are made pursuant to the terms of 9 confidentiality agreements or provisions that prohibit the disclosure and restrict the use of the holdings information. No compensation is received by any party in consideration of the disclosure of the Fund's portfolio holdings pursuant to these arrangements. Management of the Fund Board of Directors The Board of Directors provides broad supervision over the affairs of the Fund. Management Information Information with respect to Directors and officers of the Fund is shown below. Unless otherwise indicated, their addresses are 100 Park Avenue, New York, New York 10017.
Term of Office Name, (Age), Position(s) and Length of Principal Occupation(s) During Past 5 Years, Directorships With Fund Time Served* and Other Information - ------------------------ -------------- --------------------------------------------------------------------------- INDEPENDENT DIRECTORS Maureen Fonseca (52)**** July 2007 to Head of School, The Masters School (education); Director or Trustee of Director Date each of the investment companies of the Seligman Group of Funds**; Trustee, New York State Association of Independent Schools and Greens Farms Academy (education); and Commissioner, Middle States Association (education). John R. Galvin (78) 1995 to Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts Director Date University; Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Chairman Emeritus, American Council on Germany. Formerly, Director, Raytheon Co. (defense and commercial electronics); Governor of the Center for Creative Leadership; and Trustee, Institute for Defense Analyses. From February 1995 until June 1997, Director, USLIFE Corporation (life insurance). From June 1987 to June 1992, Supreme Allied Commander, NATO, and the Commander-in-Chief, United States European Command. John F. Maher (64) December Retired President and Chief Executive Officer, and former Director, Great Director 2006 to Western Financial Corporation (bank holding company) and its principal Date subsidiary, Great Western Bank (a federal savings bank). Director or Trustee of each of the investment companies of the Seligman Group of Funds**. From 1989 to 1999, Director, Baker Hughes (energy products and services). Frank A. McPherson (75) 1995 to Retired Chairman of the Board and Chief Executive Officer of Kerr- Director Date McGee Corporation (diversified energy and chemical company); Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Director, DCP Midstream GP, LLP (natural gas processing and transporting), Integris Health (owner of various hospitals), Oklahoma Medical Research Foundation, Oklahoma Foundation for Excellence in Education, National Cowboy and Western Heritage Museum, and Oklahoma City Museum of Art. Formerly, Director, ConocoPhillips (integrated international oil corporation), Kimberly-Clark Corporation (consumer products), Oklahoma Chapter of the Nature Conservancy, Boys and Girls Clubs of Oklahoma, Oklahoma City Public Schools Foundation, Oklahoma City Chamber of Commerce and BOK Financial (bank holding company). From 1990 until 1994, Director, the Federal Reserve System's Kansas City Reserve Bank. Betsy S. Michel (65) 1984 to Attorney; Director or Trustee of each of the investment companies of the Director Date Seligman Group of Funds**; and Trustee, The Geraldine R. Dodge Foundation (charitable foundation) and Drew University (Madison, NJ). Formerly, Chairman of the Board of Trustees of St. George's School (Newport, RI) and Trustee, World Learning, Inc. (international educational training) and Council of New Jersey Grantmakers.
Number of Portfolios in Fund Complex Principal Occupation(s) During Past 5 Years, Directorships Overseen and Other Information by Director - --------------------------------------------------------------------------- ------------- Head of School, The Masters School (education); Director or Trustee of 59 each of the investment companies of the Seligman Group of Funds**; Trustee, New York State Association of Independent Schools and Greens Farms Academy (education); and Commissioner, Middle States Association (education). Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts 59 University; Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Chairman Emeritus, American Council on Germany. Formerly, Director, Raytheon Co. (defense and commercial electronics); Governor of the Center for Creative Leadership; and Trustee, Institute for Defense Analyses. From February 1995 until June 1997, Director, USLIFE Corporation (life insurance). From June 1987 to June 1992, Supreme Allied Commander, NATO, and the Commander-in-Chief, United States European Command. Retired President and Chief Executive Officer, and former Director, Great 59 Western Financial Corporation (bank holding company) and its principal subsidiary, Great Western Bank (a federal savings bank). Director or Trustee of each of the investment companies of the Seligman Group of Funds**. From 1989 to 1999, Director, Baker Hughes (energy products and services). Retired Chairman of the Board and Chief Executive Officer of Kerr- 59 McGee Corporation (diversified energy and chemical company); Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Director, DCP Midstream GP, LLP (natural gas processing and transporting), Integris Health (owner of various hospitals), Oklahoma Medical Research Foundation, Oklahoma Foundation for Excellence in Education, National Cowboy and Western Heritage Museum, and Oklahoma City Museum of Art. Formerly, Director, ConocoPhillips (integrated international oil corporation), Kimberly-Clark Corporation (consumer products), Oklahoma Chapter of the Nature Conservancy, Boys and Girls Clubs of Oklahoma, Oklahoma City Public Schools Foundation, Oklahoma City Chamber of Commerce and BOK Financial (bank holding company). From 1990 until 1994, Director, the Federal Reserve System's Kansas City Reserve Bank. Attorney; Director or Trustee of each of the investment companies of the 59 Seligman Group of Funds**; and Trustee, The Geraldine R. Dodge Foundation (charitable foundation) and Drew University (Madison, NJ). Formerly, Chairman of the Board of Trustees of St. George's School (Newport, RI) and Trustee, World Learning, Inc. (international educational training) and Council of New Jersey Grantmakers.
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Term of Office Name, (Age), Position(s) and Length of Principal Occupation(s) During Past 5 Years, Directorships With Fund Time Served* and Other Information - ------------------------ -------------- ------------------------------------------------------------------------------- Leroy C. Richie (66) 2000 to Counsel, Lewis & Munday, P.C. (law firm); Director or Trustee of each of Director Date the investment companies of the Seligman Group of Funds**. Director, Vibration Control Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally, Inc. (digital imaging) and Infinity, Inc. (oil and gas exploration and production); Director, OGE Energy Corp. (energy and energy services provider offering physical delivery and related services for both electricity and natural gas); Director and Chairman, Highland Park Michigan Economic Development Corp; and Chairman, Detroit Public Schools Foundation. Formerly, Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director, Kerr- McGee Corporation (diversified energy and chemical company); Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. From 1990 until 1997, Vice President and General Counsel, Automotive Legal Affairs, Chrysler Corporation. Robert L. Shafer (75) 1980 to Ambassador and Permanent Observer of the Sovereign Military Order of Director Date Malta to the United Nations; and Director or Trustee of each of the investment companies of the Seligman Group of Funds**. Formerly, from May 1987 until June 1997, Director, USLIFE Corporation (life insurance) and from December 1973 until January 1996, Vice President, Pfizer Inc. (pharmaceuticals). James N. Whitson (73) 1993 to Retired Executive Vice President and Chief Operating Officer, Sammons Director Date Enterprises, Inc. (a diversified holding company); Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Director, CommScope, Inc. (manufacturer of telecommunications equipment). Formerly, Director and Consultant, Sammons Enterprises, Inc.; and Director, C-SPAN (cable television networks). William C. Morris*** (69) 1988 to Chairman and Director, J. & W. Seligman & Co. Incorporated; Chairman Director and Chairman of Date of the Board and Director or Trustee of each of the investment companies the Board of the Seligman Group of Funds**; Chairman and Director, Seligman Advisors, Inc., Seligman Services, Inc. and Carbo Ceramics Inc. (manufacturer of ceramic proppants for oil and gas industry); Director, Seligman Data Corp.; and President and Chief Executive Officer, The Metropolitan Opera Association. Formerly, Director, Kerr-McGee Corporation (diversified energy and chemical company); and Chief Executive Officer of each of the investment companies of the Seligman Group of Funds. Brian T. Zino*** (55) CEO: 2002 Director and President, J. & W. Seligman & Co. Incorporated; President, Director, Chief Executive to Date Dir.: Chief Executive Officer and Director or Trustee of each of the investment Officer and President 1993 to companies of the Seligman Group of Funds**; Director, Seligman Date Pres.: Advisors, Inc. and Seligman Services, Inc.; Chairman, Seligman Data 1995 to Corp. and a member of the Board of Governors of the Investment Date Company Institute. Formerly, Director and Chairman, ICI Mutual Insurance Company. John B. Cunningham (43) 2004 to In addition to his duties with the Fund, he is Managing Director and Chief Vice President and Date Investment Officer, J. &W. Seligman & Co. Incorporated; Vice President Portfolio Manager and Portfolio Manager of Tri-Continental Corporation (a closed-end investment company) and Seligman Income and Growth Fund, Inc.; Vice President of Seligman Portfolios, Inc. and Portfolio Manager of its Common Stock Portfolio; and Vice President and Co-Portfolio Manager of Seligman TargetHorizon ETF Portfolios, Inc. He joined Seligman in 2004. Formerly, Managing Director and Senior Portfolio Manager of Salomon Brothers Asset Management ("SBAM") and Group Head, SBAM and Equity Team. Erik J. Voss (40) October Managing Director, J. & W. Seligman & Co. Incorporated; Vice President Vice President and 2006 to and Portfolio Manager, Seligman Capital Fund, Inc. and Seligman Growth Co-Portfolio Manager Date Fund, Inc., Vice President and Co-Portfolio Manager, Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation; Vice President of Seligman Portfolios, Inc. and Portfolio Manager of its Seligman Capital Portfolio and Co-Portfolio Manager of its Seligman Common Stock Portfolio; and portfolio manager of one other registered investment company. Formerly, portfolio manager, Wells Capital Management Incorporated from January 2005 through March 2006, and prior thereto, Strong Capital Management, Inc. from October 2000 through January 2005.
Number of Portfolios in Fund Complex Principal Occupation(s) During Past 5 Years, Directorships Overseen and Other Information by Director - ------------------------------------------------------------------------------- ------------- INDEPENDENT DIRECTORS........................................................... Counsel, Lewis & Munday, P.C. (law firm); Director or Trustee of each of 59 the investment companies of the Seligman Group of Funds**. Director, Vibration Control Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally, Inc. (digital imaging) and Infinity, Inc. (oil and gas exploration and production); Director, OGE Energy Corp. (energy and energy services provider offering physical delivery and related services for both electricity and natural gas); Director and Chairman, Highland Park Michigan Economic Development Corp; and Chairman, Detroit Public Schools Foundation. Formerly, Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director, Kerr- McGee Corporation (diversified energy and chemical company); Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. From 1990 until 1997, Vice President and General Counsel, Automotive Legal Affairs, Chrysler Corporation. Ambassador and Permanent Observer of the Sovereign Military Order of 59 Malta to the United Nations; and Director or Trustee of each of the investment companies of the Seligman Group of Funds**. Formerly, from May 1987 until June 1997, Director, USLIFE Corporation (life insurance) and from December 1973 until January 1996, Vice President, Pfizer Inc. (pharmaceuticals). Retired Executive Vice President and Chief Operating Officer, Sammons 59 Enterprises, Inc. (a diversified holding company); Director or Trustee of each of the investment companies of the Seligman Group of Funds**; and Director, CommScope, Inc. (manufacturer of telecommunications equipment). Formerly, Director and Consultant, Sammons Enterprises, Inc.; and Director, C-SPAN (cable television networks). INTERESTED DIRECTORS AND PRINCIPAL OFFICERS................................................ Chairman and Director, J. & W. Seligman & Co. Incorporated; Chairman 59 of the Board and Director or Trustee of each of the investment companies of the Seligman Group of Funds**; Chairman and Director, Seligman Advisors, Inc., Seligman Services, Inc. and Carbo Ceramics Inc. (manufacturer of ceramic proppants for oil and gas industry); Director, Seligman Data Corp.; and President and Chief Executive Officer, The Metropolitan Opera Association. Formerly, Director, Kerr-McGee Corporation (diversified energy and chemical company); and Chief Executive Officer of each of the investment companies of the Seligman Group of Funds. Director and President, J. & W. Seligman & Co. Incorporated; President, 59 Chief Executive Officer and Director or Trustee of each of the investment companies of the Seligman Group of Funds**; Director, Seligman Advisors, Inc. and Seligman Services, Inc.; Chairman, Seligman Data Corp. and a member of the Board of Governors of the Investment Company Institute. Formerly, Director and Chairman, ICI Mutual Insurance Company. In addition to his duties with the Fund, he is Managing Director and Chief N/A Investment Officer, J. &W. Seligman & Co. Incorporated; Vice President and Portfolio Manager of Tri-Continental Corporation (a closed-end investment company) and Seligman Income and Growth Fund, Inc.; Vice President of Seligman Portfolios, Inc. and Portfolio Manager of its Common Stock Portfolio; and Vice President and Co-Portfolio Manager of Seligman TargetHorizon ETF Portfolios, Inc. He joined Seligman in 2004. Formerly, Managing Director and Senior Portfolio Manager of Salomon Brothers Asset Management ("SBAM") and Group Head, SBAM and Equity Team. Managing Director, J. & W. Seligman & Co. Incorporated; Vice President N/A and Portfolio Manager, Seligman Capital Fund, Inc. and Seligman Growth Fund, Inc., Vice President and Co-Portfolio Manager, Seligman Income and Growth Fund, Inc. and Tri-Continental Corporation; Vice President of Seligman Portfolios, Inc. and Portfolio Manager of its Seligman Capital Portfolio and Co-Portfolio Manager of its Seligman Common Stock Portfolio; and portfolio manager of one other registered investment company. Formerly, portfolio manager, Wells Capital Management Incorporated from January 2005 through March 2006, and prior thereto, Strong Capital Management, Inc. from October 2000 through January 2005.
11
Term of Office Name, (Age), Position(s) and Length of Principal Occupation(s) During Past 5 Years, Directorships With Fund Time Served* and Other Information - ------------------------ -------------- -------------------------------------------------------------------------- Eleanor T.M. Hoagland (56) 2004 to Managing Director, J. & W. Seligman & Co. Incorporated; and Vice Vice President and Chief Date President and Chief Compliance Officer for each of the investment Compliance Officer companies of the Seligman Group of Funds**. Thomas G. Rose (50) 2000 to Managing Director, Chief Financial Officer and Treasurer, J. & W. Vice President Date Seligman & Co. Incorporated; Senior Vice President, Finance, Seligman Advisors, Inc. and Seligman Data Corp.; and Vice President of each of the investment companies of the Seligman Group of Funds**, Seligman Services, Inc. and Seligman International, Inc. Lawrence P. Vogel (51) V.P.: 1992 Senior Vice President and Treasurer, Investment Companies, J. & W. Vice President and to Date Seligman & Co. Incorporated; Vice President and Treasurer of each of the Treasurer Treas.: 2000 investment companies of the Seligman Group of Funds**; and Treasurer, to Date Seligman Data Corp.
Number of Portfolios in Fund Complex Principal Occupation(s) During Past 5 Years, Directorships Overseen and Other Information by Director - -------------------------------------------------------------------------- ------------- Managing Director, J. & W. Seligman & Co. Incorporated; and Vice N/A President and Chief Compliance Officer for each of the investment companies of the Seligman Group of Funds**. Managing Director, Chief Financial Officer and Treasurer, J. & W. N/A Seligman & Co. Incorporated; Senior Vice President, Finance, Seligman Advisors, Inc. and Seligman Data Corp.; and Vice President of each of the investment companies of the Seligman Group of Funds**, Seligman Services, Inc. and Seligman International, Inc. Senior Vice President and Treasurer, Investment Companies, J. & W. N/A Seligman & Co. Incorporated; Vice President and Treasurer of each of the investment companies of the Seligman Group of Funds**; and Treasurer, Seligman Data Corp.
12
Term of Office Name, (Age), Position(s) and Length of Principal Occupation(s) During Past 5 Years, Directorships With Fund Time Served* and Other Information - ------------------------ -------------- ------------------------------------------------------------------------- INTERESTED DIRECTORS AND PRINCIPAL OFFICERS Frank J. Nasta (43) 1994 to Director, Managing Director, General Counsel and Corporate Secretary, J. Secretary Date & W. Seligman & Co. Incorporated; Secretary of each of the investment companies of the Seligman Group of Funds**; Director and Corporate Secretary, Seligman Advisors, Inc. and Seligman Services, Inc.; and Corporate Secretary Seligman International, Inc. and Seligman Data Corp.
Number of Portfolios in Fund Complex Principal Occupation(s) During Past 5 Years, Directorships Overseen and Other Information by Director - ------------------------------------------------------------------------- ------------- Director, Managing Director, General Counsel and Corporate Secretary, J. N/A & W. Seligman & Co. Incorporated; Secretary of each of the investment companies of the Seligman Group of Funds**; Director and Corporate Secretary, Seligman Advisors, Inc. and Seligman Services, Inc.; and Corporate Secretary Seligman International, Inc. and Seligman Data Corp.
- -------- * Each Director serves for an indefinite term, until the election and qualification of a successor or until his or her earlier death, resignation or removal. Each officer is elected annually by the Board. ** The Seligman Group of Funds currently consists of twenty-two registered investment companies, including the Fund. *** Mr. Morris and Mr. Zino are considered "interested persons" of the Fund, as defined in the 1940 Act, by virtue of their positions with Seligman and its affiliates. ****Dr. Fonseca became a member of the Board of Directors on July 19, 2007. The standing committees of the Board include the Board Operations Committee, Audit Committee and Director Nominating Committee. These Committees are comprised solely of Directors who are not "interested" persons of the Fund as that term is defined in the 1940 Act. The duties of these Committees are described below. Board Operations Committee. This Committee has authority generally to direct the operations of the Board, including the nomination of members of other Board Committees and the selection of legal counsel for the Fund. The Committee met six times during the year ended December 31, 2007. Members of the Committee are Messrs. McPherson (Chairman), Galvin, Maher, Richie, Shafer and Whitson, and Mses. Fonseca and Michel. In his capacity as Chairman of the Board Operations Committee, Mr. McPherson performs duties similar to those of a "lead independent director," as he chairs meetings of the independent Directors, and acts as a point of contact between the independent Directors and Seligman between board meetings in respect of general matters. Audit Committee. This Committee recommends an independent registered public accounting firm for selection as auditors by the Board annually. In addition, the Committee assists the Board in its oversight of the Fund's financial reporting process and operates pursuant to a written charter. The Committee met twice during the year ended December 31, 2007. Members of the Committee are Messrs. Whitson (Chairman), Galvin, Maher and Richie. Director Nominating Committee. This Committee selects and nominates persons for election as Directors by the Board. In addition, if a shareholder meeting is held where Directors are to be elected, the Committee will select and nominate persons for election as Directors at such shareholder meeting. The Committee may consider and evaluate nominee candidates properly submitted by shareholders if a vacancy among the Independent Directors of the Fund occurs and if, based on the Board's then current size, composition and structure, the Committee determines that the vacancy should be filled. A shareholder or group of shareholders (referred to in either case as a "Nominating Shareholder") that, individually or as a group, has beneficially owned at least $10,000 of the Fund's shares for at least one year prior to the date the Nominating Shareholder submits a candidate for nomination as a director may submit one candidate to the Nominating Committee for consideration at a special meeting or other meeting of shareholders at which directors will be elected. Nominations will not be considered except in connection with such meetings of shareholders. To be timely for consideration by the Nominating Committee, the submission, including all required information, must be submitted in writing via first class mail to the attention of the Secretary of the Fund at 100 Park Avenue, New York, NY 10017 and received at such time as may be determined by the Fund's Board of Directors in its reasonable discretion. The Nominating Committee will consider only one candidate submitted by a Nominating Shareholder for nomination for election. The Nominating Committee will not consider self-nominated candidates or candidates nominated by members of a candidate's family, including such candidate's spouse, children, parents, uncles, aunts, grandparents, nieces and nephews. The Nominating Committee will consider and evaluate candidates submitted by the Nominating Shareholder on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. These 13 criteria may include the candidate's relevant knowledge, experience and expertise, the candidate's ability to carry out his or her duties in the best interests of the Fund and the candidate's ability to qualify as a disinterested director. The charter for the Nominating Committee, which provides a detailed description of the criteria used by the Nominating Committee as well as information required to be provided by shareholders submitting candidates for consideration by the Nominating Committee, may be obtained by writing to the Secretary of the Fund at the address above. The Committee met twice during the year ended December 31, 2007. Members of the Committee are Messrs. Shafer (Chairman) and McPherson, and Ms. Michel. Beneficial Ownership of Shares As of December 31, 2007, the Directors beneficially owned shares in the Fund and the Seligman Group of Funds as follows:
Aggregate Dollar Range of Shares Dollar Range of Fund Shares Owned Owned by Director in the Seligman Name By Director Group of Funds - ---- ------------------------------------- --------------------------------- INDEPENDENT DIRECTORS Maureen Fonseca....................... None $1-$10,000 John R. Galvin........................ $1-$10,000 $50,001-$100,000 John F. Maher......................... $1-$10,000 Over $100,000 Frank A. McPherson.................... $1-$10,000 Over $100,000 Betsy S. Michel....................... $10,001-$50,000 Over $100,000 Leroy C. Richie....................... $1-$10,000 Over $100,000 Robert L. Shafer...................... $10,001-$50,000 Over $100,000 James N. Whitson...................... $10,001-$50,000 Over $100,000 INTERESTED DIRECTORS William C. Morris..................... $10,001-$50,000 Over $100,000 Brian T. Zino......................... $10,001-$50,000 Over $100,000
Compensation
Total Compensation Aggregate Pension or Retirement from Fund and Fund Name and Compensation Benefits Accrued as Part Complex Paid to Position with Fund from Fund (1) of Fund Expenses Directors (1)(2) - ------------------ ------------- ------------------------ ------------------ Maureen Fonseca, Director /(3)/. $ 587 N/A $ 43,565 John R. Galvin, Director........ 1,265 N/A 106,500 John F. Maher, Director/(4) /... 1,284 N/A 105,000 Frank A. McPherson, Director.... 1,278 N/A 106,500 Betsy S. Michel, Director....... 1,332 N/A 112,500 Leroy C. Richie, Director....... 1,338 N/A 112,500 Robert L. Shafer, Director...... 1,332 N/A 112,500 James N. Whitson, Director...... 1,265 N/A 106,500
- -------- (1)For the Fund's year ended December 31, 2007. (2)As of December 31, 2007, the Seligman Group of Funds consisted of twenty-three registered investment companies, including the Fund. (3)Dr. Fonseca was appointed to the Board of Directors on July 19, 2007. (4)Mr. Maher is deferring his fees. No compensation is paid by the Fund to Directors or officers of the Fund who are employees of Seligman. The Fund has a deferred compensation plan under which independent directors may elect to defer receiving their fees. A director who has elected deferral of his or her fees may choose a rate of return equal to either (1) the interest rate on short-term Treasury Bills, or (2) the rate of return on the shares of certain of the investment companies advised by Seligman, as designated by the director. The cost of such fees and earnings (when incurred) is included in directors' fees and expenses, and the accumulated balance thereof is included in other liabilities in the Fund's financial statements. Mr. Maher is currently deferring compensation pursuant to the deferred compensation plan. Mr. Maher has accrued deferred compensation (including earnings/losses) in respect of the Fund in the amount of $1,268 as of December 31, 2007. 14 The Fund may, but is not obligated to, purchase shares of the other funds in the Seligman Group of Funds to hedge its obligations in connection with the Fund's deferred compensation plan. Class A shares of the Funds may be issued without a sales charge to present and former directors or trustees (and their family members) of the Funds. Class A shares may be sold at net asset value to these persons since such sales require less sales effort and lower sales-related expenses as compared with sales to the general public. Code of Ethics Seligman, Seligman Advisors, their subsidiaries and affiliates, and the Seligman Group of Funds have adopted a Code of Ethics that sets forth the circumstances under which officers, directors and employees (collectively, "Employees") are permitted to engage in personal securities transactions. The Code of Ethics proscribes certain practices with regard to personal securities transactions and personal dealings, provides a framework for the reporting and monitoring of personal securities transactions by Seligman's Chief Compliance Officer, and sets forth a procedure of identifying, for disciplinary action, those individuals who violate the Code of Ethics. The Code of Ethics prohibits Employees (including all investment team members) from purchasing or selling any security or an equivalent security that is being purchased or sold by any client, or where the Employee intends, or knows of another's intention, to purchase or sell a security on behalf of a client. The Code also prohibits all Employees from acquiring securities in a private placement or in an initial or secondary public offering, unless prior approval has been obtained from Seligman's Chief Compliance Officer. The Code of Ethics prohibits (1) each portfolio manager or member of an investment team from purchasing or selling any security within seven calendar days either before or after the purchase or sale of the security by a client's account (including investment company accounts) that the portfolio manager or investment team manages; (2) each Employee from profiting from short-term trading (a profitable purchase and sale or vice-versa within 60 days); and (3) each member of an investment team from profiting from short sales of a security if, at that time, any client managed by that team has a long position in that security. Any profit realized pursuant to any of these prohibitions must be disgorged to a charitable organization. Employees are required, except under very limited circumstances, to engage in personal securities transactions through a broker/dealer designated by Seligman. All transactions by Employees in non-exempt securities must be pre-cleared by Seligman's compliance system. This system is designed to prevent transactions in securities that would conflict with the interests of clients. All Employees are also required to disclose all securities beneficially owned by them upon commencement of employment and at the end of each calendar year. A copy of the Code of Ethics is on public file with, and is available upon request from, the SEC. You can access it through the SEC's Internet site, www.sec.gov. Proxy Voting Policies Introduction. On behalf of the Fund, one or more independent third parties under the supervision of Seligman votes the proxies of the securities held in the Fund's portfolio in accordance with Seligman's criteria of what is in the best interests of the Fund's shareholders. The financial interest of the shareholders of the Fund is the primary consideration in determining how proxies should be voted. Seligman has a responsibility to analyze proxy issues and to ensure that voting is accomplished in a way consistent with those financial interests. In the case of social and political responsibility issues which do not involve financial considerations, it is not possible to fairly represent the diverse views of the Fund's shareholders. As a result, Seligman's policy generally is to abstain from voting on these issues. Notwithstanding the above, proposals seeking disclosure of certain matters relating to social and political issues may be supported if such disclosure is not deemed to be unduly burdensome. The Proxy Voting Process. Proxies for securities held in the portfolios of the Fund will be received, processed and voted by one or more independent third parties under the supervision of Seligman pursuant to the guidelines (the "Guidelines") established by Seligman's Proxy Voting Committee (the "Committee"). A description of the Guidelines can be found below. The Committee was established to set Seligman's policy and Guidelines, to consider new corporate governance issues as they arise, to assist in determining how Seligman will respond to such issues and to provide oversight of the proxy voting process. The Committee currently consists of Seligman's Chief Investment Officer (Chair), Seligman's Chief Financial Officer and Seligman's General Counsel. 15 Seligman subscribes to a service offered by an independent third party that provides research on proposals to be acted upon at shareholder meetings and assistance in the tracking, voting and recordkeeping of proxies. Conflicts of Interests. Seligman's Chief Compliance Officer maintains a Proxy Watch List, which contains the names of those companies that may present the potential for conflict in the voting process with Seligman, Seligman Advisors or any Seligman affiliate. For example, the Proxy Watch List will include those portfolio companies for which Seligman separately manages assets in private accounts or which are significant distributors of Seligman's products and services. As described below, proxy voting for these companies will be subject to a higher level of consideration. Deviations from Guidelines and Special Situations. Seligman recognizes that it may not always be in the best interest of the shareholders of the Fund to vote in accordance with the Guidelines on a particular issue. In such circumstances, Seligman may deviate from the Guidelines. A member of the Committee must approve any deviation from the Guidelines. Furthermore, a majority of the Committee's members must approve any deviation from the Guidelines for issuers included on the Proxy Watch List. Similarly, one member of the Committee must approve the voting decision for proposals of a unique nature requiring a case-by-case analysis. A majority of the Committee must approve the voting decision for such proposals if the issuer is included on the Proxy Watch List. Seligman may consider the views of the management of a portfolio company, as well as the view of Seligman's investment professionals, when analyzing potential deviations from the Guidelines and for those proposals requiring a case-by-case evaluation. Guidelines Summary. The Guidelines are briefly described as follows: 1. Seligman votes with the recommendations of a company's board of directors on general corporate governance issues such as changing the company's name, ratifying the appointment of auditors and procedural matters relating to shareholder meetings. 2. Seligman opposes, and supports the elimination of, anti-takeover proposals, including those relating to classified Boards, supermajority votes, poison pills, issuance of blank check preferred and establishment of classes with disparate voting rights. 3. Seligman abstains from voting on issues relating to social and/or political responsibility, except for matters relating to disclosure issues if not deemed unduly burdensome for the company (e.g., political contributions). 4. Seligman votes for stock option plans, increases in the number of shares under existing stock option plans and other amendments to the terms of such plans; provided that the overall dilution of all active stock option plans and stock purchase plans does not exceed 10% on a fully diluted basis and are otherwise considered to align the interest of the company with those of shareholders (e.g., all such plans must specifically prohibit repricing). 5. Seligman generally votes with the recommendations of a company's board of directors on other matters relating to executive compensation, unless considered excessive. 6. Seligman will withhold voting for the entire board of directors (or individual directors as the case may be) if: (a) less than 75% of the board is independent; (b) the board has a nominating or compensation committee of which less than 75% of its members are independent; (c) the board has recommended shareholders vote for an anti-takeover device which Seligman votes against; or (d) the board has recommended a matter relating to a stock option plan or stock purchase plan which Seligman votes against. 7. Seligman will vote for proposals relating to the authorization of additional common stock up to 5 times that currently outstanding. 8. Seligman will vote for proposals to effect stock splits. 9. Seligman will vote for proposals authorizing share repurchase programs. 10. Seligman will vote against authorization to transact unidentified business at the meeting. 16 11. Acquisitions, mergers, reorganizations, reincorporations and other similar transactions will be voted on a case-by-case basis. 12. Proposals to amend a company's charter or by-laws (other than as identified above) will be voted on a case-by-case basis. 13. Seligman will vote against all proposals where the company did not provide adequate information to make a decision. 14. Seligman abstains from voting shares which have recently been sold or for which information was not received on a timely basis. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available (i) without charge upon request by calling toll free (800) 221-2450 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC's website at www.sec.gov. Information for each new 12-month period ending June 30 will be available no later than August 31 of that year. Control Persons and Principal Holders of Securities Control Persons As of April 2, 2008, there was no person or persons who controlled the Fund, either through a significant ownership of shares or any other means of control. Principal Holders As of April 2, 2008, 14.26% of the Fund's Class B shares of capital stock then outstanding, 27.55% of the Fund's Class D shares of capital stock then outstanding and 95.29% of the Fund's Class R shares of capital stock then outstanding were registered in the name of Merrill Lynch, Pierce, Fenner & Smith Incorporated FBO Customers, Attn. Fund Administration, 4800 Deer Lake Drive East, Jacksonville, FL 32246; 8.55% of the Fund's Class C shares of capital stock then outstanding was registered in the name of Citigroup Global House Account, 333 West 34th Street, New York, NY 10002 and, 26.21% and 6.40% of the Fund's Class I shares of capital stock then outstanding were registered in the names of Patterson & Co. for the J. & W. Seligman & Co. Incorporated Matched Accumulation Plan, Attn: Pension Plan Services, 100 Park Avenue, New York, NY 10017 and Patterson & Co. for the Seligman Data Corp 401K/Thrift Plan, Attn: Pension Plan Services, 100 Park Avenue, New York, NY 10017, respectively. In addition, 38.75%, 13.45%, 7.12% and 5.25% of the Fund's Class I shares of capital stock then outstanding was registered in the name of State Street Bank & Trust Co., FBO Customers, North Carolina College Savings, 105 Rosemont Avenue, Westwood, MA 02090, respectively. As of the same date, there were no principal holders who owned 5% or more of Class A shares of the then outstanding shares of capital stock of the Fund. Management Ownership As of April 2, 2008, Directors and officers of the Fund as a group owned less than 1% of the Fund's Class A shares of the then outstanding shares of capital stock of the Fund. As of the same date, Directors and officers of the Fund did not own any shares of the Fund's Class B shares, Class C shares, Class D shares or Class R shares. As of April 2, 2008, Directors and officers of the Fund as a group owned 5.75% of the Fund's Class I shares of the then outstanding shares of capital stock of the Fund. Investment Advisory and Other Services Investment Manager Subject to the control of the Fund's Board of Directors, Seligman manages the investment of the assets of the Fund and administers its business and other affairs pursuant to a management agreement approved by the Board of Directors and the initial shareholders of the Fund (the "Management Agreement"). As of the date of this SAI, Seligman also served as investment manager to twenty-one other US registered investment companies which, 17 together with the Fund, make up the "Seligman Group of Funds." There are no other management-related service contracts under which services are provided to the Fund. No person or persons, other than the directors, officers or employees of Seligman and the Fund, regularly advise the Fund or Seligman with respect to the Fund's investments. Seligman is a successor firm to an investment banking business founded in 1864 which has thereafter provided investment services to individuals, families, institutions, and corporations. Mr. William C. Morris, Chairman and Director of Seligman and Chairman of the Board of Directors and Director of the Fund, owns a majority of the outstanding voting securities of Seligman and is a controlling person of Seligman. All of the officers of the Fund listed above are officers or employees of Seligman. Their affiliations with the Fund and with Seligman are provided under their principal business occupations. The Fund pays Seligman a management fee for its services, calculated daily and payable monthly. The management fee is equal to 0.65% per annum of the Fund's average daily net assets on the first $1 billion of net assets, 0.60% per annum of the Fund's average daily net assets on the next $1 billion of net assets and 0.55% per annum of the Fund's average daily net assets in excess of $2 billion. For the year ended December 31, 2007, the Fund paid Seligman $1,571,225, equal to 0.65% per annum of its average daily net assets. For the year ended December 31, 2006, the Fund paid Seligman $1,606,416, equal to 0.65% per annum of its average daily net assets. For the year ended December 31, 2005, the Fund paid Seligman $1,787,774, equal to 0.65% per annum of its average daily net assets. The Fund pays all of its expenses other than those assumed by Seligman, including administration, shareholder services and distribution fees, fees and expenses of independent attorneys and auditors, taxes and governmental fees, including fees and expenses of qualifying the Fund and its shares under federal and state securities laws, and expenses of repurchase or redemption of shares, expenses of printing and distributing reports, notices and proxy materials to shareholders, expenses of printing and filing reports and other documents with governmental agencies, expenses of shareholders' meetings, expenses of corporate data processing and related services, shareholder record keeping and shareholder account services, fees and disbursements of transfer agents and custodians, expenses of disbursing dividends and distributions, fees and expenses of directors of the Fund not employed by or serving as a Director of Seligman or its affiliates, insurance premiums, interest on borrowings, and extraordinary expenses such as litigation expenses. The Management Agreement provides that Seligman will not be liable to the Fund for any error of judgment or mistake of law, or for any loss arising out of any investment, or for any act or omission in performing its duties under the Management Agreement, except for willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations and duties under the Management Agreement. The Management Agreement was initially approved by the Board of Directors at a Meeting held on September 30, 1988 and by the shareholders at a special meeting held on December 16, 1988. Amendments to the Management Agreement, effective April 10, 1991, to increase the fee rate payable to Seligman by the Fund, were approved by the Fund's Board of Directors on January 17, 1991 and by the shareholders at a special meeting held on April 10, 1991. The amendments to the Management Agreement, effective January 1, 1996, to increase the fee rate payable to Seligman by the Fund were approved by the Fund's Board of Directors on September 21, 1995 and by the shareholders at a special meeting on December 12, 1995. The Management Agreement will continue in effect until December 31 of each year if (1) such continuance is approved in the manner required by the 1940 Act (i.e., by a vote of a majority of the Board of Directors or of the outstanding voting securities of the Fund and by a vote of a majority of the Directors who are not parties to the Management Agreement or interested persons of any such party) and (2) Seligman shall not have notified the Fund at least 60 days prior to December 31 of any year that it does not desire such continuance. The Management Agreement may be terminated by the Fund, without penalty, on 60 days' written notice to Seligman and will terminate automatically in the event of its assignment. The Fund has agreed to change its name upon termination of the Management Agreement if continued use of the name would cause confusion in the context of Seligman's business. Principal Underwriter Seligman Advisors (an affiliate of Seligman), located at 100 Park Avenue, New York, New York 10017, acts as general distributor of the shares of the Fund and of each of the other mutual funds in the Seligman Group. Seligman Advisors is an "affiliated person" (as defined in the 1940 Act) of Seligman, which is itself an affiliated person of the Fund. Those individuals identified above under "Management Information" as directors or officers of both the Fund and Seligman Advisors are affiliated persons of both entities. 18 Services Provided by the Investment Manager Under the Management Agreement, dated December 29, 1988, as amended April 10, 1991 and January 1, 1996, subject to the control of the Fund's Board of Directors, Seligman manages the investment of the assets of the Fund, including making purchases and sales of portfolio securities consistent with the Fund's investment objectives and policies, and administers its business and other affairs. Seligman provides the Fund with such office space, administrative and other services and executive and other personnel as are necessary for Fund operations. Seligman pays all of the compensation of directors of the Fund who are employees or consultants of Seligman and of the officers and employees of the Fund. Seligman also provides senior management for Seligman Data Corp. ("SDC"), the Fund's shareholder service agent. Service Agreements There are no other management-related service contracts under which services are provided to the Fund. Other Investment Advice No person or persons, other than directors, officers, or employees of Seligman, regularly advise the Fund or Seligman with respect to the Fund's investments. Dealer Reallowances Dealers and financial advisors receive a percentage of the initial sales charge on sales of Class A shares of the Fund, as set forth below: Class A shares:
Regular Dealer Sales Charge Sales Charge Reallowance as a % of as a % of Net as a % of Amount of Purchase Offering Price(1) Amount Invested Offering Price ------------------ ----------------- --------------- -------------- Less than $50,000... 5.75% 6.10% 5.00% $50,000 - $99,999... 4.50 4.71 4.00 $100,000 - $249,999. 3.50 3.63 3.00 $250,000 - $499,999. 2.50 2.56 2.25 $500,000 - $999,999. 2.00 2.04 1.75 $1,000,000 and over. 0 0 0
- -------- (1)"Offering Price" is the amount that you actually pay for Fund shares; it includes the initial sales charge. Seligman Services, Inc. ("Seligman Services"), an affiliate of Seligman, is a limited purpose broker/dealer. Prior to January 1, 2006, Seligman Services received commissions from certain sales of Fund shares. Accordingly, for the year ended December 31, 2005, Seligman Services received commissions in the amount of $3,704. Rule 12b-1 Plan The Fund has adopted an Administration, Shareholder Services and Distribution Plan ("12b-1 Plan") in accordance with Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. Under the 12b-1 Plan, the Fund may pay to Seligman Advisors an administration, shareholder services and distribution fee in respect of the Fund's Class A, Class B, Class C, Class D shares and Class R shares. (Effective on the close of business on May 16, 2008, the Fund's Class D shares will be combined with Class C shares, and Class D shares will no longer be available. After Class D shares are combined with Class C shares, all former Class D shareholders will be subject to the Fund's Rule 12b-1 Plan in respect of Class C shares, which is identical in its terms to Class D shares. There is no administration, shareholder services and distribution fee in respect of the Fund's Class I shares.) Payments under the 12b-1 Plan may include, but are not limited to: (1) compensation to securities dealers and other organizations ("Service Organizations") for providing distribution assistance with respect to assets invested in the Fund; (2) compensation to Service Organizations for providing administration, accounting and other shareholder services with respect to Fund shareholders; and (3) otherwise promoting the sale of shares of the Fund, including paying for the preparation of advertising and sales literature and the printing and distribution of such 19 promotional materials and prospectuses to prospective investors and defraying Seligman Advisors' costs incurred in connection with its marketing efforts with respect to shares of the Fund. Seligman, in its sole discretion, may also make similar payments to Seligman Advisors from its own resources, which may include the management fee that Seligman receives from the Fund. Payments made by the Fund under the 12b-1 Plan are intended to be used to encourage sales of shares of the Fund, as well as to discourage redemptions. Fees paid by the Fund under the 12b-1 Plan with respect to any class of shares may not be used to pay expenses incurred solely in respect of any other class or any other Seligman fund. Expenses attributable to more than one class of the Fund are allocated between the classes in accordance with a methodology approved by the Fund's Board of Directors. Expenses of distribution activities that benefit both the Fund and other Seligman funds will be allocated among the applicable funds based on relative gross sales during the quarter in which such expenses are incurred, in accordance with a methodology approved by the Fund's Board of Directors. Class A Under the 12b-1 Plan, the Fund, with respect to Class A shares, is authorized to pay monthly to Seligman Advisors a service fee at an annual rate of up to 0.25% of the average daily net asset value of the Class A shares. This fee is used by Seligman Advisors exclusively to make payments to Service Organizations which have entered into agreements with Seligman Advisors. Such Service Organizations receive from Seligman Advisors a continuing fee of up to 0.25% on an annual basis, payable quarterly, of the average daily net assets of Class A shares attributable to the particular Service Organization for providing personal service and/or maintenance of shareholder accounts. The fee payable to Service Organizations from time to time shall, within such limits, be determined by the Directors of the Fund. The Fund is not obligated to pay Seligman Advisors for any such costs it incurs in excess of the fee described above. No expense incurred in one year by Seligman Advisors with respect to Class A shares of the Fund may be paid from Class A 12b-1 fees received from the Fund in any other year. If the Fund's 12b-1 Plan is terminated in respect of Class A shares, no amounts (other than amounts accrued but not yet paid) would be owed by the Fund to Seligman Advisors with respect to Class A shares. The total amount paid by the Fund to Seligman Advisors in respect of Class A shares for the year ended December 31, 2007 was $520,298, equivalent to 0.25% per annum of the Class A shares' average daily net assets. Class B Under the 12b-1 Plan, the Fund, with respect to Class B shares, is authorized to pay monthly a 12b-1 fee at an annual rate of up to 1% of the average daily net asset value of the Class B shares. This fee is comprised of (1) a distribution fee equal to 0.75% per annum, substantially all of which is paid directly to one or more third parties that have purchased Seligman Advisor's rights to this fee (the "Purchasers") to compensate them for having funded, at the time of sale of Class B shares (i) a 4% sales commission to Service Organizations and (ii) prior to August 1, 2004, a payment of up to 0.35% of sales to Seligman Advisors to help defray its costs of distributing Class B shares; and (2) a service fee of up to 0.25% per annum which is paid to Seligman Advisors. A small portion of the distribution fee is paid to Seligman Advisors in connection with sales of Class B shares for which no commissions are paid; Seligman Advisors may pay the entire 12b-1 fee to Service Organizations who have not received any sales commission for the sale of Class B shares. The service fee is used by Seligman Advisors exclusively to make payments to Service Organizations which have entered into agreements with Seligman Advisors. Such Service Organizations receive from Seligman Advisors a continuing service fee of up to 0.25% on an annual basis, payable quarterly, of the average daily net assets of Class B shares attributable to the particular Service Organization for providing personal service and/or maintenance of shareholder accounts. The amounts expended by Seligman Advisors or the Purchasers in any one year upon the initial purchase of Class B shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year. The Fund's 12b-1 Plan permits expenses incurred in respect of Class B shares in one year to be paid from Class B 12b-1 fees received from the Fund in any other year; however, in any fiscal year the Fund is not obligated to pay any 12b-1 fees in excess of the fees described above. Seligman Advisors and the Purchasers are not reimbursed for expenses which exceed such fees. If the Fund's 12b-1 Plan is terminated in respect of Class B shares, no amounts (other than amounts accrued but not yet paid) would be owed by the Fund to Seligman Advisors or the Purchasers with respect to Class B shares. The total amount paid by the Fund in respect of Class B shares for the year ended December 31, 2007 was $49,919, equivalent to 1% per annum of the Class B shares' average daily net assets. Class C Under the 12b-1 Plan, the Fund, with respect to Class C shares, is authorized to pay monthly to Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily net asset value of the Class C shares. This fee is used by 20 Seligman Advisors as follows: During the first year following the sale of Class C shares, a distribution fee of 0.75% of the average daily net assets attributable to such Class C shares is used, along with any contingent deferred sales charge ("CDSC") proceeds, to (1) reimburse Seligman Advisors for its (A) payment at the time of sale of Class C shares of a 0.75% sales commission to Service Organizations or (B) ongoing payment of 0.75% of the average daily net assets attributable to such Class C shares to Service Organizations who elect not to receive a time of sale payment and (2) pay for other distribution expenses, including paying for the preparation of advertising and sales literature and the printing and distribution of such promotional materials and prospectuses to prospective investors and other marketing costs of Seligman Advisors. In addition, during the first year following the sale of Class C shares, a service fee of up to 0.25% of the average daily net assets attributable to such Class C shares is used to reimburse Seligman Advisors for its prepayment to Service Organizations at the time of sale of Class C shares of a service fee of 0.25% of the net asset value of the Class C share sold (for shareholder services to be provided to Class C shareholders over the course of the one year immediately following the sale) and for its ongoing payment of a service fee of 0.25% of the average daily net assets attributable to such Class C shares to those Service Organizations who elect not to receive a time of sale payment. The payment of service fees to Seligman Advisors is limited to amounts Seligman Advisors actually paid to Service Organizations as service fees at either the time of sale or the ongoing service fees paid to Service Organizations who elect not to receive such service fees at the time of sale. After the initial one-year period following a sale of Class C shares, the 12b-1 fee attributable to such Class C shares is paid to Service Organizations for providing continuing shareholder services and distribution assistance in respect of the Fund. The total amount paid by the Fund to Seligman Advisors in respect of Class C shares for the year ended December 31, 2007 was $41,212, equivalent to 1% per annum of the Class C shares' average daily net assets. The amounts expended by Seligman Advisors in any one year with respect to Class C shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year. The Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect of Class C shares in one year to be paid from Class C 12b-1 fees in any other year; however, in any year the Fund is not obligated to pay any 12b-1 fees in excess of the fees described above. As of December 31, 2007, Seligman Advisors incurred $343,283 of expenses in respect of the Fund's Class C shares that were not reimbursed from the amount received from the Fund's 12b-1 Plan. This amount is equal to 10.06% of the net assets of Class C shares at December 31, 2007. If the Fund's 12b-1 Plan is terminated in respect of Class C shares of the Fund, no amounts (other than amounts accrued but not yet paid) would be owed by the Fund to Seligman Advisors with respect to Class C shares. Class D (NOT AVAILABLE AFTER MAY 16, 2008) Effective at the close of business (4:00 p.m. EST) on May 16, 2008, the Fund's Class D shares will be combined with Class C shares, and Class D shares will no longer be available. After Class D shares are combined with Class C shares, all former Class D shareholders will be subject to the Fund's Rule 12b-1 plan in respect of Class C shares (as described immediately above), which is identical in its terms to Class D shares. Accordingly, the description of the Fund's 12b-1 Plan in respect of Class D shares will not be relevant after May 16, 2008. Under the 12b-1 Plan, the Fund, with respect to Class D shares, is authorized to pay monthly to Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily net asset value of the Class D shares. This fee is used by Seligman Advisors as follows: During the first year following the sale of Class D shares, a distribution fee of 0.75% of the average daily net assets attributable to such Class D shares is used, along with any CDSC proceeds, to (1) reimburse Seligman Advisors for its (A) payment at the time of sale of Class D shares of a 0.75% sales commission to Service Organizations or (B) ongoing payment of 0.75% of the average daily net assets attributable to such Class D shares to Service Organizations who elect not to receive a time-of-sale payment and (2) pay for other distribution expenses, including paying for the preparation of advertising and sales literature and the printing and distribution of such promotional materials and prospectuses to prospective investors and other marketing costs of Seligman Advisors. In addition, during the first year following the sale of Class D shares, a service fee of up to 0.25% of the average daily net assets attributable to such Class D shares is used to reimburse Seligman Advisors for its prepayment to Service Organizations at the time of sale of Class D shares of a service fee of 0.25% of the net asset value of the Class D shares sold (for shareholder services to be provided to Class D shareholders over the course of the one year immediately following the sale) and for its ongoing payment of a service fee of 0.25% of the average daily net assets attributable to such Class D shares to those Service Organizations who elect not to receive a time of sale payment. The payment of service fees to Seligman Advisors is limited to amounts Seligman Advisors actually paid to Service Organizations as service fees at either the time of sale or the ongoing services fees paid to Service Organizations who elect not to receive such service fees at the time of sale. After the initial one-year period 21 following a sale of Class D shares, the 12b-1 fee attributable to such Class D shares is paid to Service Organizations for providing continuing shareholder services and distribution assistance in respect of the Fund. The total amount paid by the Fund to Seligman Advisors in respect of Class D shares for the year ended December 31, 2007 was $130,771, equivalent to 1% per annum of the Class D shares' average daily net assets. The amounts expended by Seligman Advisors in any one year with respect to Class D shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year. The Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect of Class D shares in one year to be paid from Class D 12b-1 fees in any other year; however, in any year the Fund is not obligated to pay any 12b-1 fees in excess of the fees described above. As of December 31, 2007, Seligman Advisors incurred $822,457 of unreimbursed expenses in respect of the Fund's Class D shares that were not reimbursed from the amount received from the Fund's 12b-1 Plan. This amount is equal to 7.35% of the net assets of Class D shares at December 31, 2007. If the Fund's 12b-1 Plan is terminated in respect of Class D shares of the Fund, no amounts (other than amounts accrued but not yet paid) would be owed by the Fund to Seligman Advisors with respect to Class D shares. Class R Under the 12b-1 Plan, the Fund, with respect to Class R shares, is authorized to pay monthly to Seligman Advisors a 12b-1 fee at an annual rate of up to 0.50% of the average daily net asset value of the Class R shares. This 12b-1 fee is comprised of (1) a distribution fee equal to 0.25% of the average daily net assets attributable to the Class R shares and (2) a service fee of up to 0.25% of the average daily net asset value of the Class R shares. The 12b-1 fee is used by Seligman Advisors in one of two ways, depending on the payout option chosen by Service Organizations. This fee is used by Seligman Advisors as follows: Option 1--Service Organization opts for time-of-sale payment. A distribution fee of 0.25% of the average daily net assets attributable to such Class R shares is used, along with any CDSC proceeds, to (1) reimburse Seligman Advisors for its payment at the time of sale of Class R shares of a 0.75% sales commission to the Service Organization, and (2) pay for other distribution expenses, including paying for the preparation of advertising and sales literature and the printing and distribution of such promotional materials and prospectuses to prospective investors and other marketing costs of Seligman Advisors. In addition, during the first year following the sale of Class R shares, a service fee of up to 0.25% of the average daily net assets attributable to such Class R shares is used to reimburse Seligman Advisors for its prepayment to the Service Organization at the time of sale of Class R shares of a service fee of 0.25% of the net asset value of the Class R shares sold (for shareholder services to be provided to Class R shareholders over the course of the one year immediately following the sale). After the initial one-year period following a sale of Class R shares, the 0.25% servicing fee is used to reimburse Seligman Advisors for its payments to the Service Organization for providing continuing shareholder services. The payment of service fees to Seligman Advisors is limited to amounts Seligman Advisors actually paid to Service Organizations at the time of sale as service fees. Option 2--Service Organization does not opt for time-of-sale payment. The entire 12b-1 fee attributable to the sale of the Class R shares, along with any CDSC proceeds, is used to (1) reimburse Seligman Advisors for its on-going payment of the entire 12b-1 fees attributable to such Class R shares to the Service Organization for providing continuing shareholder services and distribution assistance in respect of the Fund and (2) pay for other distribution expenses, including paying for the preparation of advertising and sales literature and the printing and distribution of such promotional materials and prospectuses to prospective investors and other marketing costs of Seligman Advisors. The total amount paid by the Fund to Seligman Advisors in respect of Class R shares for the year ended December 31, 2007 was $7,042, equivalent to 0.50% per annum of the Class R shares' average daily net assets. The amounts expended by Seligman Advisors in any one year with respect to Class R shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year. The Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect of Class R shares in one fiscal year to be paid from Class R 12b-1 fees in any other fiscal year; however, in any fiscal year the Fund is not obligated to pay any 12b-1 fees in excess of the fees described above. As of December 31, 2007, Seligman Advisors incurred $24,157 of expenses in respect of the Fund's Class R shares that were not reimbursed from the amount received from the Fund's 12b-1 Plan. This amount is equal to 1.13% of the net assets of Class R shares at December 31, 2007. 22 If the 12b-1 Plan is terminated in respect of Class R shares of the Fund, no amounts (other than amounts accrued but not yet paid) would be owed by the Fund to Seligman Advisors with respect to Class R shares. ----------------- Payments made by the Fund under the 12b-1 Plan for the year ended December 31, 2007, were spent on the following activities in the following amounts:
Class A Class B Class C Class D Class R - -------- ------- ------- -------- ------- Compensation to underwriters... $ -0- $ 276 $ 2,101 $ 7,404 $ 9 Compensation to broker/dealers. $520,298 $12,458 $39,111 $123,367 $7,033 Other Compensation*............ $ -0- $37,185 $ -0- $ -0- $ -0-
- -------- * Payment is made to the Purchasers to compensate them for having funded, at the time of sale, payments to broker/dealers and underwriters. The 12b-1 Plan was initially approved on July 16, 1992 by the Board of Directors, including a majority of the Directors who are not "interested persons" (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the 12b-1 Plan or in any agreement related to the 12b-1 Plan ("Qualified Directors") and was approved by shareholders of the Fund at a Special Meeting of the Shareholders held on November 23, 1992. The 12b-1 Plan became effective in respect of the Class A shares on January 1, 1993. The 12b-1 Plan was approved in respect of the Class B shares on March 21, 1996 by the Board of Directors of the Fund, including a majority of the Qualified Directors, and became effective in respect of the Class B shares on April 22, 1996. The 12b-1 Plan was approved in respect of the Class C shares on May 20, 1999 by the Directors, including a majority of the Qualified Directors, and became effective in respect of the Class C shares on June 1, 1999. The 12b-1 Plan was approved in respect of the Class D shares on March 18, 1993 by the Directors, including a majority of the Qualified Directors, and became effective in respect of the Class D shares on May 1, 1993. The 12b-1 Plan was approved in respect of Class R shares on March 20, 2003 by the Directors, including a majority of the Qualified Directors, and became effective in respect of the Class R shares on April 30, 2003. The 12b-1 Plan will continue in effect until December 31 of each year so long as such continuance is approved annually by a majority vote of both the Directors of the Fund and the Qualified Directors, cast in person at a meeting called for the purpose of voting on such approval. The 12b-1 Plan may not be amended to increase materially the amounts payable to Service Organizations with respect to a class without the approval of a majority of the outstanding voting securities of the class. If the amount payable in respect of Class A shares under the 12b-1 Plan is proposed to be increased materially, the Fund will either (1) permit holders of Class B shares to vote as a separate class on the proposed increase or (2) establish a new class of shares subject to the same payment under the 12b-1 Plan as existing Class A shares, in which case the Class B shares will thereafter convert into the new class instead of into Class A shares. No material amendment to the 12b-1 Plan may be made except by vote of a majority of both the Directors and the Qualified Directors. The 12b-1 Plan requires that the Treasurer of the Fund shall provide to the Directors, and the Directors shall review, at least quarterly, a written report of the amounts expended (and purposes therefor) under the 12b-1 Plan. Rule 12b-1 also requires that the selection and nomination of Directors who are not "interested persons" of the Fund be made by such disinterested Directors. The 12b-1 Plan is reviewed annually by the Directors. Seligman Services acts as a broker/dealer of record for shareholder accounts that do not have a designated financial advisor. As such, it receives compensation pursuant to the Fund's 12b-1 Plan for providing personal services and account maintenance to such accounts. For the year ended December 31, 2007, Seligman Services received service fees pursuant to the Fund's 12b-1 Plan of $126,585. Other Service Providers SDC, which is owned by certain other investment companies in the Seligman Group, is the shareholder servicing agent and dividend paying agent for the Fund. SDC charges the Fund at cost for its services. These costs may include amounts paid by SDC to financial intermediaries and other third parties who provide sub-transfer agency services. Certain officers and directors of the Fund are also officers and directors of SDC. SDC's address is 100 Park Avenue, New York, New York 10017. 23 Portfolio Managers For purposes of this discussion, each member of the portfolio team is referred to as a "portfolio manager". The following tables set forth certain additional information from that discussed in the Prospectuses with respect to the portfolio managers of the Fund. Unless noted otherwise, all information is provided as of December 31, 2006. Other Accounts Managed by Portfolio Managers. The table below identifies, for each of the portfolio managers, the number of accounts managed (other than the Fund) and the total assets in such accounts, within each of the following categories: other registered investment companies, other pooled investment vehicles, and other accounts. None of the accounts noted below has an advisory fee based on performance of the account. For purposes of the table below, each series or portfolio of a registered investment company is treated as a separate registered investment company.
Other Registered Other Pooled Portfolio Manager Investment Companies Investment Vehicles Other Accounts - ----------------- ------------------------------- -------------------------- ------------------------------ John B. Cunningham 8 Other Registered Investment 0 Other Pooled Investment 11 Other Accounts with Companies with Vehicles. approximately $1.4 million in approximately $2.69 billion in total assets under net assets under management. management. Erik J. Voss 7 Other Registered Investment 0 Other Pooled Investment 20 Other Accounts with Companies with Vehicles. approximately $245.8 million approximately $3.46 billion in in total assets under net assets under management. management.
Compensation/Material Conflicts of Interest. Set forth below is an explanation of the structure of, and method(s) used to determine portfolio manager compensation. Also set forth below is an explanation of material conflicts of interest that may arise between a portfolio manager's management of the Fund's investments and investments in other accounts. Compensation: For the year ended December 31, 2007, as compensation for his responsibilities, including those relating to his responsibilities as Chief Investment Officer of Seligman, Mr. Cunningham received a fixed base salary and a bonus. The amount of Mr. Cunningham's bonus was based on (i) a guaranteed minimum amount and (ii) a performance component based on the weighted average pre-tax investment performance of three investment companies (one of which is the Fund) for which Mr. Cunningham serves as portfolio manager as compared with the funds constituting the Lipper Large-Cap Core Funds Average for the three-year period ending December 31, 2007. For the year ended December 31, 2007, as compensation for his responsibilities, Mr. Voss received (i) a fixed base salary; (ii) a fixed minimum bonus; and (iii) a bonus based on the investment performance of two other Seligman investment companies for which Mr. Voss serves as Portfolio Manager (the "Voss Funds") as compared to the funds constituting the Lipper averages that include the Voss Funds. To reduce the amount of time the portfolio managers dedicate to marketing efforts and client services, the investment team has an experienced product manager that acts as the primary liaison between Seligman Advisors' (the distributor of the Seligman mutual funds) marketing department and the investment team. Conflicts of Interest: Actual or potential conflicts of interest may arise from the fact that Seligman, and the portfolio managers of the Fund have day-to-day management responsibilities with respect to accounts of clients of Seligman other than the Fund ("Other Accounts"). Seligman has policies and procedures intended to mitigate or manage the conflicts of interest described below. There is no guarantee that any such policies or procedures will detect each and every situation in which a conflict of interest arises. 24 Seligman may receive higher compensation with respect to Other Accounts (including accounts which are private investment funds or have performance or higher fees paid to Seligman, or in which one or more portfolio managers have direct or indirect personal interest in the receipt of such fees) than that received with respect to the Fund. This may create a potential conflict of interest for Seligman or its portfolio managers by providing an incentive to favor these Other Accounts when, for example, placing securities transactions. In addition, Seligman could be viewed as having a conflict of interest to the extent that Seligman or an affiliate has a proprietary investment in one or more Other Accounts, the portfolio managers have personal investments, directly or indirectly, in one or more Other Accounts or the Other Accounts are investment options in Seligman's employee benefit plans. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as Seligman may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very limited availability. Seligman may be perceived as causing accounts it manages to participate in an offering to increase Seligman's overall allocation of securities in that offering. A potential conflict of interest also may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account or when a sale in one account lowers the sale price received in a sale by a second account. Because Seligman manages accounts that engage in short sales of securities of the type in which many clients may invest, Seligman could be seen as harming the performance of certain client accounts (i.e., those not engaging in short sale transactions) for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. Conversely, Seligman could be seen as benefiting those accounts that may engage in short sales through the sale of securities held by other clients to the extent that such sales reduce the cost to cover the short positions. Seligman and its affiliates may at times give advice or take action with respect to accounts that differs from the advice given other accounts. A particular security may be bought or sold only for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. Simultaneous portfolio transactions in the same security by multiple clients may tend to decrease the prices received by clients for sales of such securities and increase the prices paid by clients for purchases of such securities. A conflict may also arise to the extent that Seligman advises multiple accounts which own different capital structures of an issuer (e.g., bonds versus common stocks). This conflict may be more pronounced if such an issuer files for bankruptcy and Seligman participates in negotiations to restructure that issuer. Employees of Seligman, including portfolio managers, may engage in personal trading, subject to Seligman's Code of Ethics. In addition to the general conflicts noted above, personal trading by employees may create apparent or actual conflicts to the extent that one or more employees personally benefit or appear to benefit from subsequent trading by clients in similar securities. Because portfolio managers of Seligman manage multiple client accounts, portfolio managers may devote unequal time and attention to the portfolio management of client accounts. Securities Ownership. As of December 31, 2007, Mr. Cunningham owned between $100,001 and $500,000 of shares of the Fund. As of the same date, Mr. Voss did not own shares of the Fund. Brokerage Allocation and Other Practices Brokerage Transactions Seligman will seek the most favorable price and execution in the purchase and sale of portfolio securities of the Fund. When two or more of the investment companies in the Seligman Group of Funds or other investment advisory clients of Seligman desire to buy or sell the same security at the same time, the securities purchased or sold are allocated by Seligman in a manner believed to be equitable to each. There may be possible advantages or disadvantages of such transactions with respect to price or the size of positions readily obtainable or saleable. In over-the-counter markets, the Fund deals with responsible primary market makers unless a more favorable execution or price is believed to be obtainable. The Fund may buy securities from or sell securities to dealers acting as principal in accordance with applicable law. 25 For the years ended December 31, 2007, 2006 and 2005, the Fund paid total brokerage commissions to others for execution, research and statistical services in the amounts of $609,741, $830,277 and $762,488, respectively. Commissions For the years ended December 31, 2007, 2006 and 2005, the Fund did not execute any portfolio transactions with, and therefore did not pay any commissions to, any broker affiliated with either the Fund, Seligman, or Seligman Advisors. Brokerage Selection Seligman selects broker-dealers with the goal of obtaining "best execution". Seligman will consider a full range and quality of a broker-dealer's services, such as price, market familiarity, reliability, integrity, commission rates, execution and settlement capabilities, ability to handle large orders, financial condition, technological infrastructure and operational capabilities, willingness to commit capital and the brokerage and research services provided or made available by the broker-dealer. These brokerage and research services, including supplemental investment research, analysis, and reports concerning issuers, industries, and securities, may be useful to Seligman in connection with its services to clients other than the Fund. The relative weighting given to any of the criteria mentioned above depends on a variety of factors including the nature of the transaction, the market on which a particular trade is being executed and the number of broker-dealers making a market in the security to be traded. Although sales of investment company shares will not be considered in selecting broker-dealers to effect securities transactions, Seligman offers its investment products primarily through the broker-dealer selling networks and expects that nearly all broker-dealers that effect securities transactions for the investment companies of the Seligman Group of Funds will have a relationship with Seligman or its affiliates to distribute shares of the investment companies or other investment products offered by Seligman. Seligman ranks broker-dealers through an internal voting process which considers the services provided by broker-dealers excluding investment company or product sales by that broker-dealer. In connection with any agency trades, Seligman determines the reasonableness of the commissions to be paid to a broker-dealer based upon the quality of the brokerage and research services provided, or arranged for, and as a result, may select a broker-dealer whose commission costs may be higher than another would have charged. Seligman monitors and evaluates the performance and execution capabilities of broker-dealers through which it places orders and periodically reviews its policy with regard to negotiating commissions or mark-ups for the investment companies of the Seligman Group of Funds in light of current market conditions, statistical studies and other available information. Regular Broker-Dealers During the year ended December 31, 2007, the Fund acquired securities of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or of their parents. The Fund held securities of Morgan Stanley (the parent company of Morgan Stanley Dean Witter) with an aggregate value of $2,602,390; JPMorgan Chase, with an aggregate value of $4,244,963, Lehman Brothers Holdings Inc. (the parent company of Lehman Brothers Inc.) with an aggregate value of $1,773,424, Wachovia Corp., with an aggregate value of $1,503,706 and Goldman Sachs Group, with an aggregate value of $1,559,112, in each case as of December 31, 2007. Capital Stock and Other Securities Capital Stock The Fund is authorized to issue 500,000,000 shares of capital stock, each with a par value of $0.50, divided into six classes, designated Class A common stock, Class B common stock, Class C common stock, Class D common stock, Class I common stock and Class R common stock (Class D shares will be combined with Class C shares at the close of business on May 16, 2008. Accordingly, thereafter there will exist only five classes of shares). Each share of the Fund's Class A, Class B, Class C, Class D, Class I and Class R common stock is equal as to earnings, assets, and voting privileges, except that each class bears its own separate distribution and, potentially, certain other class expenses and has exclusive voting rights with respect to any matter to which a separate vote of any class is required by the 1940 Act or applicable state law. The Fund has adopted a Plan ("Multiclass Plan") pursuant to Rule 18f-3 under the 1940 Act permitting the issuance and sale of multiple classes of common stock. In accordance with the 26 Fund's Articles of Incorporation, the Board of Directors may authorize the creation of additional classes of common stock with such characteristics as are permitted by the Multiclass Plan and Rule 18f-3. The 1940 Act requires that where more than one class exists, each class must be preferred over all other classes in respect of assets specifically allocated to such class. All shares have noncumulative voting rights for the election of directors. Each outstanding share is fully paid and non-assessable, and each is freely transferable. There are no liquidation, conversion, or preemptive rights. Other Securities The Fund has no authorized securities other than common stock. Purchase, Redemption, and Pricing of Shares Purchase of Shares Class A Purchase Price. Class A shares may be purchased at a price equal to the next determined net asset value per share, plus an initial sales charge. Employee and Family Members. Class A shares of the Fund may be issued without a sales charge to present and former directors, trustees, officers, employees (and their respective family members) of the Fund, the other investment companies in the Seligman Group of Funds, and Seligman and its affiliates. Family members are defined to include lineal descendants and lineal ancestors, siblings (and their spouses and children) and any company or organization controlled by any of the foregoing. Such sales may also be made to employee benefit plans and thrift plans for such persons and to any investment advisory, custodial, trust or other fiduciary account managed or advised by Seligman or any affiliate. The sales may be made for investment purposes only, and shares may be resold only to the Fund. Class A shares may be sold at net asset value to these persons since such sales require less sales effort and lower sales related expenses as compared with sales to the general public. If you are eligible to purchase Class A shares without a sales charge or qualify for volume discounts, you should inform your financial advisor, financial intermediary or SDC of such eligibility and be prepared to provide proof thereof. Purchases of Class A shares by a "single person" (as defined below under "Persons Entitled to Reductions") may be eligible for the following reductions in initial sales charges: Discounts and Rights of Accumulation. Reduced sales charges will apply if the sum of (i) the current amount being invested by a "single person" in Class A shares of the Fund and in Class A shares of other Seligman mutual funds (excluding Class A shares of the Seligman Cash Management Fund, Inc.), (ii) the current net asset value of the Class A shares and Class B shares of other Seligman mutual funds already owned by the "single person" other than Seligman Cash Management Fund, Inc. (except as provided in (iii)) and (iii) the current net asset value of Class A shares of Seligman Cash Management Fund, Inc. which were acquired by a "single person" through an exchange of Class A shares of another Seligman mutual fund, exceeds the breakpoint discount thresholds for Class A shares described in the Prospectus (the "Breakpoint Discounts"). The value of the shares contemplated by items (ii) and (iii) above (collectively, the "Prior Owned Shares") will be taken into account only if SDC or the financial intermediary (if you are purchasing through a financial intermediary) is notified that there are holdings eligible for aggregation to meet the applicable Breakpoint Discount thresholds. If you are purchasing shares through a financial intermediary, you should consult with your intermediary to determine what information you will need to provide them in order to receive the Breakpoint Discounts to which you may be entitled. This information may include account records regarding shares eligible for aggregation that are held at any financial intermediary, as well as a social security or tax identification number. You may need to provide this information each time you purchase shares. In addition, certain financial intermediaries may prohibit you from aggregating investments in the Seligman Group if those investments are held in your accounts with a different intermediary or with SDC. If you are dealing directly with SDC, you should provide SDC with account information for any shares eligible for aggregation. This information includes account records and a social security or tax identification number. You may need to provide this information each time you purchase shares. 27 Letter of Intent. A letter of intent allows you to purchase Class A shares over a 13-month period with the benefit of the Breakpoint Discounts discussed in the Prospectus, based on the total amount of Class A shares of the Fund that the letter states that you intend to purchase plus the current net asset value of the Prior Owned Shares. Reduced sales charges may be applied to purchases made within a 13-month period starting from the date of receipt from you of a letter of intent. In connection with such arrangement, a portion of the shares you initially purchase will be held in escrow to provide for any sales charges that might result if you fail to purchase the amount of shares contemplated by the letter of intent assuming your purchases would not otherwise be eligible for Breakpoint Discounts. These shares will be released upon completion of the purchases contemplated by the letter of intent. In the event you do not fulfill your obligations and the amount of any outstanding sales charge is greater than the value of the shares in escrow, you will be required to pay the difference. If the amount of the outstanding sales charge is less than the value of the shares in escrow, you will receive any shares remaining in escrow after shares with a value equal to the amount of the outstanding sales charge are redeemed by the transfer agent. Persons Entitled To Reductions. Reductions in initial sales charges apply to purchases of Class A shares in an account held by a "single person. A "single person" includes an individual; members of a family unit comprising husband, wife and minor children; or a trustee or other fiduciary purchasing for a single fiduciary account. Employee benefit plans qualified under Section 401 of the Internal Revenue Code of 1986, as amended, organizations tax exempt under Section 501(c)(3) or (13) of the Internal Revenue Code, and non-qualified employee benefit plans that satisfy uniform criteria are also considered "single persons" for this purpose. The uniform criteria are as follows: 1. Employees must authorize the employer, if requested by the Fund, to receive in bulk and to distribute to each participant on a timely basis the Fund's Prospectuses, reports, and other shareholder communications. 2. Employees participating in a plan will be expected to make regular periodic investments (at least annually). A participant who fails to make such investments may be dropped from the plan by the employer or the Fund 12 months and 30 days after the last regular investment in his account. In such event, the dropped participant would lose the discount on share purchases to which the plan might then be entitled. 3. The employer must solicit its employees for participation in such an employee benefit plan or authorize and assist an investment dealer in making enrollment solicitations. Eligible Employee Benefit Plans. The table of sales charges in the Prospectuses applies to sales to "eligible employee benefit plans," except that the Fund may sell shares at net asset value to "eligible employee benefit plans" which have at least $2 million in plan assets at the time of investment in the Fund, but, in the event of plan termination, will be subject to a CDSC of 1 % on shares purchased within 18 months prior to plan termination. "Eligible employee benefit plan" means any plan or arrangement, whether or not tax qualified, which provides for the purchase of Fund shares. Sales to eligible employee benefit plans are believed to require limited sales effort and sales-related expenses and therefore are made at net asset value. However, Section 403(b) plans sponsored by public educational institutions are not eligible for net asset value purchases based on the aggregate investment made by the plan or number of eligible employees. Sales to eligible employee benefit plans must be made in connection with a payroll deduction system of plan funding or other systems acceptable to SDC, the Fund's shareholder service agent. Contributions or account information for plan participation also should be transmitted to SDC by methods which it accepts. Additional information about "eligible employee benefit plans" is available from financial advisors or Seligman Advisors. Ascensus (formerly, BISYS) Plans. Plans that (i) own Class B shares of any Seligman mutual fund and (ii) participate in Seligman Growth 401(k) through Ascensus' third-party administration platform may, with new contributions, purchase Class A shares at net asset value. Class A shares purchased at net asset value are subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. Further Types of Reductions. Class A shares may also be issued without an initial sales charge in the following instances: (1)to any registered unit investment trust which is the issuer of periodic payment plan certificates, the net proceeds of which are invested in Fund shares; 28 (2)to separate accounts established and maintained by an insurance company which are exempt from registration under Section 3(c)(11) of the 1940 Act; (3)to registered representatives and employees (and their spouses and minor children) of any dealer or bank that has a sales agreement with Seligman Advisors; (4)to financial institution trust departments; (5)to registered investment advisers exercising discretionary investment authority with respect to the purchase of Fund shares; (6)to accounts of financial institutions or authorized dealers or investment advisors that charge account management fees, provided Seligman or one of its affiliates has entered into an agreement with respect to such accounts; (7)pursuant to sponsored arrangements with organizations which make recommendations to, or permit group solicitations of, its employees, members or participants in connection with the purchase of shares of the Fund; (8)to other investment companies in the Seligman Group in connection with a deferred fee arrangement for outside Directors, or pursuant to a "fund of funds" arrangement; (9)to certain "eligible employee benefit plans" as discussed above; (10)to those partners and employees of outside counsel to the Fund or its directors or trustees who regularly provide advice and services to the Fund, to other funds managed by Seligman, or to their directors or trustees; (11)in connection with sales pursuant to a retirement plan alliance program which has a written agreement with Seligman Advisors; and (12)to participants in retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Section 401(a), 401(k), 403(b), or 457 of the Internal Revenue Code and "rabbi trusts", for which Charles Schwab & Co., Inc. or an affiliate acts a broker-dealer, trustee, or record keeper. CDSC Applicable to Class A Shares. Class A shares purchased without an initial sales charge due to a purchase of $1,000,000 or more, alone or through a volume discount, Right of Accumulation or letter of intent, are subject to a CDSC of 1% on redemptions of such shares within 18 months of purchase. Employee benefit plans eligible for net asset value sales may be subject to a CDSC of 1% for terminations at the plan level only, on redemptions of shares purchased within 18 months prior to plan termination, except that any such plan that is or was a separate account client of Seligman at the time of initial investment in a Seligman mutual fund (or within the prior 30 days) will not be subject to a CDSC on redemption of any shares. Other available reductions will not be subject to a 1% CDSC. The 1% CDSC will be waived on shares that were purchased through Morgan Stanley Dean Witter & Co. by certain Chilean institutional investors (i.e., pension plans, insurance companies, and mutual funds). Upon redemption of such shares within an 18-month period, Morgan Stanley Dean Witter will reimburse Seligman Advisors a pro rata portion of the fee it received from Seligman Advisors at the time of sale of such shares. See "CDSC Waivers" below for other waivers which may be applicable to Class A shares. Class B Class B shares may be purchased at a price equal to the next determined net asset value, without an initial sales charge. However, Class B shares are subject to a CDSC if the shares are redeemed within six years of purchase at rates set forth in the table below, charged as a percentage of the current net asset value or the original purchase price, whichever is less.
Years Since Purchase CDSC -------------------- ---- Less than 1 year...................... 5% 1 year or more but less than 2 years.. 4% 2 years or more but less than 3 years. 3% 3 years or more but less than 4 years. 3% 4 years or more but less than 5 years. 2% 5 years or more but less than 6 years. 1% 6 years or more....................... 0%
29 Approximately eight years after purchase, Class B shares will convert automatically to Class A shares. Shares purchased through reinvestment of dividends and distributions on Class B shares also will convert automatically to Class A shares along with the underlying shares on which they were earned. Conversion occurs during the month which precedes the eighth anniversary of the purchase date. If Class B shares of the Fund are exchanged for Class B shares of another Seligman Mutual Fund, the conversion period applicable to the Class B shares acquired in the exchange will apply, and the holding period of the shares exchanged will be tacked onto the holding period of the shares acquired. Class B shareholders of the Fund exercising the exchange privilege will continue to be subject to the Fund's CDSC schedule if such schedule is higher or longer than the CDSC schedule relating to the new Class B shares. In addition, Class B shares of the Fund acquired by exchange will be subject to the Fund's CDSC schedule if such schedule is higher or longer than the CDSC schedule relating to the Class B shares of the Seligman mutual fund from which the exchange has been made. Class C Class C shares may be purchased at a price equal to the next determined net asset value, without an initial sales charge. However, Class C shares are subject to a CDSC of 1% if the shares are redeemed within one year of purchase, charged as a percentage of the current net asset value or the original purchase price, whichever is less. Unlike Class B shares, Class C shares do not convert to Class A shares. Class D (NOT AVAILABLE AFTER MAY 16, 2008) Effective at the close of business (4:00 p.m. EST) on May 16, 2008, the Fund's Class D shares will be combined with Class C shares, and Class D shares will no longer be available. Purchase orders for Class D shares to be effective on or after May 9, 2008 through May 16, 2008 may, in the Fund's discretion, be rejected due to operational reasons relating to the combination; if you are considering purchasing Class D shares during such period, you should consider Class C shares instead (consult your financial advisor as necessary). Any orders for exchange or redemption of the Fund's Class D shares to be effective through May 16, 2008 will continue to be accepted in accordance with the Prospectus. All orders (i.e., purchases, exchanges and redemptions) for Class D shares to be effective after the close of business on May 16, 2008 cannot be processed because no Class D shares will be outstanding or offered. Class D shares are identical in their terms to the Class C shares. When offered, Class D shares may be purchased at a price equal to the next determined net asset value, without an initial sales charge. However, Class D shares are subject to a CDSC of 1% if the shares are redeemed within one year of purchase, charged as a percentage of the current net asset value or the original purchase price, whichever is less. Unlike Class B shares, Class D shares do not convert to Class A shares. Class I Class I shares may be purchased at a price equal to the next determined net asset value. Class I shares are not subject to any initial or contingent deferred sales charges or distribution expense. This Class, however, is only offered to certain types of investors. Persons who are eligible to purchase Class I shares of the Fund are described in the Prospectus for the Class I shares. Unlike Class B shares, Class I shares do not convert to Class A shares. Class R Class R shares may be purchased at a price equal to the next determined net asset value, without an initial sales charge. However, Class R shares are subject to a CDSC of 1% if the shares are redeemed within one year of the plan's initial purchase of Class R shares, charged as a percentage of the current net asset value or the original purchase price, whichever is less. Unlike Class B shares, Class R shares do not convert to Class A shares. Systematic Withdrawals. Class B, Class C, Class D and Class R shareholders who reinvest both their dividends and capital gain distributions to purchase additional shares of the Fund may use the Systematic Withdrawal Plan to withdraw up to 12%, 10%, 10% and 10%, respectively, of the value of their accounts per year without the imposition of a CDSC. Account value is determined as of the date the systematic withdrawals begin. 30 CDSC Waivers. The CDSC on Class B, Class C, Class D and Class R shares (and certain Class A shares, as discussed above) will be waived or reduced in the following instances: (1)on redemptions following the death or disability (as defined in Section 72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial owner; (2)in connection with (1) distributions from retirement plans qualified under Section 401(a) of the Internal Revenue Code when such redemptions are necessary to make distributions to plan participants (such payments include, but are not limited to, death, disability, loans, retirement, or separation of service), (2) distributions from a custodial account under Section 403(b)(7) of the Internal Revenue Code or an IRA due to death, disability, or minimum distribution requirements after attainment of age 70 1/2 or, for accounts established prior to January 1, 1998, attainment of age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA; (3)in whole or in part, in connection with shares sold to current and retired Directors of the Fund; (4)in whole or in part, in connection with shares sold to any state, county, or city or any instrumentality, department, authority, or agency thereof, which is prohibited by applicable investment laws from paying a sales load or commission in connection with the purchase of any registered investment management company; (5)in whole or in part, in connection with systematic withdrawals; (6)in connection with participation in the Merrill Lynch Small Market 401(k) Program, retirement programs administered or serviced by the Princeton Retirement Group, Paychex, ADP Retirement Services, Hartford Securities Distribution Company, Inc., or NYLIM Service Company LLC, or retirement programs or accounts administered or serviced by Mercer HR Services, LLC or its affiliates; (7)on incidental redemptions to cover administrative expenses (such expenses include, but are not limited to, trustee fees, wire fees or courier fees) not to exceed $25.00 per occurrence; (8)on redemptions of shares initially purchased by an eligible employee benefit plan that are not in connection with a plan-level termination; and (9)on any redemption of Class A shares that are purchased by an eligible employee benefit plan that is a separate account client of Seligman at the time of initial investment (or within the prior 30 days) in a Seligman mutual fund. If, with respect to a redemption of any Class A, Class B, Class C, Class D or Class R shares sold by a dealer, the CDSC is waived because the redemption qualifies for a waiver as set forth above, the dealer shall remit to Seligman Advisors promptly upon notice, an amount equal to the payment or a portion of the payment made by Seligman Advisors at the time of sale of such shares. Payment in Securities. In addition to cash, the Fund may accept securities in payment for Fund shares sold at the applicable public offering price (net asset value and, if applicable, any sales charge). Generally, the Fund will only consider accepting securities (l) to increase its holdings in a portfolio security, or (2) if Seligman determines that the offered securities are a suitable investment for the Fund and in a sufficient amount for efficient management. Although no minimum has been established, it is expected that the Fund would not accept securities with a value of less than $100,000 per issue in payment for shares. The Fund may reject in whole or in part offers to pay for Fund shares with securities, may require partial payment in cash for applicable sales charges, and may discontinue accepting securities as payment for Fund shares at any time without notice. The Fund will not accept restricted securities in payment for shares. The Fund will value accepted securities in the manner provided for valuing portfolio securities of the Fund. Any securities accepted by the Fund in payment for the Fund's shares will have an active and substantial market and have a value which is readily ascertainable. Fund Reorganizations Class A shares may be issued without an initial sales charge in connection with the acquisition of cash and securities owned by other investment companies. Any CDSC will be waived in connection with the redemption of shares of the Fund if the Fund is combined with another Seligman mutual fund, or in connection with a similar reorganization transaction. 31 Offering Price When you buy or sell Fund shares, you do so at the Class's net asset value ("NAV") next calculated after Seligman Advisors accepts your request. However, in some cases, the Fund has authorized certain financial intermediaries (and other persons designated by such financial intermediaries) to receive purchase and redemption orders on behalf of the Fund. In such instances, customer orders will be priced at the Class's NAV next calculated after the authorized financial intermediary (or other persons designated by such financial intermediary) receives the request. Any applicable sales charge will be added to the purchase price for Class A shares. NAV per share of each class of the Fund is determined as of the close of regular trading on the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time), on each day that the NYSE is open for business. The NYSE is currently closed on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. NAV per share for a class is computed by dividing such class's share of the value of the net assets of the Fund (i.e., the value of its assets less liabilities) by the total number of outstanding shares of such class. All expenses of the Fund, including the management fee, are accrued daily and taken into account for the purpose of determining NAV. The NAV of Class B, Class C, Class D and Class R shares will generally be lower than the NAV of Class A shares as a result of the higher 12b-1 fees with respect to such shares, which in turn will be lower than the NAV of Class I shares, which have no 12b-1 fee and which may have lower expenses. Generally, portfolio securities, including open short positions and options written, are valued at the last sales price on the securities exchange or securities market on which such securities primarily are traded. Securities traded on an over-the-counter market are valued at the last sales price on the primary exchange or market on which they are traded. Securities not listed on an exchange or security market or for which there is no last sales price are valued at the mean of the most recent bid and asked price, or by Seligman based on quotations provided by primary market makers in such securities. If Seligman concludes that the most recently reported (or closing) price of a security held by the Fund is no longer valid or reliable, or such price is otherwise unavailable, Seligman will value the security based upon its fair value as determined in accordance with procedures approved by the Board of Directors. In addition, fair value pricing may also be utilized, in accordance with procedures approved by the Board of Directors in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts or extreme market volatility. Foreign currency exchange rates are also determined in accordance with procedures approved by the Fund's Board of Directors. Any other assets for which recent market quotations are not readily available are valued at fair value as determined in accordance with procedures approved by the Fund's Board of Directors. Short-term obligations with 60 days or less remaining to maturity are generally valued at current market quotations or amortized cost if Seligman believes it approximates fair value. Short-term obligations with more than 60 days remaining to maturity will be valued at current market value until the sixtieth day prior to maturity, and will then be valued as described above for short-term obligations maturing in 60 days or less. Premiums received on the sale of call options will be included in the net asset value, and the current market value of the options sold by the Fund will be subtracted from its net asset value. For purposes of determining the net asset value per share of the Fund, all assets and liabilities initially expressed in foreign currencies will be converted into US dollars on the basis of a pricing service that takes into account the quotes provided by a number of such major banks. Specimen Price Make-Up Under the current distribution arrangements between the Fund and Seligman Advisors, Class A shares shares are sold with a maximum initial sales charge of 5.75% and Class B, Class C, Class D, Class I and Class R shares are sold at NAV/(1)/. (Class D shares will be combined with Class C shares at the close of business on May 16, 2008. Accordingly, thereafter there will exist only five classes of shares). Using each Class's NAV at December 31, 2007, the maximum offering price of the Fund's shares is as follows: Class A Net asset value per share.............................. $11.44 Maximum initial sales charge (5.75% of offering price). 0.70 ------ Offering price to public............................... $12.14 ======
32 Class B Net asset value and offering price per share/(1)/.. $11.17 ====== Class C Net asset value and offering price per share/(1) /. $11.18 ====== Class D/(2)/ Net asset value and offering price per share/(1)/.. $11.17 ====== Class I Net asset value and offering price per share....... $11.53 ====== Class R Net asset value and offering price per share/(1)/.. $11.47 ======
- -------- (1)Class B shares are subject to a CDSC declining from 5% in the first year after purchase to 0% after six years. Class C shares and Class D shares are subject to a 1% CDSC if you redeem your shares within one year of purchase. Class R shares may be subject to a 1% CDSC on shares redeemed within one year of a retirement plan's initial purchase. (2)Class D shares are not offered after the close of business on May 16, 2008. Redemption in Kind The procedures for selling Fund shares under ordinary circumstances are set forth in the Prospectuses. In unusual circumstances, payment may be postponed, or the right of redemption postponed for more than seven days, if: (i) the orderly liquidation of portfolio securities is prevented by the closing of, or restricted trading on, the NYSE; (ii) during periods of emergency which make the disposal by the Fund of its shares impracticable or it is not reasonably practicable for the Fund to fairly determine the value of its net assets; or (iii) such other periods as ordered by the SEC for the protection of the Fund's shareholders. Under these circumstances, redemption proceeds may be made in securities (i.e., a redemption in kind). If payment is made in securities, a shareholder may incur brokerage expenses in converting these securities to cash. Anti-Money Laundering As part of the Fund's responsibility for the prevention of money laundering, you may be required by the Fund, Seligman or their respective service providers to provide additional information, including information needed to verify the source of funds used to purchase shares and your identity or the identity of any underlying beneficial owners of your shares. In the event of delay or failure by you to produce any requested information, the Fund or its service providers may refuse to accept a subscription or, to the extent permitted or required by applicable law, cause a complete redemption of your shares from the Fund. The Fund, by written notice to you, may suspend payment to you of any proceeds or distributions if the Fund or its service providers reasonably deem it necessary to do so in order to comply with applicable laws and regulations, including any anti-money laundering laws and regulations applicable to the Fund, Seligman or their respective service providers. Arrangements Permitting Frequent Trading of Fund Shares. The Fund has no arrangements with any person to permit frequent trading of Fund shares. Taxation of the Fund The Fund is qualified and intends to continue to qualify for tax treatment as a regulated investment company under Subchapter M of the Internal Revenue Code. For each year so qualified, the Fund will not be subject to federal income taxes on its investment company taxable income and net capital gains, if any, realized during any taxable year, which it distributes to its shareholders, provided that at least 90% of its investment company taxable income (which includes net short-term capital gains) is distributed to shareholders each year. Qualification does not, of course, involve governmental supervision of management or investment practices or policies. Investors should consult their own counsel for a complete understanding of the requirements the Fund must meet to qualify for such treatment. The information set forth in the Prospectuses and the following discussion relate solely to the US federal income taxes on dividends and distributions by the Fund and assumes that the Fund qualifies as a regulated investment company. 33 Dividends from net investment income (other than qualified dividend income) and distributions from the excess of net short-term capital gains over net long-term capital losses are taxable as ordinary income to shareholders, whether received in cash or reinvested in additional shares. For taxable years beginning before January 1, 2011, dividends from qualified dividend income will be taxed at a reduced rate to individuals of generally 15% (5% for individuals in lower tax brackets). Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (generally foreign corporations incorporated in a possession of the United States or in certain countries with a comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States). The amount of dividend income that may be designated as "qualified dividend income" by the Fund will generally be limited to the aggregate of the eligible dividends received by the Fund. In addition, the Fund must meet certain holding period requirements with respect to the shares on which the Fund received the eligible dividends, and the non-corporate US shareholder must meet certain holding period requirements with respect to the Fund shares. To the extent designated as derived from the Fund's dividend income that would be eligible for the dividends received deduction if the Fund were not a regulated investment company, distributions are eligible, subject to certain restrictions, for the 70% dividends received deduction for corporations. If for any year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders. Such distributions will generally be taxable to the shareholders as qualified dividend income and generally will be eligible for the dividends received deduction in the case of corporate shareholders. Distributions of net capital gains (i.e., the excess of net long-term capital gains over any net short-term capital losses) are taxable as long-term capital gain, whether received in cash or invested in additional shares, regardless of how long the shares have been held by a shareholder. Non-corporate US shareholders will be subject to federal income tax on distributions of net capital gains at a maximum rate of 15% if designated as derived from the Fund's capital gains from property held for more than one year and recognized in taxable years beginning before January 1, 2011. Net capital gain of a corporate shareholder is taxed at the same rate as ordinary income. Such distributions are not eligible for the dividends received deduction allowed to corporate shareholders. Shareholders receiving distributions in the form of additional shares issued by the Fund will be treated for federal income tax purposes as having received a distribution in an amount equal to the cash that could have been elected to be received instead of the additional shares. Dividends and capital gain distributions declared in October, November or December, payable to shareholders of record on a specified date in such a month and paid in the following January will be treated as having been paid by the Fund and received by each shareholder in December. Under this rule, therefore, shareholders may be taxed in one year on dividends or distributions actually received in January of the following year. Any gain or loss realized upon a sale or redemption of shares in the Fund by a shareholder who is not a dealer in securities will generally be treated as a long-term capital gain or loss if the shares have been held for more than one year and otherwise as a short-term capital gain or loss. Long-term capital gain of a non-corporate US shareholder that is recognized in a taxable year beginning before January 1, 2011 is generally taxed at a maximum rate of 15% in respect of shares that are held for more than one year. Net capital gain of a corporate shareholder is taxed at the same rate as ordinary income. However, if shares on which a long-term capital gain distribution has been received are subsequently sold or redeemed and such shares have been held for six months or less (after taking into account certain hedging transactions), any loss realized will be treated as long-term capital loss to the extent that it offsets the long-term capital gain distribution. In addition, no loss will be allowed on the sale or other disposition of shares of the Fund if, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the holder acquires (including shares acquired through dividend reinvestment) securities that are substantially identical to the shares of the Fund. In determining gain or loss on shares of the Fund that are sold or exchanged within 90 days after acquisition, a shareholder generally will not be permitted to include in the tax basis attributable to such shares the sales charge incurred in acquiring such shares to the extent of any subsequent reduction of the sales charge by reason of the exchange or reinstatement options offered by the Fund. Any sales charge not taken into account in determining the tax basis of shares sold or exchanged within 90 days after acquisition will be added to the shareholder's tax basis in the shares acquired pursuant to the exchange or reinstatement options. The Fund is subject to a 4% nondeductible excise tax on the under-distribution of amounts required to be paid pursuant to a prescribed formula. The formula requires payment to shareholders during a calendar year of distributions representing at least 98% of the Fund's ordinary income for the calendar year, at least 98% of its net 34 capital gain income realized during the one-year period ending on October 31 during such year, and all ordinary income and net capital gain income for prior years that was not previously distributed. The Fund intends to make sufficient distributions or deemed distributions of its ordinary income and net capital gain income prior to the end of each calendar year to avoid liability for the excise tax. Unless a shareholder includes a certified taxpayer identification number (social security number for individuals) on the account application and certifies that the shareholder is not subject to backup withholding, the Fund is required to withhold and remit to the US Treasury Department a portion of distributions and other reportable payments to the shareholder. Shareholders should be aware that, under regulations promulgated by the US Treasury Department, the Fund may be fined on an annual basis for each account for which a certified taxpayer identification number (social security number for individuals) is not provided. In the event that such a fine is imposed, the Fund may charge a service fee equal to such fine that may be deducted from the shareholder's account and offset against any undistributed dividends and capital gain distributions. The Fund also reserves the right to close any account which does not have a certified taxpayer identification number or social security number, as applicable. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder") depends on whether the income from the Fund is "effectively connected" with a US trade or business carried on by such shareholder. If the income from the Fund is not effectively connected with a US trade or business carried on by a foreign shareholder, ordinary income dividends paid to such foreign shareholders generally will be subject to a 30% US withholding tax under existing provisions of the Internal Revenue Code applicable to foreign individuals and entities unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty or law. Nonresident shareholders are urged to consult their own tax advisers concerning the applicability of the US withholding tax. If the income from the Fund is effectively connected with a US trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends, undistributed capital gains credited to such shareholder and any gains realized upon the sale of shares of the Fund will be subject to US federal income tax at the graduated rates applicable to US citizens or domestic corporations, and a foreign corporate investor will also be subject to a branch profits tax. In the case of foreign non-corporate shareholders, the Fund may be required to backup withhold US federal income tax on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund, the procedure for claiming the benefit of a lower treaty rate and the applicability of foreign taxes. Transfers by gift of shares of the Fund by an individual foreign shareholder will not be subject to US federal gift tax, but the value of shares of the Fund held by such a shareholder at his death will generally be includible in his gross estate for US federal estate tax purposes, subject to any applicable estate tax treaty. Shareholders are urged to consult their tax advisors concerning the effect of federal income and state and local taxes in their individual circumstances. Underwriters Distribution of Securities The Fund and Seligman Advisors are parties to a Distributing Agreement dated January 1, 1993 under which Seligman Advisors acts as the exclusive agent for distribution of shares of the Fund. Seligman Advisors accepts orders for the purchase of Fund shares, which are offered continuously. As general distributor of the Fund's capital stock, Seligman Advisors allows reallowances to all dealers on sales of Class A shares, as set forth above under "Dealer Reallowances" and prior to June 4, 2007, Class C shares Seligman Advisors retains the balance of sales charges and any CDSCs paid by investors. Total initial sales charges paid by shareholders of Class A shares and (only through June 3, 2007) Class C shares of the Fund for the years ended December 31, 2007, 2006 and 2005 amounted to $42,768, $35,701 and $33,305, respectively, of which $5,145, $3,673 and, $3,553, respectively, was retained by Seligman Advisors. Effective June 4, 2007 there is no initial sales charge on purchases of Class C shares. 35 Compensation Seligman Advisors, which is an affiliated person of Seligman, which is an affiliated person of the Fund, received the following commissions (including sales charges after January 1, 2006 that otherwise would have been paid to Seligman Services) and other compensation from the Fund during the year ended December 31, 2007:
Compensation on Net Underwriting Redemptions and Discounts and Repurchases (CDSC on Commissions (Class A Class A, Class C, Class D Other and Class C Sales and Class R Brokerage Compensation Charges Retained) (1) Shares Retained)(2) Commissions (3) --------------------- ------------------------- ----------- ------------ $5,145......... $3,548 $0 $9,790
- -------- (1)Effective June 4, 2007, there is no initial sales charges on purchases of Class C shares. Accordingly, any net underwriting discounts and commissions in respect of Class C shares retained by Seligman Advisors would relate to purchases prior to June 4, 2007. (2)Seligman Advisors has sold its rights to collect a substantial portion of the distribution fees paid by the Fund in respect of Class B shares and any CDSC imposed on redemptions of Class B shares to the Purchasers in connection with an arrangement discussed above under "Rule 12b-1 Plan." (3)During the year ended December 31, 2007, Seligman Advisors received distribution and service fees in respect of Class B, Class C, Class D and Class R shares pursuant to the Fund's Rule 12b-1 Plan. These amounts and the arrangements pursuant to which such compensation is paid are detailed above under the discussion "Rule 12b-1 Plan." Other Payments Seligman Advisors pays authorized dealers and investment advisors, from its own resources, a fee on purchases of Class A shares of the Seligman mutual funds (other than Seligman TargetHorizon ETF Portfolios, Inc. (the "TargETFunds") and Seligman Cash Management Fund, Inc. (the "Cash Fund")) of $1,000,000 or more ("NAV sales"), calculated as follows:
Payment to Dealer Amount of Purchase (as a % of NAV Sales) ------------------ --------------------- $1,000,000 - $3,999,999.. 1.00% $4,000,000 - $24,999,999. 0.50% $25,000,000 or more...... 0.25%
With respect to purchases of Class A shares of the TargETFunds, Seligman Advisors shall pay authorized dealers and investment advisors 0.25% on NAV sales attributable to such funds. Assets exchanged from the TargETFunds to another Seligman mutual fund are not eligible for the fees described above. Class A shares representing only an initial purchase of the Cash Fund are not eligible for the fees described above; however, such shares will become eligible for the applicable fee described above once they are exchanged for Class A shares of another Seligman mutual fund. The calculation of the fee will be based on assets held by a "single person," including an individual, members of a family unit comprising husband, wife and minor children purchasing securities for their own account, or a trustee or other fiduciary purchasing for a single fiduciary account or single trust. Purchases made by a trustee or other fiduciary for a fiduciary account may not be aggregated with purchases made on behalf of any other fiduciary or individual account. Seligman Advisors also pays authorized dealers and investment advisors, from its own resources, a fee on assets of certain investments in Class A shares of the Seligman mutual funds participating in an "eligible employee benefit plan" that are attributable to the particular authorized dealer or investment advisor. The shares eligible for the applicable fee described below are those on which an initial sales charge was not paid because either the participating eligible employee benefit plan has, for accounts opened prior to January 7, 2008, at least (1) $500,000 invested in the Seligman mutual funds or (2) 50 eligible employees to whom such plan is made available or, for accounts opened on or after January 7, 2008, at least $2 million in plan assets at the time of investment in the Fund. The payment schedule, for each calendar year, in respect of the Seligman mutual funds (other than the TargETFunds and the Cash Fund) is as follows:
Payment to Dealer Amount of Purchase (as a % of NAV Sales) ------------------ --------------------- Sales up to but not including $4,000,000. 1.00% $4,000,000 - $24,999,999................. 0.50% $25,000,000 or more...................... 0.25%
36 The payment is based on cumulative sales for each plan during a single calendar year, or portion thereof. Assets exchanged from the TargETFunds to another Seligman mutual fund are not eligible for the fees described above. Class A shares representing only an initial purchase of the Cash Fund are not eligible for the fees described above; however, such shares will become eligible for the applicable fee once they are exchanged for Class A shares of another Seligman mutual fund. The payment schedule, for each calendar year, in respect of the TargETFunds is 0.25% of sales. These fees in respect of eligible employee benefit plans and the fees on NAV sales described above are not duplicative (i.e., the fee is paid one time to authorized dealers or investment advisors for each purchase of Class A shares of $1,000,000 or more participating in an eligible employee benefit plan). With respect to the fees relating to eligible employee benefit plans and NAV sales (each as described above), no fees shall be payable on any assets invested in the Fund by an eligible employee benefit plan that is a separate account client of Seligman at the time of initial investment (or within the prior 30 days) in the Fund. Seligman and Seligman Advisors may make cash and non-cash payments to banks, broker-dealers, insurance companies, financial planning firms, third party administrators and other financial intermediaries (collectively, "Financial Intermediaries"), subject to Seligman and Seligman Advisors' respective internal policies and procedures. Seligman Advisors provides Financial Intermediaries with sales literature and advertising materials relating to the registered investment companies advised by Seligman (the "Seligman Funds"). Seligman Advisors also shares expenses with Financial Intermediaries for costs incurred in hosting seminars for employees and clients of Financial Intermediaries, subject to Seligman Advisors' internal policies and procedures governing payments for such seminars. These seminars may take place at Seligman Advisors' headquarters or other appropriate locations and may include reimbursement of travel expenses (i.e., transportation, lodging and meals) of employees of Financial Intermediaries in connection with training and education seminars. Subject to Seligman Advisors' internal policies and procedures, Seligman Advisors may provide any or all of the following to employees of Financial Intermediaries and their guest(s): (i) an occasional meal, a sporting event or theater ticket or other comparable entertainment; (ii) gifts of less than $100 per person per year; and/or (iii) Seligman Advisors' promotional items of nominal value (golf balls, shirts, etc.). In addition, Financial Intermediaries may have omnibus accounts and similar arrangements with SDC and may be paid by SDC for providing sub-transfer agency and other services. Such expenses paid by SDC are included in the annual operating expenses set forth in the Prospectus. Seligman and/or Seligman Advisors have revenue sharing arrangements with certain Financial Intermediaries. Payments to these Financial Intermediaries are usually structured in any of three ways or a combination thereof: (i) as a percentage of gross sales; (ii) as a percentage of net assets attributable to the Financial Intermediary; or (iii) a fixed dollar amount. The foregoing payments (which may take the form of expense reimbursements) by Seligman, Seligman Advisors and/or SDC may be made for shareholder servicing, promotion of Seligman Funds, and other services provided by Seligman, such as advisory services to managed accounts, marketing support and/or access to sales meetings, sales representatives and management representatives of the Financial Intermediaries. These payments are in addition to the 12b-1 fees and sales loads borne by shareholders, as well as the finders' fees and loads paid by Seligman Advisors, as set forth in the prospectus or otherwise described above. Such payments may result in, or be necessary for, the inclusion of the Seligman Funds on a sales list, including a preferred or select sales list, in various sales programs. Receipt by Financial Intermediaries of the foregoing payments or services could create an incentive for the Financial Intermediaries to offer a Seligman Fund in lieu of other mutual funds where such payments or services are not provided. Shareholders should consult their Financial Intermediaries for further information. 37 Calculation of Performance Data The Fund may quote performance data in various ways. All performance information supplied by the Fund in advertising is historical and past performance is not indicative of future investment results. The rate of return will vary and the principal value of an investment will fluctuate. Shares, if redeemed, may be worth more or less than their original cost. Performance Calculations Performance quoted in advertising reflects any change in price per share, assumes the reinvestment of dividends and capital gain distributions, if any, and may or may not include the effect of a Class's maximum initial sales charge and/or contingent deferred sales charge (CDSC), as applicable. Such performance may be quoted as a percentage or as a dollar amount, may be calculated over any time period and may be presented in a table, graph or similar illustration. Excluding applicable sales charges from a performance calculation produces a higher performance figure than if such sales charges were included in the calculation. Effective January 7, 2008, the maximum initial sales charge on investments in Class A shares of less than $50,000 is 5.75%. Effective June 4, 2007, there is no initial sales charge on purchases of Class C shares. Although for all periods presented the Fund's Class C share returns do not reflect an initial sales charge, the actual returns for periods prior to June 4, 2007 would have been lower if a 1.00% maximum initial sales charge then in effect was incurred. Effective at the close of business on May 16, 2008, the Fund will no longer offer Class D shares. For additional information, see the section of the Prospectus "Deciding Which Class of Shares to Buy -- Class C or Class D." Average annual total returns are calculated by determining the growth or decline in the value of a hypothetical $1,000 investment in the Fund over a stated period, and then calculating the annual rate required for this hypothetical investment to grow to the amount that would have been received upon a redemption at the end of such period (i.e., the average annual compound rate of return). Average annual total returns include any applicable maximum initial sales charge or CDSC. Cumulative total returns reflect the simple change in the value of a hypothetical investment in the Fund over a stated period. The cumulative total return for each Class of shares of the Fund shown below is calculated by assuming a hypothetical initial investment of $1,000 at the beginning of the period specified; subtracting the maximum initial sales charge for Class A shares; determining total value of all dividends and capital gain distributions, if any, that would have been paid during the period on such shares assuming that each dividend or distribution was reinvested in additional shares at net asset value; calculating the total value of the investment at the end of the period; subtracting the CDSC on Class B, Class C, Class D, and Class R shares, if applicable; and finally, by dividing the difference between the amount of the hypothetical initial investment at the beginning of the period and its total value at the end of the period by the amount of the hypothetical initial investment. Ten-year returns for Class B shares reflect automatic conversion to Class A shares approximately eight years after their date of purchase. No adjustments have been made for any income taxes payable by investors on dividends invested or gain distributions taken in shares or on the redemption of shares. Historical Investment Results Class A The average annual total returns for the Fund's Class A shares for the one-, five-, and ten-year periods ended December 31, 2007, were (7.50)%, 8.43% and 0.66%, respectively. These returns were computed by assuming a hypothetical initial payment of $1,000 in Class A shares of the Fund, subtracting the maximum initial sales charge of 5.75% of the public offering price and assuming that all of the dividends and capital gain distributions paid by the Fund's Class A shares, if any, were reinvested over the relevant periods. It was then assumed that at the end of the one-, five- and ten-year periods, the entire amounts were redeemed. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for Class A shares of the Fund for the ten-year period ended December 31, 2007 was 6.77%. Thus, a $1,000 investment in Class A shares made on December 31, 1997 had a value of $1,068 on December 31, 2007. 38 Class B The average annual total returns for the Fund's Class B shares for the one-, five- and ten-year periods ended December 31, 2007 were (6.91)%, 8.62% and 0.64%, respectively. These returns were computed by assuming a hypothetical initial payment of $1,000 in Class B shares of the Fund and assuming that all of the dividends and capital gain distributions paid by the Fund's Class B shares, if any, were reinvested over the relevant periods. The ten-year return reflects automatic conversion to Class A shares approximately eight years after initial purchase. It was then assumed that at the end of the one-, five- and ten-year periods, the entire amounts were redeemed, subtracting the applicable CDSC. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for the Fund's Class B shares for the ten-year period ended December 31, 2007 was 6.60%. Thus, a $1,000 investment in Class B shares made on December 31, 1997 had a value of $1,066 on December 31, 2007. Class C The average annual total return for the Fund's Class C shares for the one- and five-year periods ended December 31, 2007 and the period from May 27, 1999 (commencement of operations) through December 31, 2007 were (3.42)%, 8.92% and (1.46)%, respectively. These returns were computed by assuming a hypothetical initial payment of $1,000 in Class C shares of the Fund and assuming that all of the dividends and capital gain distributions paid by the Fund's Class C shares, if any, were reinvested over the relevant periods. It was then assumed that at the end of the one-and five- year periods and the period since inception, that the entire amounts were redeemed, subtracting the 1% CDSC, if applicable. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for Class C shares of the Fund from the period May 27, 1999 (commencement of operations of Class C shares) through December 31, 2007 was (11.91)%. Thus, a $1,000 investment in Class C shares on May 27, 1999 had a value of $881 on December 31, 2007. Class D The average annual total returns for the Fund's Class D shares for the one-, five- and ten-year periods ended December 31, 2007 were (3.42)%, 8.90% and 0.49%, respectively. These returns were computed by assuming a hypothetical initial payment of $1,000 in Class D shares of the Fund and assuming that all of the dividends and capital gain distributions paid by the Fund's Class D shares, if any, were reinvested over the relevant periods. It was then assumed that at the end of the one-, five- and ten-year periods, that the entire amounts were redeemed, subtracting the 1% CDSC, if applicable. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for Class D shares of the Fund for the ten-year period ended December 31, 2007 was 4.96%. Thus, a $1,000 investment in Class D shares made on December 31, 1997 had a value of $1,050 on December 31, 2007. Class I The average total returns for the Fund's Class I shares for the one- and five-year periods ended December 31, 2007 and for the period from November 30, 2001 (commencement of operations) through December 31, 2007 were (1.42)%, 10.20% and 3.15%, respectively. These returns were computed by assuming a hypothetical initial payment of $1,000 in Class I shares of the Fund and assuming that all of the dividends and capital gain distributions paid by the Fund's Class I shares, if any, were reinvested over the relevant period. It was then assumed that at the end of the one- and five-year periods and the period since inception, that the entire amounts were redeemed. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for the Fund's Class I shares for the period from November 30, 2001 (commencement of operations) through December 31, 2007 was 20.75%. Thus, a $1,000 investment in Class I shares made on November 30, 2001 had a value of $1,207 on December 31, 2007. 39 Class R The average annual total return for the Fund's Class R shares for the one-year period ended December 31, 2007 and for the period from April 30, 2003 (commencement of offering of Class R shares) through December 31, 2007 was (3.03)% and 9.70%, respectively. These returns were computed assuming a hypothetical initial payment of $1,000 in Class R shares of the Fund and assuming that all of the dividends and capital gain distributions paid by the Fund's Class R shares, if any, were reinvested over the relevant time periods. It was then assumed that at the end of the one-year period and period since inception, the entire amounts were redeemed, subtracting the 1% CDSC, if applicable. The average annual total return was then calculated by calculating the annual rate required for the initial payment to grow to the amount which would have been received upon such redemption (i.e., the average annual compound rate of return). The cumulative total return for the Fund's Class R shares for the period April 30, 2003 (commencement of offering of Class R shares) through December 31, 2007 was 54.13%. Thus, a $1,000 investment in Class R shares made on April 30, 2003 had a value of $1,541 on December 31, 2007. Financial Statements The Fund's Annual Report to Shareholders for the year ended December 31, 2007, contains a portfolio of the investments of the Fund as of December 31, 2007, as well as certain other financial information as of this date. The financial statements and notes included in the Annual Report, which includes the Report of Independent Registered Public Accounting Firm thereon, are incorporated herein by reference. The Annual Report will be furnished without charge to investors who request copies of this SAI. General Information Custodian. State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105, serves as custodian of the Fund. It also maintains, under the general supervision of Seligman, the accounting records and determines the net asset value for the Fund. Independent Registered Public Accounting Firm. Deloitte & Touche LLP, Independent Registered Public Accounting Firm, has been selected as auditors of the Fund. Their address is Two World Financial Center, New York, New York 10281. 40 EX-99.17(H) 13 c50349d.txt (RIVERSOURCE INVESTMENTS LOGO) (THREADNEEDLE LOGO) PROSPECTUS SUPPLEMENT -- JAN. 22, 2009*
FUND PROSPECTUS DATE FORM # - -------------------------------------------------------------- RiverSource 120/20 Contrarian Equity Fund June 27, 2008 S-6519-99 C RiverSource Absolute Return Currency and Income Fund Dec. 30, 2008 S-6502-99 G RiverSource Balanced Fund Nov. 28, 2008 S-6326-99 AD RiverSource California Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource Disciplined Equity Fund Sept. 29, 2008 S-6263-99 H RiverSource Disciplined International Equity Fund Dec. 30, 2008 S-6506-99 E RiverSource Disciplined Large Cap Growth Fund Nov. 28, 2008 S-6285-99 D RiverSource Disciplined Large Cap Value Fund Nov. 28, 2008 S-6523-99 C RiverSource Disciplined Small and Mid Cap Equity Fund Sept. 29, 2008 S-6505-99 E RiverSource Disciplined Small Cap Value Fund Sept. 29, 2008 S-6397-99 E RiverSource Diversified Bond Fund Oct. 30, 2008 S-6495-99 AC RiverSource Diversified Equity Income Fund Nov. 28, 200 S-6475-99 AD RiverSource Dividend Opportunity Fund Aug. 29, 2008 S-6341-99 AD RiverSource Emerging Markets Bond Fund Dec. 30, 2008 S-6398-99 E RiverSource Equity Value Fund May 30, 2008 S-6382-99 W RiverSource Floating Rate Fund Sept. 29, 2008 S-6501-99 E RiverSource Global Bond Fund Dec. 30, 2008 S-6309-99 AE RiverSource Global Technology Fund Dec. 30, 2008 S-6395-99 N RiverSource Growth Fund Sept. 29, 2008 S-6455-99 AD RiverSource High Yield Bond Fund July 30, 2008 S-6370-99 AD RiverSource Income Builder Basic Income Fund March 31, 2008 S-6394-99 E RiverSource Income Builder Enhanced Income Fund March 31, 2008 S-6394-99 E RiverSource Income Builder Moderate Income Fund March 31, 2008 S-6394-99 E RiverSource Income Opportunities Fund Sept. 29, 2008 S-6266-99 H RiverSource Inflation Protected Securities Fund Sept. 29, 2008 S-6280-99 G RiverSource Intermediate Tax- Exempt Fund Jan. 29, 2008 S-6355-99 T RiverSource Large Cap Equity Fund Sept. 29, 2008 S-6244-99 J RiverSource Large Cap Value Fund Sept. 29, 2008 S-6246-99 J RiverSource Limited Duration Bond Fund Sept. 29, 2008 S-6265-99 H RiverSource Mid Cap Growth Fund Jan. 29, 2008 S-6426-99 AD RiverSource Mid Cap Value Fund Nov. 28, 2008 S-6241-99 K RiverSource Minnesota Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource New York Tax- Exempt Fund Oct. 30, 2008 S-6328-99 AH RiverSource Partners Aggressive Growth Fund July 30, 2008 S-6260-99 J RiverSource Partners Fundamental Value Fund July 30, 2008 S-6236-99 L RiverSource Partners International Select Growth Fund Dec. 30, 2008 S-6243-99 M RiverSource Partners International Select Value Fund Dec. 30, 2008 S-6242-99 M RiverSource Partners International Small Cap Fund Dec. 30, 2008 S-6258-99 K RiverSource Partners Select Value Fund July 30, 2008 S-6240-99 K RiverSource Partners Small Cap Equity Fund July 30, 2008 S-6237-99 L RiverSource Partners Small Cap Growth Fund May 30, 2008 S-6301-99 L RiverSource Partners Small Cap Value Fund July 30, 2008 S-6239-99 L RiverSource Portfolio Builder Aggressive Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Conservative Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Aggressive Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Conservative Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Moderate Fund March 31, 2008 S-6282-99 G RiverSource Portfolio Builder Total Equity Fund March 31, 2008 S-6282-99 G RiverSource Precious Metals and Mining Fund May 30, 2008 S-6142-99 AE RiverSource Real Estate Fund Aug. 29, 2008 S-6281-99 G RiverSource Retirement Plus 2010 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2015 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2020 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2025 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2030 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2035 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2040 Fund June 27, 2008 S-6507-99 E RiverSource Retirement Plus 2045 Fund June 27, 2008 S-6507-99 E RiverSource Short Duration U.S. Government Fund July 30, 2008 S-6042-99 AE RiverSource Small Cap Advantage Fund May 30, 2008 S-6427-99 N RiverSource Small Company Index Fund March 31, 2008 S-6357-99 U RiverSource Strategic Allocation Fund Nov. 28, 2008 S-6141-99 AE RiverSource Strategic Income Allocation Fund Nov. 28, 2008 S-6287-99 D RiverSource Tax-Exempt Bond Fund Jan. 29, 2008 S-6310-99 AE RiverSource Tax-Exempt High Income Fund Jan. 29, 2008 S-6430-99 AE RiverSource U.S. Government Mortgage Fund July 30, 2008 S-6245-99 K Threadneedle Emerging Markets Fund Dec. 30, 2008 S-6354-99 V Threadneedle European Equity Fund Dec. 30, 2008 S-6006-99 N Threadneedle Global Equity Fund Dec. 30, 2008 S-6334-99 AG Threadneedle Global Equity Income Fund Dec. 30, 2008 S-6334-99 AG Threadneedle Global Extended Alpha Fund Dec. 30, 2008 S-6334-99 AG Threadneedle International Opportunity Fund Dec. 30, 2008 S-6140-99 AG
- -------------------------------------------------------------------------------- S-6141-10 A (1/09) * Valid until Dec. 30, 2009 Effective February 9, 2009, the section of prospectus "Initial Sales Charge -- Waiver of the sales charge for Class A shares" is replaced with the following: INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - current or retired Board members, officers or employees of the funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - current or retired Ameriprise Financial Services, Inc. financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - registered representatives and other employees of financial institutions having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - portfolio managers employed by subadvisers of the funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - partners and employees of outside legal counsel to the funds or the funds' directors or trustees who regularly provide advice and services to the funds, or to their directors or trustees. - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another fund in the RiverSource complex of funds; - through or under a wrap fee product or other investment product sponsored by a financial intermediary that charges an account management fee that has, or clears trades through a financial intermediary that has, a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; - through bank trust departments. - purchases made through "eligible employee benefit plans" created under section 401(a), 401(k), 457 and 403(b) which: - have at least $1 million in plan assets at the time of investment; - have a plan level or omnibus account that is maintained with the fund or its transfer agent; and - transact directly with the fund or its transfer agent through a third party administrator or third party recordkeeper. For more information regarding waivers of sales charges for Class A purchases, please see the SAI. The distributor may, in its sole discretion, authorize the waiver of sales charges for additional purchases or categories of purchases. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide your financial intermediary with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial intermediary provide this information to the fund when placing your purchase order. Because the current prospectus is available on the funds' website at riversource.com free of charge, information regarding breakpoint discounts is not separately disclosed on the website. S-6141-10 A (1/09) * Valid until Dec. 30, 2009 (RIVERSOURCE INVESTMENTS LOGO) PROSPECTUS SUPPLEMENT -- JANUARY 13, 2009 RIVERSOURCE LARGE CAP EQUITY FUND (PROSPECTUS DATED SEPT. 29, 2008) S-6244-99 J On Jan. 8, 2009, RiverSource Large Cap Equity Fund's Board of Directors approved in principle the merger of RiverSource Large Cap Equity Fund (the "Fund") into RiverSource Disciplined Equity Fund, a fund that seeks to provide shareholders with long-term capital growth. More information about RiverSource Disciplined Equity Fund and the proposed merger will be included in proxy materials. Completion of the merger is subject to approval by shareholders of the Fund. It is currently anticipated that proxy materials regarding the merger will be distributed to shareholders during the first or second quarter of 2009, and that a meeting of shareholders to consider the merger will be scheduled for the second quarter of 2009. S-6244-2 A (1/09) (RIVERSOURCE INVESTMENTS LOGO) (THREADNEEDLE LOGO) PROSPECTUS SUPPLEMENT -- NOV. 7, 2008
FUND (Prospectus Date) FORM # - ---------------------------------------------------- RIVERSOURCE 120/20 CONTRARIAN EQUITY FUND (6/27/08) S-6502-99 F RIVERSOURCE 130/30 U.S. EQUITY FUND (6/27/08) S-6502-99 F RIVERSOURCE ABSOLUTE RETURN CURRENCY AND INCOME FUND (6/27/08) S-6502-99 F RIVERSOURCE BALANCED FUND (11/29/07) S-6326-99 AC RIVERSOURCE CALIFORNIA TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE CASH MANAGEMENT FUND (9/29/08) S-6320-99 AF RIVERSOURCE DISCIPLINED EQUITY FUND (9/29/08) S-6263-99 H RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND (12/28/07) S-6506-99 D RIVERSOURCE DISCIPLINED LARGE CAP GROWTH FUND (11/29/07) S-6285-99 C RIVERSOURCE DISCIPLINED LARGE CAP VALUE FUND (8/1/08) S-6523-99 A RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND (9/29/08) S-6505-99 E RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND (9/29/08) S-6397-99 E RIVERSOURCE DIVERSIFIED BOND FUND (10/30/08) S-6495-99 AC RIVERSOURCE DIVERSIFIED EQUITY INCOME FUND (11/29/07) S-6475-99 AC RIVERSOURCE DIVIDEND OPPORTUNITY FUND (8/29/08) S-6341-99 AD RIVERSOURCE EMERGING MARKETS BOND FUND (12/28/07) S-6398-99 D RIVERSOURCE EQUITY VALUE FUND (5/30/08) S-6382-99 W RIVERSOURCE FLOATING RATE FUND (9/29/08) S-6501-99 E RIVERSOURCE GLOBAL BOND FUND (12/28/07) S-6309-99 AD RIVERSOURCE GLOBAL TECHNOLOGY FUND (12/28/07) S-6395-99 M RIVERSOURCE GROWTH FUND (9/29/08) S-6455-99 AD RIVERSOURCE HIGH YIELD BOND FUND (7/30/08) S-6370-99 AD RIVERSOURCE INCOME BUILDER BASIC INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME BUILDER ENHANCED INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME BUILDER MODERATE INCOME FUND (3/31/08) S-6394-99 E RIVERSOURCE INCOME OPPORTUNITIES FUND (9/29/08) S-6266-99 H RIVERSOURCE INFLATION PROTECTED SECURITIES FUND (9/29/08) S-6280-99 G RIVERSOURCE INTERMEDIATE TAX-EXEMPT FUND (1/29/08) S-6355-99 T RIVERSOURCE LARGE CAP EQUITY FUND (9/29/08) S-6244-99 J RIVERSOURCE LARGE CAP VALUE FUND (9/29/08) S-6246-99 J RIVERSOURCE LIMITED DURATION BOND FUND (9/29/08) S-6265-99 H RIVERSOURCE MID CAP GROWTH FUND (1/29/08) S-6426-99 AD RIVERSOURCE MID CAP VALUE FUND (11/29/07) S-6241-99 J RIVERSOURCE MINNESOTA TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE NEW YORK TAX-EXEMPT FUND (10/30/08) S-6328-99 AH RIVERSOURCE PARTNERS AGGRESSIVE GROWTH FUND (7/30/08) S-6260-99 J RIVERSOURCE PARTNERS FUNDAMENTAL VALUE FUND (7/30/08) S-6236-99 L RIVERSOURCE PARTNERS INTERNATIONAL SELECT GROWTH FUND (12/28/07) S-6243-99 L RIVERSOURCE PARTNERS INTERNATIONAL SELECT VALUE FUND (12/28/07) S-6242-99 L RIVERSOURCE PARTNERS INTERNATIONAL SMALL CAP FUND (12/28/07) S-6258-99 J RIVERSOURCE PARTNERS SELECT VALUE FUND (7/30/08) S-6240-99 K RIVERSOURCE PARTNERS SMALL CAP EQUITY FUND (7/30/08) S-6237-99 L RIVERSOURCE PARTNERS SMALL CAP GROWTH FUND (5/30/08) S-6301-99 L RIVERSOURCE PARTNERS SMALL CAP VALUE FUND (7/30/08) S-6239-99 L RIVERSOURCE PORTFOLIO BUILDER AGGRESSIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER CONSERVATIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE AGGRESSIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE CONSERVATIVE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER MODERATE FUND (3/31/08) S-6282-99 G RIVERSOURCE PORTFOLIO BUILDER TOTAL EQUITY FUND (3/31/08) S-6282-99 G RIVERSOURCE PRECIOUS METALS AND MINING FUND (5/30/08) S-6142-99 AE RIVERSOURCE REAL ESTATE FUND (8/29/08) S-6281-99 G RIVERSOURCE RETIREMENT PLUS 2010 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2015 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2020 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2025 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2030 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2035 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2040 FUND (6/27/08) S-6507-99 E RIVERSOURCE RETIREMENT PLUS 2045 FUND (6/27/08) S-6507-99 E RIVERSOURCE S&P 500 INDEX FUND (3/31/08) S-6434-99 N RIVERSOURCE SHORT DURATION U.S. GOVERNMENT FUND (7/30/08) S-6042-99 AE RIVERSOURCE SMALL CAP ADVANTAGE FUND (5/30/08) S-6427-99 N RIVERSOURCE SMALL COMPANY INDEX FUND (3/31/08) S-6357-99 U RIVERSOURCE STRATEGIC ALLOCATION FUND (11/29/07) S-6141-99 AD RIVERSOURCE STRATEGIC INCOME ALLOCATION FUND (11/29/07) S-6287-99 C RIVERSOURCE TAX-EXEMPT BOND FUND (1/29/08) S-6310-99 AE RIVERSOURCE TAX-EXEMPT HIGH INCOME FUND (1/29/08) S-6430-99 AE RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND (2/29/08) S-6433-99 AE RIVERSOURCE U.S. GOVERNMENT MORTGAGE FUND (7/30/08) S-6245-99 K THREADNEEDLE EMERGING MARKETS FUND (12/28/07, amended 3/31/08) S-6354-99 U THREADNEEDLE EUROPEAN EQUITY FUND (12/28/07, amended 3/31/08) S-6006-99 M THREADNEEDLE GLOBAL EQUITY FUND (8/1/08) S-6334-99 AF THREADNEEDLE GLOBAL EQUITY INCOME FUND (8/1/08) S-6334-99 AF THREADNEEDLE GLOBAL EXTENDED ALPHA FUND (8/1/08) S-6334-99 AF THREADNEEDLE INTERNATIONAL OPPORTUNITY FUND (12/28/07, amended 3/31/08) S-6140-99 AF
Effective November 7, 2008, RiverSource Investments, LLC, investment manager to the RiverSource complex of funds, and a wholly owned subsidiary of Ameriprise Financial, Inc., announced the closing of its acquisition of J. & W. Seligman & Co. Incorporated ("Seligman Investments"). Seligman Investments served as investment manager to the Seligman group of funds. The RiverSource Complex of Funds disclosure on the Table of Contents page is revised as follows: RIVERSOURCE COMPLEX OF FUNDS The RiverSource complex of funds includes a comprehensive array of funds from RiverSource Investments, including several Seligman funds. RiverSource Investments has also partnered with a number of professional investment managers, including its affiliate, Threadneedle Investments, to expand the array of funds offered in the RiverSource complex. RiverSource funds, RiverSource Partners funds and Threadneedle funds share the same Board of Directors/Trustees (the Board), and the same policies and procedures including those set forth in the service section. Although the Seligman funds share the same Board, they do not currently have the same policies and procedures, and may not be exchanged for shares of the RiverSource funds, RiverSource Partners funds or Threadneedle funds. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource complex of funds. RiverSource Variable Portfolio Funds and Seligman (Variable) Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated and unaffiliated insurance companies. The first paragraph in the "Investment Manager" section is revised as follows: RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds (including the RiverSource Partners funds, Threadneedle funds and Seligman funds), and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Complex of Funds disclosure in the "Buying and Selling Shares" section is revised as follows: RIVERSOURCE COMPLEX OF FUNDS THE RIVERSOURCE COMPLEX OF FUNDS INCLUDES "RIVERSOURCE" FUNDS, "RIVERSOURCE PARTNERS" FUNDS, AND "THREADNEEDLE" FUNDS (EACH INDIVIDUALLY A "FUND" OR A "RIVERSOURCE FUND" AND COLLECTIVELY THE "FUNDS" OR THE "RIVERSOURCE FUNDS"). THE RIVERSOURCE COMPLEX OF FUNDS ALSO INCLUDES "SELIGMAN" FUNDS. THE RIVERSOURCE FUNDS AND THE SELIGMAN FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD"), BUT INVESTORS MAY NOT CURRENTLY MAKE EXCHANGES BETWEEN THE SELIGMAN FUNDS AND THE RIVERSOURCE FUNDS. SELIGMAN FUNDS GENERALLY HAVE SEPARATE AND DISTINCT POLICIES AND PROCEDURES FROM THE RIVERSOURCE FUNDS. THE RIVERSOURCE FUNDS SHARE THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THIS SERVICE SECTION OF THIS PROSPECTUS. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A RIVERSOURCE FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL RIVERSOURCE FUNDS (INCLUDING "THREADNEEDLE" OR "RIVERSOURCE PARTNERS" FUNDS), OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." AN INVESTOR OR FINANCIAL ADVISOR MAY NOT INCLUDE THE MARKET VALUE OF ANY SELIGMAN FUNDS OWNED BY THE INVESTOR IN THIS CALCULATION. FOR ALL FUNDS EXCEPT RIVERSOURCE CASH MANAGEMENT FUND, RIVERSOURCE S&P 500 INDEX FUND AND RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND: Effective Dec. 1, 2008, the "Investment Options Summary" table in the "Buying and Selling Shares" section is revised as follows: INVESTMENT OPTIONS SUMMARY
CONTINGENT PLAN INITIAL SALES DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(a) CHARGE CHARGE (CDSC) SERVICE FEE(b) FEE - ---------------------------------------------------------------------------------------------------------------------------------- Class A Available to all Yes. Payable at time of No.(c) Yes. No. investors. purchase. Lower or no 0.25% sales charge for larger investments. - ---------------------------------------------------------------------------------------------------------------------------------- Class B(d),(e) Available to all No. Entire purchase price Maximum 5% CDSC during Yes. No. investors. is invested in shares of the first year decreasing 1.00% the fund. to 0% after six years. - ---------------------------------------------------------------------------------------------------------------------------------- Class C Available to all No. Entire purchase price 1% CSDC may apply if you Yes. No. investors. is invested in shares of sell shares within one 1.00% the fund. year after purchase. - ----------------------------------------------------------------------------------------------------------------------------------
CONTINGENT PLAN INITIAL SALES DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(a) CHARGE CHARGE (CDSC) SERVICE FEE(b) FEE - ---------------------------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying investors. - ---------------------------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25% discretionary managed accounts. - ----------------------------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) A 1% CDSC may be accessed on Class A shares sold within 18 months after purchase. See "Buying and Selling Shares, Sales Charges, Class A -- contingent deferred sales charge" for more information. (d) See "Buying and Selling Shares, Sales Charges, Class B and Class C -- contingent deferred sales charge alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. (e) Class B shares of each of RiverSource Floating Rate Fund, RiverSource Inflation Protected Securities Fund, RiverSource Intermediate Tax- Exempt Fund, RiverSource Limited Duration Bond Fund and RiverSource Short Duration U.S. Government Fund are closed to new investors and new purchases. (Existing shareholders in these funds may continue to own Class B shares and make exchanges into and out of existing accounts where Class B shares of these funds are maintained.) Class B shares of RiverSource Absolute Return Currency and Income Fund are only available for exchanges from Class B shares of another RiverSource fund. FOR ALL FUNDS EXCEPT RIVERSOURCE CASH MANAGEMENT FUND, RIVERSOURCE S&P 500 INDEX FUND AND RIVERSOURCE TAX-EXEMPT MONEY MARKET FUND: Effective Dec. 1, 2008, the following information is added after the section "Sales Charges -- Initial Sales Charge -- Waivers of the sales charge for Class A shares": CLASS A -- CONTINGENT DEFERRED SALES CHARGE For Class A shares purchased after Dec. 1, 2008 without a sales charge, a 1% CDSC may be charged if you sell your shares within 18 months after purchase. A CDSC will be based on the original purchase cost or the current market value of the shares being sold, whichever is less. CDSC -- WAIVERS OF THE CDSC FOR CLASS A SHARES. The CDSC will be waived on sales of shares: - To which no sales commission or transaction fee was paid to an authorized financial institution at the time of purchase. - Purchased through reinvestment of dividends and capital gain distributions. - In the event of the shareholder's death. - From a monthly, quarterly or annual systematic redemption plan of up to an annual amount of 12% of the account value on a per fund basis. - In an account that has been closed because it falls below the minimum account balance. - That result in mandatory withdrawals from an ERISA plan of a shareholder who is at least 70 1/2 years old. - That result from returns of excess contributions or excess deferral amounts made to a retirement plan participant. - Purchased prior to Dec. 1, 2008. The distributor may, in its sole discretion, authorize the waiver of the CDSC for additional purchases or categories of purchases. Policies relating to waiving the CDSC may be modified or withdrawn at any time. The following information is added to the section "Exchanges -- Other exchange policies": - If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange of those shares. Any CDSC will be deducted when you sell the shares you received from the exchange. The CDSC imposed at that time will be based on the period that begins when you bought shares of the original fund and ends when you sell the shares of the fund you exchanged to. FOR ALL FUNDS EXCEPT RIVERSOURCE S&P 500 INDEX FUND: Effective Nov. 21, 2008, the Repurchases paragraph in the "Selling Shares" section is revised as follows: REPURCHASES. You can change your mind after requesting a sale of shares and use all or part of the sale proceeds to purchase new shares of RiverSource funds. If your original purchase was in Class A or Class B, you may use all or part of the sale proceeds to purchase new Class A shares in any RiverSource fund account linked together for ROA purposes. Your repurchase will be in Class A shares at NAV, up to the amount of the sale proceeds. Repurchases of Class B shares will also be in Class A shares at NAV. Any CDSC paid upon redemption of your Class B shares will not be reimbursed. If your original purchase was in Class C, you will be allowed to reinvest in the same Class C account and fund you originally purchased. In a Class C repurchase, the CDSC you paid will be reinvested and the shares will be deemed to have the original cost and purchase date for purposes of applying the CDSC (if any) to subsequent redemptions. Systematic withdrawals and purchases will be excluded from this policy. In order for you to take advantage of this repurchase waiver, you must notify your financial institution within 90 days of the date your sale request was processed. Contact your financial institution for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. The following paragraph in the "Additional Services and Compensation" section is revised as follows: Distribution and Shareholder Services. RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, and Seligman Advisors, Inc., 100 Park Avenue, New York, New York 10017, (collectively, the distributor), provide underwriting and distribution services to the RiverSource funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor reallows the remainder of these fees (or the full fee) to the financial institutions that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the RiverSource funds' policy regarding directed brokerage. S-6495-10 A (11/08) (RIVERSOURCE INVESTMENTS LOGO) PROSPECTUS SUPPLEMENT -- NOV. 1, 2008
Fund Prospectus date Form # RiverSource Large Cap Equity Fund Sept. 29, 2008 S-6244-99 J
The Principal Investment Strategies section has been revised as follows: PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) will choose equity investments by employing proprietary, disciplined quantitative methods. The investment manager's disciplined quantitative approach is designed to identify companies with: - - Attractive valuations, based on factors such as price-to-earnings ratios; - - Sound balance sheets; or - - Improving outlooks, based on an analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - - The security is overvalued relative to other potential investments. - - The company does not meet the investment manager's performance expectations. The universe of stocks from which the investment manager selects the Fund's investments primarily will be those included in the Fund's benchmark, the S&P 500 Index. In selecting stocks for the Fund to purchase or to sell, the investment manager employs a rigorous process for evaluating the relationship between the risk associated with each security and its potential for positive returns. This process includes factors such as: - - Limits on positions relative to weightings in the benchmark index. - - Limits on sector and industry allocations relative to the benchmark index. - - Limits on size of holdings relative to market liquidity. The investment manager may use derivatives such as futures, options, swaps and forward contracts, to produce incremental earnings, to hedge existing positions, maintain investment efficiency or to increase flexibility. The Principal Risks section has been revised to delete Foreign Risk and to add Quantitative Model Risk: QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. The Past Performance section has been revised to reflect the following index change to provide a more appropriate performance measurement for the Fund:
EXISTING INDEX INDEX EFFECTIVE NOV. 1, 2008 - ---------------------------------------------------------------------------------------------------------- Russell 1000 Index (primary index) S&P 500 Index (new primary index) S&P 500 Index (secondary index) NA
Effective Nov. 1, 2008, the Russell 1000 Index is replaced with the S&P 500 Index as the Fund's primary benchmark. Information on both indexes will be included for a one-year transition period. In the future, however, only the S&P 500 Index will be included. The information following the second paragraph in the Investment Manager section has been revised as follows: Portfolio Manager(s). The portfolio managers responsible for the Fund's day-to- day management are: Dimitris J. Bertsimas, Ph.D., Senior Portfolio Manager - - Managed the Fund since 2008. - - Joined RiverSource Investments as a portfolio manager and leader of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. - - Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. - - MS and Ph.D., MIT. Gina K. Mourtzinou, Ph.D., Portfolio Manager - - Managed the Fund since 2008. - - Joined RiverSource Investments as a portfolio manager and member of the Disciplined Equity and Asset Allocation Team in 2002. - - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where she served as Vice President of Research and Analytics, 1999 to 2002. - - Began investment career as a consultant to asset managers in 1996; became portfolio manager in 2002. - - Ph.D., MIT. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. S-6244-1 A (11/08) Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE LARGE CAP EQUITY FUND PROSPECTUS SEPT. 29, 2008 RIVERSOURCE LARGE CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. Classes A, B, C, I, R2, R3, R4 and R5 As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. YOU MAY QUALIFY FOR SALES CHARGE DISCOUNTS ON PURCHASES OF CLASS A SHARES. PLEASE NOTIFY YOUR FINANCIAL INSTITUTION IF YOU HAVE OTHER ACCOUNTS HOLDING SHARES OF RIVERSOURCE FUNDS TO DETERMINE WHETHER YOU QUALIFY FOR A SALES CHARGE DISCOUNT. SEE "BUYING AND SELLING SHARES" FOR MORE INFORMATION. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE FUND.................................................... 3P Objective................................................... 3p Principal Investment Strategies............................. 3p Principal Risks............................................. 4p Past Performance............................................ 6p Fees and Expenses........................................... 10p Other Investment Strategies and Risks....................... 13p Fund Management and Compensation............................ 15p FINANCIAL HIGHLIGHTS........................................ 17P BUYING AND SELLING SHARES................................... S.1 Description of Share Classes................................ S.2 Investment Options -- Classes of Shares ................. S.2 Sales Charges............................................ S.5 Opening an Account....................................... S.11 Exchanging or Selling Shares................................ S.14 Exchanges................................................ S.16 Selling Shares........................................... S.18 VALUING FUND SHARES......................................... S.19 DISTRIBUTIONS AND TAXES..................................... S.19 GENERAL INFORMATION......................................... S.22
RIVERSOURCE COMPLEX OF FUNDS The RiverSource complex of funds includes funds branded "RiverSource," "RiverSource Partners," and "Threadneedle." These funds share the same Board of Directors/Trustees, and the same policies and procedures including those set forth in the service section. RiverSource Variable Portfolio Funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts offered by affiliated insurance companies. Please see the Statement of Additional Information (SAI) for a complete list of mutual funds included in the RiverSource complex of funds. - -------------------------------------------------------------------------------- 2P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS THE FUND OBJECTIVE RiverSource Large Cap Equity Fund (the Fund) seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, there is no assurance this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund may invest in income-producing equity securities, such as dividend paying stocks, convertible securities and preferred stocks. Up to 25% of the Fund's net assets may be invested in foreign investments. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager (RiverSource Investments, LLC) will hold both growth and value companies and at times may favor one more than the other based on available opportunities. When optimizing for growth, the investment manager invests in companies it believes to have above-average long-term growth potential, or technological superiority, and it selects investments based, among other factors, on: - - Effective management. - - Financial strength. - - Competitive market or product position. - - Technological advantage relative to other companies. When optimizing for value, the investment manager invests in companies that appear to be undervalued by various measures or that may be temporarily out of favor, but have good prospects for capital appreciation, and it selects investments based, among other factors, on: - - Identifying a variety of large, well-established companies whose underlying fundamentals are stable, or are anticipated to become stable, or whose fundamentals are improving. - - Identifying stocks that are undervalued: - because they have one or more ratios, such as price-to-earnings or price-to- cash flow, that are low relative to the general market, or have a yield that exceeds the market; - because one or more of their valuation ratios are low relative to historical levels for the stock; - because one or more of their valuation ratios or other financial measures make that stock attractive relative to its peers; or - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 3P - because they are undervalued relative to their intrinsic value, as identified by the investment manager. In evaluating whether to sell a security, the investment manager considers factors including, among others whether: - - The security is overvalued relative to other potential investments. - - The security has reached the investment manager's price objective. - - The company has met the investment manager's earnings and/or growth expectations. - - Potential losses, due to factors such as a market down-turn, can be minimized. - - A more attractive opportunity has been identified. The investment manager may use derivatives such as futures, options, forward contracts and structured investments, to produce incremental earnings, to hedge existing positions, or to increase flexibility. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Gains or losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial gain or loss for the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. - -------------------------------------------------------------------------------- 4P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. FOREIGN RISK. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risk: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 5P ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - - how the Fund's performance has varied for each full calendar year shown on the bar chart; and - - how the Fund's average annual total returns compare to recognized indexes shown on the table. Both the bar chart and the table assume that all distributions have been reinvested. The performance of different classes varies because of differences in sales charges and other fees and expenses. How the Fund has performed in the past (before and after taxes) does not indicate how the Fund will perform in the future. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of such fee waivers/expense caps, performance would have been lower. See "Fees and Expenses" for any current fee waivers/expense caps. Bar Chart. Class A share information is shown in the bar chart; the sales charge for Class A shares is not reflected in the bar chart. Table. The table shows total returns from hypothetical investments in Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares of the Fund. These returns are compared to the indexes shown for the same periods. For purposes of the performance calculation in the table we assumed: - - the maximum sales charge for Class A shares; - - sales at the end of the period and deduction of the applicable contingent deferred sales charge (CDSC) for Class B and Class C shares; - - no sales charge for Class I, Class R2, Class R3, Class R4 and Class R5 shares; and - - with the exception of Class A shares, no adjustments for taxes paid by an investor on the reinvested income and capital gains. - -------------------------------------------------------------------------------- 6P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS AFTER-TAX RETURNS After-tax returns are shown only for Class A shares. After-tax returns for the other classes will vary. After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns will depend on your tax situation and most likely will differ from the returns shown in the table. If you hold your shares in a tax-deferred account, such as a 401(k) plan or an IRA, the after-tax returns do not apply to you since you will not incur taxes until you begin to withdraw from your account. The return after taxes on distributions for a period may be the same as the return before taxes for the same period if there were no distributions or if the distributions were small. The return after taxes on distributions and sale of Fund shares for a period may be greater than the return before taxes for the same period if there was a tax loss realized on sale of Fund shares. The benefit of the tax loss (since it can be used to offset other gains) may result in a higher return. - -------------------------------------------------------------------------------- CLASS A SHARE PERFORMANCE (BASED ON CALENDAR YEARS) (BAR CHART) +27.57% +5.52% +5.76% +14.95% +2.68% 2003 2004 2005 2006 2007
During the periods shown in the bar chart, the highest return for a calendar quarter was +16.15% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -4.93% (quarter ended Sept. 30, 2004). 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 Fund's Class A year-to-date return at June 30, 2008 was -14.26%. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 7P AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2007)
SINCE SINCE INCEPTION SINCE INCEPTION (CLASSES A, INCEPTION (CLASSES R2, 1 YEAR 5 YEARS B, C & R4) (CLASS I) R3 & R5) RiverSource Large Cap Equity Fund: Class A Return before taxes -3.25% +9.63% +3.92%(a) N/A N/A Return after taxes on distributions -5.84% +8.44% +2.93%(a) N/A N/A Return after taxes on distributions and sale of fund shares -0.75% +7.83% +2.92%(a) N/A N/A Class B Return before taxes -2.64% +9.76% +4.01%(a) N/A N/A Class C Return before taxes +1.00% +10.04% +4.21%(a) N/A N/A Class I Return before taxes +3.14% N/A N/A +7.23%(b) N/A Class R2 Return before taxes +2.49% N/A N/A N/A +3.30%(c) Class R3 Return before taxes +2.74% N/A N/A N/A +3.55%(c) Class R4 Return before taxes +2.77% +11.10% +5.19%(a) N/A N/A Class R5 Return before taxes +2.87% N/A N/A N/A +3.68%(c) Russell 1000(R) Index (reflects no deduction for fees, expenses or taxes) +5.77% +13.43% +6.81%(d) +9.16%(e) +6.56%(f) S&P 500 Index (reflects no deduction for fees, expenses or taxes) +5.49% +12.83% +6.30%(d) +8.69%(e) +6.42%(f) Lipper Large-Cap Core Funds Index +6.63% +11.55% +5.49%(d) +8.12%(e) +7.10%(f)
(a) Inception date is March 28, 2002. (b) Inception date is March 4, 2004. (c) Inception date is Dec. 11, 2006. (d) Measurement period started April 1, 2002. (e) Measurement period started March 1, 2004. (f) Measurement period started Dec. 1, 2006. The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. - -------------------------------------------------------------------------------- 8P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. See "Fund Management and Compensation" for more information. Past performance for Class R2 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class B. Past performance for Class R3 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class A. Past performance for Class R5 for the period prior to the beginning of operations for that class may be calculated based on the performance of Class R4. In each case, the blended class performance will be adjusted to reflect differences in sales charges, but not differences in annual Fund operating expenses (for example, 12b-1 fees). The use of blended performance generally results in a presentation of higher performance for classes with higher operating expenses than those of the class with which they are blended, and a presentation of lower performance for classes with lower operating expenses than those of the class with which they are blended. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 9P FEES AND EXPENSES Fund investors pay various expenses. The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Expenses are based on the Fund's most recent fiscal year, adjusted to reflect current fees. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS A CLASS B CLASS C CLASS R5 Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75%(a) None None None Maximum deferred sales charge (load) imposed on sales (as a percentage of offering price at time of purchase) None 5% 1% None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS: CLASS A CLASS B CLASS C Management fees(b) 0.47% 0.47% 0.47% Distribution and/or service (12b-1) fees 0.25% 1.00% 1.00% Other expenses(c) 0.31% 0.32% 0.32% Total annual fund operating expenses 1.03% 1.79% 1.79% Fee waiver/expense reimbursement 0.07% 0.06% 0.07% Total annual (net) fund operating expenses(d) 0.96% 1.73% 1.72% Acquired fund fees and expenses(e) 0.02% 0.02% 0.02% Total fund and acquired fund fees and expenses(e) 0.98% 1.75% 1.74%
CLASS I CLASS R2 CLASS R3 CLASS R4 CLASS R5 Management fees(b) 0.47% 0.47% 0.47% 0.47% 0.47% Distribution and/or service (12b-1) fees 0.00% 0.50% 0.25% 0.00% 0.00% Other expenses(c) 0.10% 0.42% 0.42% 0.40% 0.20% Total annual fund operating expenses 0.57% 1.39% 1.14% 0.87% 0.67% Fee waiver/expense reimbursement 0.03% 0.05% 0.05% 0.05% 0.08% Total annual (net) fund operating expenses(d) 0.54% 1.34% 1.09% 0.82% 0.59% Acquired fund fees and expenses(e) 0.02% 0.02% 0.02% 0.02% 0.02% Total fund and acquired fund fees and expenses(e) 0.56% 1.36% 1.11% 0.84% 0.61%
(a) This charge may be reduced depending on the value of your total investments in RiverSource Funds. See "Sales Charges." (b) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.08% for the most recent fiscal year. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. See "Fund Management and Compensation" for more information. - -------------------------------------------------------------------------------- 10P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS (c) Other expenses include an administrative services fee, a transfer agency fee (for all classes except Class I), a custody fee, other nonadvisory expenses and a plan administration services fee (for Class R2, Class R3 and Class R4). (d) The investment manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. (e) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, is as shown. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 11P EXAMPLES These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. These examples assume that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. These examples also assume that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $669 $884 $1,116 $1,782 Class B $678(b) $964(b) $1,175(b) $1,926(c) Class C $277(b) $563 $ 975 $2,126 Class I $ 57 $186 $ 327 $ 738 Class R2 $138 $442 $ 767 $1,692 Class R3 $113 $364 $ 634 $1,409 Class R4 $ 86 $279 $ 489 $1,096 Class R5 $ 62 $213 $ 377 $ 855
(a) Includes a 5.75% sales charge. (b) Includes the applicable CDSC. (c) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A(a) $669 $884 $1,116 $1,782 Class B $178 $564 $ 975 $1,926(b) Class C $177 $563 $ 975 $2,126 Class I $ 57 $186 $ 327 $ 738 Class R2 $138 $442 $ 767 $1,692 Class R3 $113 $364 $ 634 $1,409 Class R4 $ 86 $279 $ 489 $1,096 Class R5 $ 62 $213 $ 377 $ 855
(a) Includes a 5.75% sales charge. (b) Based on conversion of Class B shares to Class A shares in the ninth year of ownership. - -------------------------------------------------------------------------------- 12P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds") ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses. Although ETFs are designed to replicate the price and yield of a specified market index, there is no guarantee that an ETF will track its specified market index, which may result in a loss. For more information on strategies and holdings, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 13P Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. - -------------------------------------------------------------------------------- 14P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource funds, and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.47% of the Fund's average daily net assets, including an adjustment under the terms of a performance incentive arrangement. The adjustment is computed by comparing the Fund's performance to the performance of an index of comparable funds published by Lipper Inc. The index against which the Fund's performance is currently measured for purposes of the performance incentive adjustment is the Lipper Large-Cap Core Funds Index. In certain circumstances, the Fund's Board may approve a change in the index. The maximum adjustment (increase or decrease) is 0.12% of the Fund's average net assets on an annual basis. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement is available in the Fund's most recent annual or semiannual shareholder report. Portfolio Manager(s). The portfolio managers responsible for the day-to-day management of the Fund are: Robert Ewing, CFA, Portfolio Manager - - Managed the Fund since 2004. - - Joined RiverSource Investments in 2002. - - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1990 to 2002. - - Began investment career in 1988. - - BS, Boston College Carroll School of Management. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 15P Nick Thakore, Portfolio Manager - - Managed the Fund since 2004. - - Joined RiverSource Investments in 2002. - - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1993 to 2002. - - Began investment career in 1993. - - MBA, Wharton School at University of Pennsylvania. Mr. Thakore provides direct day-to-day management for approximately one-third of the portfolio optimizing for growth. Mr. Ewing provides direct day-to-day management for approximately one-third of the portfolio optimizing for value. Messrs. Ewing and Thakore coordinate day-to-day management of the remainder of the portfolio, allocating approximately one-third of the portfolio among a team of research analysts who select investments in their allocations based on the sectors that they cover. These allocations are generally consistent with the sector weighting of the S&P 500 Index, an unmanaged index of common stocks, but allocations may vary. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. - -------------------------------------------------------------------------------- 16P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS FINANCIAL HIGHLIGHTS THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND THE FUND'S FINANCIAL PERFORMANCE. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THE INFORMATION FOR THE FISCAL YEARS ENDED ON OR AFTER JULY 31, 2007 HAS BEEN DERIVED FROM THE FINANCIAL STATEMENTS AUDITED BY ERNST & YOUNG LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS, IS INCLUDED IN THE ANNUAL REPORT WHICH, IF NOT INCLUDED WITH THIS PROSPECTUS, IS AVAILABLE UPON REQUEST. THE INFORMATION FOR THE PERIODS ENDED ON OR BEFORE JULY 31, 2006 HAS BEEN AUDITED BY OTHER AUDITORS. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 17P CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.05 $5.40 $5.26 $4.64 $4.53 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .06(b) .06 .04 .01 Net gains (losses) (both realized and unrealized) (.90) .79 .12 .61 .32 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.83) .85 .18 .65 .33 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.06) (.04) (.02) -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.70) (.20) (.04) (.03) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.52 $6.05 $5.40 $5.26 $4.64 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3,389 $5,039 $5,461 $1,030 $1,248 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.03% 1.09% 1.06% 1.16% 1.23% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .97% 1.09% 1.06% 1.11% 1.20% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.31% .99% 1.08% .79% .36% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.40%) 15.79% 3.51% 13.99% 7.19% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.96% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 18P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.91 $5.29 $5.15 $4.56 $4.48 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.88) .76 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .77 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.15) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.91 $5.29 $5.15 $4.56 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $433 $833 $1,169 $472 $572 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 1.98% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.95% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .56% .23% .28% .02% (.46%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.97%) 14.71% 2.72% 13.09% 6.48% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 19P CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.92 $5.30 $5.16 $4.57 $4.49 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.89) .77 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.86) .78 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.02) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.16) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.92 $5.30 $5.16 $4.57 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $32 $35 $9 $11 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 2.01% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.98% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .55% .23% .28% .02% (.43%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (16.11%) 14.80% 2.71% 13.06% 6.46% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 20P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $6.09 $5.44 $5.31 $4.67 $5.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(c) .09(c) .10 .05 -- Net gains (losses) (both realized and unrealized) (.90) .78 .12 .63 (.28) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.81) .87 .22 .68 (.28) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) (.09) (.03) -- Distributions from realized gains (.65) (.14) -- (.01) (.13) - ----------------------------------------------------------------------------------------------------------- Total distributions (.73) (.22) (.09) (.04) (.13) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.09 $5.44 $5.31 $4.67 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $39 $68 $105 $43 $14 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .57% .63% .59% .70% .72%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .57% .63% .59% .65% .71%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.74% 1.44% 1.53% 1.24% .74%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.02%) 16.13% 4.06% 14.64% (5.65%)(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.56% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 21P CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.08 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .06 .03 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .22 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.69) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.08 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.39% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.14% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .67%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.45%) 3.71%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 22P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.09 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .04 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.82) .23 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.56 $6.09 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.14% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .89% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.40% .92%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.19%) 3.88%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 23P CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.13 $5.47 $5.28 $4.66 $4.54 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .07(b) .09 .04 .01 Net gains (losses) (both realized and unrealized) (.92) .79 .12 .61 .34 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .86 .21 .65 .35 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.02) (.02) (.01) Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.20) (.02) (.03) (.23) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.58 $6.13 $5.47 $5.28 $4.66 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $179 $330 $1,069 $-- $8 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .87% .90% .81% .95% 1.03% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .82% .89% .81% .90% 1.00% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.46% 1.14% 1.41% 1.08% .50% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.40%) 15.80% 4.03% 14.06% 7.44% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.81% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- 24P RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.11 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .06 Net gains (losses) (both realized and unrealized) (.93) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .25 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.61 $6.11 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $25 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.21% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.38%) 4.24%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.66% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 PROSPECTUS 25P RIVERSOURCE COMPLEX OF FUNDS THE RIVERSOURCE COMPLEX OF FUNDS INCLUDES FUNDS BRANDED "RIVERSOURCE," "RIVERSOURCE PARTNERS," AND "THREADNEEDLE" (EACH INDIVIDUALLY, A "FUND" OR A "RIVERSOURCE FUND" AND COLLECTIVELY, THE "FUNDS" OR THE "RIVERSOURCE FUNDS"). THESE FUNDS SHARE THE SAME BOARD OF DIRECTORS/TRUSTEES (THE "BOARD"), AND THE SAME POLICIES AND PROCEDURES INCLUDING THOSE SET FORTH IN THIS SERVICE SECTION. FOR EXAMPLE, FOR PURPOSES OF CALCULATING THE INITIAL SALES CHARGE ON THE PURCHASE OF CLASS A SHARES OF A FUND, AN INVESTOR OR FINANCIAL ADVISOR SHOULD CONSIDER THE COMBINED MARKET VALUE OF ALL RIVERSOURCE FUNDS (INCLUDING "THREADNEEDLE" OR "RIVERSOURCE PARTNERS" BRANDED FUNDS), OWNED BY THE INVESTOR AS DEFINED UNDER "INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA)." BUYING AND SELLING SHARES The RiverSource funds are generally available directly and through broker-dealers, banks, and other financial intermediaries or institutions (financial institutions), including certain qualified and non-qualified plans, wrap fee products or other investment products sponsored by financial institutions. THESE FINANCIAL INSTITUTIONS MAY CHARGE YOU ADDITIONAL FEES FOR THE SERVICES THEY PROVIDE AND THEY MAY HAVE DIFFERENT POLICIES NOT DESCRIBED IN THIS PROSPECTUS. Some policy differences may include different minimum investment amounts, exchange privileges, fund choices and cutoff times for investments. Additionally, recordkeeping, transaction processing and payments of distributions relating to your account may be performed by the financial institutions through which your shares of the fund(s) are held. Since the fund (and its service providers) may not have a record of your account transactions, you should always contact the financial institution through which you purchased or at which you maintain your shares of the fund to make changes to your account or to give instructions concerning your account, or to obtain information about your account. The fund and its service providers, including the distributor and the transfer agent, are not responsible for the failure of one of these financial institutions to carry out its obligations to its customers. - -------------------------------------------------------------------------------- S.1 S-6400-4 DESCRIPTION OF SHARE CLASSES INVESTMENT OPTIONS -- CLASSES OF SHARES The RiverSource funds offer different classes of shares. There are differences among the fees and expenses for each share class. See the "Fees and Expenses" table for more information. Not everyone is eligible to buy every share class. After determining which share classes you are eligible to buy, decide which share class best suits your needs. Your financial institution can help you with this decision. The following table shows the key features of each share class. (THE COVER OF THIS PROSPECTUS INDICATES WHICH SHARE CLASSES ARE CURRENTLY OFFERED FOR THIS FUND.) INVESTMENT OPTIONS SUMMARY
CONTINGENT PLAN INITIAL DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(A) SALES CHARGE CHARGE (CDSC) SERVICE FEE(B) FEE - ------------------------------------------------------------------------------------------------------------- Class A Available to Yes. Payable at No. Yes. No. all investors. time of purchase. 0.25% Lower or no sales charge for larger investments. - ------------------------------------------------------------------------------------------------------------- Class Available to No. Entire Maximum 5% CDSC during Yes. No. B(c) all investors. purchase price is the first year decreasing 1.00% invested in to 0% after six years. shares of the fund. - ------------------------------------------------------------------------------------------------------------- Class C Available to No. Entire 1% CDSC may apply if you Yes. No. all investors. purchase price is sell shares within one 1.00% invested in year after purchase. shares of the fund. - ------------------------------------------------------------------------------------------------------------- Class I Limited to No. No. No. No. qualifying institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R2 Limited to No. No. Yes. Yes. qualifying 0.50% 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R3 Limited to No. No. Yes. Yes. qualifying 0.25% 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R4 Limited to No. No. No. Yes. qualifying 0.25% institutional investors. - ------------------------------------------------------------------------------------------------------------- Class R5 Limited to No. No. No. No. qualifying institutional investors. - -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- S.2
INVESTMENT OPTIONS SUMMARY (CONTINUED) CONTINGENT PLAN INITIAL DEFERRED SALES DISTRIBUTION AND ADMINISTRATION AVAILABILITY(A) SALES CHARGE CHARGE (CDSC) SERVICE FEE(B) FEE - ------------------------------------------------------------------------------------------------------------- Class W Limited to No. No. Yes. No. qualifying 0.25% discretionary managed accounts. - -------------------------------------------------------------------------------------------------------------
(a) See "Buying and Selling Shares, Determining which class of shares to purchase" for more information on availability of share classes and eligible investors. See "Buying and Selling Shares, Opening an Account" for information on minimum investment and account balance requirements. (b) For each of Class A, Class B, Class C, Class R2, Class R3 and Class W shares, as applicable, each fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, that allows it to pay distribution and shareholder servicing-related expenses for the sale of shares and the servicing of shareholders. This plan has been reviewed and approved by the Board. Because these fees are paid out of fund assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of distribution (sales) or servicing charges. (c) See "Buying and Selling Shares, Sales Charges, Class B and Class C -- contingent deferred sales charge alternative" for more information on the timing of conversion of Class B shares to Class A shares. Timing of conversion will vary depending on the date of your original purchase of the Class B shares. DISTRIBUTION AND SERVICE FEES The distribution and shareholder servicing fees for Class A, Class B, Class C, Class R2, Class R3 and Class W shares are subject to the requirements of Rule 12b-1 under the Investment Company Act of 1940, as amended, and are used to reimburse the distributor for certain expenses it incurs in connection with distributing a fund's shares and directly or indirectly providing services to fund shareholders. These expenses include payment of distribution and shareholder servicing fees to financial institutions that sell shares of the fund or provide services to fund shareholders, up to 0.50% of the average daily net assets of Class R2 shares sold and held through them and up to 0.25% of the average daily net assets of Class A, Class B, Class C, Class R3 and Class W shares sold and held through them. For Class A, Class B, Class R2, Class R3 and Class W shares, the distributor begins to pay these fees immediately after purchase. For Class C shares, the distributor pays these fees in advance for the first 12 months. Financial institutions also receive distribution fees up to 0.75% of the average daily net assets of Class C shares sold and held through them, which the distributor begins to pay 12 months after purchase. For Class B shares, and, for the first 12 months following the sale of Class C shares, the fund's distributor retains the distribution fee of up to 0.75% in order to finance the payment of sales commissions to financial institutions that sell Class B shares, and to pay for other distribution related expenses. Financial institutions may compensate their financial advisors with the shareholder servicing and distribution fees paid to them by the distributor. IF YOU MAINTAIN SHARES OF THE FUND DIRECTLY WITH THE FUND, WITHOUT WORKING DIRECTLY WITH A FINANCIAL INSTITUTION OR FINANCIAL ADVISOR, DISTRIBUTION AND SERVICE FEES WILL BE RETAINED BY THE DISTRIBUTOR. - -------------------------------------------------------------------------------- S.3 PLAN ADMINISTRATION FEE Class R2, Class R3 and Class R4 shares pay an annual plan administration services fee for the provision of various administrative, recordkeeping, communication and educational services. The fee for Class R2, Class R3 and Class R4 shares is equal on an annual basis to 0.25% of average daily net assets attributable to the respective class. DETERMINING WHICH CLASS OF SHARES TO PURCHASE CLASS A, CLASS B AND CLASS C SHARES New purchases of Class B shares will not be permitted if your Rights of Accumulation are $50,000 or higher, and new purchases of Class C shares will not be permitted if your Rights of Accumulation are $1,000,000 or higher. See "Sales Charges, Initial Sales Charge -- Rights of Accumulation (ROA)" for information on Rights of Accumulation. Class B shares have a higher annual distribution fee than Class A shares and a contingent deferred sales charge (CDSC) for six years. Class B shares convert to Class A shares in the ninth year of ownership. Class B shares purchased through reinvested dividends and distributions also will convert to Class A shares in the same proportion as the other Class B shares. Class C shares also have a higher annual distribution fee than Class A shares. Class C shares have no sales charge if you hold the shares for longer than one year. Unlike Class B shares, Class C shares do not convert to Class A shares. As a result, you will pay a distribution fee for as long as you hold Class C shares. If you choose a deferred sales charge option (Class B or Class C), you should consider the length of time you intend to hold your shares. To help you determine which investment is best for you, consult your financial institution. CLASS I SHARES. The following eligible investors may purchase Class I shares: - - Any fund distributed by RiverSource Distributors, Inc., if the fund seeks to achieve its investment objective by investing primarily in shares of the fund and other RiverSource funds. Class I shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. CLASS R SHARES. The following eligible institutional investors may purchase Class R2, Class R3, Class R4 and Class R5 shares: - - Qualified employee benefit plans. - - Trust companies or similar institutions, and charitable organizations that meet the definition in Section 501(c)(3) of the Internal Revenue Code. - -------------------------------------------------------------------------------- S.4 - - Non-qualified deferred compensation plans whose participants are included in a qualified employee benefit plan described above. - - State sponsored college savings plans established under Section 529 of the Internal Revenue Code. - - Health Savings Accounts (HSAs) created pursuant to public law 108-173. Additionally, if approved by the distributor, the following eligible institutional investors may purchase Class R5 shares: - - Institutional or corporate accounts above a threshold established by the distributor (currently $1 million per fund or $10 million in all RiverSource funds). - - Bank Trust departments. Class R shares generally are not available to retail non-retirement accounts, traditional and Roth IRAs, Coverdell Educational Savings Accounts, SEPs, SAR- SEPs, SIMPLE IRAs and individual 403(b) plans. Class R shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. CLASS W SHARES. The following eligible investors may purchase Class W shares: - - Investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Class W shares may be purchased, sold or exchanged only through the distributor or an authorized financial institution. Shares originally purchased in a discretionary managed account may continue to be held in Class W outside of a discretionary managed account, but no additional Class W purchases may be made and no exchanges to Class W shares of another fund may be made outside of a discretionary managed account. IN ADDITION, FOR CLASS I, CLASS R AND CLASS W SHARES, THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY ACCEPT OR AUTHORIZE FINANCIAL INSTITUTIONS TO ACCEPT INVESTMENTS FROM OTHER PURCHASERS NOT LISTED ABOVE. For more information, see the SAI. SALES CHARGES CLASS A -- INITIAL SALES CHARGE ALTERNATIVE Your purchase price for Class A shares is generally the net asset value (NAV) plus a front-end sales charge. The distributor receives the sales charge and re-allows a portion of the sales charge to the financial institution through which you purchased the shares. The distributor retains the balance of the sales charge. The distributor retains the full sales charge you pay when you purchase shares of the fund directly (not through a separately authorized financial institution). Sales charges vary depending on the amount of your purchase. - -------------------------------------------------------------------------------- S.5 SALES CHARGE* FOR CLASS A SHARES:
MAXIMUM AS A % OF AS A % OF NET RE-ALLOWANCE AS A % TOTAL MARKET VALUE PURCHASE PRICE** AMOUNT INVESTED OF PURCHASE PRICE - ---------------------------------------------------------------------------------------- Up to $49,999 5.75% 6.10% 5.00% $50,000 -- $99,999 4.75 4.99 4.00 $100,000 -- $249,999 3.50 3.63 3.00 $250,000 -- $499,999 2.50 2.56 2.15 $500,000 -- $999,999 2.00 2.04 1.75 $1,000,000 or more 0.00 0.00 0.00***
* Because of rounding in the calculation of the offering price, the portion of the sales charge retained by the distributor may vary and the actual sales charge you pay may be more or less than the sales charge calculated using these percentages. ** Purchase price includes the sales charge. ***Although there is no sales charge for purchases with a total market value over $1,000,000, and therefore no re-allowance, the distributor may pay a financial institution the following: a sales commission of up to 1.00% for a sale with a total market value of $1,000,000 to $2,999,999; a sales commission up to 0.50% for a sale of $3,000,000 to $9,999,999; and a sales commission up to 0.25% for a sale of $10,000,000 or more. INITIAL SALES CHARGE -- RIGHTS OF ACCUMULATION (ROA). You may be able to reduce the sales charge on Class A shares, based on the combined market value of accounts in your ROA group, as described below. The current market values of the following investments are eligible to be added together for purposes of determining the sales charge on your purchase: - - Your current investment in a fund; and - - Previous investments you and members of your household have made in Class A, Class B or Class C shares in the fund and other RiverSource funds, provided your investment was subject to a sales charge. Your household consists of you, your spouse or domestic partner and your unmarried children under age 21 sharing a mailing address. The following accounts are eligible to be included in determining the sales charge on your purchase: - - Individual or joint accounts; - - Roth and traditional IRAs, SEPs, SIMPLEs and TSCAs, provided they are invested in Class A, Class B or Class C shares that were subject to a sales charge; - - UGMA/UTMA accounts for which you, your spouse, or your domestic partner is parent or guardian of the minor child; - - Revocable trust accounts for which you or a member of your household, individually, is the beneficial owner/grantor; - - Accounts held in the name of your, your spouse's, or your domestic partner's sole proprietorship or single owner limited liability company or S corporation; and - -------------------------------------------------------------------------------- S.6 - - Qualified retirement plan assets, provided that you are the sole owner of the business sponsoring the plan, are the sole participant (other than a spouse) in the plan, and have no intention of adding participants to the plan. The following accounts are NOT eligible to be included in determining the sales charge on your purchase: - - Accounts of pension and retirement plans with multiple participants, such as 401(k) plans (which are combined to reduce the sales charge for the entire pension or retirement plan and therefore are not used to reduce the sales charge for your individual accounts); - - Investments in Class A shares where the sales charge is waived, for example, purchases through wrap accounts; - - Investments in Class D, Class E, Class I, Class R2, Class R3, Class R4, Class R5, Class W or Class Y shares; - - Investments in 529 plans, donor advised funds, variable annuities, variable life insurance products, wrap accounts or managed separate accounts; and - - Charitable and irrevocable trust accounts. If you purchase RiverSource fund shares through different financial institutions, and you want to include those assets toward a reduced sales charge, you must inform your financial institution in writing about the other accounts when placing your purchase order. Contact your financial institution to determine what information is required. Unless you provide your financial institution in writing with information about all of the accounts that may count toward a sales charge reduction, there can be no assurance that you will receive all of the reductions for which you may be eligible. You should request that your financial institution provide this information to the fund when placing your purchase order. For more information on rights of accumulation, please see the SAI. INITIAL SALES CHARGE -- LETTER OF INTENT (LOI). Generally, if you intend to invest $50,000 or more (including any existing ROA) over a period of up to 13 months, you may be able to reduce the front-end sales charge(s) for investments in Class A shares by completing and filing an LOI. The required form of LOI may vary by financial institution. Existing ROA can be included in your LOI. Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI. Five percent of the commitment amount will be placed in escrow. At the end of the 13-month period, the LOI will end and the shares will be released from escrow. If you do not invest the commitment amount by the end of the 13 months, the remaining unpaid sales charge will be redeemed from the escrowed shares and the remaining balance released from escrow. - -------------------------------------------------------------------------------- S.7 Existing ROA Example. Shareholder currently has $60,000 ROA in RiverSource funds. Shareholder completes an LOI to invest $100,000 in RiverSource funds (ROA eligible accounts). Shareholder only needs to invest an additional $40,000 in RiverSource funds' Class A shares in order to fulfill the LOI commitment and receive reduced front-end sales charge(s) over the next 13 months. Notification Obligation. You must request the reduced sales charge when you buy shares. If you do not complete and file an LOI, or do not request the reduced sales charge at the time of purchase, you will not be eligible for the reduced sales charge. You should request that your financial institution provide this information to the fund when placing your purchase order. For more detail on LOIs, please contact your financial institution or see the SAI. INITIAL SALES CHARGE -- WAIVERS OF THE SALES CHARGE FOR CLASS A SHARES. Sales charges do not apply to: - - current or retired Board members, officers or employees of RiverSource funds or RiverSource Investments or its affiliates, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - current or retired Ameriprise Financial Services, Inc. (Ameriprise Financial Services) financial advisors, employees of financial advisors, their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - registered representatives and other employees of financial institutions having a selling agreement with the distributor, including their spouses, domestic partners, children, parents and their spouse's or domestic partner's parents. - - portfolio managers employed by subadvisers of the RiverSource funds, including their spouses or domestic partners, children, parents and their spouse's or domestic partner's parents. - - retirement plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code, if those purchases are made through a broker, agent, or other financial institution. - - direct rollovers from qualified employee benefit plans, provided that the rollover involves a transfer to Class A shares in the same fund. - - purchases made: - with dividend or capital gain distributions from a fund or from the same class of another RiverSource fund; - through or under a wrap fee product or other investment product sponsored by a financial institution having a selling agreement with the distributor; - through state sponsored college savings plans established under Section 529 of the Internal Revenue Code; - through bank trust departments. - - shareholders whose original purchase was in a Strategist fund merged into a RiverSource fund in 2000. - -------------------------------------------------------------------------------- S.8 The distributor may, in its sole discretion, authorize the waiver of sales charges for additional purchases or categories of purchases. Policies related to reducing or waiving the sales charge may be modified or withdrawn at any time. Unless you provide your financial institution with information in writing about all of the factors that may count toward a waiver of the sales charge, there can be no assurance that you will receive all of the waivers for which you may be eligible. You should request that your financial institution provide this information to the fund when placing your purchase order. Because the current prospectus is available on riversource.com free of charge, RiverSource Investments does not separately disclose information regarding breakpoint discounts on the website. CLASS B AND CLASS C -- CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE FOR CLASS B, the CDSC is based on the sale amount and the number of years between purchase and sale. The following table shows how CDSC percentages on sales decline:
IF THE SALE IS MADE DURING THE: THE CDSC PERCENTAGE RATE IS:* First year 5% Second year 4% Third year 4% Fourth year 3% Fifth year 2% Sixth year 1% Seventh or eighth year 0%
* Because of rounding in the calculation, the portion of the CDSC retained by the distributor may vary and the actual CDSC you pay may be more or less than the CDSC calculated using these percentages. Although there is no front-end sales charge when you buy Class B shares, the distributor pays a sales commission of 4% to financial institutions that sell Class B shares. A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class B shares. You may not make additional purchases of Class B shares if your ROA exceeds $49,999.99. Purchases made prior to May 21, 2005 age on a calendar year basis. Purchases made beginning May 21, 2005 age on a daily basis. For example, a purchase made on Nov. 12, 2004 completed its first year on Dec. 31, 2004 under calendar year aging. However, a purchase made on Nov. 12, 2005 completed its first year on Nov. 11, 2006 under daily aging. - -------------------------------------------------------------------------------- S.9 Class B shares purchased prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares purchased beginning May 21, 2005 will convert to Class A shares one month after the completion of the eighth year of ownership. FOR CLASS C, a 1% CDSC may be charged if you sell your shares within one year after purchase. Although there is no front-end sales charge when you buy Class C shares, the distributor pays a total amount up to 1% (including sales commission and advance of service fees) to financial institutions that sell Class C shares. See "Buying and Selling Shares -- Distribution and Service Fees." A portion of this commission may, in turn, be paid to your financial advisor. The distributor receives any CDSC imposed when you sell your Class C shares. You may not make additional purchases of Class C shares if your ROA exceeds $999,999.99. For both Class B and Class C, if the amount you sell causes the value of your investment to fall below the cost of the shares you have purchased, the CDSC will be based on the lower of the cost of those shares purchased or market value. Because the CDSC is imposed only on sales that reduce your total purchase payments, you do not have to pay a CDSC on any amount that represents appreciation in the value of your shares, income earned by your shares, or capital gains. In addition, the CDSC on your sale, if any, will be based on your oldest purchase payment. The CDSC on the next amount sold will be based on the next oldest purchase payment. EXAMPLE Assume you had invested $10,000 in Class B shares and that your investment had appreciated in value to $12,000 after 3 1/2 years, including reinvested dividends and capital gain distributions. You could sell up to $2,000 worth of shares without paying a CDSC ($12,000 current value less $10,000 purchase amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500 representing part of your original purchase price. The CDSC rate would be 3% because the sale was made during the fourth year after the purchase. CDSC -- WAIVERS OF THE CDSC FOR CLASS B SHARES. The CDSC will be waived on sales of shares: - - in the event of the shareholder's death; - - held in trust for an employee benefit plan; or - - held in IRAs or certain qualified plans, such as Keogh plans, tax-sheltered custodial accounts or corporate pension plans, provided that the shareholder is: - at least 59 1/2 years old AND - taking a retirement distribution (if the sale is part of a transfer to an IRA or qualified plan, or a custodian-to-custodian transfer, the CDSC will not be waived) OR - selling under an approved substantially equal periodic payment arrangement. - -------------------------------------------------------------------------------- S.10 CDSC -- WAIVERS OF THE CDSC FOR CLASS C SHARES. The CDSC will be waived on sales of shares in the event of the shareholder's death. CLASS I, CLASS R2, CLASS R3, CLASS R4, CLASS R5 AND CLASS W -- NO SALES CHARGE. For each of Class I, Class R2, Class R3, Class R4, Class R5 and Class W, there is no initial sales charge or CDSC. OPENING AN ACCOUNT Financial institutions are required by law to obtain certain personal information from each person who opens an account in order to verify the identity of the person. As a result, when you open an account you will be asked to provide your name, permanent street address, date of birth, and Social Security or Employer Identification number. You may also be asked for other identifying documents or information. If you do not provide this information, the financial institution through which you are investing in the fund may not be able to open an account for you. If the financial institution through which you are investing in the fund is unable to verify your identity, your account may be closed, or other steps may be taken, as deemed appropriate. When you buy shares, your order will be priced at the next NAV calculated after your order is accepted by the fund or an authorized financial institution. You may establish and maintain your account with an authorized financial institution or directly with the fund. The fund may appoint servicing agents to accept purchase orders and to accept exchange (and sale) orders on its behalf. Accounts maintained by the fund will be supported by the fund's transfer agent. METHODS OF PURCHASING SHARES These methods of purchasing shares generally apply to Class A, Class B, and Class C shares. ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION ALL REQUESTS The financial institution through which you buy shares may have different policies not described in this prospectus, including different minimum investment amounts and minimum account balances. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL You or the financial institution through which you buy shares may establish an account directly with the fund. To establish an account in this fashion, complete a RiverSource funds account application with your financial advisor or investment professional, and mail the account application to the address below. Account applications may be obtained at riversource.com or may be requested by calling - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.11 METHODS OF PURCHASING SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY MAIL (CONT.) (888) 791-3380. Make your check payable to the fund. The fund does not accept cash, credit card convenience checks, money orders, traveler's checks, starter checks, third or fourth party checks, or other cash equivalents. Mail your check and completed application to: REGULAR MAIL RIVERSOURCE FUNDS P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FUNDS C/O BFDS 30 DAN ROAD CANTON, MA 02021-2809 If you already have an account, include your name, account number, and the name of the fund and class of shares you wish to purchase along with your check. You can make scheduled investments in the fund by moving money from your checking account or savings account. See the Minimum Investment and Account Balance chart below for more information regarding scheduled investment plans. - -------------------------------------------------------------------------------- BY WIRE OR ACH Fund shares purchased in an account established and maintained with the fund may be paid for by federal funds wire. Before sending a wire, call (888) 791-3380 to notify the fund's transfer agent of the wire and to receive further instructions. If you are establishing an account with a wire purchase, you are required to send a signed account application to the address above. Please include the wire control number or your new account number on the application. Your bank or financial institution may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY EXCHANGE Call (888) 791-3380 or send signed written instructions to the address above. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.12 MINIMUM INVESTMENT AND ACCOUNT BALANCE
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT RIVERSOURCE THREADNEEDLE THOSE LISTED TO DISCIPLINED GLOBAL THE RIGHT TAX QUALIFIED SMALL CAP EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W - ------------------------------------------------------------------------------------------- INITIAL INVESTMENT $2,000 $1,000 $5,000 $10,000 $500 - ------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $100 $100 $100 None - ------------------------------------------------------------------------------------------- ACCOUNT BALANCE* $300 None $2,500 $5,000 $500
* If your fund account balance falls below the minimum account balance for any reason, including a market decline, you may be asked to increase it to the minimum account balance or establish a scheduled investment plan. If you do not do so within 30 days, your shares may be automatically redeemed and the proceeds mailed to you. - -------------------------------------------------------------------------------- MINIMUM INVESTMENT AND ACCOUNT BALANCE -- SCHEDULED INVESTMENT PLANS
FOR ALL FUNDS, CLASSES AND ACCOUNTS EXCEPT RIVERSOURCE THREADNEEDLE THOSE LISTED TO DISCIPLINED GLOBAL THE RIGHT TAX QUALIFIED SMALL CAP EXTENDED (NONQUALIFIED) ACCOUNTS VALUE FUND ALPHA FUND CLASS W - ------------------------------------------------------------------------------------------- INITIAL INVESTMENT $100 $100 $5,000 $10,000 $500 - ------------------------------------------------------------------------------------------- ADDITIONAL INVESTMENTS $100 $50 $100 $100 None - ------------------------------------------------------------------------------------------- ACCOUNT BALANCE** None None $2,500 $5,000 $500
** If your fund account balance is below the minimum initial investment described above, you must make payments at least monthly. - -------------------------------------------------------------------------------- These minimums may be waived for accounts that are managed by an investment professional, for accounts held in approved discretionary or non-discretionary wrap programs, for accounts that are a part of an employer-sponsored retirement plan, or for other account types if approved by the distributor. The fund reserves the right to modify its minimum account requirements at any time, with or without prior notice. Please contact your financial institution for information regarding wire or electronic funds transfer. IMPORTANT: Payments sent by electronic fund transfers (ACH), a bank authorization or check that are not guaranteed may take up to 10 days to clear. If you request a sale within 10 days of purchase, this may cause your sale request to fail to process if the requested amount includes unguaranteed funds. - -------------------------------------------------------------------------------- S.13 EXCHANGING OR SELLING SHARES You may exchange or sell shares by having your financial institution process your transaction. If your account is maintained directly with your financial institution, you must contact that financial institution to exchange or sell shares of the fund. If your account was established with the fund, there are a variety of methods you may use to exchange or sell shares of the fund. WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES ACCOUNT ESTABLISHED WITH YOUR FINANCIAL INSTITUTION ALL REQUESTS You can exchange or sell shares by having your financial institution process your transaction. The financial institution through which you purchased shares may have different policies not described in this prospectus, including different transaction limits, exchange policies and sale procedures. - -------------------------------------------------------------------------------- ACCOUNT ESTABLISHED WITH THE FUND BY MAIL Mail your exchange or sale request to: REGULAR MAIL RIVERSOURCE FUNDS P.O. BOX 8041 BOSTON, MA 02266-8041 EXPRESS MAIL RIVERSOURCE FUNDS C/O BFDS 30 DAN ROAD CANTON, MA 02021-2809 Include in your letter: - your name - the name of the fund(s) - your account number - the class of shares to be exchanged or sold - your Social Security number or Employer Identification number - the dollar amount or number of shares you want to exchange or sell - specific instructions regarding delivery or exchange destination - signature(s) of registered account owner(s) - any special documents the transfer agent may require in order to process your order - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.14 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) Corporate, trust or partnership accounts may need to send additional documents. Payment will be mailed to the address of record and made payable to the names listed on the account, unless your request specifies differently and is signed by all owners. A Medallion Signature Guarantee is required if: - Amount is over $50,000. - You want your check made payable to someone other than yourself. - Your address has changed within the last 30 days. - You want the check mailed to an address other than the address of record. - You want the proceeds sent to a bank account not on file. - You are the beneficiary of the account and the account owner is deceased (additional documents may be required). A Medallion Signature Guarantee assures that a signature is genuine and not a forgery. The financial institution providing the Guarantee is financially liable for the transaction if the signature is a forgery. Eligible guarantors include commercial banks, trust companies, savings associations, and credit unions as defined by the Federal Deposit Insurance Act. Note: A guarantee from a notary public is not acceptable. NOTE: Any express mail delivery charges you pay will vary depending on domestic or international delivery instructions. - -------------------------------------------------------------------------------- BY TELEPHONE Call (888) 791-3380. Unless you elect not to have telephone exchange and sale privileges, they will automatically be available to you. Reasonable procedures will be used to confirm authenticity of telephone exchange or sale requests. Telephone privileges may be modified or discontinued at any time. Telephone exchange and sale privileges automatically apply to all accounts except custodial, corporate or qualified retirement accounts. You may request that these privileges NOT apply by writing to the address above. Payment will be mailed to the address of record and made payable to the names listed on the account. Telephone sale requests are limited to $100,000 per day. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- S.15 WAYS TO REQUEST AN EXCHANGE OR SALE OF SHARES (CONTINUED) ACCOUNT ESTABLISHED WITH THE FUND (CONT.) BY WIRE OR ACH You can wire money from your fund account to your bank account. Make sure we have your bank account information on file. If we do not have this information, you will need to send written instructions with your bank's name and a voided check or savings account deposit slip. Call (888) 791-3380 or send a letter of instruction, with a Medallion Signature Guarantee if required, to the address above. A service fee may be charged against your account for each wire sent. Minimum amount: $100 Your bank or financial institution may charge additional fees for wire transactions. - -------------------------------------------------------------------------------- BY SCHEDULED PAYOUT PLAN You may elect to receive regular periodic payments through an automatic sale of shares. See the SAI for more information. - -------------------------------------------------------------------------------- EXCHANGES Generally, you may exchange your fund shares for shares of the same class of any other publicly offered RiverSource fund without a sales charge. For complete information on the fund you are exchanging into, including fees and expenses, read that fund's prospectus carefully. Your exchange will be priced at the next NAV calculated after your transaction request is received in good order. You may be subject to a sales charge if you exchange from a money market fund into an equity or fixed income fund. SHORT-TERM TRADING AND OTHER SO-CALLED MARKET TIMING PRACTICES ARE FREQUENT TRADING PRACTICES BY CERTAIN SHAREHOLDERS INTENDED TO PROFIT AT THE EXPENSE OF OTHER SHAREHOLDERS BY SELLING SHARES OF A FUND SHORTLY AFTER PURCHASE. MARKET TIMING MAY ADVERSELY IMPACT A FUND'S PERFORMANCE BY PREVENTING THE INVESTMENT MANAGER FROM FULLY INVESTING THE ASSETS OF THE FUND, DILUTING THE VALUE OF SHARES HELD BY LONG-TERM SHAREHOLDERS, OR INCREASING THE FUND'S TRANSACTION COSTS. FUNDS THAT INVEST IN SECURITIES THAT TRADE INFREQUENTLY MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF INEFFICIENCIES IN THE SECURITIES MARKETS. FUNDS THAT INVEST IN SECURITIES THAT TRADE ON OVERSEAS SECURITIES MARKETS MAY BE VULNERABLE TO MARKET TIMERS WHO SEEK TO TAKE ADVANTAGE OF CHANGES IN THE VALUES OF SECURITIES BETWEEN THE CLOSE OF OVERSEAS MARKETS AND - -------------------------------------------------------------------------------- S.16 THE CLOSE OF U.S. MARKETS, WHICH IS GENERALLY THE TIME AT WHICH A FUND'S NAV IS CALCULATED. TO THE EXTENT THAT A FUND HAS SIGNIFICANT HOLDINGS OF SMALL CAP STOCKS OR FOREIGN SECURITIES, THE RISKS OF MARKET TIMING MAY BE GREATER FOR THE FUND THAN FOR OTHER FUNDS. SEE "PRINCIPAL INVESTMENT STRATEGIES" FOR A DISCUSSION OF THE TYPES OF SECURITIES IN WHICH YOUR FUND INVESTS. SEE "VALUING FUND SHARES" FOR A DISCUSSION OF THE RIVERSOURCE FUNDS' POLICY ON FAIR VALUE PRICING, WHICH IS INTENDED, IN PART, TO REDUCE THE FREQUENCY AND EFFECT OF MARKET TIMING. THE RIVERSOURCE FUNDS' BOARD HAS ADOPTED A POLICY THAT IS DESIGNED TO DETECT AND DETER MARKET TIMING THAT MAY BE HARMFUL TO THE FUNDS. EACH FUND SEEKS TO ENFORCE THIS POLICY THROUGH ITS SERVICE PROVIDERS AS FOLLOWS: - - The fund tries to distinguish market timing from trading that it believes is not harmful, such as periodic rebalancing for purposes of asset allocation or dollar cost averaging or other purchase and exchange transactions not believed to be inconsistent with the best interest of fund shareholders or the Board's policy. The fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may vary depending on the type of fund, the class of shares and where the shares are maintained. Under the fund's procedures, there is no set number of transactions in the fund that constitutes market timing. Even one purchase and subsequent sale by related accounts may be market timing. Generally, the fund seeks to restrict the exchange privilege of an investor who makes more than three exchanges into or out of the fund in any 90-day period. Accounts held by a retirement plan or a financial institution for the benefit of its participants or clients, which typically engage in daily transactions, are not subject to this limit, although the fund may seek the assistance of financial institutions in applying similar restrictions on their participants or clients. The fund's ability to monitor and discourage abusive trading practices in omnibus accounts is more limited. - - The fund may rely on the monitoring policy of a financial institution, for example, a retirement plan administrator or similar authorized financial institution authorized to distribute the funds, if it determines the policy and procedures of such financial institutions are sufficient to protect the fund and its shareholders. - - If an investor's trading activity is determined to be market timing or otherwise harmful to existing shareholders, the fund reserves the right to modify or discontinue the investor's exchange privilege or reject the investor's purchases or exchanges, including purchases or exchanges accepted by a financial institution. The fund may treat accounts it believes to be under common control as a single account for these purposes, although it may not be able to identify all such accounts. - -------------------------------------------------------------------------------- S.17 - - Although the fund does not knowingly permit market timing, it cannot guarantee that it will be able to identify and restrict all short-term trading activity. The fund receives purchase and sale orders through financial institutions where market timing activity may not always be successfully detected. Other exchange policies: - - Exchanges must be made into the same class of shares of the new fund. - - Exchanges into RiverSource Tax-Exempt Money Market Fund may be made only from Class A shares. - - If your exchange creates a new account, it must satisfy the minimum investment amount for new purchases. - - Once the fund receives your exchange request, you cannot cancel it. - - Shares of the new fund may not be used on the same day for another exchange or sale. - - Shares of Class W originally purchased, but no longer held in a discretionary managed account, may not be exchanged for Class W shares of another fund. You may continue to hold these shares in the fund. Changing your investment to a different fund will be treated as a sale and purchase, and you will be subject to applicable taxes on the sale and sales charges on the purchase of the new fund. SELLING SHARES You may sell your shares at any time. The payment will be sent within seven days after your request is received in good order. When you sell shares, the amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received in good order, minus any applicable CDSC. REPURCHASES. You can change your mind after requesting a sale and use all or part of the sale proceeds to purchase new shares in the same account, fund and class from which you sold. If you reinvest in Class A, you will purchase the new shares at NAV, up to the amount of the sale proceeds, instead of paying a sales charge on the date of a new purchase. If you reinvest in Class B or Class C, any CDSC you paid on the amount you are reinvesting also will be reinvested. In order for you to take advantage of this repurchase waiver, you must notify your financial institution within 90 days of the date your sale request was processed. Contact your financial institution for information on required documentation. The repurchase privilege may be modified or discontinued at any time and use of this option may have tax consequences. The fund reserves the right to redeem in kind. For more details and a description of other sales policies, please see the SAI. - -------------------------------------------------------------------------------- S.18 VALUING FUND SHARES For classes of shares sold with an initial sales charge, the public offering or purchase price is the net asset value plus the sales charge. For funds or classes of shares sold without an initial sales charge, the public offering price is the NAV. Orders in good form are priced at the NAV next determined after you place your order. Good form or good order means that your instructions have been received in the form required by the fund. This may include, for example, providing the fund name and account number, the amount of the transaction and all required signatures. For more information, contact your financial institution. The NAV is the value of a single share of the fund. The NAV is determined by dividing the value of the fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations. Market quotations are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by a fund is materially affected by events that occur after the close of a securities market but prior to the time as of which the fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that a fund has significant holdings of foreign securities or small cap stocks that may trade infrequently, fair valuation may be used more frequently than for other funds. The RiverSource funds use an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of a fund's securities may be listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares. In that event, the NAV of the fund's shares may change on days when shareholders will not be able to purchase or sell the fund's shares. DISTRIBUTIONS AND TAXES As a shareholder you are entitled to your share of your fund's net income and net gains. Each fund distributes dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. - -------------------------------------------------------------------------------- S.19 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS Your fund's net investment income is distributed to you as dividends. Dividends may be composed of qualified dividend income, which is eligible for preferential tax rates under current tax law, as well as other ordinary dividend income, which may include dividends which are non-qualified dividends, interest income and short-term capital gains. Generally, capital gains are realized when a security is sold for a higher price than was paid for it. Generally, capital losses are realized when a security is sold for a lower price than was paid for it. Typically, each realized capital gain or loss is long-term or short-term depending on the length of time the fund held the security. Realized capital gains and losses offset each other. The fund offsets any net realized capital gains by any available capital loss carryovers. Net short-term capital gains, if any, are included in net investment income and are taxable as ordinary income when distributed to the shareholder. Net realized long-term capital gains, if any, are distributed by the end of the calendar year as capital gain distributions. If the fund's distributions exceed its current and accumulated earnings and profits, that portion of the fund's distributions will be treated as a return of capital to the shareholders to the extent of their basis in their shares. A return of capital will generally not be taxable; however, any amounts received in excess of basis are treated as capital gain. Forms 1099 sent to shareholders report any return of capital. Certain derivative instruments subject the fund to special tax rules, the effect of which may be to accelerate income to the fund, defer fund losses, cause adjustments in the holding periods of fund securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. REINVESTMENTS Dividends and capital gain distributions are automatically reinvested in additional shares in the same class of the fund, unless you request distributions in cash. The financial institution through which you purchased shares may have different policies. Distributions are reinvested at the next calculated NAV after the distribution is paid. If you choose cash distributions, you will receive cash only for distributions declared after your request has been processed. TAXES If you buy shares shortly before the record date of a distribution, you may pay taxes on money earned by the fund before you were a shareholder. You will pay the full pre-distribution price for the shares, then receive a portion of your investment back as a distribution, which may be taxable. - -------------------------------------------------------------------------------- S.20 For tax purposes, an exchange is considered a sale and purchase, and may result in a gain or loss. A sale is a taxable transaction. Generally, if you sell shares for less than their cost, the difference is a capital loss or if you sell shares for more than their cost, the difference is a capital gain. Your gain may be short term (for shares held for one year or less) or long term (for shares held for more than one year). You may not create a tax loss or reduce a tax gain, based on paying a sales charge, by exchanging shares before the 91(st) day after the day of purchase. If you buy Class A shares and exchange into another fund before the 91(st) day after the day of purchase, you may not be able to include the sales charge in your calculation of tax gain or loss on the sale of the first fund you purchased. The sales charge may be included in the calculation of your tax gain or loss on a subsequent sale of the second fund you purchased. For more information, see the SAI. Distributions related to shares not held in IRAs or other retirement accounts are subject to federal income tax and may be subject to state and local taxes in the year they are declared. You must report distributions on your tax returns, even if they are reinvested in additional shares. Shares held in an IRA or qualified retirement account are generally subject to different tax rules. Taking a distribution from your IRA or qualified retirement plan may subject you to federal taxes, withholding, penalties and reporting requirements. Please consult your tax advisor. Income received by a fund may be subject to foreign tax and withholding. Tax conventions between certain countries and the U.S. may reduce or eliminate these taxes. REITs often do not provide complete tax information until after the calendar year-end; generally mid to late January and continuing through early February. Consequently, if your fund has significant investments in REITs, you may not receive your Form 1099-DIV until February. Other RiverSource funds tax statements are generally mailed in January. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in a fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. - -------------------------------------------------------------------------------- S.21 GENERAL INFORMATION AVAILABILITY AND TRANSFERABILITY OF FUND SHARES Please consult with your financial institution to determine the availability of the RiverSource funds. RiverSource funds may only be purchased or sold directly or through financial institutions authorized by the distributor to offer the RiverSource funds. NOT ALL FINANCIAL INSTITUTIONS ARE AUTHORIZED TO SELL THE FUNDS. If you set up an account at a financial institution that does not have, and is unable to obtain, a selling agreement with the distributor of the RiverSource funds, you will not be able to transfer RiverSource fund holdings to that account. In that event, you must either maintain your RiverSource fund holdings with your current financial institution, find another financial institution with a selling agreement, or sell your shares, paying any applicable CDSC. Please be aware that transactions in taxable accounts are taxable events and may result in income tax liability. ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the funds. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide administrative services to the RiverSource funds. These services include administrative, accounting, treasury, and other services. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." Custody Services. Ameriprise Trust Company, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides custody services to all but a limited number of the RiverSource funds, for which U.S. Bank National Association, The Bank of New York or JP Morgan Chase Bank, N.A. provide custody services. In addition to paying the custodian for these services, the RiverSource funds pay for certain transaction fees and out-of-pocket expenses incurred while providing custody services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." - -------------------------------------------------------------------------------- S.22 Distribution and Shareholder Services. RiverSource Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the distributor or RiverSource Distributors), provides underwriting and distribution services to the RiverSource funds. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees. The distributor may retain a portion of these fees to support its distribution and shareholder servicing activity. The distributor re-allows the remainder of these fees (or the full fee) to the financial institutions that sell fund shares and provide services to shareholders. Fees paid by a fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth under "Investment Options -- Classes of Shares" and in the SAI. The distributor also administers any sales charges paid by an investor at the time of purchase or at the time of sale. See "Shareholder Fees (fees paid directly from your investment)" under "Fees and Expenses" for the scheduled sales charge of each share class. See "Buying and Selling Shares, Sales Charges" for variations in the scheduled sales charges, and for how these sales charges are used by the distributor. See "Other Investment Strategies and Risks" for the RiverSource funds' policy regarding directed brokerage. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide transfer agency services to the RiverSource funds. The RiverSource funds pay the transfer agent a fee that varies by class, as set forth in the SAI, and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these transfer agency services to the funds. Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RiverSource Service Corporation pays a portion of these fees to financial institutions that provide sub-recordkeeping and other services to fund shareholders. The SAI provides additional information about the services provided and the fee schedules for the transfer agent agreements. Plan Administration Services. Under a Plan Administration Services Agreement the fund pays for plan administration services, including services such as implementation and conversion services, account set-up and maintenance, reconciliation and account recordkeeping, education services and administration to various plan types, including 529 plans, retirement plans and Health Savings Accounts (HSAs). Fees paid by a fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." PAYMENTS TO FINANCIAL INSTITUTIONS The distributor and its affiliates make or support additional cash payments out of their own resources (including profits earned from providing services to the fund) to financial institutions, including inter-company allocation of resources or - -------------------------------------------------------------------------------- S.23 payments to affiliated broker-dealers, in connection with agreements between the distributor and financial institutions pursuant to which these financial institutions sell fund shares and provide services to their clients who are shareholders of the fund. These payments and intercompany allocations (collectively, "payments") do not change the price paid by investors in the fund or fund shareholders for the purchase or ownership of fund shares of the fund, and these payments are not reflected in the fees and expenses of the fund, as they are not paid by the fund. In exchange for these payments, a financial institution may elevate the prominence or profile of the fund within the financial institution's organization, and may provide the distributor and its affiliates with preferred access to the financial institution's registered representatives or preferred access to the financial institution's customers. These arrangements are sometimes referred to as marketing and/or sales support payments, program and/or shareholder servicing payments, or revenue sharing payments. These arrangements create potential conflicts of interest between a financial institution's pecuniary interest and its duties to its customers, for example, if the financial institution receives higher payments from the sale of a certain fund than it receives from the sale of other funds, the financial institution or its representatives may be incented to recommend or sell shares of the fund where it receives or anticipates receiving the higher payment instead of other investment options that may be more appropriate for the customer. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments and the distributor, and the products they offer, including the fund. These payments are typically negotiated based on various factors including, but not limited to, the scope and quality of the services provided by the financial institution, its reputation in the industry, its ability to attract and retain assets, its access to target markets, its customer relationships, the profile the fund may obtain within the financial institution, and the access the distributor or other representatives of the fund may have within the financial institution for advertisement, training or education, including opportunities to present at or sponsor conferences for the registered representatives of the financial institution and its customers. - -------------------------------------------------------------------------------- S.24 These payments are usually calculated based on a percentage of fund assets owned through the financial institution and/or as a percentage of fund sales attributable to the financial institution. Certain financial institutions require flat fees instead of, or in addition to, these asset-based fees as compensation for including or maintaining a fund on their platforms, and, in certain situations, may require the reimbursement of ticket or operational charges -- fees that a financial institution charges its registered representatives for effecting transactions in the fund. The amount of payment varies by financial institution (e.g., initial platform set-up fees, ongoing maintenance or service fees, or asset or sales based fees). The amount of payments also varies by the type of sale. For instance, purchases of one fund may warrant a greater or lesser amount of payments than purchases of another fund. Additionally, sale and maintenance of shares on a stand alone basis may result in a greater or lesser amount of payments than the sale and maintenance of shares made through a plan, wrap or other fee-based program. Payments to affiliates may include payments as compensation to employees of RiverSource Investments who are licensed by the distributor in respect of certain sales and solicitation activity on behalf of the fund. These payments may be and often are significant. Additional information concerning the amount and calculation of these payments is available in the fund's SAI. Payments to affiliated broker-dealers are within the range of the payments the distributor pays to similarly-situated third party financial institutions and the payments such affiliated broker-dealers receive from third party fund sponsors related to the sale of their sponsored funds. However, because of the large amount of RiverSource fund assets (in aggregate) currently held in customer accounts of the affiliated broker-dealers, the distributor and its affiliates, in the aggregate, pay significantly more in absolute dollars than other third-party fund sponsors pay to the affiliated broker-dealers for the sale and servicing of their sponsored funds. This level of payment creates potential conflicts of interest which the affiliated broker-dealers seek to mitigate by disclosure and implementation of internal controls, as well as the rules and regulations of applicable regulators. From time to time, to the extent permitted by SEC and FINRA rules and by other applicable laws and regulations, the distributor and its affiliates may make other reimbursements or payments to financial institutions or their registered representatives, including non-cash compensation, in the form of gifts of nominal value, occasional meals, tickets, or other entertainment, support for due diligence trips, training and educational meetings or conference sponsorships, support for recognition programs, and other forms of non-cash compensation permissible under regulations to which these financial institutions and their representatives are subject. To the extent these are made as payments instead of reimbursement, they may provide profit to the financial institution to the extent the cost of such services was less than the actual expense of the service. - -------------------------------------------------------------------------------- S.25 The financial institution through which you are purchasing or own shares of the fund has been authorized directly or indirectly by the distributor to sell the fund and/or to provide services to you as a shareholder of the fund. Investors and current shareholders may wish to take such payment arrangements into account when considering and evaluating any recommendations they receive relating to fund shares. If you have questions regarding the specific details regarding the payments your financial institution may receive from the distributor or its affiliates related to your purchase or ownership of the fund, please contact your financial institution. The SAI contains additional detail regarding payments made by the distributor to financial institutions. The payments described in this section are in addition to fees paid by the fund to the distributor under 12b-1 plans, which fees may be used to compensate financial institutions for the distribution of fund shares and the servicing of fund shareholders, or paid by the fund to the transfer agent under the transfer agent agreement or plan administration agreement, which fees may be used to support networking or servicing fees to compensate financial institutions for supporting shareholder account maintenance, sub-accounting, plan recordkeeping or other services provided directly by the financial institution to shareholders or plans and plan participants, including retirement plans, 529 plans, Health Savings Account plans, or other plans, where participants beneficially own shares of the fund. Financial institutions may separately charge you additional fees. See "Buying and Selling Shares." ADDITIONAL MANAGEMENT INFORMATION MANAGER OF MANAGERS EXEMPTION. The RiverSource funds have received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. - -------------------------------------------------------------------------------- S.26 AFFILIATED PRODUCTS. RiverSource Investments also serves as investment manager to RiverSource funds which are structured to provide asset-allocation services to shareholders of those funds by investing in shares of other RiverSource funds (Funds of Funds) and to discretionary managed accounts that invest exclusively in RiverSource funds (collectively referred to as "affiliated products"). These affiliated products, individually or collectively, may own a significant percentage of the fund's outstanding shares. The fund may experience relatively large purchases or redemptions from the affiliated products. Although RiverSource Investments may seek to minimize the impact of these transactions, for example, by structuring them over a reasonable period of time or through other measures, the fund may experience increased expenses as it buys and sells securities to manage transactions for the affiliated products. In addition, because the affiliated products may own a substantial portion of the fund, a redemption by one or more affiliated products could cause the fund's expense ratio to increase as the fund's fixed costs would be spread over a smaller asset base. RiverSource Investments monitors expense levels and is committed to offering funds that are competitively priced. RiverSource Investments reports to the Board on the steps it has taken to manage any potential conflicts. See the SAI for information on the percent of the fund owned by affiliated products. CASH RESERVES. A fund may invest its daily cash balance in RiverSource Short- Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. A fund will invest in Short-Term Cash Fund only to the extent it is consistent with the fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. FUND HOLDINGS DISCLOSURE. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by a fund. A description of these policies and procedures is included in the SAI. - -------------------------------------------------------------------------------- S.27 LEGAL PROCEEDINGS. 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 fund is 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 fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the fund. Information regarding certain pending and settled legal proceedings may be found in the fund's shareholder reports and in the SAI. Additionally, 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. - -------------------------------------------------------------------------------- S.28 THIS PAGE LEFT BLANK INTENTIONALLY PRIVACY POLICY RiverSource funds are committed to respecting shareholders' rights of privacy and we have adopted the following policy to maintain the confidentiality of the information you share with us: INFORMATION WE COLLECT We know that you expect us to conduct and process your business in a manner that is both accurate and efficient. To do so, we may collect information about you, such as your name, address, Social Security number and the names of your beneficiaries. This information is collected from applications or other forms that you provide to us or the financial institutions that distribute the RiverSource funds. We also collect information about your transactions in the RiverSource funds. Financial institutions which distribute the RiverSource funds and service your account, whether or not affiliated with us, may have a customer relationship with you and may independently collect information from you. This Privacy Policy does not apply to their independent collection or use of information about you. INFORMATION WE DISCLOSE We do not disclose any nonpublic personal information about our customers or former customers to anyone, except in two circumstances. We disclose information to companies, whether or not affiliated with us, that help us by providing services to you, including companies that market funds on our behalf. We also disclose information when we are permitted or required by law to do so, such as when information is provided to the IRS for tax purposes. SECURITY To safeguard your personal information, we insist that the distributors and other companies that perform services for us limit access to your personal information to authorized employees and agents, and maintain appropriate physical, electronic, and procedural safeguards. This privacy policy applies to each fund in the RiverSource family of mutual funds and to RiverSource Investments, LLC, RiverSource Distributors, Inc. and RiverSource Service Corporation, with respect to the investment advisory, distribution, and shareholder services each may provide to the RiverSource funds. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE PROSPECTUS RiverSource Funds can be purchased from authorized financial institutions. The fund can be found under the "RiverSource" banner in most mutual fund quotations. Additional information about the fund and its investments is available in the fund's SAI, and annual and semiannual reports to shareholders. In the fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the fund, contact RiverSource Funds or your financial institution. To make a shareholder inquiry, contact the financial institution through whom you purchased the fund. RiverSource Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 (888) 791-3380 RiverSource Funds information available at RiverSource Investments website address: riversource.com/funds You may review and copy information about the fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549-0102. Investment Company Act File #811-2111 TICKER SYMBOL Class A: ALEAX Class B: ALEBX Class C: ARQCX Class I: ALRIX Class R2: -- Class R3: -- Class R4: ALEYX Class R5: --
(RIVERSOURCE INVESTMENTS LOGO) S-6244-99 J (9/08) EX-99.17(I) 14 e74236mod.txt Exhibit 17(i) Seligman Common Stock Fund, Inc. ------------------------------------------------------------------------------- Annual Report December 31, 2008 Seeking Total Return Through a Combination of Capital Appreciation and Current Income (J. & W. SELIGMAN LOGO) Table of Contents Interview With Your Portfolio Manager....................... 4 Performance Overview........................................ 6 Portfolio Overview.......................................... 9 Understanding and Comparing Your Fund's Expenses............ 13 Portfolio of Investments.................................... 14 Statement of Assets and Liabilities......................... 23 Statement of Operations..................................... 24 Statements of Changes in Net Assets......................... 25 Notes to Financial Statements............................... 26 Financial Highlights........................................ 36 Report of Independent Registered Public Accounting Firm..... 42 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement.. 43 Proxy Results............................................... 48 Directors and Officers...................................... 49 Required Federal Income Tax Information..................... 52 Additional Fund Information................................. 53
3 Interview With Your Portfolio Manager Note: In conjunction with the acquisition of the Fund's previous investment manager by RiverSource Investments, LLC, the team responsible for the Fund's management was changed in November 2008 from the Seligman Core/Growth Investment Team to the RiverSource Disciplined Equity and Asset Allocation Team. Q. HOW DID SELIGMAN COMMON STOCK FUND PERFORM FOR THE YEAR ENDED DECEMBER 31, 2008? A. For the one year ended December 31, 2008, Seligman Common Stock Fund posted a total return, based on the net asset value of Class A shares of -44.6%. In comparison, the Fund's benchmark, the S&P 500 Index, returned -37.0%, and the Fund's peers, as measured by the Lipper Multi-Cap Core Funds Average, returned -38.8%. Q. WHAT MARKET CONDITIONS AND ECONOMIC FACTORS MATERIALLY IMPACTED THE FUND'S INVESTMENT RESULTS DURING THE YEAR? A. Weak economic data points released in January in manufacturing, employment, and retail sales fueled fears of global recession and sparked a sharp sell- off in equities. The credit freeze continued as growth slowed and banks and brokers reined in capital as the financial system continued to absorb losses related to subprime debt. The combined crises in housing, the credit market, and the economy spurred an activist Federal Reserve Board (the Fed) and the Administration to take unprecedented steps to shore up the economy. The liquidity crisis reached its peak in March when the Fed intervened to facilitate the sale of investment bank Bear Stearns to JPMorgan Chase. Bear Stearns, an 85-year-old financial institution, was highly leveraged and after losing access to capital, was on the brink of insolvency. Seeking to contain the damage and shore up the financial system, the Fed stepped in and engineered the sale of the troubled investment bank. The Administration and Congress were similarly proactive in addressing the crisis. In addition to enacting a $160 billion fiscal stimulus program, the cap on mortgages that Fannie Mae and Freddie Mac can acquire and guarantee was raised in an effort to support home purchases. The Fed reacted to the weakening economic outlook with a federal funds target rate cut in January, made between the Fed's regular meetings, followed by three additional decreases during the period. As the Fed moved, however, concerns of inflation grew and the dollar weakened. As the dollar weakened, commodities rallied and stock prices continued to decline. At the end of June, oil prices had reached north of $140 per barrel. The resultant impact was a slowing of consumer spending and the economy itself. Commodity prices reversed course in June, essentially giving back gains earned earlier in the fiscal year. Investors were largely driven out of commodities and commodity-related stocks that had performed well earlier in the period, in search of more defensive positions. In September we witnessed the unfolding of several unprecedented events that affected markets on a global scale. Fannie Mae and Freddie Mac were put into conservatorship. On September 15, Lehman Brothers filed for bankruptcy. The ripple effects of the failing of this 158-year old investment bank were widespread. Several cash management funds with exposure to Lehman debt suffered, with the net asset value of the Reserve Primary Fund falling below $1 per share -- "breaking the buck." Credit markets across the globe froze up, which had a significant implication on markets as a whole. Investors started focusing more on higher quality stocks. The stock of any company with a fair amount of debt on its balance sheet suddenly became a question mark to investors. The downgrading of AIG's credit rating led to a liquidity crisis (its stock price suffered a 95% decline on September 16, 2008) that ended in the largest government bailout of a company in US history. Merrill Lynch quickly sold itself to Bank of 4 Interview With Your Portfolio Manager America, and commercial banks WAMU and Wachovia were quickly sold to JPMorgan Chase and Wells Fargo, respectively. Personal consumption in the US contracted for the first time in almost two decades during the third quarter of 2008. With mounting job losses, tighter credit conditions, and a significantly amplified level of household debt, the resulting recession has been much deeper than we have experienced in quite some time. The US consumer accounts for approximately two-thirds of the US economy. When the consumer retrenches, as they did during 2008, the resulting impact on the economy as a whole is tremendous. Q. WHAT INVESTMENT STRATEGIES AND TECHNIQUES MATERIALLY IMPACTED THE FUND'S INVESTMENT RESULTS DURING THE YEAR? A. Information technology was the Fund's largest sector weighting during the year and was the Fund's largest overweight, relative to its benchmark. The sector was among the poorer performing areas of the benchmark during the year and a combination of stock selection and sector allocation led the Fund's investment results within the sector to lag those of the benchmark. A scale-back in the Fund's allocation to the sector was initiated late in the year. The area that had the largest negative impact on the Fund's investment results, as compared to the benchmark, was the materials sector. The sector accounted for a modest portion (less than 5%) of the Fund's and benchmark's allocation. The Fund underperformed the benchmark in the sector by a wide margin, due primarily to stock selection. Stock selection was also notably detrimental in the financials, consumer staples, and consumer discretionary sectors. Stock selection was the strongest in the health care sector. The Fund's overweight in the sector also aided its performance, as health care was among the better performing areas of the benchmark during the year. From an allocation perspective, the Fund's underweightings in the financials and industrials sectors benefited relative performance, as these sectors were among the benchmark's bottom performing areas. Holdings that aided the Fund's investment results during the year included Allstate (insurance), Pfizer (pharmaceuticals), Gilead Sciences (biotechnology), and Wal-Mart Stores (food and staples retailing). Holdings that detracted from the Fund's investment results included CIGNA (health care providers and services), Smurfit-Stone Container (containers and packaging), Bank of America (diversified financial services), and Comverse Technology (communications equipment). By year-end, the Fund's position in Comverse Technology had been eliminated. - ------- The views and opinions expressed are those of the Portfolio Manager(s), are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of market forecasts. Opinions, estimates, and forecasts may be changed without notice. 5 Performance Overview This section of the report is intended to help you understand the performance of Seligman Common Stock Fund and to provide a summary of the Fund's portfolio characteristics. Performance data quoted in this report represents past performance and does not guarantee or indicate future investment results. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Total returns of the Fund (except for Class I shares) as of the most recent month end will be available at WWW.SELIGMAN.COM(1) by the seventh business day following that month end. Calculations assume reinvestment of distributions, if any. Performance data quoted does not reflect the deduction of taxes that an investor may pay on distributions or the redemption of Fund shares. The chart on page 7 compares $10,000 hypothetical investments made in Class A shares, with and without the initial 5.75% maximum sales charge and in Class B shares, without contingent deferred sales charge ("CDSC"), to a $10,000 investment made in the Standard and Poor's 500 Composite Stock Price Index ("S&P 500 Index"), for the ten-year period ended December 31, 2008. The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. The performance of Class C, Class I and Class R shares, which commenced on later dates, and of Class A and Class B shares for other periods, with and without applicable sales charges and CDSCs, is not shown in the chart but is included in the total returns table that follows the chart. The performance of Class C, Class I and Class R shares will differ from the performance shown for Class A and Class B shares, based on the differences in sales charges and fees paid by shareholders. Returns for Class A shares are calculated with and without the effect of the initial 5.75% maximum sales charge that became effective on January 7, 2008. Returns for Class B shares are calculated with and without the effect of the maximum 5% CDSC, charged on redemptions made within one year of the date of purchase, declining to 1% in the sixth year and 0% thereafter. Returns for Class C and Class R shares are calculated with and without the effect of the 1% CDSC, charged on redemptions made within one year of purchase. Returns for Class C shares would have been lower for periods prior to June 4, 2007 if the 1% initial sales charge then in effect was incurred. On May 16, 2008, Class D shares of the Fund were converted to Class C shares at their respective net asset values. Effective at the close of business on May 16, 2008, Class D shares are no longer offered by the Fund. Class I shares do not have sales charges, and returns are calculated accordingly. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. - ------- 1 The website reference is an inactive textual reference and information contained in or otherwise accessible through the website does not form a part of this report or the Fund's prospectuses or statement of additional information. 6 Performance Overview (LINE GRAPH) Investment Results TOTAL RETURNS For Periods Ended December 31, 2008 - --------------------------------------------------------------------------------
AVERAGE ANNUAL ------------------------------------------------------------ CLASS C CLASS I CLASS R SINCE SINCE SINCE SIX ONE FIVE TEN INCEPTION INCEPTION INCEPTION MONTHS* YEAR YEARS YEARS 5/27/99 11/30/01 4/30/03 - ---------------------------------------------------------------------------------------------------- CLASS A - ---------------------------------------------------------------------------------------------------- With Sales Charge (39.26)% (47.76)% (7.57)% (6.62)% n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without Sales Charge (35.57) (44.56) (6.46) (6.06) n/a n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS B - ---------------------------------------------------------------------------------------------------- With CDSC+ (38.88) (47.65) (7.48) n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.79) (45.02) (7.17) (6.63)++ n/a n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS C - ---------------------------------------------------------------------------------------------------- With 1% CDSC (36.37) (45.51) n/a n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.75) (44.98) (7.16) n/a (7.26)% n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS I (35.36) (44.30) (6.06) n/a n/a (5.44)% n/a - ---------------------------------------------------------------------------------------------------- CLASS R - ---------------------------------------------------------------------------------------------------- With 1% CDSC (36.27) (45.20) n/a n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.65) (44.67) (6.68) n/a n/a n/a (2.77)% - ---------------------------------------------------------------------------------------------------- BENCHMARKS** - ---------------------------------------------------------------------------------------------------- Lipper Multi-Cap Core Funds Average (31.60) (38.81) (2.61) 0.82 0.12 (0.96) 1.78 - ---------------------------------------------------------------------------------------------------- S&P 500 Index (28.47) (36.99) (2.19) (1.38) (1.92) (1.40) 1.67 - ----------------------------------------------------------------------------------------------------
- ------- See footnotes on page 8. 7 Performance Overview NET ASSET VALUE PER SHARE
CLASS A CLASS B CLASS C CLASS I CLASS R - ---------------------------------------------------------------------------------- 12/31/08 $ 6.02 $ 5.87 $ 5.88 $ 6.07 $ 6.04 - ---------------------------------------------------------------------------------- 6/30/08 9.72 9.48 9.49 9.79 9.75 - ---------------------------------------------------------------------------------- 12/31/07 11.44 11.17 11.18 11.53 11.47 - ----------------------------------------------------------------------------------
- ------- * Returns for periods of less than one year are not annualized. ** The Lipper Multi-Cap Core Funds Average ("Lipper Average") and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of fees, taxes and sales charges. The S&P 500 Index also excludes the effect of expenses. The Lipper Average measures the performance of funds, that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. The S&P 500 Index measures the performance of 500 of the largest US companies based on market capitalizations. Investors cannot invest directly in an average or index. + The CDSC is 5% if you sell your shares within one year of purchase and 2% for the five-year period. ++ The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. 8 Portfolio Overview Diversification of Net Assets December 31, 2008 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS DECEMBER 31, ---------------- ISSUES COST VALUE 2008 2007 - ---------------------------------------------------------------------------------- COMMON STOCKS: - ---------------------------------------------------------------------------------- Aerospace and Defense 2 $ 780,180 $ 744,270 0.7 2.8 - ---------------------------------------------------------------------------------- Air Freight and Logistics 1 307,962 334,087 0.3 0.5 - ---------------------------------------------------------------------------------- Airlines 1 198,334 200,286 0.2 1.2 - ---------------------------------------------------------------------------------- Auto Components -- -- -- -- 1.1 - ---------------------------------------------------------------------------------- Automobiles 1 201,508 210,784 0.2 0.4 - ---------------------------------------------------------------------------------- Beverages 3 3,153,815 3,242,929 3.2 -- - ---------------------------------------------------------------------------------- Biotechnology 3 1,971,107 2,212,889 2.2 1.9 - ---------------------------------------------------------------------------------- Building Products 1 208,091 269,045 0.3 -- - ---------------------------------------------------------------------------------- Capital Markets 2 2,706,074 1,008,766 1.0 4.3 - ---------------------------------------------------------------------------------- Chemicals 6 2,908,319 2,653,857 2.6 -- - ---------------------------------------------------------------------------------- Commercial Banks 6 3,837,310 1,851,809 1.8 1.2 - ---------------------------------------------------------------------------------- Commercial Services and Supplies 3 787,962 911,129 0.9 1.0 - ---------------------------------------------------------------------------------- Communications Equipment 4 1,453,721 1,056,191 1.1 5.6 - ---------------------------------------------------------------------------------- Computers and Peripherals 4 2,761,437 2,898,263 2.9 4.3 - ---------------------------------------------------------------------------------- Construction and Engineering -- -- -- -- 1.2 - ---------------------------------------------------------------------------------- Consumer Finance 1 249,267 235,284 0.2 1.1 - ---------------------------------------------------------------------------------- Containers and Packaging 1 397,238 7,860 -- 2.3 - ---------------------------------------------------------------------------------- Distributors 1 196,996 190,928 0.2 -- - ---------------------------------------------------------------------------------- Diversified Consumer Services 1 270,579 323,896 0.3 -- - ---------------------------------------------------------------------------------- Diversified Financial Services 4 13,063,098 8,064,443 8.0 3.9 - ---------------------------------------------------------------------------------- Diversified Telecommunication Services 3 463,546 484,565 0.5 2.4 - ---------------------------------------------------------------------------------- Electric Utilities 3 1,959,871 1,510,042 1.5 0.7 - ---------------------------------------------------------------------------------- Electrical Equipment 1 454,687 486,767 0.5 0.5 - ---------------------------------------------------------------------------------- Electronic Equipment, Instruments and Components 2 407,961 436,343 0.4 -- - ---------------------------------------------------------------------------------- Energy Equipment and Services 8 2,714,830 1,953,040 1.9 3.1 - ---------------------------------------------------------------------------------- Food and Staples Retailing 3 10,129,029 5,878,281 5.8 2.3 - ---------------------------------------------------------------------------------- Food Products 7 2,299,066 2,378,249 2.4 -- - ---------------------------------------------------------------------------------- Gas Utilities 1 200,715 212,027 0.2 -- - ---------------------------------------------------------------------------------- Health Care Equipment and Supplies 2 394,684 408,003 0.4 1.0 - ---------------------------------------------------------------------------------- Health Care Providers and Services 4 1,849,802 1,079,517 1.1 1.7 - ---------------------------------------------------------------------------------- Hotels, Restaurants and Leisure -- -- -- -- 0.9 - ---------------------------------------------------------------------------------- Household Durables 8 1,645,911 1,852,760 1.8 -- - ---------------------------------------------------------------------------------- Household Products 2 533,282 552,295 0.6 -- - ---------------------------------------------------------------------------------- (Continued on page 10.)
9 Portfolio Overview Diversification of Net Assets (continued) December 31, 2008 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS DECEMBER 31, ---------------- ISSUES COST VALUE 2008 2007 - ---------------------------------------------------------------------------------- COMMON STOCKS: (continued) - ---------------------------------------------------------------------------------- Independent Power Producers and Energy Traders -- $ -- $ -- -- 0.6 - ---------------------------------------------------------------------------------- Industrial Conglomerates 2 1,231,609 1,142,911 1.1 2.5 - ---------------------------------------------------------------------------------- Insurance 8 4,557,670 4,997,299 4.9 2.5 - ---------------------------------------------------------------------------------- Internet Software and Services 2 1,477,894 433,322 0.4 2.3 - ---------------------------------------------------------------------------------- IT Services 5 1,386,153 1,421,036 1.4 -- - ---------------------------------------------------------------------------------- Leisure Equipment and Products 3 596,712 635,983 0.6 -- - ---------------------------------------------------------------------------------- Life Sciences Tools and Services -- -- -- -- 0.6 - ---------------------------------------------------------------------------------- Machinery 6 1,253,413 1,397,837 1.4 1.2 - ---------------------------------------------------------------------------------- Media 5 2,377,846 2,434,475 2.4 2.7 - ---------------------------------------------------------------------------------- Metals and Mining 5 1,669,178 1,319,989 1.3 2.2 - ---------------------------------------------------------------------------------- Multi-Utilities 1 196,175 192,940 0.2 -- - ---------------------------------------------------------------------------------- Multiline Retail 3 565,482 489,953 0.5 1.8 - ---------------------------------------------------------------------------------- Oil, Gas and Consumable Fuels 24 15,859,315 13,294,691 13.1 9.5 - ---------------------------------------------------------------------------------- Personal Products 1 195,940 226,627 0.2 -- - ---------------------------------------------------------------------------------- Pharmaceuticals 8 14,238,097 13,262,822 13.1 5.4 - ---------------------------------------------------------------------------------- Real Estate Investment Trusts 2 507,068 539,915 0.5 0.3 - ---------------------------------------------------------------------------------- Road and Rail 5 4,763,281 4,579,497 4.5 -- - ---------------------------------------------------------------------------------- Semiconductors and Semiconductor Equipment 7 3,694,706 3,098,987 3.1 3.5 - ---------------------------------------------------------------------------------- Software 3 532,431 567,844 0.6 3.2 - ---------------------------------------------------------------------------------- Specialty Retail 12 4,912,991 5,058,166 5.0 1.1 - ---------------------------------------------------------------------------------- Textiles, Apparel and Luxury Goods 5 1,075,736 1,152,606 1.1 0.6 - ---------------------------------------------------------------------------------- Tobacco -- -- -- -- 2.6 - ---------------------------------------------------------------------------------- Trading Companies and Distributors 2 403,466 413,993 0.4 -- - ---------------------------------------------------------------------------------- Wireless Telecommunication Services 1 216,909 155,116 0.2 1.6 - ---------------------------------------------------------------------------------- TOTAL COMMON STOCKS 199 120,218,454 100,464,614 99.2 89.6 - ---------------------------------------------------------------------------------- OPTIONS PURCHASED 7 1,168,949 22,647 -- 1.0 - ---------------------------------------------------------------------------------- EQUITY-LINKED NOTES 2 2,550,000 180,852 0.2 5.3 - ---------------------------------------------------------------------------------- OTHER SHORT-TERM HOLDING AND OTHER ASSETS LESS LIABILITIES 1 620,800 620,800 0.6 4.1 - ---------------------------------------------------------------------------------- NET ASSETS 209 $124,558,203 $101,288,913 100.0 100.0 - ----------------------------------------------------------------------------------
10 Portfolio Overview Largest Industries+ December 31, 2008 - -------------------------------------------------------------------------------- (MONTHLY DIVIDEND REAL ESTATE FUND - LARGEST SECTORS GRAPHIC) Largest Portfolio Holdings++ December 31, 2008 - --------------------------------------------------------------------------------
PERCENT OF SECURITY VALUE NET ASSETS - ------------------------------------------------------------------------------- Pfizer $5,887,530 5.8 - ------------------------------------------------------------------------------- Wal-Mart Stores 5,351,711 5.3 - ------------------------------------------------------------------------------- Johnson & Johnson 4,490,720 4.4 - ------------------------------------------------------------------------------- Chevron 4,237,889 4.2 - ------------------------------------------------------------------------------- JPMorgan Chase 3,579,223 3.5 - ------------------------------------------------------------------------------- Bank of America 2,264,332 2.2 - ------------------------------------------------------------------------------- International Business Machines 2,236,468 2.2 - ------------------------------------------------------------------------------- Home Depot 2,153,981 2.1 - ------------------------------------------------------------------------------- Citigroup 2,144,838 2.1 - ------------------------------------------------------------------------------- Gilead Sciences 1,860,882 1.8 - -------------------------------------------------------------------------------
There can be no assurance that the securities presented have remained or will remain in the Fund's portfolio. Information regarding the Fund's portfolio holdings should not be construed as a recommendation to buy or sell any security or as an indication that any security is suitable for a particular investor. - ------- See footnotes on page 12. 11 Portfolio Overview Largest Portfolio Changes July 1 to December 31, 2008 - --------------------------------------------------------------------------------
LARGEST PURCHASES LARGEST SALES - ----------------------------------- ----------------------------------- Wal-Mart Stores* Exxon Mobil - ----------------------------------- ----------------------------------- Johnson & Johnson* Microsoft** - ----------------------------------- ----------------------------------- Pfizer AT&T** - ----------------------------------- ----------------------------------- Citigroup* Philip Morris International** - ----------------------------------- ----------------------------------- International Business Machines* Hewlett-Packard** - ----------------------------------- ----------------------------------- Chevron Cephalon - ----------------------------------- ----------------------------------- Bank of America UST** - ----------------------------------- ----------------------------------- PepsiCo* Target** - ----------------------------------- ----------------------------------- Gilead Sciences* Delta Air Lines** - ----------------------------------- ----------------------------------- Comcast (Class A)* Barr Laboratories** - ----------------------------------- -----------------------------------
Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities, listed in descending order. - ------- + Includes options purchased. ++ Excludes options purchased and short-term holdings. * Position added during the period. ** Position eliminated during the period. 12 Understanding and Comparing Your Fund's Expenses As a shareholder of the Fund, you incur ongoing expenses, such as management fees, distribution and/or service (12b-1) fees (as applicable), and other Fund expenses. The information below is intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to compare them with the ongoing expenses of investing in other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing expenses only and do not reflect any transactional costs, such as sales charges (also known as loads) on certain purchases or redemptions. Therefore, the table is useful in comparing ongoing expenses only, and will not help you to determine the relative total expenses of owning different funds. In addition, if transactional costs were included, your total expenses would have been higher. The table is based on an investment of $1,000 invested at the beginning of July 1, 2008 and held for the entire six-month period ended December 31, 2008. ACTUAL EXPENSES The table below provides information about actual expenses and actual account values. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at the beginning of the period by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled "Expenses Paid During Period" for the Fund's share class that you own to estimate the expenses that you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical expenses and hypothetical account values based on the actual expense ratio of each class and an assumed rate of return of 5% per year before expenses, which is not the actual return of any class of the Fund. The hypothetical expenses and account values may not be used to estimate the ending account value or the actual expenses you paid for the period. You may use this information to compare the ongoing expenses of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
ACTUAL HYPOTHETICAL ------------------------------ ------------------------------- BEGINNING ENDING ENDING ACCOUNT ANNUALIZED ACCOUNT EXPENSES PAID ACCOUNT EXPENSES PAID VALUE EXPENSE VALUE DURING PERIOD VALUE DURING PERIOD 7/1/08 RATIO* 12/31/08 7/1/08 TO 12/31/08** 12/31/08 7/1/08 TO 12/31/08** - ----------------------------------------------------------------------------------------------------- Class A $1,000.00 1.55% $644.30 $6.41 $1,017.34 $ 7.86 - ----------------------------------------------------------------------------------------------------- Class B 1,000.00 2.30 642.10 9.49 1,013.57 11.64 - ----------------------------------------------------------------------------------------------------- Class C 1,000.00 2.30 642.50 9.50 1,013.57 11.64 - ----------------------------------------------------------------------------------------------------- Class I 1,000.00 0.91 646.40 3.77 1,020.56 4.62 - ----------------------------------------------------------------------------------------------------- Class R 1,000.00 1.80 643.50 7.44 1,016.09 9.12 - -----------------------------------------------------------------------------------------------------
- ------- * Expenses of Class B, Class C, Class I and Class R shares differ from the expenses of Class A shares due to the differences in 12b-1 fees and other class-specific expenses paid by each share class. See the Fund's prospectuses for a description of each share class and its fees, expenses and sales charges. ** Expenses are equal to the annualized expense ratio based on actual expenses for the period July 1, 2008 to December 31, 2008, multiplied by the average account value over the period, multiplied by 184/366 (number of days in the period). 13 Portfolio of Investments December 31, 2008
SHARES VALUE COMMON STOCKS 99.2% - ------------------------------------------------------------------------------ AEROSPACE AND DEFENSE 0.7% - ------------------------------------------------------------------------------ General Dynamics 8,767 $ 504,892 - ------------------------------------------------------------------------------ United Technologies 4,466 239,378 - ------------------------------------------------------------------------------ 744,270 - ------------------------------------------------------------------------------ AIR FREIGHT AND LOGISTICS 0.3% - ------------------------------------------------------------------------------ C.H. Robinson Worldwide 6,071 334,087 - ------------------------------------------------------------------------------ AIRLINES 0.2% - ------------------------------------------------------------------------------ Southwest Airlines 23,235 200,286 - ------------------------------------------------------------------------------ AUTOMOBILES 0.2% - ------------------------------------------------------------------------------ Harley-Davidson 12,421 210,784 - ------------------------------------------------------------------------------ BEVERAGES 3.2% - ------------------------------------------------------------------------------ Brown-Forman (Class B) 4,790 246,637 - ------------------------------------------------------------------------------ Coca-Cola 29,646 1,342,074 - ------------------------------------------------------------------------------ PepsiCo 30,203 1,654,218 - ------------------------------------------------------------------------------ 3,242,929 - ------------------------------------------------------------------------------ BIOTECHNOLOGY 2.2% - ------------------------------------------------------------------------------ Celgene* 4,510 249,313 - ------------------------------------------------------------------------------ Cephalon* 1,333 102,694 - ------------------------------------------------------------------------------ Gilead Sciences* 36,388 1,860,882 - ------------------------------------------------------------------------------ 2,212,889 - ------------------------------------------------------------------------------ BUILDING PRODUCTS 0.3% - ------------------------------------------------------------------------------ Masco 24,173 269,045 - ------------------------------------------------------------------------------ CAPITAL MARKETS 1.0% - ------------------------------------------------------------------------------ Goldman Sachs Group 2,751 232,157 - ------------------------------------------------------------------------------ Morgan Stanley 48,417 776,609 - ------------------------------------------------------------------------------ 1,008,766 - ------------------------------------------------------------------------------ CHEMICALS 2.6% - ------------------------------------------------------------------------------ CF Industries Holdings 4,055 199,344 - ------------------------------------------------------------------------------ Dow Chemical 71,320 1,076,219 - ------------------------------------------------------------------------------ E. I. duPont de Nemours 8,185 207,080 - ------------------------------------------------------------------------------ Monsanto 10,954 770,614 - ------------------------------------------------------------------------------ PPG Industries 4,644 197,045 - ------------------------------------------------------------------------------ Sigma-Aldrich 4,819 203,555 - ------------------------------------------------------------------------------ 2,653,857 - ------------------------------------------------------------------------------ COMMERCIAL BANKS 1.8% - ------------------------------------------------------------------------------ BB&T 12,006 329,685 - ------------------------------------------------------------------------------ Fifth Third Bancorp 28,659 236,723 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 14 Portfolio of Investments December 31, 2008
SHARES VALUE COMMERCIAL BANKS (continued) - ------------------------------------------------------------------------------ KeyCorp 24,547 $ 209,140 - ------------------------------------------------------------------------------ SunTrust Banks 12,105 357,582 - ------------------------------------------------------------------------------ U.S. Bancorp 17,031 425,945 - ------------------------------------------------------------------------------ Wells Fargo 52,840 292,734 - ------------------------------------------------------------------------------ 1,851,809 - ------------------------------------------------------------------------------ COMMERCIAL SERVICES AND SUPPLIES 0.9% - ------------------------------------------------------------------------------ Avery Dennison 6,850 224,200 - ------------------------------------------------------------------------------ Republic Services 8,747 216,838 - ------------------------------------------------------------------------------ Waste Management 14,185 470,091 - ------------------------------------------------------------------------------ 911,129 - ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT 1.1% - ------------------------------------------------------------------------------ Cisco Systems* 18,387 299,708 - ------------------------------------------------------------------------------ Corning 21,751 207,287 - ------------------------------------------------------------------------------ Nortel Networks* 7,555 1,964 - ------------------------------------------------------------------------------ QUALCOMM 15,273 547,232 - ------------------------------------------------------------------------------ 1,056,191 - ------------------------------------------------------------------------------ COMPUTERS AND PERIPHERALS 2.9% - ------------------------------------------------------------------------------ Dell* 18,954 194,089 - ------------------------------------------------------------------------------ International Business Machines 26,574 2,236,468 - ------------------------------------------------------------------------------ Lexmark International (Class A)* 7,760 208,744 - ------------------------------------------------------------------------------ QLogic* 19,268 258,962 - ------------------------------------------------------------------------------ 2,898,263 - ------------------------------------------------------------------------------ CONSUMER FINANCE 0.2% - ------------------------------------------------------------------------------ Capital One Financial 7,378 235,284 - ------------------------------------------------------------------------------ CONTAINERS AND PACKAGING 0.0% - ------------------------------------------------------------------------------ Smurfit-Stone Container* 30,823 7,860 - ------------------------------------------------------------------------------ DISTRIBUTORS 0.2% - ------------------------------------------------------------------------------ Genuine Parts 5,043 190,928 - ------------------------------------------------------------------------------ DIVERSIFIED CONSUMER SERVICES 0.3% - ------------------------------------------------------------------------------ H&R Block 14,256 323,896 - ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES 8.0% - ------------------------------------------------------------------------------ Bank of America 160,819 2,264,332 - ------------------------------------------------------------------------------ CIT Group 16,751 76,050 - ------------------------------------------------------------------------------ Citigroup 319,648 2,144,838 - ------------------------------------------------------------------------------ JPMorgan Chase 113,518 3,579,223 - ------------------------------------------------------------------------------ 8,064,443 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 15 Portfolio of Investments December 31, 2008
SHARES VALUE DIVERSIFIED TELECOMMUNICATION SERVICES 0.5% - ------------------------------------------------------------------------------ CenturyTel 7,509 $ 205,221 - ------------------------------------------------------------------------------ Embarq 6,262 225,182 - ------------------------------------------------------------------------------ Frontier Communications 6,197 54,162 - ------------------------------------------------------------------------------ 484,565 - ------------------------------------------------------------------------------ ELECTRIC UTILITIES 1.5% - ------------------------------------------------------------------------------ Entergy 2,351 195,439 - ------------------------------------------------------------------------------ Exelon 13,106 728,825 - ------------------------------------------------------------------------------ FirstEnergy 12,058 585,778 - ------------------------------------------------------------------------------ 1,510,042 - ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT 0.5% - ------------------------------------------------------------------------------ Emerson Electric 13,296 486,767 - ------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS 0.4% - ------------------------------------------------------------------------------ Jabil Circuit 33,645 227,104 - ------------------------------------------------------------------------------ Tyco Electronics 12,908 209,239 - ------------------------------------------------------------------------------ 436,343 - ------------------------------------------------------------------------------ ENERGY EQUIPMENT AND SERVICES 1.9% - ------------------------------------------------------------------------------ Baker Hughes 2,990 95,889 - ------------------------------------------------------------------------------ BJ Services 19,063 222,465 - ------------------------------------------------------------------------------ Ensco International 6,653 188,879 - ------------------------------------------------------------------------------ Halliburton 34,991 636,136 - ------------------------------------------------------------------------------ Nabors Industries* 15,458 185,032 - ------------------------------------------------------------------------------ Noble 6,708 148,180 - ------------------------------------------------------------------------------ Smith International 7,419 169,821 - ------------------------------------------------------------------------------ Weatherford International* 28,340 306,638 - ------------------------------------------------------------------------------ 1,953,040 - ------------------------------------------------------------------------------ FOOD AND STAPLES RETAILING 5.8% - ------------------------------------------------------------------------------ Rite Aid* 891,664 276,416 - ------------------------------------------------------------------------------ Wal-Mart Stores 95,464 5,351,711 - ------------------------------------------------------------------------------ Walgreen 10,140 250,154 - ------------------------------------------------------------------------------ 5,878,281 - ------------------------------------------------------------------------------ FOOD PRODUCTS 2.4% - ------------------------------------------------------------------------------ Archer-Daniels-Midland 7,304 210,574 - ------------------------------------------------------------------------------ Campbell Soup 6,365 191,014 - ------------------------------------------------------------------------------ General Mills 16,427 997,940 - ------------------------------------------------------------------------------ J.M. Smucker 4,530 196,421 - ------------------------------------------------------------------------------ Kellogg 4,655 204,122 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 16 Portfolio of Investments December 31, 2008
SHARES VALUE FOOD PRODUCTS (continued) - ------------------------------------------------------------------------------ Sara Lee 30,873 $ 302,247 - ------------------------------------------------------------------------------ Tyson Foods (Class A) 31,499 275,931 - ------------------------------------------------------------------------------ 2,378,249 - ------------------------------------------------------------------------------ GAS UTILITIES 0.2% - ------------------------------------------------------------------------------ Questar 6,486 212,027 - ------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES 0.4% - ------------------------------------------------------------------------------ Becton, Dickinson 3,160 216,112 - ------------------------------------------------------------------------------ Covidien 5,295 191,891 - ------------------------------------------------------------------------------ 408,003 - ------------------------------------------------------------------------------ HEALTH CARE PROVIDERS AND SERVICES 1.1% - ------------------------------------------------------------------------------ Cardinal Health 6,312 217,575 - ------------------------------------------------------------------------------ CIGNA 33,750 568,687 - ------------------------------------------------------------------------------ Quest Diagnostics 4,565 236,969 - ------------------------------------------------------------------------------ UnitedHealth Group 2,116 56,286 - ------------------------------------------------------------------------------ 1,079,517 - ------------------------------------------------------------------------------ HOUSEHOLD DURABLES 1.8% - ------------------------------------------------------------------------------ Black & Decker 4,826 201,775 - ------------------------------------------------------------------------------ Centex 25,320 269,405 - ------------------------------------------------------------------------------ D.R. Horton 28,623 202,365 - ------------------------------------------------------------------------------ Leggett & Platt 14,280 216,913 - ------------------------------------------------------------------------------ Lennar 32,752 283,960 - ------------------------------------------------------------------------------ Pulte Homes 20,112 219,824 - ------------------------------------------------------------------------------ Snap-on 6,135 241,596 - ------------------------------------------------------------------------------ Whirlpool 5,246 216,922 - ------------------------------------------------------------------------------ 1,852,760 - ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS 0.6% - ------------------------------------------------------------------------------ Colgate-Palmolive 5,214 357,368 - ------------------------------------------------------------------------------ Kimberly-Clark 3,696 194,927 - ------------------------------------------------------------------------------ 552,295 - ------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES 1.1% - ------------------------------------------------------------------------------ 3M 9,400 540,876 - ------------------------------------------------------------------------------ Tyco International 27,872 602,035 - ------------------------------------------------------------------------------ 1,142,911 - ------------------------------------------------------------------------------ INSURANCE 4.9% - ------------------------------------------------------------------------------ AFLAC 10,815 495,760 - ------------------------------------------------------------------------------ Allstate 56,683 1,856,935 - ------------------------------------------------------------------------------ Chubb 7,448 379,848 - ------------------------------------------------------------------------------ Marsh & McLennan 15,548 377,350 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 17 Portfolio of Investments December 31, 2008
SHARES VALUE INSURANCE (continued) - ------------------------------------------------------------------------------ MetLife 4,508 $ 157,149 - ------------------------------------------------------------------------------ Progressive* 54,485 806,923 - ------------------------------------------------------------------------------ Prudential Financial 2,527 76,467 - ------------------------------------------------------------------------------ Travelers 18,736 846,867 - ------------------------------------------------------------------------------ 4,997,299 - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES 0.4% - ------------------------------------------------------------------------------ SAVVIS* 29,425 202,738 - ------------------------------------------------------------------------------ Symantec* 17,055 230,584 - ------------------------------------------------------------------------------ 433,322 - ------------------------------------------------------------------------------ IT SERVICES 1.4% - ------------------------------------------------------------------------------ Affiliated Computer Services (Class A)* 4,949 227,407 - ------------------------------------------------------------------------------ Automatic Data Processing 7,118 280,022 - ------------------------------------------------------------------------------ MasterCard (Class A) 2,861 408,923 - ------------------------------------------------------------------------------ Paychex 7,169 188,401 - ------------------------------------------------------------------------------ Western Union 22,056 316,283 - ------------------------------------------------------------------------------ 1,421,036 - ------------------------------------------------------------------------------ LEISURE EQUIPMENT AND PRODUCTS 0.6% - ------------------------------------------------------------------------------ Eastman Kodak 26,368 173,501 - ------------------------------------------------------------------------------ Hasbro 7,547 220,146 - ------------------------------------------------------------------------------ Mattel 15,146 242,336 - ------------------------------------------------------------------------------ 635,983 - ------------------------------------------------------------------------------ MACHINERY 1.4% - ------------------------------------------------------------------------------ Dover 7,205 237,189 - ------------------------------------------------------------------------------ Eaton 4,373 217,382 - ------------------------------------------------------------------------------ Flowserve 4,249 218,823 - ------------------------------------------------------------------------------ Illinois Tool Works 7,296 255,725 - ------------------------------------------------------------------------------ Ingersoll-Rand (Class A) 14,249 247,220 - ------------------------------------------------------------------------------ Pall 7,791 221,498 - ------------------------------------------------------------------------------ 1,397,837 - ------------------------------------------------------------------------------ MEDIA 2.4% - ------------------------------------------------------------------------------ CBS (Class B) 39,912 326,879 - ------------------------------------------------------------------------------ Comcast (Class A)* 84,398 1,424,638 - ------------------------------------------------------------------------------ Gannett 27,201 217,608 - ------------------------------------------------------------------------------ New York Times (Class A) 27,468 201,340 - ------------------------------------------------------------------------------ News Corp. (Class B) 29,044 264,010 - ------------------------------------------------------------------------------ 2,434,475 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 18 Portfolio of Investments December 31, 2008
SHARES VALUE METALS AND MINING 1.3% - ------------------------------------------------------------------------------ AK Steel Holdings 28,790 $ 268,323 - ------------------------------------------------------------------------------ Alcoa 4,814 54,206 - ------------------------------------------------------------------------------ Freeport-McMoRan Copper & Gold 2,273 55,552 - ------------------------------------------------------------------------------ Nucor 14,620 675,444 - ------------------------------------------------------------------------------ US Steel 7,163 266,464 - ------------------------------------------------------------------------------ 1,319,989 - ------------------------------------------------------------------------------ MULTI-UTILITIES 0.2% - ------------------------------------------------------------------------------ Wisconsin Energy 4,596 192,940 - ------------------------------------------------------------------------------ MULTILINE RETAIL 0.5% - ------------------------------------------------------------------------------ Big Lots* 12,297 178,184 - ------------------------------------------------------------------------------ Family Dollar Stores 6,942 180,978 - ------------------------------------------------------------------------------ Kohl's* 3,613 130,791 - ------------------------------------------------------------------------------ 489,953 - ------------------------------------------------------------------------------ OIL, GAS AND CONSUMABLE FUELS 13.1% - ------------------------------------------------------------------------------ Apache 6,669 497,041 - ------------------------------------------------------------------------------ Cabot Oil & Gas 7,148 185,848 - ------------------------------------------------------------------------------ Chesapeake Energy 20,619 333,409 - ------------------------------------------------------------------------------ Chevron 57,292 4,237,889 - ------------------------------------------------------------------------------ ConocoPhillips 29,500 1,528,100 - ------------------------------------------------------------------------------ Consol Energy 7,246 207,091 - ------------------------------------------------------------------------------ El Paso 1,887 14,775 - ------------------------------------------------------------------------------ EOG Resources 7,526 501,081 - ------------------------------------------------------------------------------ Exxon Mobil 11,689 933,133 - ------------------------------------------------------------------------------ Hess 8,562 459,266 - ------------------------------------------------------------------------------ Marathon Oil 20,516 561,318 - ------------------------------------------------------------------------------ Massey Energy 13,763 189,792 - ------------------------------------------------------------------------------ Murphy Oil 4,618 204,808 - ------------------------------------------------------------------------------ Noble Energy 6,831 336,222 - ------------------------------------------------------------------------------ Occidental Petroleum 12,200 731,878 - ------------------------------------------------------------------------------ Peabody Energy 10,757 244,722 - ------------------------------------------------------------------------------ Pioneer Natural Resources 10,313 166,864 - ------------------------------------------------------------------------------ Range Resources Corp. 4,996 171,812 - ------------------------------------------------------------------------------ Southwestern Energy 16,904 489,709 - ------------------------------------------------------------------------------ Spectra Energy 18,039 283,934 - ------------------------------------------------------------------------------ Sunoco 5,420 235,553 - ------------------------------------------------------------------------------ Tesoro 23,795 313,380 - ------------------------------------------------------------------------------ Valero Energy 12,352 267,297 - ------------------------------------------------------------------------------ XTO Energy 5,664 199,769 - ------------------------------------------------------------------------------ 13,294,691 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 19 Portfolio of Investments December 31, 2008
SHARES VALUE PERSONAL PRODUCTS 0.2% - ------------------------------------------------------------------------------ Estee Lauder Companies (Class A) 7,320 $ 226,627 - ------------------------------------------------------------------------------ PHARMACEUTICALS 13.1% - ------------------------------------------------------------------------------ Abbott Laboratories 6,628 353,736 - ------------------------------------------------------------------------------ Eli Lilly 18,537 746,485 - ------------------------------------------------------------------------------ Forest Laboratories* 9,278 236,311 - ------------------------------------------------------------------------------ Johnson & Johnson 75,058 4,490,720 - ------------------------------------------------------------------------------ Merck 17,748 539,539 - ------------------------------------------------------------------------------ Pfizer 332,441 5,887,530 - ------------------------------------------------------------------------------ Schering-Plough 31,885 543,002 - ------------------------------------------------------------------------------ Wyeth 12,410 465,499 - ------------------------------------------------------------------------------ 13,262,822 - ------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS 0.5% - ------------------------------------------------------------------------------ Equity Residential 8,007 238,769 - ------------------------------------------------------------------------------ Public Storage 3,788 301,146 - ------------------------------------------------------------------------------ 539,915 - ------------------------------------------------------------------------------ ROAD AND RAIL 4.5% - ------------------------------------------------------------------------------ Burlington Northern Santa Fe 16,711 1,265,190 - ------------------------------------------------------------------------------ CSX 24,120 783,176 - ------------------------------------------------------------------------------ Norfolk Southern 18,332 862,521 - ------------------------------------------------------------------------------ Ryder System 5,892 228,492 - ------------------------------------------------------------------------------ Union Pacific 30,128 1,440,118 - ------------------------------------------------------------------------------ 4,579,497 - ------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT 3.1% - ------------------------------------------------------------------------------ Altera 13,898 232,236 - ------------------------------------------------------------------------------ Intel 120,082 1,760,402 - ------------------------------------------------------------------------------ Linear Technology 10,335 228,610 - ------------------------------------------------------------------------------ LSI Logic* 71,557 235,423 - ------------------------------------------------------------------------------ Microchip Technology 10,930 213,463 - ------------------------------------------------------------------------------ National Semiconductor 18,685 188,158 - ------------------------------------------------------------------------------ Xilinx 13,507 240,695 - ------------------------------------------------------------------------------ 3,098,987 - ------------------------------------------------------------------------------ SOFTWARE 0.6% - ------------------------------------------------------------------------------ BMC Software* 3,785 101,854 - ------------------------------------------------------------------------------ Compuware* 32,971 222,554 - ------------------------------------------------------------------------------ salesforce.com* 7,605 243,436 - ------------------------------------------------------------------------------ 567,844 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 20 Portfolio of Investments December 31, 2008
SHARES OR SHARES SUBJECT TO CALL VALUE SPECIALTY RETAIL 5.0% - ------------------------------------------------------------------------------ Abercrombie & Fitch (Class A) 6,200 $ 143,034 - ------------------------------------------------------------------------------ AutoNation* 25,484 251,782 - ------------------------------------------------------------------------------ AutoZone* 1,914 266,946 - ------------------------------------------------------------------------------ Bed Bath & Beyond* 10,196 259,182 - ------------------------------------------------------------------------------ Best Buy 9,875 277,586 - ------------------------------------------------------------------------------ The Gap 16,390 219,462 - ------------------------------------------------------------------------------ Home Depot 93,570 2,153,981 - ------------------------------------------------------------------------------ Limited Brands 23,072 231,643 - ------------------------------------------------------------------------------ Lowe's 27,373 589,067 - ------------------------------------------------------------------------------ RadioShack 21,168 252,746 - ------------------------------------------------------------------------------ Sherwin-Williams 3,450 206,137 - ------------------------------------------------------------------------------ Staples 11,529 206,600 - ------------------------------------------------------------------------------ 5,058,166 - ------------------------------------------------------------------------------ TEXTILES, APPAREL AND LUXURY GOODS 1.1% - ------------------------------------------------------------------------------ Coach* 13,511 280,623 - ------------------------------------------------------------------------------ Liz Clairborne 83,332 216,663 - ------------------------------------------------------------------------------ NIKE (Class B) 4,007 204,357 - ------------------------------------------------------------------------------ Polo Ralph Lauren 5,022 228,049 - ------------------------------------------------------------------------------ VF 4,070 222,914 - ------------------------------------------------------------------------------ 1,152,606 - ------------------------------------------------------------------------------ TRADING COMPANIES AND DISTRIBUTORS 0.4% - ------------------------------------------------------------------------------ Fastenal 5,278 183,938 - ------------------------------------------------------------------------------ W.W. Grainger 2,918 230,055 - ------------------------------------------------------------------------------ 413,993 - ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES 0.2% - ------------------------------------------------------------------------------ Sprint Nextel* 84,763 155,116 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $120,218,454) 100,464,614 - ------------------------------------------------------------------------------ OPTIONS PURCHASED* 0.0% - ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT 0.0% - ------------------------------------------------------------------------------ JDS Uniphase, Call expiring January 2009 at $15 87,800 878 - ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES 0.0% - ------------------------------------------------------------------------------ Citigroup, Call expiring January 2009 at $30 49,100 491 - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES 0.0% - ------------------------------------------------------------------------------ Yahoo!, Call expiring January 2009 at $25 105,600 2,640 - ------------------------------------------------------------------------------ Yahoo!, Call expiring January 2009 at $30 48,900 978 - ------------------------------------------------------------------------------ 3,618 - ------------------------------------------------------------------------------
- ------- See footnotes on page 22. 21 Portfolio of Investments December 31, 2008
SHARES, SHARES SUBJECT TO CALL OR PRINCIPAL AMOUNT VALUE PHARMACEUTICALS 0.0% - ------------------------------------------------------------------------------ Bristol-Myers Squibb, Call expiring January 2009 at $25 64,400 shs. $ 14,168 - ------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT 0.0% - ------------------------------------------------------------------------------ Marvell Technology Group, Call expiring January 2009 at $15 30,200 1,510 - ------------------------------------------------------------------------------ Marvell Technology Group, Call expiring January 2009 at $20 79,300 1,982 - ------------------------------------------------------------------------------ 3,492 - ------------------------------------------------------------------------------ TOTAL OPTIONS PURCHASED (Cost $1,168,949) 22,647 - ------------------------------------------------------------------------------ SHORT-TERM HOLDINGS 1.2% - ------------------------------------------------------------------------------ EQUITY-LINKED NOTES+ 0.2% - ------------------------------------------------------------------------------ Lehman Brothers: - ------------------------------------------------------------------------------ 53.51%, 9/14/2008(a)** $1,275,000 80,803 - ------------------------------------------------------------------------------ 39.5%, 10/2/2008(b)** 1,275,000 100,049 - ------------------------------------------------------------------------------ Total Equity-Linked Notes (Cost $2,550,000) 180,852 - ------------------------------------------------------------------------------ MONEY MARKET FUND 1.0% - ------------------------------------------------------------------------------ SSgA U.S. Treasury Money Market Fund (Cost $1,016,982) 1,016,982 shs. 1,016,982 - ------------------------------------------------------------------------------ TOTAL SHORT-TERM HOLDINGS (Cost $3,566,982) 1,197,834 - ------------------------------------------------------------------------------ TOTAL INVESTMENTS (Cost $124,954,385) 100.4% 101,685,095 - ------------------------------------------------------------------------------ OTHER ASSETS LESS LIABILITIES (0.4)% (396,182) - ------------------------------------------------------------------------------ NET ASSETS 100.0% $101,288,913 - ------------------------------------------------------------------------------
- ------- * Non-income producing security. ** Security in default and non-income producing. + The security may be offered and sold only to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. These notes are exchangeable at maturity, based on the terms of the respective notes, for shares of common stock of a company or cash at a maturity value which is generally determined as follows: The principal amount of the notes plus or minus the lowest return of the companies' respective stock prices determined at maturity from the date of purchase of the notes: (a) Delta Air Lines, Intel and Mylan (b) Health Net, Kohl's and Prudential Financial Industry classifications have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements. 22 Statement of Assets and Liabilities December 31, 2008 ASSETS: - -------------------------------------------------------------------- Investments, at value: - -------------------------------------------------------------------- Common stocks (cost $120,218,454) $100,464,614 - -------------------------------------------------------------------- Options purchased (cost $1,168,949) 22,647 - -------------------------------------------------------------------- Short-term holdings (cost $3,566,982) 1,197,834 - -------------------------------------------------------------------- Total investments (cost $124,954,385) 101,685,095 - -------------------------------------------------------------------- Restricted cash 72,682 - -------------------------------------------------------------------- Dividends receivable 158,894 - -------------------------------------------------------------------- Receivable for securities sold 126,285 - -------------------------------------------------------------------- Receivable for Capital Stock sold 52,703 - -------------------------------------------------------------------- Investment in, and expenses prepaid to, shareholder service agent 31,134 - -------------------------------------------------------------------- Other 7,128 - -------------------------------------------------------------------- TOTAL ASSETS 102,133,921 - -------------------------------------------------------------------- LIABILITIES: - -------------------------------------------------------------------- Payable for securities purchased 368,216 - -------------------------------------------------------------------- Payable for Capital Stock repurchased 308,174 - -------------------------------------------------------------------- Management fee payable 55,027 - -------------------------------------------------------------------- Distribution and service (12b-1) fees payable 27,179 - -------------------------------------------------------------------- Bank overdraft 2,913 - -------------------------------------------------------------------- Accrued expenses and other 83,499 - -------------------------------------------------------------------- TOTAL LIABILITIES 845,008 - -------------------------------------------------------------------- NET ASSETS $101,288,913 - -------------------------------------------------------------------- COMPOSITION OF NET ASSETS: - -------------------------------------------------------------------- Capital Stock, at par ($0.50 par value; 1,000,000,000 shares authorized; 16,864,763 shares outstanding): - -------------------------------------------------------------------- Class A $ 7,250,363 - -------------------------------------------------------------------- Class B 109,112 - -------------------------------------------------------------------- Class C 586,882 - -------------------------------------------------------------------- Class I 361,288 - -------------------------------------------------------------------- Class R 124,736 - -------------------------------------------------------------------- Additional paid-in capital 195,830,873 - -------------------------------------------------------------------- Undistributed net investment income (Note 7) 297,174 - -------------------------------------------------------------------- Accumulated net realized loss (Note 7) (80,002,225) - -------------------------------------------------------------------- Net unrealized depreciation of investments (23,269,290) - -------------------------------------------------------------------- NET ASSETS $101,288,913 - -------------------------------------------------------------------- NET ASSET VALUE PER SHARE: - -------------------------------------------------------------------- CLASS A ($87,221,883 / 14,500,725 shares) $6.02 - -------------------------------------------------------------------- CLASS B ($1,280,176 / 218,223 shares) $5.87 - -------------------------------------------------------------------- CLASS C ($6,895,904 / 1,173,765 shares) $5.88 - -------------------------------------------------------------------- CLASS I ($4,385,375 / 722,577 shares) $6.07 - -------------------------------------------------------------------- CLASS R ($1,505,575 / 249,473 shares) $6.04 - --------------------------------------------------------------------
- ------- See Notes to Financial Statements. 23 Statement of Operations For the Year Ended December 31, 2008 INVESTMENT INCOME: - --------------------------------------------------------------------- Interest $ 2,949,593 - --------------------------------------------------------------------- Dividends (net of foreign taxes withheld of $6,209) 2,885,755 - --------------------------------------------------------------------- TOTAL INVESTMENT INCOME 5,835,348 - --------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------------------- Management fee 1,046,446 - --------------------------------------------------------------------- Shareholder account services 562,799 - --------------------------------------------------------------------- Distribution and service (12b-1) fees 487,033 - --------------------------------------------------------------------- Registration 83,120 - --------------------------------------------------------------------- Auditing and legal fees 68,046 - --------------------------------------------------------------------- Custody and related services 59,590 - --------------------------------------------------------------------- Shareholder reports and communications 49,997 - --------------------------------------------------------------------- Directors' fees and expenses 13,263 - --------------------------------------------------------------------- Miscellaneous 22,113 - --------------------------------------------------------------------- TOTAL EXPENSES 2,392,407 - --------------------------------------------------------------------- NET INVESTMENT INCOME 3,442,941 - --------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS WRITTEN: - --------------------------------------------------------------------- Net realized loss on investments (78,990,456) - --------------------------------------------------------------------- Net realized gain on options written 51,754 - --------------------------------------------------------------------- Net change in unrealized depreciation of investments and options written (12,816,966) - --------------------------------------------------------------------- NET LOSS ON INVESTMENTS AND OPTIONS WRITTEN (91,755,668) - --------------------------------------------------------------------- DECREASE IN NET ASSETS FROM OPERATIONS $(88,312,727) - ---------------------------------------------------------------------
- ------- See Notes to Financial Statements. 24 Statements of Changes in Net Assets
YEAR ENDED DECEMBER 31, ---------------------------- 2008 2007 - ---------------------------------------------------------------------------- OPERATIONS: - ---------------------------------------------------------------------------- Net investment income $ 3,442,941 $ 5,825,760 - ---------------------------------------------------------------------------- Net realized gain (loss) on investments (78,990,456) 22,032,830 - ---------------------------------------------------------------------------- Net realized gain on options written 51,754 844,246 - ---------------------------------------------------------------------------- Net change in unrealized depreciation of investments and options written (12,816,966) (31,397,909) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM OPERATIONS (88,312,727) (2,695,073) - ---------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: - ---------------------------------------------------------------------------- Net investment income: - ---------------------------------------------------------------------------- Class A (2,991,828) (5,293,316) - ---------------------------------------------------------------------------- Class B (35,052) (80,757) - ---------------------------------------------------------------------------- Class C (107,099) (69,733) - ---------------------------------------------------------------------------- Class D (47,893) (224,454) - ---------------------------------------------------------------------------- Class I (153,717) (192,584) - ---------------------------------------------------------------------------- Class R (38,920) (33,259) - ---------------------------------------------------------------------------- Total (3,374,509) (5,894,103) - ---------------------------------------------------------------------------- Net realized short-term gain on investments: - ---------------------------------------------------------------------------- Class A (426,134) (8,459,565) - ---------------------------------------------------------------------------- Class B (7,270) (171,538) - ---------------------------------------------------------------------------- Class C (34,019) (158,713) - ---------------------------------------------------------------------------- Class D -- (521,573) - ---------------------------------------------------------------------------- Class I (17,622) (289,115) - ---------------------------------------------------------------------------- Class R (6,579) (85,867) - ---------------------------------------------------------------------------- Total (491,624) (9,686,371) - ---------------------------------------------------------------------------- Net realized long-term gain on investments: - ---------------------------------------------------------------------------- Class A (3,926,523) (9,265,435) - ---------------------------------------------------------------------------- Class B (66,987) (202,937) - ---------------------------------------------------------------------------- Class C (313,464) (177,264) - ---------------------------------------------------------------------------- Class D -- (580,598) - ---------------------------------------------------------------------------- Class I (162,368) (298,791) - ---------------------------------------------------------------------------- Class R (60,620) (95,532) - ---------------------------------------------------------------------------- Total (4,529,962) (10,620,557) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS (8,396,095) (26,201,031) - ---------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: - ---------------------------------------------------------------------------- Net proceeds from sales of shares 6,758,776 9,272,400 - ---------------------------------------------------------------------------- Investment of dividends 2,278,987 3,824,632 - ---------------------------------------------------------------------------- Exchanged from associated funds 1,231,676 1,716,566 - ---------------------------------------------------------------------------- Investment of gain distribution 3,859,786 15,372,224 - ---------------------------------------------------------------------------- Total 14,129,225 30,185,822 - ---------------------------------------------------------------------------- Cost of shares repurchased (24,744,390) (39,161,240) - ---------------------------------------------------------------------------- Exchanged into associated funds (2,382,182) (2,044,222) - ---------------------------------------------------------------------------- Total (27,126,572) (41,205,462) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (12,997,347) (11,019,640) - ---------------------------------------------------------------------------- PROCEEDS FROM REGULATORY SETTLEMENT (NOTE 10) 209,621 -- - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS (109,496,548) (39,915,744) - ---------------------------------------------------------------------------- NET ASSETS: - ---------------------------------------------------------------------------- Beginning of year 210,785,461 250,701,205 - ---------------------------------------------------------------------------- END OF YEAR (including undistributed net investment income of $297,174 and $21,190, respectively) $ 101,288,913 $210,785,461 - ----------------------------------------------------------------------------
- ------- See Notes to Financial Statements. 25 Notes to Financial Statements 1. ORGANIZATION AND MULTIPLE CLASSES OF SHARES -- Seligman Common Stock Fund, Inc. (the "Fund") is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end diversified management investment company (Note 13). The Fund offers the following five classes of shares: Class A shares are sold with an initial sales charge of up to 5.75% (4.75% prior to January 7, 2008) and are subject to a continuing service fee of up to 0.25% on an annual basis. Class A shares purchased in an amount of $1,000,000 or more are sold without an initial sales charge but are subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions made within 18 months of purchase. Effective January 7, 2008, eligible employee benefit plans which have at least $2,000,000 in plan assets may purchase Class A shares at net asset value, but, in the event of plan termination, will be subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. Class B shares are sold without an initial sales charge but are subject to a distribution fee of 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions made in the first year of purchase, declining to 1% in the sixth year and 0% thereafter. Class B shares will automatically convert to Class A shares approximately eight years after their date of purchase. If Class B shares of the Fund are exchanged for Class B shares of another Seligman mutual fund, the holding period of the shares exchanged will be added to the holding period of the shares acquired, both for determining the applicable CDSC and the conversion of Class B shares to Class A shares. Class C shares are sold without an initial sales charge but are subject to a distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% imposed on redemptions made within one year of purchase. The Board of Directors of the Fund approved the automatic conversion of all of the Fund's outstanding Class D shares to Class C shares at their relative net asset values. The conversion was implemented on May 16, 2008. Effective at the close of business on May 16, 2008, the Fund no longer offers Class D shares. The conversion did not affect individual shareholder account values. Class I shares are offered to certain institutional clients and other investors, as described in the Fund's Class I shares prospectus. Class I shares are sold without any sales charges and are not subject to distribution or service fees. Class R shares are offered to certain employee benefit plans and are not available to all investors. They are sold without an initial sales charge, but are subject to a distribution fee of up to 0.25% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% on redemptions made within one year of a plan's initial purchase of Class R shares. All classes of shares represent interests in the same portfolio of investments, have the same rights and are generally identical in all respects except that each class bears its own class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. 2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which require management to make certain estimates and assumptions at the date of the financial statements. Actual results may differ from these estimates. The following summarizes the significant accounting policies of the Fund: A. SECURITY VALUATION AND RISK -- Securities traded on an exchange are valued at the last sales price on the primary exchange or market on which they are traded. Securities not listed on an exchange or security market, or securities for which there is no last sales price, are valued at the mean of the most recent bid and asked prices or are valued by RiverSource Investments, LLC 26 Notes to Financial Statements ("RiverSource" or the "Manager") based on quotations provided by primary market makers in such securities. Securities for which market quotations are not readily available (or are otherwise no longer valid or reliable) are valued at fair value determined in accordance with procedures approved by the Board of Directors. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts, and extreme market volatility. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. Short-term holdings maturing in 60 days or less are valued at current market quotations or amortized cost if the Fund's Manager believes it approximates fair value. Short-term holdings that mature in more than 60 days are valued at current market quotations until the 60th day prior to maturity and are then valued as described above for securities maturing in 60 days or less. Investments in money market funds are valued at net asset value. On January 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 ("SFAS 157"), "Fair Value Measurements." SFAS 157 establishes a three-tier hierarchy to classify the assumptions, referred to as inputs, used in valuation techniques (as described above) to measure fair value of the Fund's investments. These inputs are summarized in three broad levels: Level 1 -- quoted prices in active markets for identical investments; Level 2 -- other significant observable inputs (including quoted prices in inactive markets or for similar investments); and Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining fair value) (Note 3). Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. To the extent that the Fund invests a substantial percentage of its assets in an industry, the Fund's performance may be negatively affected if that industry falls out of favor. Stocks of large-capitalization companies have at times experienced periods of volatility and negative performance. During such periods, the value of such stocks may decline and the Fund's performance may be negatively affected. B. EQUITY-LINKED NOTES -- The Fund may purchase notes created by a counterparty, typically an investment bank. The notes bear interest at a fixed or floating rate. At maturity, the notes must be exchanged for an amount based on the value of one or more equity securities ("Underlying Stocks") of third party issuers. The exchange value may be limited to an amount less than the actual value of the Underlying Stocks at the maturity date. Any difference between the exchange amount and the original cost of the notes will be a gain or loss. C. OPTIONS -- The Fund is authorized to write and purchase put and call options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Written and purchased options are non-income producing investments. 27 Notes to Financial Statements D. RESTRICTED CASH -- Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Fund's insurance policies. E. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class- specific expenses), and realized and unrealized gains or losses are allocated daily to each class of shares based upon the relative value of shares of each class. Class-specific expenses, which include distribution and service (12b-1) fees and any other items that are specifically attributable to a particular class, are charged directly to such class. For the year ended December 31, 2008, distribution and service (12b-1) fees, shareholder account services and registration expenses were class-specific expenses. F. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial reporting and federal income tax purposes. Dividends receivable are recorded on ex-dividend dates, except that certain dividends from foreign securities where the ex-dividend dates may have passed are recorded as soon as the Fund is informed of the dividend. Interest income is recorded on an accrual basis. G. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on ex-dividend dates. H. TAXES -- There is no provision for federal income tax. The Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all taxable net income and net gain realized. Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109," requires the Fund to measure and recognize in its financial statements the benefit of a tax position taken (or expected to be taken) on an income tax return if such position will more likely than not be sustained upon examination based on the technical merits of the position. The Fund files income tax returns in the US Federal jurisdiction, as well as the New York State and New York City jurisdictions. Based upon its review of tax positions for the Fund's open tax years of 2005-2008 in these jurisdictions, the Fund has determined that FIN 48 did not have a material impact on the Fund's financial statements for the year ended December 31, 2008. 3. FAIR VALUE MEASUREMENTS -- A summary of the value of the Fund's investments as of December 31, 2008, based on the level of inputs used in accordance with SFAS 157 (Note 2a), is as follows:
VALUATION INPUTS VALUE ------------------------------------------------------------------ Level 1 -- Quoted Prices in Active Markets for Identical Investments $101,504,243 ------------------------------------------------------------------ Level 2 -- Other Significant Observable Inputs 180,852 ------------------------------------------------------------------ Level 3 -- Significant Unobservable Inputs -- ------------------------------------------------------------------ Total $101,685,095 ------------------------------------------------------------------
4. MANAGEMENT AND DISTRIBUTION SERVICES, AND OTHER RELATED-PARTY TRANSACTIONS -- A. MANAGEMENT AND ADMINISTRATIVE SERVICES -- On November 7, 2008, RiverSource, investment manager to the RiverSource complex of funds, and a wholly owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise"), announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("JWS"). With the Acquisition completed and shareholders of the Fund having previously approved (at a Special Meeting held earlier in November 2008) a new Investment Management Services Agreement between RiverSource and the Fund, RiverSource is the new investment manager of the Fund effective November 7, 2008. 28 Notes to Financial Statements The Manager receives a fee (and, prior to November 7, 2008, JWS received a fee), calculated daily and payable monthly, equal to 0.65% per annum of the first $1 billion of the Fund's average daily net assets, 0.60% per annum of the next $1 billion of the Fund's average daily net assets, and 0.55% per annum of the Fund's average daily net assets in excess of $2 billion. The management fee reflected in the Statement of Operations represents 0.65% per annum of the Fund's average daily net assets. For the year ended December 31, 2008, RiverSource received $97,946 of such fee and the balance was paid to JWS. Under an Administrative Services Agreement, effective November 7, 2008, Ameriprise administers certain aspects of the Fund's business and other affairs at no cost. Ameriprise provides the Fund with office space, and certain administrative and other services and executive and other personnel as are necessary for Fund operations. Ameriprise pays all of the compensation of Board members of the Fund who are employees or consultants of RiverSource and of the officers and other personnel of the Fund. Ameriprise reserves the right to seek Board approval to increase the fees payable by the Fund under the Administrative Services Agreement. However, Ameriprise anticipates that any such increase in fees would be offset by corresponding decreases in advisory fees under the Investment Management Services Agreement. If an increase in fees under the Administrative Services Agreement would not be offset by corresponding decreases in advisory fees, the Fund will inform shareholders prior to the effectiveness of such increase. Prior to November 7, 2008, administrative services were provided to the Fund by JWS as part of its former management agreement with the Fund. B. DISTRIBUTION SERVICES -- For the year ended December 31, 2008, RiverSource Fund Distributors, Inc. (formerly Seligman Advisors, Inc.) (the "Distributor"), agent for the distribution of the Fund's shares and an affiliate of the Manager, received commissions and concessions of $3,252 from sales of Class A shares. Commissions of $14,175 were also paid to dealers for sales of Class A shares. The Fund has an Administration, Shareholder Services and Distribution Plan (the "Plan") with respect to distribution of its shares. Under the Plan, with respect to Class A shares, service organizations can enter into agreements with the Distributor and receive a continuing fee of up to 0.25% on an annual basis, payable monthly, of the average daily net assets of the Class A shares attributable to the particular service organizations for providing personal services and/or the maintenance of shareholder accounts. The Distributor charges such fees to the Fund pursuant to the Plan. For the year ended December 31, 2008, fees incurred under the Plan aggregated $341,378, or 0.24% per annum of the average daily net assets of Class A shares. Under the Plan, with respect to Class B shares, Class C shares, Class D shares (only through May 16, 2008), and Class R shares, service organizations can enter into agreements with the Distributor and receive a continuing fee for providing personal services and/or the maintenance of shareholder accounts of up to 0.25% on an annual basis of the average daily net assets of the Class B, Class C, Class D, and Class R shares for which the organizations are responsible; and, for Class C, Class D and Class R shares, fees for providing other distribution assistance of up to 0.75% (0.25%, in the case of Class R shares) on an annual basis of such average daily net assets. Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan. For the year ended December 31, 2008, fees incurred under the Plan, equivalent to 1% per annum of the average daily net assets of Class B, Class C, and Class D shares, and 0.50% per annum of the average daily net assets of Class R shares, amounted to $24,726, $72,347, $38,153, and $10,429, respectively. The Distributor and RiverSource Services, Inc. (formerly Seligman Services, Inc.), also an affiliate of the Manager, are eligible to receive distribution and service (12b-1) fees pursuant to the Plan. 29 Notes to Financial Statements For the year ended December 31, 2008, the Distributor and RiverSource Services, Inc. received distribution and service (12b-1) fees of $78,425. The Distributor is entitled to retain any CDSC imposed on certain redemptions of Class A, Class C, Class D, and Class R shares. For the year ended December 31, 2008, such charges amounted to $1,252. The Distributor has sold to third parties its rights to collect any CDSC imposed on redemptions of Class B shares. C. TRANSFER AGENT AND SHAREHOLDER SERVICES -- For the year ended December 31, 2008, Seligman Data Corp., which is owned by the Fund and certain associated investment companies, charged the Fund at cost $562,799 for shareholder account services in accordance with a methodology approved by the Fund's directors. Class I shares receive more limited shareholder services than the Fund's other classes of shares (the "Retail Classes"). Seligman Data Corp. does not allocate to Class I the costs of any of its departments that do not provide services to the Class I shareholders. Costs of Seligman Data Corp. directly attributable to the Retail Classes of the Fund were charged to those classes in proportion to their relative net asset values. Costs directly attributable to Class I shares were charged to Class I. The remaining charges were allocated to the Retail Classes and Class I by Seligman Data Corp. pursuant to a formula based on their net assets, shareholder transaction volumes and number of shareholder accounts. The Fund and certain other associated investment companies (together, the "Guarantors") have severally but not jointly guaranteed the performance and observance of all the terms and conditions of a lease entered into by Seligman Data Corp., including the payment of rent by Seligman Data Corp. (the "Guaranty"). The lease and the related Guaranty expire in January 2019. The obligation of the Fund to pay any amount due under the Guaranty is limited to a specified percentage of the full amount, which generally is based on the Fund's percentage of the expenses billed by Seligman Data Corp. to all Guarantors in the preceding calendar quarter. As of December 31, 2008, the Fund's potential obligation under the Guaranty is $242,800. As of December 31, 2008, no event has occurred which would result in the Fund becoming liable to make any payment under the Guaranty. A portion of the rent paid by Seligman Data Corp. is charged to the Fund as part of Seligman Data Corp.'s shareholder account services cost. As of December 31, 2008, the Fund's investment in Seligman Data Corp. is recorded at a cost of $22,506. The Fund's Board has approved RiverSource Service Corporation ("RSC") as the Fund's new transfer and shareholder service agent, and the termination of the Fund's relationship with Seligman Data Corp., effective on or about May 9, 2009. RSC is an affiliate of RiverSource. The fees and expenses expected to be charged to the Fund by RSC are generally lower than the fees and expenses charged by Seligman Data Corp. Nevertheless, as a result of the termination of the relationship with Seligman Data Corp., the Fund will incur certain non-recurring charges, including charges relating to Seligman Data Corp.'s leases, that would in the aggregate approximate 0.16% of the Fund's net assets as of January 23, 2009 (the "Non-Recurring Charges"). These Non-Recurring Charges will be incurred over a period of several months beginning January 28, 2009. Fund shareholders would bear their proportionate share of the Fund's expenses, including the Non-Recurring Charges. D. DIRECTORS' FEES AND EXPENSES -- Directors' fees and expenses includes the compensation of Board members who are not employees of RiverSource and the Fund's proportionate share of certain expenses of a company providing limited administrative services to the Fund and the other Seligman and RiverSource Funds. These expenses include boardroom and office expense, 30 Notes to Financial Statements employee compensation, employee health and retirement benefits and certain other expenses. For the period from November 7, 2008 through December 31, 2008, the Fund paid $60 to this company for such services. The Fund has a compensation arrangement under which directors who receive fees may elect to defer receiving such fees. Directors may elect to have their deferred fees accrue interest or earn a return based on the performance of the Fund or other funds in the Seligman and RiverSource Groups of Investment Companies. The cost of such fees and earnings/loss accrued thereon is included in directors' fees and expenses and the accumulated balance thereof at December 31, 2008, of $1,638 is included in accrued expenses and other liabilities. Deferred fees and related accrued earnings are not deductible by the Fund for federal income tax purposes until such amounts are paid. Certain officers and directors of the Fund are officers or directors of the Manager, Ameriprise, the Distributor, RiverSource Services, Inc., RSC, and/or Seligman Data Corp. 5. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $200 million committed line of credit that is shared by substantially all open-end funds in the Seligman Group of Investment Companies. The directors have currently limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility are subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurs a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may be drawn upon only for temporary purposes and is subject to certain other customary restrictions. The credit facility commitment expires in June 2009, but is renewable annually with the consent of the participating banks. For the year ended December 31, 2008, the Fund did not borrow from the credit facility. 6. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio securities, excluding short-term investments, for the year ended December 31, 2008, amounted to $194,120,652 and $203,742,084, respectively. 7. FEDERAL TAX INFORMATION -- Certain components of income, expense and realized capital gain and loss are recognized at different times or have a different character for federal income tax purposes and for financial reporting purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. As a result of the differences described above, the treatment for financial reporting purposes of distributions made during the year from net investment income or net realized gains may differ from their treatment for federal income tax purposes. Further, the cost of investments also can differ for federal income tax purposes. At December 31, 2008, the cost of investments for federal income tax purposes was $125,682,074. The tax basis cost was greater than the cost for financial reporting purposes due to the tax deferral of losses on wash sales of $767,660, which is partially offset by the tax deferral of gains on limited partnerships of $39,971. 31 Notes to Financial Statements The tax basis components of accumulated losses at December 31, 2008 are presented below. Gross unrealized appreciation of portfolio securities $ 4,084,047 ------------------------------------------------------------------- Gross unrealized depreciation of portfolio securities (28,081,026) ------------------------------------------------------------------- Net unrealized depreciation of portfolio securities (23,996,979) ------------------------------------------------------------------- Undistributed ordinary income 198,051 ------------------------------------------------------------------- Capital loss carryforward (18,820,220) ------------------------------------------------------------------- Timing differences (post-October losses) (60,409,401) ------------------------------------------------------------------- Total accumulated losses $(103,028,549) -------------------------------------------------------------------
At December 31, 2008, the Fund had a capital loss carryforward for federal income tax purposes of $18,820,220, all of which expires in 2016 and is available for offset against future taxable net capital gains. Accordingly, no capital gain distributions are expected to be paid to shareholders until net capital gains have been realized in excess of the available capital loss carryforward. There is no assurance that the Fund will be able to utilize all of its capital loss carryforward before it expires. In addition, from November 1, 2008 through December 31, 2008, the Fund incurred $60,409,401 of net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ended December 31, 2009. These losses will be available to offset future taxable net gains. 8. OPTIONS WRITTEN -- Transactions in options written during the year ended December 31, 2008, were as follows:
SHARES SUBJECT TO CALL PREMIUMS ----------------------------------------------------------------------- Options outstanding, December 31, 2007 -- $ -- ----------------------------------------------------------------------- Options written 64,300 63,430 ----------------------------------------------------------------------- Options expired (60,100) (51,754) ----------------------------------------------------------------------- Options exercised (4,200) (11,676) ----------------------------------------------------------------------- Options outstanding, December 31, 2008 -- $ -- -----------------------------------------------------------------------
9. CAPITAL SHARE TRANSACTIONS -- Transactions in shares of Capital Stock were as follows:
YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008 2007 ---------------------------------------------------------------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 213,538 $ 1,699,273 194,974 $ 2,562,851 ---------------------------------------------------------------------------------------- Investment of dividends 212,577 1,908,482 253,765 3,288,401 ---------------------------------------------------------------------------------------- Exchanged from associated funds 99,660 860,251 67,798 902,296 ---------------------------------------------------------------------------------------- Converted from Class B* 85,010 814,533 90,142 1,192,556 ---------------------------------------------------------------------------------------- Investment of gain distribution 346,649 3,209,972 1,035,053 12,902,409 ---------------------------------------------------------------------------------------- Total 957,434 8,492,511 1,641,732 20,848,513 ---------------------------------------------------------------------------------------- Cost of shares repurchased (2,246,839) (19,151,497) (2,329,652) (31,051,541) ---------------------------------------------------------------------------------------- Exchanged into associated funds (245,247) (1,923,819) (104,428) (1,359,094) ---------------------------------------------------------------------------------------- Total (2,492,086) (21,075,316) (2,434,080) (32,410,635) ---------------------------------------------------------------------------------------- Decrease (1,534,652) $(12,582,805) (792,348) $(11,562,122) ----------------------------------------------------------------------------------------
------- See footnotes on page 34. 32 Notes to Financial Statements
YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008+ 2007 ---------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 15,838 $ 128,998 23,644 $ 302,735 ---------------------------------------------------------------------------------------- Investment of dividends 3,464 31,142 5,423 68,978 ---------------------------------------------------------------------------------------- Exchanged from associated funds 6,787 58,822 43,908 523,464 ---------------------------------------------------------------------------------------- Investment of gain distribution 7,587 68,511 27,525 336,428 ---------------------------------------------------------------------------------------- Total 33,676 287,473 100,500 1,231,605 ---------------------------------------------------------------------------------------- Cost of shares repurchased (57,688) (468,429) (115,603) (1,506,990) ---------------------------------------------------------------------------------------- Exchanged into associated funds (9,293) (73,428) (28,316) (352,012) ---------------------------------------------------------------------------------------- Converted to Class A* (87,341) (814,533) (92,275) (1,192,556) ---------------------------------------------------------------------------------------- Total (154,322) (1,356,390) (236,194) (3,051,558) ---------------------------------------------------------------------------------------- Decrease (120,646) $ (1,068,917) (135,694) $ (1,819,953) ---------------------------------------------------------------------------------------- CLASS C SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 117,534 $ 910,222 7,340 $ 95,107 ---------------------------------------------------------------------------------------- Investment of dividends 11,949 101,494 4,901 62,054 ---------------------------------------------------------------------------------------- Exchanged from associated funds 30,867 223,321 9,370 120,650 ---------------------------------------------------------------------------------------- Converted from Class D** 970,012 10,243,323 -- -- ---------------------------------------------------------------------------------------- Investment of gain distribution 36,959 334,114 25,387 309,282 ---------------------------------------------------------------------------------------- Total 1,167,321 11,812,474 46,998 587,093 ---------------------------------------------------------------------------------------- Cost of shares repurchased (261,629) (2,165,324) (74,545) (981,174) ---------------------------------------------------------------------------------------- Exchanged into associated funds (37,194) (268,071) (9,385) (120,127) ---------------------------------------------------------------------------------------- Total (298,823) (2,433,395) (83,930) (1,101,301) ---------------------------------------------------------------------------------------- Increase (decrease) 868,498 $ 9,379,079 (36,932) $ (514,208) ---------------------------------------------------------------------------------------- CLASS D SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 109,904 $ 1,129,972 162,959 $ 2,111,477 ---------------------------------------------------------------------------------------- Investment of dividends 4,550 45,232 15,146 193,072 ---------------------------------------------------------------------------------------- Exchanged from associated funds 7,151 73,491 13,023 166,580 ---------------------------------------------------------------------------------------- Investment of gain distribution -- -- 86,663 1,054,800 ---------------------------------------------------------------------------------------- Total 121,605 1,248,695 277,791 3,525,929 ---------------------------------------------------------------------------------------- Cost of shares repurchased (143,009) (1,441,922) (320,391) (4,166,341) ---------------------------------------------------------------------------------------- Exchanged into associated funds (10,443) (106,809) (16,848) (212,989) ---------------------------------------------------------------------------------------- Converted to Class C** (970,012) (10,243,323) -- -- ---------------------------------------------------------------------------------------- Total (1,123,464) (11,792,054) (337,239) (4,379,330) ---------------------------------------------------------------------------------------- Decrease (1,001,859) $(10,543,359) (59,448) $ (853,401) ----------------------------------------------------------------------------------------
------- See footnotes on page 34. 33 Notes to Financial Statements
YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008 2007 ---------------------------------------------------------------------------------------- CLASS I SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 206,695 $ 1,703,090 118,049 $ 1,530,621 ---------------------------------------------------------------------------------------- Investment of dividends 17,321 153,717 14,798 192,584 ---------------------------------------------------------------------------------------- Investment of gain distribution 19,271 179,990 46,978 587,906 ---------------------------------------------------------------------------------------- Total 243,287 2,036,797 179,825 2,311,111 ---------------------------------------------------------------------------------------- Cost of shares repurchased (112,062) (829,119) (38,578) (508,773) ---------------------------------------------------------------------------------------- Increase 131,225 $ 1,207,678 141,247 $ 1,802,338 ---------------------------------------------------------------------------------------- CLASS R SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 133,420 $ 1,187,221 194,890 $ 2,669,609 ---------------------------------------------------------------------------------------- Investment of dividends 4,320 38,920 1,415 19,543 ---------------------------------------------------------------------------------------- Exchanged from associated funds 1,561 15,791 273 3,576 ---------------------------------------------------------------------------------------- Investment of gain distribution 7,234 67,199 14,538 181,399 ---------------------------------------------------------------------------------------- Total 146,535 1,309,131 211,116 2,874,127 ---------------------------------------------------------------------------------------- Cost of shares repurchased (81,527) (688,099) (70,987) (946,421) ---------------------------------------------------------------------------------------- Exchanged into associated funds (1,457) (10,055) -- -- ---------------------------------------------------------------------------------------- Total (82,984) (698,154) (70,987) (946,421) ---------------------------------------------------------------------------------------- Increase 63,551 $ 610,977 140,129 $ 1,927,706 ----------------------------------------------------------------------------------------
-------- * Automatic conversion of Class B shares to Class A shares approximately eight years after their initial purchase date. ** Effective May 16, 2008, Class D shares were converted to Class C shares. + January 1, 2008 to May 16, 2008, in the case of Class D shares. 10. PROCEEDS FROM REGULATORY SETTLEMENT -- In June 2008, as a result of a settlement of an administrative proceeding brought by the SEC against an unaffiliated third party relating to market timing and/or late trading of mutual funds, the Fund received $209,621, which represented the Fund's portion of the proceeds from the settlement (the Fund was not a party to the proceeding). The proceeds received by the Fund were recorded as an increase to additional paid-in capital. 11. OTHER MATTERS -- In late 2003, JWS conducted an extensive internal review concerning mutual fund trading practices. JWS's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies then managed by JWS (the "Seligman Funds"); this arrangement was in the process of being closed down by JWS before September 2003. JWS identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, JWS, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. JWS also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York ("NYAG"). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against JWS and the Distributor relating to frequent trading in the Seligman Funds. JWS responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that JWS had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. 34 In September 2006, the NYAG commenced a civil action in New York State Supreme Court against JWS, the Distributor, Seligman Data Corp. and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by JWS is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by JWS to the Seligman Funds were excessive. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by JWS and not by the Seligman Funds. If the NYAG obtains injunctive relief, each of JWS, RiverSource Investments, LLC ("RiverSource") and their affiliates could, in the absence of the SEC in its discretion granting exemptive relief, be enjoined from providing advisory and underwriting services to the Seligman Funds and other registered investment companies, including those funds in the RiverSource complex. Neither JWS nor RiverSource believes that the foregoing legal action or other possible actions will have a material adverse impact on JWS, RiverSource or their current and former clients, including the Seligman Funds and other investment companies managed by RiverSource; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences. 12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT -- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 ("SFAS 161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of December 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. 13. SUBSEQUENT EVENTS -- On January 8, 2009, the Fund's Board approved in principle the merger of the Fund into RiverSource Disciplined Equity Fund. The completion of the merger is subject to approval by shareholders of the Fund. It is currently anticipated that proxy materials regarding the merger will be distributed to shareholders of the Fund during the first or second quarter of 2009, and that a special meeting of shareholders to consider such merger will be scheduled for the second quarter of 2009. 35 Financial Highlights The tables below are intended to help you understand each Class's financial performance for the periods presented. Certain information reflects financial results for a single share of a Class that was held throughout the periods shown. Per share amounts are calculated using average shares outstanding during the period. Total return shows the rate that you would have earned (or lost) on an investment in each Class, assuming you reinvested all your dividend and capital gain distributions, if any. Total returns do not reflect any sales charges or transaction costs on your investment or taxes investors may incur on distributions or on the redemption of shares, and are not annualized for periods of less than one year.
CLASS A - ---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 2008 2007 2006 2005 2004 - ---------------------------------------------------------------------------------------------- PER SHARE DATA: - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $11.44 $13.08 $11.67 $11.58 $10.42 - ---------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ---------------------------------------------------------------------------------------------- Net investment income 0.20 0.33 0.09 0.06 0.07 - ---------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.14) (0.49) 1.80 0.09 1.16 - ---------------------------------------------------------------------------------------------- TOTAL FROM INVESTMENT OPERATIONS (4.94) (0.16) 1.89 0.15 1.23 - ---------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: - ---------------------------------------------------------------------------------------------- Dividends from net investment income (0.20) (0.33) (0.09) (0.06) (0.07) - ---------------------------------------------------------------------------------------------- Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ---------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (0.49) (1.48) (0.48) (0.06) (0.07) - ---------------------------------------------------------------------------------------------- PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $6.02 $11.44 $13.08 $11.67 $11.58 - ---------------------------------------------------------------------------------------------- TOTAL RETURN (44.56)%(1) (1.84)% 16.23% 1.26% 11.82%# - ---------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - ---------------------------------------------------------------------------------------------- Net assets, end of year (000s $183,4- $220,1- $223,8- $264,1- omitted) $87,222 49 52 00 42 - ---------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.44% 1.33% 1.33% 1.29% 1.28% - ---------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 2.18% 2.47% 0.71% 0.50% 0.66% - ---------------------------------------------------------------------------------------------- Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ----------------------------------------------------------------------------------------------
- ------- See footnotes on page 41. 36 Financial Highlights
CLASS B - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.17 $12.79 $11.43 $11.37 $10.25 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.13 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.03) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.90) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.12) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.41) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $5.87 $11.17 $12.79 $11.43 $11.37 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (45.02)%(1) (2.54)% 15.38% 0.53% 10.93%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $1,280 $3,784 $6,068 $9,049 $13,581 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.20% 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.42% 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------
- ------- See footnotes on page 41. 37 Financial Highlights
CLASS C - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.18 $12.80 $11.44 $11.38 $10.26 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.12 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.02) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.90) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.12) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.41) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $5.88 $11.18 $12.80 $11.44 $11.38 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.98)%(1) (2.54)% 15.37% 0.53% 10.92%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $6,896 $3,412 $4,381 $4,674 $5,227 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.20% 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.42% 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------
- ------- See footnotes on page 41. 38 Financial Highlights
CLASS D - ------------------------------------------------------------------------------------------------ 1/1/08 YEAR ENDED DECEMBER 31, TO ---------------------------------------- 5/16/08* 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $11.17 $12.79 $11.43 $11.37 $10.25 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.07 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (0.64) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (0.57) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.05) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain -- (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.05) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $10.55 $11.17 $12.79 $11.43 $11.37 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (5.09)% (2.54)% 15.38% 0.53% 10.93%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of period (000s omitted) -- $11,189 $13,578 $13,704 $16,370 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.13%+ 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.79%+ 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09%(o) 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------
- ------- See footnotes on page 41. 39 Financial Highlights
CLASS I - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.53 $13.16 $11.71 $11.61 $10.44 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income 0.25 0.39 0.14 0.10 0.11 - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.19) (0.49) 1.81 0.10 1.17 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.94) (0.10) 1.95 0.20 1.28 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.24) (0.38) (0.11) (0.10) (0.11) - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.53) (1.53) (0.50) (0.10) (0.11) - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $6.07 $11.53 $13.16 $11.71 $11.61 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.30)%(1) (1.42)% 16.74% 1.69% 12.23%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $4,385 $6,818 $5,923 $4,134 $4,005 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 0.90% 0.88% 0.91% 0.93% 0.90% - ------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 2.72% 2.92% 1.13% 0.86% 1.04% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------
- ------- See footnotes on page 41. 40 Financial Highlights
CLASS R - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.47 $13.09 $11.67 $11.58 $10.42 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income 0.18 0.29 0.06 0.03 0.04 - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.16) (0.49) 1.80 0.09 1.17 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.98) (0.20) 1.86 0.12 1.21 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.17) (0.27) (0.05) (0.03) (0.05) - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.46) (1.42) (0.44) (0.03) (0.05) - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $6.04 $11.47 $13.09 $11.67 $11.58 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.67)%(1) (2.15)% 15.99% 1.01% 11.57%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $1,506 $2,133 $600 $385 $321 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 1.70% 1.58% 1.58% 1.55% 1.54% - ------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 1.92% 2.22% 0.46% 0.24% 0.40% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------
- -------- + Annualized. * Date of conversion to Class C shares. (o) Computed at the Fund level for the year ended December 31, 2008. # Excluding the effect of certain payments received from the Manager in 2004, total return would have been as follows: Class A 11.79%; Class B 10.90%; Class C 10.89%; Class D 10.90%; Class I 12.20%; and Class R 11.54%. (1) In June 2008, the Fund received its portion of the proceeds from a regulatory settlement between an unaffiliated third party and the SEC, which increased the net asset value per share and total return by $0.01 and 0.10%, respectively (Note 10). See Notes to Financial Statements. 41 Report of Independent Registered Public Accounting Firm THE BOARD OF DIRECTORS AND STOCKHOLDERS OF SELIGMAN COMMON STOCK FUND, INC.: We have audited the accompanying statement of assets and liabilities of Seligman Common Stock Fund, Inc. (the "Fund"), including the portfolio of investments, as of December 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not require to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers we performed other auditing procedures. We believe that our audits provide 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 Seligman Common Stock Fund, Inc. as of December 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP New York, New York February 27, 2009 42 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement BACKGROUND On July 7, 2008, RiverSource Investments, LLC ("RiverSource"), a wholly owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise"), entered into a stock purchase agreement with the shareholders of J. & W. Seligman & Co. Incorporated ("Seligman") under which RiverSource would acquire all of the outstanding capital stock of Seligman (the "Transaction"). The consummation of the Transaction resulted in the automatic termination of the Fund's management agreement with Seligman (the "Seligman Management Agreement"). In anticipation of the termination of the Seligman Management Agreement, at a meeting held on July 29, 2008, the directors of the Fund then serving unanimously approved an investment management agreement with RiverSource (the "Proposed Advisory Agreement"). At the special meeting of shareholders of the Fund held on November 3, 2008, the shareholders approved the Proposed Advisory Agreement. The Transaction closed on November 7, 2008, and upon the closing, RiverSource became the investment advisor to the Fund. BOARD CONSIDERATIONS Prior to their approval of the Proposed Advisory Agreement, the directors requested and evaluated extensive materials from, and were provided materials and information about the Transaction and matters related to the proposed approval by, Seligman, RiverSource and Ameriprise. In consultation with experienced counsel, who advised on the legal standards for consideration by the directors, the directors reviewed the Proposed Advisory Agreement with RiverSource. The independent directors also discussed the proposed approval with counsel in private sessions. At their meetings on June 12, 2008, July 17, 2008 and July 29, 2008, the directors discussed the Transaction with Seligman, and the Transaction and RiverSource's plans and intentions regarding the Fund with representatives of Ameriprise and RiverSource. The directors considered all factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and directors may have attributed different weights to the various factors. The directors determined that the selection of RiverSource to advise the Fund, and the overall arrangements between the Fund and RiverSource as provided in the Proposed Advisory Agreement, including the proposed advisory fee and the related administration arrangements between the Fund and Ameriprise, were fair and reasonable in light of the services to be performed, expenses incurred and such other matters as the directors considered relevant. The material factors and conclusions that formed the basis for the directors' determination included, in addition, the factors discussed in further detail below: (i) the reputation, financial strength and resources of RiverSource, and its parent, Ameriprise; (ii) the capabilities of RiverSource with respect to compliance and its regulatory histories; (iii) an assessment of RiverSource's compliance system by the Fund's Chief Compliance Officer; (iv) that RiverSource and Ameriprise assured the directors that following the Transaction there will not be any diminution in the nature, quality and extent of services provided to the Fund or its shareholders; 43 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement (v) that within the past year the directors had performed a full annual review of the Seligman Management Agreement, as required by the Investment Company Act of 1940 ("1940 Act"), for the Fund and had determined that they were satisfied with the nature, extent and quality of services provided thereunder and that the management fee rate for the Fund was satisfactory; (vi) the potential benefits to the Fund of the combination of RiverSource and Seligman to the Fund, including: greater resources to attract and retain high quality investment personnel; greater depth and breadth of investment management capabilities, including a new team of portfolio managers for the Fund; a continued high level of service to the Fund; and the potential for realization of economies of scale over time since the Fund will be part of a much larger fund complex; (vii) the fact that the Fund's total advisory and administrative fees would not increase by virtue of the Proposed Advisory Agreement, but would remain the same; (viii) that RiverSource, and not the Fund, would bear the costs of obtaining all approvals of the Proposed Advisory Agreement; (ix) the qualifications of the personnel of RiverSource and Ameriprise that would provide advisory and administrative services to the Fund; (x) the terms and conditions of the Proposed Advisory Agreement, including the directors' review of differences from the Seligman Management Agreement; (xi) that RiverSource and Ameriprise have agreed to refrain from imposing or seeking to impose, for a period of two years after the closing of the Transaction, any "unfair burden" (within the meaning of Section 15(f) of 1940 Act) on the Fund; and (xii) that certain members of RiverSource's management have a significant amount of experience integrating other fund families. NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED In considering the nature, extent and quality of the services to be provided under the Proposed Advisory Agreement, the directors of the Fund considered, among other things, the expected impact of the Transaction on the operations of the Fund, the information provided by RiverSource with respect to the nature, extent and quality of services to be provided by it, RiverSource's compliance programs and compliance records, and presentations provided on the quality of RiverSource's investment research capabilities and the other resources it and Ameriprise have indicated that they would dedicate to performing services for the Fund. The directors noted the professional experience and qualifications of the new portfolio management team proposed for the Fund and other senior personnel of RiverSource. The directors considered a report by, the Fund's Chief Compliance Officer, assessing RiverSource's compliance system, which was followed by a private session with the Fund's Chief Compliance Officer. They also discussed RiverSource's compliance system with the Chief Compliance Officer for the funds managed by RiverSource. The directors also considered RiverSource's presentation on the selection of brokers and dealers for portfolio transactions. As administrative services (provided under the Seligman Management Agreement) would be provided to the Fund by Ameriprise at no additional cost under a new administrative services agreement rather than pursuant to the Proposed Advisory Agreement, the directors considered Ameriprise's capability to provide such administrative services as well as RiverSource's and Ameriprise's roles in 44 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement coordinating the activities of the Fund's other service providers. The directors noted that Ameriprise intended to continue Seligman's practice of sub- contracting administrative services provided by Seligman for the Fund to State Street Bank and Trust Company for the foreseeable future. The directors concluded that, overall, they were satisfied with assurances from RiverSource and Ameriprise as to the expected nature, extent and quality of the services to be provided to the Fund under the Proposed Advisory Agreement and the new administrative services agreement. COSTS OF SERVICES PROVIDED AND PROFITABILITY In considering the costs of services to be provided by RiverSource under the Proposed Advisory Agreement, the directors considered, among other things, the projected pre-tax, pre-distribution expense profitability of RiverSource's proposed relationship with the Fund and discussed the assumptions of RiverSource and the limitations of the information provided. The directors noted that RiverSource had undertaken to provide profitability information in connection with future contract continuances. The directors also considered RiverSource's financial condition based on information provided by it. The directors noted that the proposed fee under the Proposed Advisory Agreement was the same as provided under the Seligman Management Agreement. The directors recognized that it is difficult to make comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors. In reviewing the projected profitability information, the directors considered the effect of fall-out benefits on RiverSource's expenses. The directors concluded that they were satisfied that RiverSource's estimated future profitability from its relationship with the Fund was not excessive. FALL-OUT BENEFITS The directors considered that RiverSource would benefit from soft dollar arrangements using portfolio brokerage of the Fund. The directors also noted RiverSource's representation that none of its affiliated broker-dealers was expected to provide brokerage services to the Fund. The directors reviewed information about RiverSource's practices with respect to allocating portfolio brokerage for brokerage and research services. The directors also considered that broker-dealer affiliates of RiverSource, including a broker-dealer affiliate of Seligman (which became an affiliate of RiverSource following the closing of the Transaction) will receive 12b-1 fees from the Fund in respect of shares held in certain accounts, and that the Fund's distributor (which also became a subsidiary of RiverSource following the closing of the Transaction) retains a portion of the 12b-1 fees from the Fund and receives a portion of the sales charges on sales or redemptions of certain classes of shares of the Fund. The directors recognized that RiverSource's profitability would be somewhat lower without these benefits. The directors noted that RiverSource may derive reputational and other benefits from its association with the Fund. INVESTMENT RESULTS The directors received and reviewed detailed performance information on the Fund at each regular Board meeting during the year in addition to the information received for the meeting regarding approval of the Proposed Advisory Agreement. The directors noted that a new portfolio manager was being proposed by RiverSource for the Fund. The directors discussed the proposed portfolio management team, its investment strategy and process and historical performance record with representatives of RiverSource. The directors reviewed performance 45 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement information of the Fund covering a wide range of periods, including the first six months of the calendar year, the preceding seven calendar years and annualized one-, three- and five-year rolling periods ending June 30, 2008. The directors reviewed information showing performance of the Fund compared to the Lipper Large-Cap Core Funds Average and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"), as well as performance relative to the other funds in the Lipper Large-Cap Core Funds Average and to a group of competitor funds selected by Seligman. The directors also reviewed annualized performance information for RiverSource Disciplined Equity Fund, which is currently advised by the proposed portfolio manager, for annualized one-, three- and five-years ended June 30, 2008, the past four calendar years, as well as year-to-date information as of July 10, 2008. The directors noted that information for RiverSource Disciplined Equity Fund was not available for all corresponding periods because it did not commence operations until April 2003. The directors noted that the results of RiverSource Disciplined Equity Fund were generally better than that of the Fund for the periods presented and the performance information was helpful in demonstrating the skill of the proposed portfolio management team, although they recognized that the performance of the Fund would differ from that of RiverSource Disciplined Equity Fund since it would use a modified version of such fund's investment process to comply with the Fund's strategy as disclosed in its prospectus. The directors noted that RiverSource Disciplined Equity Fund's calendar year results were above its benchmarks, the S&P 500 Index and Lipper Large Cap Core Funds, in 2005 and 2006, although they trailed the benchmarks in 2007. The directors recognized that it is not possible to predict what effect, if any, consummation of the Transaction would have on the future performance of the Fund. MANAGEMENT FEE AND OTHER EXPENSES The directors considered the proposed advisory fee rate to be paid by the Fund to RiverSource, which is the same as the management fee rate paid by the Fund under the Seligman Management Agreement. In addition to the materials provided by Seligman, RiverSource provided information regarding the fees for each of the RiverSource funds and managed accounts. The directors noted that the effective advisory fee rate for the RiverSource funds in the same Lipper category as the Fund were lower than the proposed advisory fee rate for the Fund, and that the RiverSource equity fund fee rates are generally subject to adjustments based on investment performance whereas the proposed fee rate for the Fund, consistent with those in the Seligman Management Agreement, do not reflect performance adjustments. The directors recognized that it is difficult to make comparisons of advisory and management fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund's proposed advisory fee rate to the rate paid by other funds in its Lipper category (the "peer group"). In considering the proposed advisory fee rate, the directors noted that the management fee rate under the Seligman Management Agreement covers administrative services provided by Seligman, whereas the Proposed Advisory Agreement does not include such services, but that Ameriprise will provide such services to the Fund pursuant to a separate administrative services agreement initially without a fee. The directors further considered that the administrative fees, since they are not included in an advisory agreement, could be increased without stockholder approval, although RiverSource noted that, at that time, it did not have an intention to seek an increase, and that any such administrative fee increase would require board approval. The directors also noted RiverSource's and 46 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement Ameriprise's covenants in the Transaction's stock purchase agreement regarding compliance with Section 15(f) of the 1940 Act. The directors noted that the management fee rate paid by a registered investment company managed by Seligman that is a "clone" of the Fund is lower than the rate paid by the Fund primarily for historical reasons. Seligman explained that the lower fee rate was largely the result of fee rate increases at the Fund that had not been sought for the "clone" portfolio. This was because, in view of the small size of the clone portfolio and the fact that, at various times, the Fund had been subsidized by Seligman, Seligman had determined not to recommend fee rate increases for the clone portfolio to match those recommended for the Fund. The directors also reviewed the Fund's total expense ratio as compared to the fees and expenses of funds within its peer group. In considering the expense ratios of the Fund, the directors noted that the Fund has elected to have shareholder services provided at cost by Seligman Data Corp. ("SDC"). SDC provides services exclusively to the Seligman Group of Funds, and the directors believed that the arrangement with SDC has provided the Fund and its shareholders with a consistently high level of service. The directors noted that RiverSource had previously indicated that no changes to the arrangements with SDC were being proposed at the time by RiverSource. The directors noted that they had concluded in their most recent continuance considerations regarding the Seligman Management Agreement that the management fee and total expense ratio were at an acceptable level in light of the quality of services provided to the Fund and in comparison to the Fund's peer group; that the advisory fee would not be increased and would stay the same for the Fund; that the total expense ratio had not changed since that determination; and that RiverSource had represented that the overall expenses for the Fund were not expected to be adversely affected by the Transaction. On that basis, the directors concluded that the total expense ratio and the proposed advisory fee for the Fund anticipated to result from the proposed arrangements with RiverSource was acceptable. ECONOMIES OF SCALE The directors noted that the management fee schedule for the Fund contains breakpoints that reduce the fee rate on assets above specified levels. The directors recognized that there is no direct relationship between the economies of scale realized by funds and those realized by their investment advisers as assets increase. The directors do not believe that there is a uniform methodology for establishing breakpoints that give effect to fund-specific economies of scale with respect to services provided by fund advisers. The directors also observed that in the investment company industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply, and that the advisory agreements for many competitor funds do not have breakpoints at all. The directors noted that RiverSource had indicated that no changes to the Fund's breakpoint arrangements were proposed to be made at the time. Having taken these factors into account, the directors concluded that the Fund's breakpoint arrangements were acceptable under the Fund's circumstances. The directors also recognized that the Fund may benefit from certain economies of scale over time from becoming a part of the larger RiverSource fund complex, based on potential future synergies of operations. 47 Proxy Results Shareholders of Seligman Common Stock Fund, Inc. voted on two proposals at a Special Meeting of Stockholders held on November 3, 2008. Shareholders voted in favor of each of the proposals. The description of each proposal and number of shares voted are as follows: PROPOSAL 1 To consider and vote upon the proposed Investment Management Services Agreement with RiverSource Investments, LLC:
FOR AGAINST ABSTAIN --------------------------------------------------------------------- 8,963,650.766 400,673.139 305,851.343 ---------------------------------------------------------------------
PROPOSAL 2 To elect ten directors to the Board:
FOR WITHHELD ------------------------------------------------------- Kathleen Blatz 10,629,944.599 503,263.649 ------------------------------------------------------- Arne H. Carlson 10,637,834.502 495,423.746 ------------------------------------------------------- Pamela G. Carlton 10,644,221.021 489,037.227 ------------------------------------------------------- Patricia M. Flynn 10,649,627.704 483,630.544 ------------------------------------------------------- Anne P. Jones 10,641,163.306 492,094.942 ------------------------------------------------------- Jeffrey Laikind 10,639,992.531 493,265.717 ------------------------------------------------------- Stephen R. Lewis, Jr. 10,647,976.488 485,281.760 ------------------------------------------------------- Catherine James Paglia 10,653,224.568 480,033.680 ------------------------------------------------------- Alison Taunton-Rigby 10,654,570.495 487,687.753 ------------------------------------------------------- William F. Truscott 10,649,864.613 483,393.635 -------------------------------------------------------
48 Directors and Officers Shareholders elect a Board of Directors that oversees the Fund's operations. In connection with the acquisition of the Fund's prior investment manager, J. & W. Seligman & Co. Incorporated, by RiverSource Investments, LLC, shareholders of the Fund voted at a Special Meeting of Shareholders held on November 3, 2008 to elect 10 members to the Fund's Board. Messrs. Maher and Richie served on the Fund's Board prior to the acquisition and will continue to do so. Each member of the Board oversees 163 portfolios in the fund complex managed by RiverSource Investments, which includes 59 Seligman Funds and 104 RiverSource Funds. The address of each Director is 901 S. Marquette Ave., Minneapolis, MN 55402. Independent Directors
PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, (AGE), POSITION(S) YEARS, DIRECTORSHIPS AND OTHER HELD WITH FUND INFORMATION - ------------------------------------------------------------------------ KATHLEEN BLATZ (54)(1,2,6,7) Attorney. Formerly, Chief Justice, Minnesota Supreme Court, 1998-2006. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ ARNE H. CARLSON Formerly, Chairman, RiverSource Funds, (74)(1,2,3,5,6) 1999-2006; Governor of Minnesota. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ PAMELA G. CARLTON (54)(4,6,7) President, Springboard -- Partners in Cross Cultural Leadership (consulting - - Director: From company). November 7, 2008 - ------------------------------------------------------------------------ PATRICIA M. FLYNN (58)(1,3,6) Trustee Professor of Economics and Management, Bentley College. Formerly, - - Director: From Dean, McCallum Graduate School of November 7, 2008 Business, Bentley College. - ------------------------------------------------------------------------ ANNE P. JONES (73)(1,2,6,7) Attorney and Consultant. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ JEFFREY LAIKIND, CFA Director, American Progressive (73)(4,6,7) Insurance. Formerly, Managing Director, Shikiar Asset Management. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ STEPHEN R. LEWIS, JR. President Emeritus and Professor of (69)(1,2,3,4,6) Economics, Carleton College; Director, Valmont Industries, Inc. (manufactures - - Director and Chairman of the irrigation systems). Board: From November 7, 2008 - ------------------------------------------------------------------------ JOHN F. MAHER (64)(4,6,7) Retired President and Chief Executive Officer, and former Director, Great - - Director: December 2006 Western Financial Corporation (bank to Date holding company) and its principal subsidiary, Great Western Bank (a federal savings bank). - ------------------------------------------------------------------------
- ------- See footnotes on page 50. 49 Directors and Officers Independent Directors (continued)
PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, (AGE), POSITION(S) YEARS, DIRECTORSHIPS AND OTHER HELD WITH FUND INFORMATION - ------------------------------------------------------------------------ CATHERINE JAMES PAGLIA Director, Enterprise Asset Management, (56)(2,3,4,5,6) Inc. (private real estate and asset management company). - - Director: From November 7, 2008 - ------------------------------------------------------------------------ LEROY C. RICHIE (66)(3,4,6) Counsel, Lewis & Munday, P.C. (law firm); Director, Vibration Control - - Director: 2000 to Date Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally Inc. (digital imaging) and Infinity, Inc. (oil and gas exploration and production); Director and Chairman, Highland Park Michigan Economic Development Corp.; and Chairman, Detroit Public Schools Foundation; Director, OGE Energy Corp. (energy and energy services provider). Formerly, Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director, Kerr-McGee Corporation (diversified energy and chemical company); Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. - ------------------------------------------------------------------------ ALISON TAUNTON-RIGBY Chief Executive Officer and Director, (64)(3,4,5,6) RiboNovix, Inc. since 2003 (biotechnology); Director, Idera - - Director: From Pharmaceutical, Inc. (biotechnology); November 7, 2008 Healthways, Inc. (health management programs). Formerly, President, Forester Biotech. - ------------------------------------------------------------------------ Interested Director* - ------------------------------------------------------------------------ WILLIAM F. TRUSCOTT President-US Asset Management and Chief (48)*(6) Investment Officer, Ameriprise Financial, Inc. and President, Chairman - - Director and Vice President: of the Board, and Chief Investment From November 7, 2008 Officer, RiverSource Investments, LLC; Director, President and Chief Executive Officer, Ameriprise Certificate Company; and Chairman of the Board, Chief Executive Officer, and President, RiverSource Distributors, Inc. Formerly, Senior Vice President-Chief Investment Officer, Ameriprise Financial, Inc.; and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005. - ------------------------------------------------------------------------
- ------- * Mr. Truscott is considered an "interested person" of the Fund, as defined in the Investment Company Act of 1940, as amended, by virtue of his position with Ameriprise Financial, Inc. and its affiliates. Member: Board Governance Committee 5 Executive Committee 2 Compliance Committee 6 Investment Review Committee 3 Contracts Committee 7 Joint Audit Committee 4 Distribution Committee
50 Directors and Officers Fund Officers The Board appoints 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 a Director and Vice President of the Fund, the Fund's other officers are:
NAME, (AGE), POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST FIVE FUND, ADDRESS YEARS - ------------------------------------------------------------------------ PATRICK T. BANNIGAN (43) Director and Senior Vice President -- Asset Management, Products - - President: and Marketing, RiverSource Investments, From November 7, 2008 LLC; Director and Vice - - 172 Ameriprise Financial President -- Asset Management, Products Center Minneapolis, MN 55474 and Marketing, RiverSource Distributors, Inc. Formerly, Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002- 2004. - ------------------------------------------------------------------------ MICHELLE M. KEELEY (44) Executive Vice President -- Equity and Fixed Income, Ameriprise Financial, Inc. - - Vice President: and RiverSource Investments, LLC; Vice From November 7, 2008 President -- Investments, Ameriprise - - 172 Ameriprise Financial Certificate Company. Formerly, Senior Center Minneapolis, MN 55474 Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004- 2006. - ------------------------------------------------------------------------ AMY K. JOHNSON (43) Vice President -- Asset Management and Trust Company Services, RiverSource - - Vice President: Investments, LLC. Formerly, Vice From November 7, 2008 President -- Operations and Compliance, - - 5228 Ameriprise Financial RiverSource Investments, LLC, 2004-2006; Center Minneapolis, MN 55474 Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004. - ------------------------------------------------------------------------ SCOTT R. PLUMMER (49) Vice President and Chief Counsel -- Asset Management, Ameriprise - - Vice President, General Financial, Inc.; Chief Counsel, Counsel and Secretary: RiverSource Distributors, Inc. and Chief From November 7, 2008 Legal Officer and Assistant Secretary, - - 5228 Ameriprise Financial RiverSource Investments, LLC; Vice Center Minneapolis, MN 55474 President, General Counsel, and Secretary, Ameriprise Certificate Company. Formerly, Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004. - ------------------------------------------------------------------------ LAWRENCE P. VOGEL (52) Treasurer of each of the investment companies of the Seligman Group of Funds - - Treasurer: since 2000; and Treasurer, Seligman Data 2000 to Date Corp. since 2000. Formerly, Senior Vice - - 100 Park Avenue President, J. & W. Seligman & Co. New York, NY 10017 Incorporated and Vice President of each of the investment companies of the Seligman Group of Funds, 1992-2008. - ------------------------------------------------------------------------ ELEANOR T.M. HOAGLAND (56) Chief Compliance Officer, RiverSource Investments, LLC (J. & W. Seligman & Co. - - Chief Compliance Officer: Incorporated prior to November 7, 2008), 2004 to Date of each of the investment companies of - - Money Laundering Prevention the Seligman Group of Funds since 2004; Officer and Identity Theft Money Laundering Prevention Officer and Prevention Officer: From Identity Theft Prevention Officer, November 7, 2008 RiverSource Investments, LLC for each of - - 100 Park Avenue the investment companies of the Seligman New York, NY 10017 Group of Funds since November 7, 2008. Formerly, Managing Director, J. & W. Seligman & Co. Incorporated and Vice President of each of the investment companies of the Seligman Group of Funds, 2004-2008. - ------------------------------------------------------------------------
The Fund's Statement of Additional Information (SAI) includes additional information about Fund directors and is available, without charge, upon request. You may call toll-free (800) 221-2450 in the US or call collect (212) 682-7600 outside the US to request a copy of the SAI, to request other information about the Fund, or to make shareholder inquiries. 51 Required Federal Income Tax Information (unaudited) Dividends paid for the year ended December 31, 2008, other than qualified dividend income, are subject to federal income tax as "ordinary income." In order to claim the dividends received deduction for these distributions, corporate shareholders must have held their shares for 46 days or more during the 90-day period beginning 45 days before each ex-dividend date. Under the Internal Revenue Code, the dividends paid to corporate shareholders that qualify for the dividends received deduction were as follows:
- ------------------------------------------------------------------------ DIVIDENDS RECEIVED DEDUCTION PERCENT - ------------------------------------------------------------------------ Class A 72.62% - ------------------------------------------------------------------------ Class B 100.00 - ------------------------------------------------------------------------ Class C 95.53 - ------------------------------------------------------------------------ Class D 100.00 - ------------------------------------------------------------------------ Class I 62.04 - ------------------------------------------------------------------------ Class R 88.45 - ------------------------------------------------------------------------
For the year ended December 31, 2008, the Fund designates the following as qualified dividends to individual shareholders:
- ------------------------------------------------------------------------- QUALIFIED DIVIDENDS PERCENT - ------------------------------------------------------------------------- Class A 72.46% - ------------------------------------------------------------------------- Class B 100.00 - ------------------------------------------------------------------------- Class C 95.32 - ------------------------------------------------------------------------- Class D 100.00 - ------------------------------------------------------------------------- Class I 61.90 - ------------------------------------------------------------------------- Class R 88.25 - -------------------------------------------------------------------------
In order for an individual to claim dividends received as qualified dividends, individual shareholders must have held their shares for more than 60 days during the 121-day period beginning 60 days before each ex-dividend rate. 52 Additional Fund Information FUND SYMBOLS Class A: SCSFX Class B: SBCSX Class C: SCKCX Class R: SCSRX MANAGER From November 7, 2008 RiverSource Investments, LLC 200 Ameriprise Financial Center Minneapolis, MN 55474 Until November 6, 2008 J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 GENERAL DISTRIBUTOR RiverSource Fund Distributors, Inc. (formerly Seligman Advisors, Inc.) 100 Park Avenue New York, NY 10017 SHAREHOLDER SERVICE AGENT Seligman Data Corp. 100 Park Avenue New York, NY 10017 Mail inquiries to: P.O. Box 9759 Providence, RI 02940-9759 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP IMPORTANT TELEPHONE NUMBERS (800) 221-2450 Shareholder Services (800) 445-1777 Retirement Plan Services (212) 682-7600 Outside the United States (800) 622-4597 24-Hour Automated Telephone Access Service - -------------------------------------------------------------------------------- QUARTERLY SCHEDULE OF INVESTMENTS A complete schedule of portfolio holdings owned by the Fund will be filed with the SEC for the first and third quarters of each fiscal year on Form N-Q, and will be available to shareholders (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US or (ii) on the SEC's website at WWW.SEC.GOV.(1) In addition, the Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Certain of the information contained on the Fund's Form N-Q is also made available to shareholders on Seligman's website at WWW.SELIGMAN.COM.(1) PROXY VOTING A description of the policies and procedures used by the Fund to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC's website at WWW.SEC.GOV.(1) Information for each new 12-month period ending June 30 will be available no later than August 31 of that year. - ------- (1) These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Fund's prospectuses or statement of additional information. 53 [This Page Intentionally Left Blank] LOGO This report is intended only for the information of shareholders or those who have received the offering prospectus covering shares of Capital Stock of Seligman Common Stock Fund, Inc., which contains information about the investment objectives, risks, charges, and expenses of the Fund, each of which should be considered carefully before investing or sending money. EQCS2 12/08 EX-99.17(J) 15 c50349e.txt Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE LARGE CAP EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE LARGE CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUND ICON)
LETTER TO SHAREHOLDERS --------------------------------------------------------- PHOTO - BANNIGAN - LEWIS Patrick T. Bannigan (left) Stephen R. Lewis, Jr. (right) Dear Fellow Shareholder, The majority of today's workers are finding themselves responsible for funding their own retirement through 401(k)s, 403(b)s and IRAs, which can be a positive development. However, today's rising health care costs, inflation and dropping retirement account values have hit many retirees hard, and put retirement dreams on hold for approximately 27% of workers age 45 and older, according to an AARP survey released in May 2008. Since retirement could last up to 20 years or more for many retirees, it's important to take the long-term view. Unfortunately, many investors now realize they may not have adequately factored in the havoc a bear market could wreak on their retirement savings or the impact of rising gas and food prices on daily living expenses. Unexpected economic events such as these make careful planning for retirement all the more important, as retirees today and in the future are likely to see a number of up and down markets and economic cycles in their lifetimes. KEEPING UP WITH THE COST OF LIVING Company medical plans for retirees have gone the way of the B&W TV; there are still a few around, but they're disappearing rapidly. A July 2008 study by Hewitt Research Associates concludes employees actually will need to replace 126% of their salary once inflation and increased medical costs are included in the calculations. The 2008 Tiburon Consumer Wealth Report reports that a couple planning to retire in 2008 at the age of 65 will need $225,000 just to cover their medical expenses during retirement. PLAN FOR YOUR RETIREMENT BY WORKING WITH A FINANCIAL PROFESSIONAL A financial professional can help you establish goals for retirement income and develop a plan for saving and investing to achieve those goals. Several retirement-focused RiverSource investment strategies, such as RiverSource(R) Portfolio Builder Series, RiverSource(R) Income Builder Series - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT - -------------------------------------------------------------------------------- and RiverSource Retirement Plus(R) Series, can help remove emotion from your investing decisions through the application of > built-in diversification and asset allocation, > risk management, > automatic rebalancing and > professional portfolio management. MORE INVESTMENT OPTIONS RiverSource Investments also offers more than 50 single-strategy mutual funds designed to help you fully diversify your portfolio, and our Advanced Alpha(SM) Strategies funds, which are meant to potentially generate increased alpha (a risk-adjusted measure of above-market returns). Talk with your financial professional about which RiverSource funds or series of funds might best meet your needs today and in the years to come. Thank you for choosing RiverSource mutual funds and for your continued support. /s/ STEPHEN R. LEWIS, JR. /s/ PATRICK T. BANNIGAN Stephen R. Lewis, Jr. Patrick T. Bannigan President, RiverSource Funds Chairman of the Boards
DID YOU KNOW... - -------------------------------------------------------------------------------- > Two-thirds of baby boomers are dependent on their homes as a retirement asset.(1) > Nearly one-quarter of adults between the ages of 65 and 74 are in the workforce, up from 19% in 2000.(2) > Twenty-seven percent of workers age 45 and older said they had put their retirement plans on hold because of the slowing economy.(3) 1 Tiburon Strategic Advisors Consumer Wealth, Liquidation, & the Retirement Income Challenge Report, May 23, 2008 2 Bureau of Labor Statistics 3 AARP survey, May 13, 2008 - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT LETTER TO SHAREHOLDERS (continued) --------------------------------------------- For more information about any of our RiverSource Funds, go online to RiverSource.com or call (888) 791-3380. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 5 p.m. Central time. 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. Neither diversification or asset allocation assure a profit or protect against loss. There is no guarantee that the strategies discussed will be successful. The RiverSource Retirement Plus, Income Builder, and Portfolio Builder Series funds are "funds of funds" comprised of holdings in several different RiverSource Funds, which may include small-cap, mid-cap, large-cap, money market, international, bond, and/or sector funds. Each of the underlying funds in which the portfolio invests has its own investment risks, and those risks can affect the value of each portfolio's shares and investments. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. Non- investment grade securities generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Investments in small- and mid- capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. See the Funds' prospectus for more information on these and other risks that may be associated with the underlying funds. Alternative investments involve substantial risks and may be more volatile than traditional investments, making them more suitable for investors with an above average tolerance for risk. 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. Not all products and all shares classes are available at all firms offering RiverSource funds. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance............... 2 Manager Commentary.................. 5 The Fund's Long-term Performance ... 10 Fund Expenses Example............... 12 Portfolio of Investments............ 15 Financial Statements................ 26 Notes to Financial Statements....... 32 Report of Independent Registered Public Accounting Firm........... 55 Federal Income Tax Information...... 57 Board Members and Officers.......... 58 Approval of Investment Management Services Agreement............... 62 Proxy Voting........................ 64
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Large Cap Equity Fund (the Fund) Class A shares declined 15.40%, excluding sales charge, for the fiscal year ended July 31, 2008. > The Fund underperformed its benchmarks, the Russell 1000(R) Index and the Standard & Poor's 500 Index (S&P 500 Index), which fell 10.62% and 11.09%, respectively, for the same 12-month period. > The Fund's peer group, the Lipper Large-Cap Core Funds Index, declined 10.11% during the same time period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
Since 1 year 3 years 5 years inception(a) - -------------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class A (excluding sales charge) -15.40% +0.48% +4.39% +1.86% - -------------------------------------------------------------------------------- Russell 1000 Index (unmanaged) -10.62% +3.08% +7.55% +4.00% - -------------------------------------------------------------------------------- S&P 500 Index (unmanaged) -11.09% +2.85% +7.03% +3.47% - -------------------------------------------------------------------------------- Lipper Large-Cap Core Funds Index -10.11% +3.12% +6.31% +2.86% - --------------------------------------------------------------------------------
(See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (a) Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - ----------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - ----------------------------------------
Net Fund and Acquired Fund Total Net (Underlying Fund Expenses(a) Fund)(b) - -------------------------------------------------------------- Class A 1.03% 0.96% 0.98% - -------------------------------------------------------------- Class B 1.79% 1.73% 1.75% - -------------------------------------------------------------- Class C 1.79% 1.72% 1.74% - -------------------------------------------------------------- Class I 0.57% 0.54% 0.56% - -------------------------------------------------------------- Class R2 1.39% 1.34% 1.36% - -------------------------------------------------------------- Class R3 1.14% 1.09% 1.11% - -------------------------------------------------------------- Class R4 0.87% 0.82% 0.84% - -------------------------------------------------------------- Class R5 0.67% 0.59% 0.61% - --------------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.08% for the year ended July 31, 2008), will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. (b) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, was 0.02% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -15.40% +0.48% +4.39% +1.86% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -15.97% -0.33% +3.58% +1.05% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -16.11% -0.36% +3.55% +1.06% - -------------------------------------------------------------------------------- Class I (inception 3/4/04) -15.02% +0.89% N/A +2.41% - -------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -15.45% N/A N/A -7.72% - -------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -15.19% N/A N/A -7.45% - -------------------------------------------------------------------------------- Class R4 (inception 3/28/02) -15.40% +0.64% +4.55% +2.02% - -------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -15.38% N/A N/A -7.39% - -------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/28/02) -20.30% -1.48% +3.14% +0.90% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -19.70% -1.49% +3.24% +1.05% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -16.85% -0.36% +3.55% +1.06% - --------------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE WITHOUT SALES CHARGE 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -17.04% +1.76% +4.62% +2.06% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -17.66% +0.90% +3.77% +1.24% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -17.61% +0.94% +3.79% +1.29% - -------------------------------------------------------------------------------- Class I (inception 3/4/04) -16.68% +2.17% N/A +2.72% - -------------------------------------------------------------------------------- Class R2 (inception 12/11/06) -17.06% N/A N/A -7.35% - -------------------------------------------------------------------------------- Class R3 (inception 12/11/06) -16.86% N/A N/A -7.19% - -------------------------------------------------------------------------------- Class R4 (inception 3/28/02) -16.87% +1.92% +4.77% +2.26% - -------------------------------------------------------------------------------- Class R5 (inception 12/11/06) -17.05% N/A N/A -7.13% - -------------------------------------------------------------------------------- WITH SALES CHARGE Class A (inception 3/28/02) -21.80% -0.22% +3.37% +1.09% - -------------------------------------------------------------------------------- Class B (inception 3/28/02) -21.32% -0.27% +3.42% +1.24% - -------------------------------------------------------------------------------- Class C (inception 3/28/02) -18.34% +0.94% +3.79% +1.29% - --------------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. - -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Large Cap Equity Fund (the Fund) Class A shares declined 15.40%, excluding sales charge, for the fiscal year ended July 31, 2008. The Fund underperformed its benchmarks, the Russell 1000(R) Index (Russell Index) and the Standard & Poor's 500 Index (S&P 500 Index), which declined 10.62% and 11.09%, respectively. The Fund's peer group, the Lipper Large-Cap Core Funds Index, fell 10.11% during the same time frame. SIGNIFICANT PERFORMANCE FACTORS Through most of the fiscal year, valuation was not an effective characteristic for choosing stocks that would outperform. Though the Fund includes a value-oriented and a growth-oriented portfolio segment in its strategy, consideration of stock valuations is a thread running through the entire portfolio. Given the Fund's valuation sensitivity, the market's aversion to value was an insurmountable headwind during this fiscal period. Stock selection detracted from the Fund's return relative to the Russell Index. Though stock selection in the consumer staples, information SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Consumer Discretionary 10.8% - -------------------------------------------------------------- Consumer Staples 9.0% - -------------------------------------------------------------- Energy 10.5% - -------------------------------------------------------------- Financials 13.4% - -------------------------------------------------------------- Health Care 13.8% - -------------------------------------------------------------- Industrials 9.3% - -------------------------------------------------------------- Information Technology 15.6% - -------------------------------------------------------------- Materials 2.8% - -------------------------------------------------------------- Options Purchased 0.3% - -------------------------------------------------------------- Telecommunication Services 8.7% - -------------------------------------------------------------- Utilities 2.7% - -------------------------------------------------------------- Other(2) 3.1% - --------------------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 3.1%, 0.8% is due to security lending activity and 2.3% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- technology and utilities sectors was advantageous, the Fund holdings in the consumer discretionary, financials, industrials and energy sectors significantly underperformed the respective sectors of the Russell Index. Sector allocations had a positive impact. The Fund's cash position was beneficial, as would be expected in a declining equity market. Having a substantially smaller financials position than the Russell Index was a meaningful contributor to relative performance, as was a larger-than-Russell Index health care weighting. However, the Fund had a smaller energy position than the Russell Index and a larger telecommunications position, which were both disadvantageous. Individual contributors to return included QUALCOMM, GENENTECH, AVON PRODUCTS and FLOWSERVE, all positions that were larger than those in the Russell Index. We owned technology stock QUALCOMM because we believe the company can benefit from a strong upcoming product cycle. The market has recently been gaining conviction that the product cycle will be favorable, as the company has begun to see traction with its third-generation cell phone chip. In July 2008, QUALCOMM settled its protracted litigation with Nokia. Biotherapeutics company GENENTECH'S minority owner Roche is trying to buy out GENENTECH and offered a substantial premium. The stock price has also risen on a promising outlook for growth in GENENTECH'S cancer treatments, fueled by favorable TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ----------------------------------------------------------------- Exxon Mobil 3.8% - -------------------------------------------------------------- Virgin Media 2.5% - -------------------------------------------------------------- Pfizer 2.3% - -------------------------------------------------------------- Microsoft 2.3% - -------------------------------------------------------------- Vodafone Group 1.9% - -------------------------------------------------------------- Chevron 1.8% - -------------------------------------------------------------- Boeing 1.7% - -------------------------------------------------------------- Bristol-Myers Squibb 1.7% - -------------------------------------------------------------- AT&T 1.6% - -------------------------------------------------------------- Philip Morris Intl 1.5% - --------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- Given the Fund's valuation sensitivity, the market's aversion to value was an insurmountable headwind during this fiscal period. expectations for several upcoming studies. FLOWSERVE makes valves and pumping machinery for industrial companies, particularly oil, gas and chemical companies, and has benefited from the high level of activity in those end markets. Individual detractors from return included VIRGIN MEDIA, HARMAN INTERNATIONAL INDUSTRIES, COUNTRYWIDE FINANCIAL and FEDERAL HOME LOAN MORTGAGE CORP. (FREDDIE MAC). British telecommunications company VIRGIN MEDIA received an attractive acquisition bid in July 2007 and subsequently conducted an auction where multiple suitors showed interest. However, difficulties in the high-yield bond market prevented the company from completing the auction. Since then, the stock price has fallen sharply amid additional concerns about the company's leverage levels and susceptibility to economic weakness. We believe VIRGIN MEDIA'S fundamentals are now better than they were a year ago, while the stock stands at about half the price. In our view, the stock's market price has disconnected from the underlying value of the company, creating an attractive opportunity. HARMAN INTERNATIONAL'S main business is producing car radios, and the company suffered as auto production has come under intense pressure in the difficult economic environment. Mortgage lender COUNTRYWIDE FINANCIAL continued to suffer from credit market difficulties, but BANK OF AMERICA finally completed its takeover of the company and the Fund's small remaining holdings of Countrywide converted into BANK OF AMERICA stock. Though the majority of government-sponsored FREDDIE MAC'S business isn't directly connected to the subprime mortgage breakdown, - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- continued weakness in the North American residential market has hurt the company due to mortgage losses and performance of securities owned by the company. CHANGES TO THE FUND'S PORTFOLIO In the first half of the fiscal year, we decreased the Fund's health care weighting relative to the Russell Index. We trimmed exposure to biotechnology stocks and some large-cap pharmaceutical stocks because of valuation concerns and, in the case of pharmaceuticals, worry that they might be negatively affected by the change in presidential administrations. Also in the first half, the Fund's weighting in materials stocks decreased, as we reduced exposure to gold stocks. We increased exposure to the consumer staples sector relative to the Russell Index, focusing on stocks with a consumer cyclical dimension rather than food and consumer goods companies. In the latter half of the Fund's fiscal year, the Fund's position in the financials sector decreased. Market performance was partially responsible for the reduction, as financial stocks generally declined in value. We also cut back the Fund's holdings of lending-based financial companies, specifically banks and savings and loans. The Fund's energy position increased in the second half of the year, also due to a combination of market results and active management. The energy sector's steep appreciation boosted the Fund's energy weighting. Meanwhile, we increased the Fund's holdings of energy services companies. Selected energy services stocks became relatively inexpensive and we believe they will benefit from increased exploration and production activity. We increased the Fund's information technology position in the second half of the year. Technology stocks, particularly some of the larger, more mature companies, seem inexpensive to us. They appear to have relatively limited downside risk due to attractive valuations, with the ability to capitalize on any improvement in economic activity. OUR FUTURE STRATEGY We manage the Fund's portfolio in three segments - a growth-oriented strategy, a value-oriented strategy and an analyst-driven segment. A - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- common theme across the three segments is our belief that valuation as a selection criterion is likely to be more effective going forward. Differences in valuations among stocks have become increasingly wide, reaching a historically rare level. In the past, such extreme valuation spreads have foreshadowed a period when valuation was more important to investors. Because each portfolio segment takes value into consideration when selecting stocks, we believe we are entering a period that could be more favorable for the Fund's strategy. Large-cap companies still have roughly the same valuation as mid- and small-cap companies. However, larger companies tend to have more stable business models, which can better withstand a decelerating economic environment, and they tend to have more international exposure, which may benefit from the tail end of the current period of dollar depreciation. (PHOTO - BOB (PHOTO - NICK EWING) THAKORE) Bob Ewing, Nick Thakore CFA(R) Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Large Cap Equity Fund Class A shares (from 4/1/02 to 7/31/08)* as compared to the performance of three widely cited performance indices, the Russell 1000 Index, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Large-Cap Core Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. * Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
SINCE Results at July 31, 2008 1 YEAR 3 YEARS 5 YEARS INCEPTION(4) RIVERSOURCE LARGE CAP EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $7,970 $9,563 $11,672 $10,590 - --------------------------------------------------------------------------------------------------- Average annual total return -20.30% -1.48% +3.14% +0.90% - --------------------------------------------------------------------------------------------------- RUSSELL 1000 INDEX(1) Cumulative value of $10,000 $8,938 $10,953 $14,390 $12,819 - --------------------------------------------------------------------------------------------------- Average annual total return -10.62% +3.08% +7.55% +4.00% - --------------------------------------------------------------------------------------------------- S&P 500 INDEX(2) Cumulative value of $10,000 $8,891 $10,880 $14,045 $12,409 - --------------------------------------------------------------------------------------------------- Average annual total return -11.09% +2.85% +7.03% +3.47% - --------------------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS INDEX(3) Cumulative value of $10,000 $8,989 $10,966 $13,579 $11,958 - --------------------------------------------------------------------------------------------------- Average annual total return -10.11% +3.12% +6.31% +2.86% - ---------------------------------------------------------------------------------------------------
Results for other share classes can be found on page 4. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP EQUITY FUND LINE GRAPH)
RIVERSOURCE LARGE CAP EQUITY FUND CLASS A (INCLUDES SALES LIPPER LARGE-CAP CHARGE) RUSSELL 1000 INDEX(1) S&P 500 INDEX(2) CORE FUNDS INDEX(3) ----------------------- --------------------- ---------------- ------------------- 4/1/02 $ 9,425 $10,000 $10,000 $10,000 7/02 7,766 8,014 7,985 8,108 7/03 8,546 8,911 8,835 8,808 7/04 9,160 10,072 9,999 9,690 7/05 10,441 11,704 11,404 10,907 7/06 10,807 12,316 12,018 11,452 7/07 12,493 14,342 13,957 13,303 7/08 10,590 12,819 12,409 11,958
(1) The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (4) Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and Lipper peer group data is from April 1, 2002. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A),(B) THE PERIOD(B),(C) - ------------------------------------------------------------------------------------------------- Class A - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 900.40 $4.35 $4.44 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.29 $4.62 $4.72 - ------------------------------------------------------------------------------------------------- Class B - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 896.30 $7.87 $7.97 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.56 $8.37 $8.47 - ------------------------------------------------------------------------------------------------- Class C - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 894.50 $7.87 $7.96 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.56 $8.37 $8.47 - ------------------------------------------------------------------------------------------------- Class I - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 901.00 $2.46 $2.55 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,022.28 $2.61 $2.72 - ------------------------------------------------------------------------------------------------- Class R2 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 897.40 $6.32 $6.42 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.72 $6.82 - ------------------------------------------------------------------------------------------------- Class R3 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 899.40 $5.15 $5.24 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.44 $5.47 $5.57 - ------------------------------------------------------------------------------------------------- Class R4 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 898.00 $3.63 $3.73 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.03 $3.87 $3.97 - ------------------------------------------------------------------------------------------------- Class R5 - ------------------------------------------------------------------------------------------------- Actual(d) $1,000 $ 900.40 $2.79 $2.88 - ------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,021.93 $2.97 $3.07 - -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES - ------------------------------------------------------------------------------------- Class A .92% .02% .94% - ------------------------------------------------------------------------------------- Class B 1.67% .02% 1.69% - ------------------------------------------------------------------------------------- Class C 1.67% .02% 1.69% - ------------------------------------------------------------------------------------- Class I .52% .02% .54% - ------------------------------------------------------------------------------------- Class R2 1.34% .02% 1.36% - ------------------------------------------------------------------------------------- Class R3 1.09% .02% 1.11% - ------------------------------------------------------------------------------------- Class R4 .77% .02% .79% - ------------------------------------------------------------------------------------- Class R5 .59% .02% .61% - -------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. Any amounts waived will not be reimbursed by the Fund. This change was effective August 1, 2008. Had this change been in place for the entire six month period ended July 31, 2008, the actual direct expenses paid would have been: $4.30 for Class A, $8.53 for Class B, $7.82 for Class C, $2.27 for Class I, $6.09 for Class R2, $4.91 for Class R3, $3.63 for Class R4 and $2.55 for Class R5; the hypothetical direct expenses paid would have been: $4.57 for Class A, $9.07 for Class B, $8.32 for Class C, $2.41 for Class I, $6.47 for Class R2, $5.22 for Class R3, $3.87 for Class R4 and $2.72 for Class R5. Additionally, had this change been in place for the entire six month period ended July 31, 2008, the actual direct and indirect expenses paid would have been: $4.39 for Class A, $8.63 for Class B, $7.91 for Class C, $2.36 for Class I, $6.18 for Class R2, $5.01 for Class R3, $3.73 for Class R4 and $2.65 for Class R5; the hypothetical direct and indirect expenses paid would have been: $4.67 for Class A, $9.17 for Class B, $8.42 for Class C, $2.51 for Class I, $6.57 for Class R2, $5.32 for Class R3, $3.97 for Class R4 and $2.82 for Class R5. (c) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (d) Based on the actual return for the six months ended July 31, 2008: -9.96% for Class A, - 10.37% for Class B, -10.55% for Class C, -9.90% for Class I, -10.26% for Class R2, -10.06% for Class R3, -10.20% for Class R4 and -9.96% for Class R5. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.1%) ISSUER SHARES VALUE(A) AEROSPACE & DEFENSE (4.1%) Boeing 1,158,424 $70,791,290 General Dynamics 52,948 4,719,785 Goodrich 138,405 6,801,222 Honeywell Intl 531,950 27,044,338 L-3 Communications Holdings 118,424 11,687,265 Lockheed Martin 184,756 19,275,593 Spirit AeroSystems Holdings Cl A 241,611(b) 5,233,294 United Technologies 306,402 19,603,600 --------------- Total 165,156,387 - -------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.1%) United Parcel Service Cl B 32,815 2,069,970 - -------------------------------------------------------------------------------------- AIRLINES (0.1%) Northwest Airlines 401,506(b) 3,677,795 UAL 173,328 1,440,356 --------------- Total 5,118,151 - -------------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Goodyear Tire & Rubber 28,780(b) 564,951 Johnson Controls 70,967 2,140,365 --------------- Total 2,705,316 - -------------------------------------------------------------------------------------- AUTOMOBILES (0.1%) Ford Motor 526,712(b) 2,528,217 General Motors 67,728(f) 749,749 Harley-Davidson 28,277 1,070,002 --------------- Total 4,347,968 - -------------------------------------------------------------------------------------- BEVERAGES (2.5%) Anheuser-Busch Companies 39,259 2,660,190 Coca-Cola 1,040,306 53,575,759 Molson Coors Brewing Cl B 302,505 16,326,195
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) BEVERAGES (CONT.) Pepsi Bottling Group 14,745 $410,648 PepsiCo 443,504 29,519,626 --------------- Total 102,492,418 - -------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.9%) Amgen 714,833(b) 44,769,991 Genentech 377,556(b) 35,962,209 Genzyme 249,477(b) 19,122,412 ImClone Systems 262,974(b) 16,811,928 --------------- Total 116,666,540 - -------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) Masco 250,330 4,127,942 - -------------------------------------------------------------------------------------- CAPITAL MARKETS (3.3%) Bank of New York Mellon 281,459 9,991,795 BlackRock 9,386 2,034,040 Blackstone Group LP 139,163 2,584,257 Goldman Sachs Group 122,537 22,551,709 KKR Private Equity Investors LP Unit 2,752,976 36,339,938 Legg Mason 116,839 4,714,454 Lehman Brothers Holdings 1,142,970 19,819,100 Merrill Lynch & Co 163,870 4,367,136 Morgan Stanley 433,275 17,105,697 Oaktree Capital Group LLC Cl A Unit 331,941(d,h) 9,294,348 Och-Ziff Capital Management Group LLC Cl A 78,518 1,282,984 State Street 38,363 2,748,325 --------------- Total 132,833,783 - -------------------------------------------------------------------------------------- CHEMICALS (1.1%) Air Products & Chemicals 25,197 2,399,006 Ashland 6,745 281,739 Dow Chemical 404,782 13,483,289
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 15
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) CHEMICALS (CONT.) Eastman Chemical 47,239 $2,832,450 Ecolab 20,992 938,342 EI du Pont de Nemours & Co 266,501 11,675,409 Hercules 13,504 270,755 Intl Flavors & Fragrances 9,639 387,681 Monsanto 65,630 7,817,189 PPG Inds 19,619 1,189,696 Praxair 37,441 3,509,345 Rohm & Haas 15,002 1,125,150 --------------- Total 45,910,051 - -------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.5%) BancorpSouth 57,883 1,232,908 BB&T 162,258(f) 4,546,469 Comerica 18,838 541,027 Fifth Third Bancorp 756,147 10,563,374 PNC Financial Services Group 99,353 7,082,875 Regions Financial 1 9 SunTrust Banks 102,054 4,190,337 Wachovia 1,178,853 20,358,792 Wells Fargo & Co 387,434 11,727,628 --------------- Total 60,243,419 - -------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Allied Waste Inds 40,342(b) 488,138 Avery Dennison 12,748 561,039 Cintas 15,638 444,745 Equifax 15,374 539,474 Monster Worldwide 14,877(b) 263,918 Pitney Bowes 24,852 787,560 Robert Half Intl 18,984 480,105 RR Donnelley & Sons 25,417 678,634 Waste Management 58,668 2,085,061 --------------- Total 6,328,674 - -------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.0%) Cisco Systems 1,131,946(b) 24,891,493 Corning 215,740 4,316,957 Motorola 610,279 5,272,811 Nokia 729,400(c,k) 19,905,194 Nokia ADR 1,879,494(c) 51,347,775 Nortel Networks 342(b,c) 2,613
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) COMMUNICATIONS EQUIPMENT (CONT.) QUALCOMM 926,698 $51,283,467 Starent Networks 356,126(b,f) 4,665,251 --------------- Total 161,685,561 - -------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.1%) Apple 187,048(b) 29,731,280 Dell 266,915(b) 6,558,102 EMC 645,118(b) 9,683,221 Hewlett-Packard 940,865 42,150,752 IBM 261,527 33,470,225 SanDisk 221,899(b) 3,128,776 --------------- Total 124,722,356 - -------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) Fluor 83,260 6,773,201 KBR 189,049 5,387,897 --------------- Total 12,161,098 - -------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (--%) Vulcan Materials 13,081 839,669 - -------------------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) American Express 180,325 6,693,664 Capital One Financial 82,648 3,459,645 SLM 55,909(b) 957,721 --------------- Total 11,111,030 - -------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (--%) Ball 11,691 521,186 Bemis 11,926 335,836 Pactiv 15,630(b) 376,839 Sealed Air 19,132 415,164 --------------- Total 1,649,025 - -------------------------------------------------------------------------------------- DISTRIBUTORS (--%) Genuine Parts 19,592 785,835 - -------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (--%) Apollo Group Cl A 16,503(b) 1,027,972 H&R Block 38,956 947,799 --------------- Total 1,975,771 - -------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.4%) Apollo Mgmt LP 1,426,700(d,h) 19,973,800 Bank of America 1,605,532 52,822,002 CIT Group 22,723 192,691 Citigroup 1,394,941 26,071,447 CME Group 6,127 2,206,517
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) DIVERSIFIED FINANCIAL SERVICES (CONT.) Interactive Brokers Group Cl A 447,495(b) $12,556,710 IntercontinentalExchange 76,455(b) 7,630,209 iShares Dow Jones US Healthcare Sector Index Fund 1 65 JPMorgan Chase & Co 1,177,978 47,861,246 KKR Financial Holdings LLC 580,995 5,966,819 Leucadia Natl 21,149 946,841 Materials Select Sector SPDR Fund 71,566(f) 2,889,835 NYSE Euronext 30,511 1,441,340 --------------- Total 180,559,522 - -------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.9%) AT&T 2,177,373 67,084,863 Chunghwa Telecom ADR 1(c) 25 Deutsche Telekom 1,804,355(c) 31,231,566 Embarq 77,675 3,555,185 Frontier Communications 180,802 2,090,071 Qwest Communications Intl 4,256,424(f) 16,302,104 Telefonica 2,070,662(c) 53,723,568 Telefonica ADR 97,827(c) 7,613,875 Verizon Communications 1,646,345 56,041,584 Windstream 175,967 2,097,527 --------------- Total 239,740,368 - -------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.8%) Allegheny Energy 20,100 972,840 American Electric Power 48,037 1,897,462 Duke Energy 151,259 2,659,133 Edison Intl 38,965 1,883,568 Entergy 132,929 14,212,769 Exelon 232,129 18,249,982 FirstEnergy 36,460 2,681,633 FPL Group 98,810 6,376,209 Pepco Holdings 24,087 600,730 Pinnacle West Capital 12,030 403,847 PPL 112,549 5,285,301
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) ELECTRIC UTILITIES (CONT.) Progress Energy 31,715 $1,341,862 Southern 461,644 16,337,581 --------------- Total 72,902,917 - -------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.4%) Emerson Electric 338,633 16,491,428 Gamesa Tecnologica 13,814(c) 656,736 --------------- Total 17,148,164 - -------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Agilent Technologies 3,004(b) 108,324 Tyco Electronics 136,863(c) 4,535,640 --------------- Total 4,643,964 - -------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.6%) Baker Hughes 70,053 5,808,094 ENSCO Intl 15,095 1,043,668 Halliburton 207,050 9,279,981 Nabors Inds 30,012(b,c) 1,094,238 Natl Oilwell Varco 122,206(b) 9,609,058 Noble 29,594 1,535,041 Pride Intl 55,056(b) 2,133,971 Rowan Companies 12,564 500,047 Schlumberger 165,535 16,818,355 Transocean 80,630(b) 10,968,099 Weatherford Intl 129,293(b) 4,878,225 --------------- Total 63,668,777 - -------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.5%) Costco Wholesale 56,905 3,566,805 CVS Caremark 268,637 9,805,251 Kroger 79,418 2,245,941 Safeway 132,565 3,542,137 SUPERVALU 23,305 597,074 SYSCO 69,319 1,965,887 Walgreen 169,526 5,821,523 Wal-Mart Stores 595,006 34,879,251 --------------- Total 62,423,869 - -------------------------------------------------------------------------------------- FOOD PRODUCTS (0.4%) Archer-Daniels-Midland 73,221 2,096,317 Kellogg 144,371 7,660,325 Kraft Foods Cl A 92,141 2,931,927 Sara Lee 228,562 3,122,157 --------------- Total 15,810,726 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) GAS UTILITIES (0.1%) Nicor 5,402 $215,108 ONEOK 96,709 4,398,325 Questar 20,732 1,096,308 --------------- Total 5,709,741 - -------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.3%) Becton Dickinson & Co 32,876 2,791,501 Boston Scientific 2,059,138(b) 24,483,151 China Medical Technologies ADR 110,635(c,f) 5,301,629 Covidien 198,175 9,758,137 Medtronic 216,057 11,414,291 --------------- Total 53,748,709 - -------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.6%) Aetna 193,362 7,929,776 AmerisourceBergen 219,065 9,172,252 Cardinal Health 327,758 17,610,437 CIGNA 126,376 4,678,440 Coventry Health Care 18,160(b) 642,319 Express Scripts 73,371(b) 5,175,590 Humana 261,683(b) 11,490,501 Laboratory Corp of America Holdings 13,323(b) 900,368 McKesson 365,600 20,469,944 Medco Health Solutions 211,662(b) 10,494,202 Patterson Companies 14,526(b) 453,647 Quest Diagnostics 18,891 1,004,246 Tenet Healthcare 57,375(b) 332,201 UnitedHealth Group 356,181 10,001,562 WellPoint 62,989(b) 3,303,773 --------------- Total 103,659,258 - -------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) IMS Health 21,711 453,760 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) HOTELS, RESTAURANTS & LEISURE (0.6%) Chipotle Mexican Grill Cl B 1(b) $64 Darden Restaurants 260,562 8,486,504 Intl Game Technology 252,174 5,474,698 Marriott Intl Cl A 173,799 4,503,132 Starbucks 290,004(b) 4,260,159 Starwood Hotels & Resorts Worldwide 24,972 856,290 --------------- Total 23,580,847 - -------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.0%) Black & Decker 7,305 438,446 Centex 251,388 3,690,376 DR Horton 427,706 4,756,091 Harman Intl Inds 226,936 9,342,954 Hovnanian Enterprises Cl A 314,091(b,f) 2,208,060 Jarden 22,309(b) 536,085 KB Home 372,092(f) 6,545,098 Leggett & Platt 19,887 387,797 Lennar Cl A 220,369 2,666,465 Meritage Homes 58,457(b) 1,055,149 Newell Rubbermaid 96,030 1,587,376 NVR 1,977(b) 1,091,937 Snap-On 6,903 388,570 Stanley Works 9,373 416,911 Whirlpool 54,642 4,136,399 --------------- Total 39,247,714 - -------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.2%) Clorox 71,006 3,869,827 Colgate-Palmolive 212,982 15,818,173 Procter & Gamble 449,018 29,401,699 --------------- Total 49,089,699 - -------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) AES 80,357(b) 1,296,962 Constellation Energy Group 21,336 1,774,301 Dynegy Cl A 59,446(b) 400,072 --------------- Total 3,471,335 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) INDUSTRIAL CONGLOMERATES (1.8%) 3M 36,650 $2,579,794 General Electric 2,016,361 57,042,852 Siemens 29,231(c) 3,552,897 Textron 98,300 4,273,101 Tyco Intl 105,559(c) 4,703,709 --------------- Total 72,152,353 - -------------------------------------------------------------------------------------- INSURANCE (3.3%) ACE LTD 428,806(c) 21,740,464 AFLAC 442,260 24,594,080 Allstate 21,365 987,490 American Intl Group 661,931 17,243,303 Aon 7,738 354,400 Arch Capital Group 36,503(b,c) 2,545,354 Assurant 14,256 857,071 Assured Guaranty 126,640(c,f) 1,451,294 Chubb 146,361 7,031,182 Endurance Specialty Holdings 61,099(c) 1,869,629 Hartford Financial Services Group 254,581 16,137,890 Max Capital Group 143,701(c) 3,372,662 MetLife 140,630 7,139,785 Principal Financial Group 19,201 816,235 Prudential Financial 346,699 23,911,830 Validus Holdings 97,234(c) 2,217,908 XL Capital Cl A 67,497(c) 1,207,521 --------------- Total 133,478,098 - -------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.3%) Amazon.com 37,016(b) 2,825,801 Expedia 537,369(b) 10,516,312 IAC/InterActiveCorp 21,698(b) 378,847 --------------- Total 13,720,960 - -------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.1%) Akamai Technologies 20,111(b) 469,391 eBay 132,377(b) 3,331,929 Equinix 22,237(b) 1,809,202 Google Cl A 69,127(b) 32,748,916 VeriSign 23,302(b) 758,247 Yahoo! 197,291(b) 3,924,118 --------------- Total 43,041,803 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) IT SERVICES (1.2%) Affiliated Computer Services Cl A 11,529(b) $555,698 Automatic Data Processing 165,598 7,072,691 Broadridge Financial Solutions 1 21 Cognizant Technology Solutions Cl A 34,291(b) 962,548 Computer Sciences 17,942(b) 849,913 Convergys 14,670(b) 186,309 Electronic Data Systems 168,116 4,170,958 Fidelity Natl Information Services 20,379 386,182 Fiserv 19,460(b) 930,577 MasterCard Cl A 83,783(f) 20,455,618 Paychex 38,069 1,253,231 Redecard 254,120(c) 4,692,695 Total System Services 23,527 460,659 Unisys 42,291(b) 156,054 Visa Cl A 33,382(b) 2,438,889 Western Union 87,834 2,427,732 --------------- Total 46,999,775 - -------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Eastman Kodak 34,500 505,080 Hasbro 27,327 1,058,102 Mattel 45,784 917,969 --------------- Total 2,481,151 - -------------------------------------------------------------------------------------- MACHINERY (1.5%) Caterpillar 195,634 13,600,476 Danaher 33,928 2,702,365 Deere & Co 232,541 16,315,077 Flowserve 147,120 19,616,980 Ingersoll-Rand Cl A 37,369(c) 1,345,284 Navistar Intl 7,584(b) 427,624 Parker Hannifin 118,219 7,291,748 --------------- Total 61,299,554 - -------------------------------------------------------------------------------------- MEDIA (7.3%) Comcast Cl A 1,441,247 29,718,513 Comcast Special Cl A 186,779 3,836,441 DIRECTV Group 195,760(b) 5,289,435 EW Scripps Cl A 3,689 25,530 Gannett 21,746 394,038
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MEDIA (CONT.) Liberty Entertainment Series A 303,858(b,e) $7,480,984 Liberty Media - Capital Series A 32,687(b,e) 507,956 McGraw-Hill Companies 31,647 1,287,083 Meredith 3,593 91,837 New York Times Cl A 13,438 169,184 News Corp Cl A 1,737,878 24,556,216 Scripps Networks Interactive Cl A 11,068(b) 448,697 Sirius XM Radio 36,484,405(b,k) 58,375,048 Time Warner 2,278,213 32,624,010 Time Warner Cable Cl A 118,025(b) 3,355,451 Viacom Cl B 211,741(b) 5,913,926 Virgin Media 9,044,507(h) 101,479,370 Vivendi 232,631(c) 9,725,494 Walt Disney 349,839 10,617,614 Washington Post Cl B 553 341,892 WorldSpace Cl A 263,942(b,f) 348,403 --------------- Total 296,587,122 - -------------------------------------------------------------------------------------- METALS & MINING (1.3%) Alcoa 280,794(i) 9,476,798 Allegheny Technologies 12,083 571,405 Coeur d'Alene Mines 4,505,183(b,f) 13,019,979 Freeport-McMoRan Copper & Gold 45,827 4,433,762 Lihir Gold 3,224,058(b,c) 8,377,633 Newmont Mining 207,694 9,960,985 Nucor 36,494 2,088,187 Timminco 265,292(b,c) 6,271,433 Titanium Metals 11,658 131,269 --------------- Total 54,331,451 - -------------------------------------------------------------------------------------- MULTILINE RETAIL (0.3%) JC Penney 137,459 4,237,861 Kohl's 96,693(b) 4,052,404 Macy's 57,315 1,078,095 Target 79,614 3,600,941 --------------- Total 12,969,301 - -------------------------------------------------------------------------------------- MULTI-UTILITIES (0.7%) Ameren 25,059 1,029,674 CenterPoint Energy 39,263 619,178
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) MULTI-UTILITIES (CONT.) CMS Energy 26,962 $363,987 Consolidated Edison 32,613 1,294,736 Dominion Resources 236,970 10,469,334 DTE Energy 19,512 799,602 Integrys Energy Group 9,142 466,791 NiSource 32,787 560,002 PG&E 42,734 1,646,541 Public Service Enterprise Group 60,818 2,542,192 Sempra Energy 29,947 1,681,824 TECO Energy 25,205 467,553 Xcel Energy 307,787 6,174,207 --------------- Total 28,115,621 - -------------------------------------------------------------------------------------- OFFICE ELECTRONICS (--%) Xerox 106,725 1,455,729 - -------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (9.1%) Anadarko Petroleum 57,901 3,353,047 Apache 20,018 2,245,419 BP ADR 141,792(c) 8,711,700 Chesapeake Energy 32,146 1,612,122 Chevron 886,464 74,959,396 ConocoPhillips 474,900 38,761,338 CONSOL Energy 24,334 1,810,206 Devon Energy 123,144 11,685,134 El Paso 85,556 1,534,019 EOG Resources 15,627 1,570,982 Exxon Mobil 1,915,009 154,024,174 Marathon Oil 139,671 6,909,524 Massey Energy 9,624 714,582 Occidental Petroleum 113,036 8,910,628 Patriot Coal 3,558(b) 448,842 Peabody Energy 34,016 2,301,182 Range Resources 2,370 115,087 Royal Dutch Shell ADR 68,458(c) 4,846,142 Ship Finance Intl 104,732(c) 3,114,730 Spectra Energy 78,605 2,135,698 Sunoco 62,954 2,556,562 Tesoro 17,661 272,686 Total 305,847(c) 23,416,154 Valero Energy 181,512 6,064,316 Williams Companies 75,121 2,407,628 XTO Energy 32,351 1,527,938 --------------- Total 366,009,236 - --------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) PAPER & FOREST PRODUCTS (0.3%) Intl Paper 234,954 $6,512,925 MeadWestvaco 20,757 556,495 Weyerhaeuser 98,119 5,245,442 --------------- Total 12,314,862 - -------------------------------------------------------------------------------------- PERSONAL PRODUCTS (1.2%) Avon Products 877,466 37,204,558 Herbalife 256,100(c) 11,060,959 --------------- Total 48,265,517 - -------------------------------------------------------------------------------------- PHARMACEUTICALS (7.1%) Bristol-Myers Squibb 3,256,206 68,771,071 Elan ADR 58,998(b,c) 1,182,910 Eli Lilly & Co 102,634 4,835,088 Johnson & Johnson 311,557 21,332,308 Merck & Co 1,642,017 54,022,359 Pfizer 5,088,066 94,994,192 Schering-Plough 515,979 10,876,837 Shire ADR 29,747(c) 1,497,464 Wyeth 795,773 32,244,722 --------------- Total 289,756,951 - -------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.3%) Apartment Investment & Management Cl A 80,423 2,748,054 AvalonBay Communities 4,673 465,945 Boston Properties 9,881 950,453 HCP 28,116 1,014,144 Kimco Realty 12,399 437,561 Plum Creek Timber 20,135 980,977 ProLogis 26,369 1,288,917 Public Storage 11,000 900,790 Simon Property Group 15,787 1,462,350 Vornado Realty Trust 11,357 1,079,710 --------------- Total 11,328,901 - -------------------------------------------------------------------------------------- ROAD & RAIL (0.8%) CSX 31,756 2,146,070 Hertz Global Holdings 3,057,405(b) 26,079,665 Norfolk Southern 45,485 3,271,281 --------------- Total 31,497,016 - --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.7%) Advanced Micro Devices 1,585,279(b) $6,674,025 Applied Materials 149,554 2,590,275 Atmel 684,885(b) 2,417,644 Broadcom Cl A 48,957(b) 1,189,166 Cypress Semiconductor 47,876(b) 1,304,621 Himax Technologies ADR 742,532(c) 2,821,622 Infineon Technologies 766,243(b,c) 5,752,134 Infineon Technologies ADR 271,122(b,c) 2,038,837 Intel 2,050,731 45,505,720 LSI 2(b) 14 MEMC Electronic Materials 16,280(b) 752,299 Micron Technology 1,922,816(b) 9,287,201 Microsemi 28,004(b) 726,984 Natl Semiconductor 43,190 904,831 ON Semiconductor 362,514(b) 3,404,006 Skyworks Solutions 84,398(b) 798,405 Spansion Cl A 3,791,334(b) 8,682,155 Teradyne 574,117(b) 5,379,476 Texas Instruments 466,539 11,374,221 --------------- Total 111,603,636 - -------------------------------------------------------------------------------------- SOFTWARE (3.5%) Adobe Systems 63,649(b) 2,631,886 Autodesk 26,806(b) 854,843 BMC Software 22,854(b) 751,668 CA 46,727 1,114,906 Citrix Systems 21,966(b) 585,174 Compuware 31,307(b) 344,377 Electronic Arts 111,588(b) 4,818,370 Intuit 38,420(b) 1,050,019 Microsoft 3,657,420 94,068,843 Nintendo ADR 363,822(c) 21,056,199 Oracle 664,725(b) 14,311,529 SAP 4,190(c) 243,499 Symantec 100,556(b) 2,118,715 --------------- Total 143,950,028 - -------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.9%) Abercrombie & Fitch Cl A 26,590 1,468,300 AutoNation 16,031(b) 165,440 AutoZone 5,144(b) 670,212
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 21
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(A) SPECIALTY RETAIL (CONT.) Bed Bath & Beyond 34,454(b) $958,855 Gap 112,983 1,821,286 Home Depot 481,084 11,464,231 Lowe's Companies 486,644(i) 9,888,605 Office Depot 30,952(b) 210,474 RadioShack 15,719 262,193 Sherwin-Williams 11,888 633,036 Staples 88,968 2,001,780 Tiffany & Co 17,789 672,246 TJX Companies 191,512 6,455,870 --------------- Total 36,672,528 - -------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.1%) Nike Cl B 48,509 2,846,508 VF 21,966 1,572,326 --------------- Total 4,418,834 - -------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.4%) Freddie Mac 2,057,347 16,808,526 Hudson City Bancorp 48,993 894,607 Washington Federal 12,857 239,140 --------------- Total 17,942,273 - -------------------------------------------------------------------------------------- TOBACCO (2.2%) Altria Group 1,150,407 23,410,782 Lorillard 17,965(b) 1,205,631 Philip Morris Intl 1,183,814 61,143,994 UST 67,961 3,575,428 --------------- Total 89,335,835 - -------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (--%) WW Grainger 7,786 696,925 - -------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.8%) American Tower Cl A 21,603(b) 905,166 Sprint Nextel 619,353 5,041,533 Turkcell ADR 106,276(c) 2,051,127 Vodafone Group 28,897,564(c) 77,409,489 Vodafone Group ADR 1,110,412(c) 29,792,354 --------------- Total 115,199,669 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $4,277,268,678) $3,944,415,463 - --------------------------------------------------------------------------------------
OPTIONS PURCHASED (0.3%) EXERCISE EXPIRATION ISSUER CONTRACTS PRICE DATE VALUE(A) CALLS Altria Group(j) Virgin Media(j) Vodafone Group ADR(j) 240,674 $100.00 Jan. 2009 $283,995 AmeriSourceBergen(j) Bristol-Myers Squibb(j) Nokia ADR(j) 224,040 100.00 Jan. 2009 495,128 Hertz Global Holdings(j) Telefonica(j) Vodafone Group ADR(j) 194,617 100.00 Jan. 2009 136,388 Hong Kong Dollar 1,012,421 7.73 March 2009 225,365 Nokia 5,033 15.00 Dec. 2008 2,708,239 Nokia 7,559 18.00 Dec. 2008 1,868,679 Nokia ADR 2,180 25.00 Jan. 2009 926,500 Sirius XM Radio 8,852 9.00 Aug. 2008 44,260 Sirius XM Radio(j) Virgin Media(j) Vodafone Group ADR(j) 213,932 100.00 Jan. 2009 53,483 - -------------------------------------------------------------------------------------------------------------------------- PUTS Goldman Sachs Group 239,727 446.25 Aug. 2008 1,080,474 NASDAQ 100 Index 28,351 43.00 Aug. 2008 708,775 Research in Motion 1,123 115.00 Dec. 2008 1,344,792 S&P 500 Index 1,072 1,240.00 Aug. 2008 1,420,400 S&P 500 Index 1,232 1,260.00 Aug. 2008 2,470,160 - -------------------------------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $22,945,180) $13,766,638 - --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (3.1%)(g) SHARES VALUE(A) RiverSource Short-Term Cash Fund, 2.54% 124,337,493(l) $124,337,493 - ----------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $124,337,493) $124,337,493 - ----------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $4,424,551,351)(m) $4,082,519,594 ===================================================================================
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2008
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------- S&P 500 Index 60 $19,006,500 Sept. 2008 $365,881
OPEN OPTIONS CONTRACTS WRITTEN AT JULY 31, 2008
NUMBER OF EXERCISE PREMIUM EXPIRATION ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(A) - -------------------------------------------------------------------------------------------------------------- Nokia Call 7,559 18 $934,566 Dec. 2008 $1,868,679 Research in Motion Put 1,123 100 856,227 Dec. 2008 735,565 S&P 500 Index Put 1,072 1,200 801,663 Aug. 2008 584,240 S&P 500 Index Put 1,232 1,220 797,104 Aug. 2008 1,065,680 Sirius XM Radio Call 8,852 10 394,191 Aug. 2008 22,130 - -------------------------------------------------------------------------------------------------------------- Total $4,276,294 - --------------------------------------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2008
CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED EXCHANGE DATE DELIVERED RECEIVED APPRECIATION DEPRECIATION - --------------------------------------------------------------------------------------------------------------- Aug. 1, 2008 805,674 1,255,519 $-- $(1,902) European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Aug. 5, 2008 662,546 425,003 331 -- U.S. Dollar European Monetary Unit - --------------------------------------------------------------------------------------------------------------- Sept. 4, 2008 22,571,000 45,016,280 381,074 -- British Pound U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 5, 2008 6,683,000 6,361,013 94,766 -- Australian Dollar U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 5, 2008 17,493,000 34,893,987 303,505 -- British Pound U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 11, 2008 44,722,000 69,847,267 197,246 -- European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Sept. 12, 2008 36,981,000 57,690,360 96,168 -- European Monetary Unit U.S. Dollar - --------------------------------------------------------------------------------------------------------------- Total $1,073,090 $(1,092) - ---------------------------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the value of foreign securities represented 10.9% of net assets. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 23 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2008, the value of these securities amounted to $29,268,148 or 0.7% of net assets. (e) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (f) At July 31, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (g) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.8% of net assets. See Note 5 to the financial statements. The Fund's cash equivalent position is 2.3% of net assets. (h) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to procedures approved, in good faith, by the Fund's Board of Directors. Information concerning such security holdings at July 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST - ---------------------------------------------------------------------------------- Apollo Mgmt LP* 08-02-07 thru 07-10-08 $31,700,520 Oaktree Capital Group LLC Cl A Unit* 05-21-07 thru 03-14-08 12,205,136 Virgin Media 11-15-06 thru 04-15-08 182,208,894
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (i) At July 31, 2008, investments in securities included securities valued at $4,835,700 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (j) Represents a worst-of-call-option that is a bundle of long forwards. All mature on the option's expiration date but have different underliers. At expiration, only one settles and this is chosen in the issuer's favor. (k) At July 31, 2008, securities valued at $22,044,694 were held to cover open call options written. See Note 6 to the financial statements. (l) Affiliated Money Market Fund - See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (m) At July 31, 2008, the cost of securities for federal income tax purposes was $4,609,836,302 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $300,203,674 Unrealized depreciation (827,520,382) - ------------------------------------------------------------------------------ Net unrealized depreciation $(527,316,708) - ------------------------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 25 FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008 ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $4,300,213,858) $3,958,182,101 Affiliated money market fund (identified cost $124,337,493) 124,337,493 - ------------------------------------------------------------------------------ Total investments in securities (identified cost $4,424,551,351) 4,082,519,594 Cash 1,338,804 Foreign currency holdings (identified cost $1) 1 Capital shares receivable 376,695 Dividends and accrued interest receivable 9,079,663 Receivable for investment securities sold 84,128,464 Unrealized appreciation on forward foreign currency contracts 1,073,090 - ------------------------------------------------------------------------------ Total assets 4,178,516,311 - ------------------------------------------------------------------------------ LIABILITIES Options contracts written, at value (premiums received $3,783,751) 4,276,294 Capital shares payable 15,079,716 Payable for investment securities purchased 64,094,744 Payable upon return of securities loaned 32,299,100 Variation margin payable 308,000 Unrealized depreciation on forward foreign currency contracts 1,092 Accrued investment management services fees 63,204 Accrued distribution fees 35,986 Accrued transfer agency fees 12,123 Accrued administrative services fees 5,528 Accrued plan administration services fees 1,300 Other accrued expenses 681,310 Collateral and deposits payable 1,175,000 - ------------------------------------------------------------------------------ Total liabilities 118,033,397 - ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $4,060,482,914 ============================================================================== REPRESENTED BY Capital stock -- $.01 par value $ 9,010,201 Additional paid-in capital 4,751,328,658 Undistributed net investment income 47,429,271 Accumulated net realized gain (loss) (406,243,610) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (341,041,606) - ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $4,060,482,914 ============================================================================== *Including securities on loan, at value $ 28,188,444 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $3,388,815,212 750,529,476 $4.52(1) Class B $ 432,695,950 98,119,285 $4.41 Class C $ 20,752,067 4,701,508 $4.41 Class I $ 38,943,788 8,562,931 $4.55 Class R2 $ 3,743 822 $4.55 Class R3 $ 3,749 822 $4.56 Class R4 $ 179,264,616 39,104,432 $4.58 Class R5 $ 3,789 822 $4.61 - -------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $4.80. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 27 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008 INVESTMENT INCOME Income: Dividends $ 113,500,028 Interest 4,306 Income distributions from affiliated money market fund 8,770,462 Fee income from securities lending 1,125,485 Less foreign taxes withheld (1,262,602) - ----------------------------------------------------------------------------- Total income 122,137,679 - ----------------------------------------------------------------------------- Expenses: Investment management services fees 25,467,893 Distribution fees Class A 10,775,702 Class B 7,098,566 Class C 270,367 Class R2 22 Class R3 11 Transfer agency fees Class A 9,066,345 Class B 1,605,617 Class C 59,194 Class R2 3 Class R3 3 Class R4 128,910 Class R5 3,535 Administrative services fees 2,524,199 Plan administration services fees Class R2 11 Class R3 11 Class R4 644,550 Compensation of board members 99,527 Custodian fees 589,410 Printing and postage 1,398,700 Registration fees 91,517 Professional fees 119,264 Other 186,595 - ----------------------------------------------------------------------------- Total expenses 60,129,952 Expenses waived/reimbursed by the Investment Manager and its affiliates (3,079,363) Earnings and bank fee credits on cash balances (400,856) - ----------------------------------------------------------------------------- Total net expenses 56,649,733 - ----------------------------------------------------------------------------- Investment income (loss) -- net 65,487,946 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008 REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 10,407,715 Foreign currency transactions (14,523,705) Futures contracts (11,520,899) Options contracts written (2,376,453) Swap transactions (2,348,917) - ----------------------------------------------------------------------------- Net realized gain (loss) on investments (20,362,259) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (865,038,637) - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (885,400,896) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(819,912,950) =============================================================================
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 65,487,946 $ 63,564,209 Net realized gain (loss) on investments (20,362,259) 703,349,838 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (865,038,637) 323,820,329 - ---------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (819,912,950) 1,090,734,376 - ---------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (36,389,921) (51,279,745) Class B -- (2,969,618) Class C -- (121,537) Class I (866,696) (1,522,653) Class R2 (32) (65) Class R3 (44) (66) Class R4 (2,588,075) (5,679,767) Class R5 -- (322,641) Net realized gain Class A (503,800,045) (125,265,857) Class B (85,854,373) (27,693,216) Class C (3,230,993) (831,229) Class I (7,554,314) (2,640,713) Class R2 (539) (115) Class R3 (539) (115) Class R4 (31,125,821) (13,607,896) Class R5 (539) (560,037) - ---------------------------------------------------------------------------------------- Total distributions (671,411,931) (232,495,270) - ----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 211,484,181 $ 370,676,879 Class B shares 33,647,160 57,068,487 Class C shares 2,226,679 2,755,399 Class I shares 10,561,864 15,570,677 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 34,516,064 28,329,694 Class R5 shares -- 26,931,801 Reinvestment of distributions at net asset value Class A shares 523,659,899 171,429,375 Class B shares 85,230,086 30,416,192 Class C shares 3,174,765 939,571 Class I shares 8,419,823 4,163,008 Class R4 shares 33,713,417 19,287,529 Class R5 shares -- 882,497 Payments for redemptions Class A shares (1,190,365,828) (1,564,111,579) Class B shares (315,875,480) (569,109,428) Class C shares (8,714,618) (10,923,150) Class I shares (30,081,251) (69,035,113) Class R4 shares (150,506,498) (882,819,499) Class R5 shares (26,533,250) (2,629,011) - ---------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (775,442,987) (2,370,166,671) - ---------------------------------------------------------------------------------------- Total increase (decrease) in net assets (2,266,767,868) (1,511,927,565) Net assets at beginning of year 6,327,250,782 7,839,178,347 - ---------------------------------------------------------------------------------------- Net assets at end of year $ 4,060,482,914 $ 6,327,250,782 ======================================================================================== Undistributed net investment income $ 47,429,271 $ 40,157,282 - ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Large Cap Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds, owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by - -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Swap transactions are valued through an authorized pricing service, broker, or an internal model. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. ILLIQUID SECURITIES At July 31, 2008, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at July 31, 2008 was $130,747,518 representing 3.22% of net assets. These securities may be valued at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 33 obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At July 31, 2008, foreign currency holdings were entirely comprised of Taiwan dollars. The Fund may enter into forward foreign currency contracts for operational purposes. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. TOTAL RETURN EQUITY SWAP TRANSACTIONS The Fund may enter into swap agreements to gain exposure to the total return on a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Under the terms of a total return equity swap agreement, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. The notional amounts of swap contracts are not recorded in the financial statements. Swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk associated with the investment in the underlying securities and also the risk of the counterparty not fulfilling its obligations under the agreement. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 35 FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures and options contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, re-characterization of REIT distributions, investments in partnerships, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $18,371,189 and accumulated net realized loss has been decreased by $18,360,779 resulting in a net reclassification adjustment to increase paid-in capital by $10,410. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income....................... $211,882,459 $ 114,060,835 Long-term capital gain................ 328,307,507 62,484,767 CLASS B Distributions paid from: Ordinary income....................... 29,908,842 16,848,997 Long-term capital gain................ 55,945,531 13,813,837
- -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------------------- CLASS C Distributions paid from: Ordinary income....................... $ 1,125,566 $ 538,139 Long-term capital gain................ 2,105,427 414,627 CLASS I Distributions paid from: Ordinary income....................... 3,498,173 2,846,125 Long-term capital gain................ 4,922,837 1,317,241 CLASS R2 Distributions paid from: Ordinary income....................... 220 123 Long-term capital gain................ 351 57 CLASS R3 Distributions paid from: Ordinary income....................... 232 124 Long-term capital gain................ 351 57 CLASS R4 Distributions paid from: Ordinary income....................... 13,430,477 12,499,767 Long-term capital gain................ 20,283,419 6,787,896 CLASS R5 Distributions paid from: Ordinary income....................... 188 603,320 Long-term capital gain................ 351 279,358
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception date) to July 31, 2007. At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income............................ $ 64,131,416 Undistributed accumulated long-term gain................. $ -- Accumulated realized loss................................ $(235,009,471) Unrealized appreciation (depreciation)................... $(528,977,890)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 37 financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $4,214,418 for the year - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.47% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Funds and the Board. For the year ended July 31, 2008 other expenses paid to this company were $27,518. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 39 attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $13,585,000 and $175,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $2,642,943 for Class A, $697,051 for Class B and $2,614 for Class C for the year ended July 31, 2008. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class A..................................................... 0.97% Class B..................................................... 1.73 Class C..................................................... 1.73 Class R2.................................................... 1.14 Class R3.................................................... 0.89 Class R4.................................................... 0.82
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A..................................................... $2,485,731 Class B..................................................... 451,611 Class C..................................................... 15,549 Class R4.................................................... 118,737
- -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.................................................... $ 11 Class R3.................................................... 11 Class R4.................................................... 7,713
Under an agreement which was effective until July 31, 2008, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would not exceed the following percentage of the Fund's average daily net assets: Class A..................................................... 1.05% Class B..................................................... 1.81 Class C..................................................... 1.81 Class I..................................................... 0.67 Class R2.................................................... 1.47 Class R3.................................................... 1.22 Class R4.................................................... 0.90 Class R5.................................................... 0.72
Effective Aug. 1, 2008, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A..................................................... 1.04% Class B..................................................... 1.81 Class C..................................................... 1.80 Class I..................................................... 0.62 Class R2.................................................... 1.42 Class R3.................................................... 1.17 Class R4.................................................... 0.90 Class R5.................................................... 0.67
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 41 EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $400,856 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $3,532,920,686 and $4,856,373,311, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 43,972,212 98,990,509 (225,955,886) (82,993,165) Class B 6,351,542 16,421,985 (65,543,343) (42,769,816) Class C 430,927 611,708 (1,682,294) (639,659) Class I 2,016,152 1,585,654 (6,198,548) (2,596,742) Class R4 6,389,837 6,289,817 (27,462,232) (14,782,578) Class R5 -- -- (4,152,231) (4,152,231) - ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------------------- Class A 59,268,105 29,154,657 (265,432,267) (177,009,505) Class B 9,841,913 5,262,317 (95,077,518) (79,973,288) Class C 475,544 162,555 (1,886,761) (1,248,662) Class I 2,660,792 705,595 (11,591,197) (8,224,810) Class R2 822 -- -- 822 Class R3 822 -- -- 822 Class R4 4,699,528 3,241,602 (149,629,106) (141,687,976) Class R5 4,421,287 149,070 (417,304) 4,153,053 - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At July 31, 2008, securities valued at $28,188,444 were on loan to brokers. For collateral, the Fund received $32,299,100 in cash. Cash collateral received is invested in an affiliated money market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the Portfolio of Investments. Income from securities lending amounted to $1,125,485 for the year ended July 31, 2008. Expenses paid to the Investment Manager as securities lending agent were $25,365 for the year ended July 31, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 6. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written during the year ended July 31, 2008, are as follows:
PUTS CALLS CONTRACTS PREMIUMS CONTRACTS PREMIUMS - ------------------------------------------------------------------------------------------ Balance July 31, 2007 20,639 $ 2,621,153 27,883 $ 3,953,892 Opened 67,904 13,043,749 189,456 7,088,685 Closed (84,243) (12,702,678) (147,275) (8,353,184) Expired (873) (507,230) (53,653) (1,360,636) - ------------------------------------------------------------------------------------------ Balance July 31, 2008 3,427 $ 2,454,994 16,411 $ 1,328,757 - ------------------------------------------------------------------------------------------
See "Summary of Significant Accounting Policies." 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 43 fund aggregated $3,280,001,945 and $3,389,054,584, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 9. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, the Fund had a capital loss carry-over of $91,172,850 at July, 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2011 $60,717,128 $20,982,455 $9,473,267
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post-October loss of $143,836,621 that is treated for income tax purposes as occurring on Aug. 1, 2008. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/ Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 45 and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 11. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.05 $5.40 $5.26 $4.64 $4.53 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07(b) .06(b) .06 .04 .01 Net gains (losses) (both realized and unrealized) (.90) .79 .12 .61 .32 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.83) .85 .18 .65 .33 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.06) (.04) (.02) -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.70) (.20) (.04) (.03) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.52 $6.05 $5.40 $5.26 $4.64 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3,389 $5,039 $5,461 $1,030 $1,248 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.03% 1.09% 1.06% 1.16% 1.23% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .97% 1.09% 1.06% 1.11% 1.20% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.31% .99% 1.08% .79% .36% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.40%) 15.79% 3.51% 13.99% 7.19% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.96% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 47 CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.91 $5.29 $5.15 $4.56 $4.48 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.88) .76 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .77 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.15) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.91 $5.29 $5.15 $4.56 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $433 $833 $1,169 $472 $572 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 1.98% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.95% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .56% .23% .28% .02% (.46%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (15.97%) 14.71% 2.72% 13.09% 6.48% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $5.92 $5.30 $5.16 $4.57 $4.49 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .01(b) .02 -- (.01) Net gains (losses) (both realized and unrealized) (.89) .77 .12 .60 .31 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.86) .78 .14 .60 .30 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.02) -- -- -- Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.16) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.41 $5.92 $5.30 $5.16 $4.57 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $32 $35 $9 $11 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.79% 1.86% 1.84% 1.93% 2.01% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.73% 1.86% 1.84% 1.88% 1.98% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .55% .23% .28% .02% (.43%) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return(g) (16.11%) 14.80% 2.71% 13.06% 6.46% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 49 CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004(B) Net asset value, beginning of period $6.09 $5.44 $5.31 $4.67 $5.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(c) .09(c) .10 .05 -- Net gains (losses) (both realized and unrealized) (.90) .78 .12 .63 (.28) - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.81) .87 .22 .68 (.28) - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) (.09) (.03) -- Distributions from realized gains (.65) (.14) -- (.01) (.13) - ----------------------------------------------------------------------------------------------------------- Total distributions (.73) (.22) (.09) (.04) (.13) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.09 $5.44 $5.31 $4.67 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $39 $68 $105 $43 $14 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement (d),(e) .57% .63% .59% .70% .72%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .57% .63% .59% .65% .71%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.74% 1.44% 1.53% 1.24% .74%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.02%) 16.13% 4.06% 14.64% (5.65%)(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from March 4, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.56% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.08 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .06 .03 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .22 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.69) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.55 $6.08 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.39% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.14% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .67%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.45%) 3.71%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 51 CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.09 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .04 Net gains (losses) (both realized and unrealized) (.90) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.82) .23 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.56 $6.09 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.14% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .89% 1.19%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.40% .92%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.19%) 3.88%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.13 $5.47 $5.28 $4.66 $4.54 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .08(b) .07(b) .09 .04 .01 Net gains (losses) (both realized and unrealized) (.92) .79 .12 .61 .34 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.84) .86 .21 .65 .35 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.02) (.02) (.01) Distributions from realized gains (.65) (.14) -- (.01) (.22) - ----------------------------------------------------------------------------------------------------------- Total distributions (.71) (.20) (.02) (.03) (.23) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.58 $6.13 $5.47 $5.28 $4.66 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $179 $330 $1,069 $-- $8 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .87% .90% .81% .95% 1.03% - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .82% .89% .81% .90% 1.00% - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.46% 1.14% 1.41% 1.08% .50% - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% 116% 128% 99% - ----------------------------------------------------------------------------------------------------------- Total return (15.40%) 15.80% 4.03% 14.06% 7.44% - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.81% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 53 CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED JULY 31, 2008 2007(B) Net asset value, beginning of period $6.11 $6.08 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .06 Net gains (losses) (both realized and unrealized) (.93) .19 - ----------------------------------------------------------------------------------------------------------- Total from investment operations (.85) .25 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.08) Distributions from realized gains (.65) (.14) - ----------------------------------------------------------------------------------------------------------- Total distributions (.65) (.22) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.61 $6.11 - ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $25 - ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .67% .70%(f) - ----------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.21% 1.44%(f) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 66% - ----------------------------------------------------------------------------------------------------------- Total return (15.38%) 4.24%(i) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.66% for the year ended July 31, 2008. (i) Not annualized. - -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE LARGE CAP EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Large Cap Equity Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 55 In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Large Cap Equity Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals............. 100.00% Dividends Received Deduction for corporations......... 100.00% U.S. Government Obligations........................... 0.00% CAPITAL GAIN DISTRIBUTION - the Fund designates $411,565,774 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 57 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme None 901 S. Marquette Ave. since 2006 Court, 1998-2006; Attorney Minneapolis, MN 55402 Age 54 - ----------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, None 901 S. Marquette Ave. since 1999 1999-2006; former Governor of Minneapolis, MN 55402 Minnesota Age 73 - ----------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard -- Partners None 901 S. Marquette Ave. since 2007 in Cross Cultural Leadership Minneapolis, MN 55402 (consulting company) Age 53 - ----------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and None 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 57 Business, Bentley College - ----------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant None 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 73 - ----------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive 901 S. Marquette Ave. since 2005 Asset Management Insurance Minneapolis, MN 55402 Age 72 - ----------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, 901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures Minneapolis, MN 55402 Chair of the irrigation systems) Age 69 Board since 2007 - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 58 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None 901 S. Marquette Ave. since 2004 Management, Inc. (private real Minneapolis, MN 55402 estate and asset management Age 55 company) - ----------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera 901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Pharmaceutical, Inc. Minneapolis, MN 55402 2003 (biotechnology); former (biotechnology); Age 64 President, Forester Biotech Healthways, Inc. (health management programs) - -----------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ----------------------------------------------------------------------------------------------------- William F. Truscott Board member President -- U.S. Asset Management None 53600 Ameriprise since 2001, and Chief Investment Officer, Financial Center Vice President Ameriprise Financial, Inc. and Minneapolis, MN 55474 since 2002 President, Chairman of the Board Age 47 and Chief Investment Officer, RiverSource Investments, LLC since 2005; Director, President, and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - -----------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 59 The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Patrick T. Bannigan President since Director and Senior Vice President, Asset 172 Ameriprise 2006 Management, Products and Marketing, Financial Center RiverSource Investments, LLC since 2006; Minneapolis, MN 55474 Director and Vice President -- Asset Age 42 Management, Products and Marketing, RiverSource Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - ------------------------------------------------------------------------------------------ Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed 172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and Financial Center RiverSource Investments, LLC since 2006; Vice Minneapolis, MN 55474 President -- Investments, Ameriprise Age 44 Certificate Company since 2003; Senior Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - ------------------------------------------------------------------------------------------ Amy K. Johnson Vice President Vice President -- Asset Management and Trust 5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC Financial Center since 2006; Vice President -- Operations and Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC, Age 42 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ------------------------------------------------------------------------------------------ Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting, 105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Chief Financial Center Financial Officer, RiverSource Distributors, Minneapolis, MN 55474 Inc. since 2006 Age 53 - ------------------------------------------------------------------------------------------ Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset 5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since Financial Center and Secretary 2005; Chief Counsel, RiverSource Distributors, Minneapolis, MN 55474 since 2006 Inc. since 2006; Vice President, General Age 49 Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - ------------------------------------------------------------------------------------------ Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance 172 Ameriprise Officer since Officer, RiverSource Investments, LLC since Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset Minneapolis, MN 55474 Management, 2003-2006; Director of Finance, Age 47 Voyageur Asset Management, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 60 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - ------------------------------------------------------------------------------------------ Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering 2934 Ameriprise Prevention Officer, Ameriprise Financial, Inc. since Financial Center Officer since 2004; Manager Anti-Money Laundering, Minneapolis, MN 55474 2004 Ameriprise Financial, Inc., 2003-2004; Age 44 Compliance Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 61 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. - -------------------------------------------------------------------------------- 62 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance, although somewhat weaker than previous years, reflected the interrelationship of particularly volatile market conditions with the investment strategies employed by the portfolio management team. Further, the Board noted that measures had been taken to enhance risk management oversight. Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board observed that the Fund's expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT 63 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING ---------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 64 RIVERSOURCE LARGE CAP EQUITY FUND -- 2008 ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS. ADVANCED ALPHA(SM) STRATEGIES RiverSource 120/20 Contrarian Equity Fund RiverSource 130/30 U.S. Equity Fund RiverSource Absolute Return Currency and Income Fund Threadneedle Global Extended Alpha Fund ADVICE-BUILT(SM) SOLUTIONS RIVERSOURCE INCOME BUILDER SERIES RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE PORTFOLIO BUILDER SERIES RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Total Equity Fund RIVERSOURCE RETIREMENT PLUS(R) SERIES RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE STRATEGIC ALLOCATION FUND RIVERSOURCE BALANCED FUND SINGLE-STRATEGY FUNDS GROWTH FUNDS RiverSource Partners Aggressive Growth Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Global Technology Fund RiverSource Growth Fund RiverSource Mid Cap Growth Fund RiverSource Partners Small Cap Growth Fund BLEND FUNDS RiverSource Disciplined Equity Fund RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Large Cap Equity Fund RiverSource Precious Metals and Mining Fund RiverSource S&P 500 Index Fund* RiverSource Small Cap Advantage Fund RiverSource Partners Small Cap Equity Fund RiverSource Small Company Index Fund VALUE FUNDS Disciplined Large Cap Value Fund RiverSource Disciplined Small Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Dividend Opportunity Fund RiverSource Equity Value Fund RiverSource Partners Fundamental Value Fund RiverSource Large Cap Value Fund RiverSource Mid Cap Value Fund RiverSource Real Estate Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Value Fund GLOBAL/INTERNATIONAL FUNDS RiverSource Disciplined International Equity Fund Threadneedle Emerging Markets Fund Threadneedle European Equity Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund RiverSource Partners International Select Growth Fund Threadneedle International Opportunity Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund
- -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TAXABLE INCOME FUNDS RiverSource Cash Management Fund** RiverSource Diversified Bond Fund RiverSource Emerging Markets Bond Fund RiverSource Floating Rate Fund RiverSource Global Bond Fund RiverSource High Yield Bond Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RiverSource Short Duration U.S. Government Fund RiverSource Strategic Income Allocation Fund RiverSource U.S. Government Mortgage Fund TAX-EXEMPT FUNDS RiverSource California Tax-Exempt Fund RiverSource Intermediate Tax-Exempt Fund RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund RiverSource Tax-Exempt High Income Fund RiverSource Tax-Exempt Money Market 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 & Poors(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 MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT RIVERSOURCE LARGE CAP EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6244 J (9/08)
EX-99.17(K) 16 c50349b.txt Annual Report and Prospectus (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED EQUITY FUND ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2008 (Prospectus also enclosed) RIVERSOURCE DISCIPLINED EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
LETTER TO SHAREHOLDERS --------------------------------------------------------- (PHOTO - BANNIGAN - LEWIS) Patrick T. Bannigan (left) Stephen R. Lewis, Jr. (right) Dear Fellow Shareholder, The majority of today's workers are finding themselves responsible for funding their own retirement through 401(k)s, 403(b)s and IRAs, which can be a positive development. However, today's rising health care costs, inflation and dropping retirement account values have hit many retirees hard, and put retirement dreams on hold for approximately 27% of workers age 45 and older, according to an AARP survey released in May 2008. Since retirement could last up to 20 years or more for many retirees, it's important to take the long-term view. Unfortunately, many investors now realize they may not have adequately factored in the havoc a bear market could wreak on their retirement savings or the impact of rising gas and food prices on daily living expenses. Unexpected economic events such as these make careful planning for retirement all the more important, as retirees today and in the future are likely to see a number of up and down markets and economic cycles in their lifetimes. KEEPING UP WITH THE COST OF LIVING Company medical plans for retirees have gone the way of the B&W TV; there are still a few around, but they're disappearing rapidly. A July 2008 study by Hewitt Research Associates concludes employees actually will need to replace 126% of their salary once inflation and increased medical costs are included in the calculations. The 2008 Tiburon Consumer Wealth Report reports that a couple planning to retire in 2008 at the age of 65 will need $225,000 just to cover their medical expenses during retirement. PLAN FOR YOUR RETIREMENT BY WORKING WITH A FINANCIAL PROFESSIONAL A financial professional can help you establish goals for retirement income and develop a plan for saving and investing to achieve those goals. Several retirement-focused RiverSource investment strategies, such as RiverSource(R) Portfolio Builder Series, RiverSource(R) Income Builder - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT - -------------------------------------------------------------------------------- Series and RiverSource Retirement Plus(R) Series, can help remove emotion from your investing decisions through the application of > built-in diversification and asset allocation, > risk management, > automatic rebalancing and > professional portfolio management. MORE INVESTMENT OPTIONS RiverSource Investments also offers more than 50 single-strategy mutual funds designed to help you fully diversify your portfolio, and our Advanced Alpha(SM) Strategies funds, which are meant to potentially generate increased alpha (a risk-adjusted measure of above-market returns). Talk with your financial professional about which RiverSource funds or series of funds might best meet your needs today and in the years to come. Thank you for choosing RiverSource mutual funds and for your continued support. /s/ STEPHEN R. LEWIS, JR. /s/ PATRICK T. BANNIGAN Stephen R. Lewis, Jr. Patrick T. Bannigan Chairman of the Boards President, RiverSource Funds
DID YOU KNOW . . . - -------------------------------------------------------------------------------- > Two-thirds of baby boomers are dependent on their homes as a retirement asset.(1) > Nearly one-quarter of adults between the ages of 65 and 74 are in the workforce, up from 19% in 2000.(2) > Twenty-seven percent of workers age 45 and older said they had put their retirement plans on hold because of the slowing economy.(3) (1) Tiburon Strategic Advisors Consumer Wealth, Liquidation, & the Retirement Income Challenge Report, May 23, 2008 (2) Bureau of Labor Statistics (3) AARP survey, May 13, 2008 - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT LETTER TO SHAREHOLDERS (continued) --------------------------------------------- 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. Neither diversification or asset allocation assure a profit or protect against loss. There is no guarantee that the strategies discussed will be successful. The RiverSource Retirement Plus, Income Builder, and Portfolio Builder Series funds are "funds of funds" comprised of holdings in several different RiverSource Funds, which may include small- cap, mid-cap, large-cap, money market, international, bond, and/or sector funds. Each of the underlying funds in which the portfolio invests has its own investment risks, and those risks can affect the value of each portfolio's shares and investments. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. Non-investment grade securities generally have more volatile prices and carry more risk to principal and income than investment grade securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. Investments in small- and mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. See the Funds' prospectus for more information on these and other risks that may be associated with the underlying funds. Alternative investments involve substantial risks and may be more volatile than traditional investments, making them more suitable for investors with an above average tolerance for risk. 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. Not all products and all shares classes are available at all firms offering RiverSource funds. For more information about any of our RiverSource Funds, go online to RiverSource.com or call (888) 791-3380. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 5 p.m. Central time. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Manager Commentary................. 6 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Financial Statements............... 23 Notes to Financial Statements...... 29 Report of Independent Registered Public Accounting Firm........... 51 Federal Income Tax Information..... 53 Board Members and Officers......... 54 Approval of Investment Management Services Agreement............... 58 Proxy Voting....................... 60
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Disciplined Equity Fund (the Fund) Class A shares declined 13.40% (excluding sales charge) for the 12 months ended July 31, 2008. > The Fund underperformed the unmanaged Standard & Poor's 500 (S&P 500 Index) Index which fell 11.09% for the annual period. > The Fund also underperformed the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which declined 10.11% for the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008) - --------------------------------------------------------------------------------
Since 1 year 3 years 5 years inception(a) - ----------------------------------------------------------------------- RiverSource Disciplined Equity Fund Class A (excluding sales charge) -13.40% +2.17% +6.73% +8.09% - ----------------------------------------------------------------------- S&P 500 Index (unmanaged) -11.09% +2.85% +7.03% +8.35% - ----------------------------------------------------------------------- Lipper Large-Cap Core Funds Index -10.11% +3.12% +6.31% +7.48% - -----------------------------------------------------------------------
(a) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. (See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- STYLE MATRIX - -------------------------------------------------------------------------------- LOGO
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Total Net Expenses(a) - ---------------------------------------- Class A 0.96% 0.96% - ---------------------------------------- Class B 1.72% 1.72% - ---------------------------------------- Class C 1.72% 1.72% - ---------------------------------------- Class I 0.61% 0.61% - ---------------------------------------- Class R2 1.41% 1.41% - ---------------------------------------- Class R3 1.15% 1.15% - ---------------------------------------- Class R4 0.91% 0.84% - ---------------------------------------- Class R5 0.66% 0.66% - ---------------------------------------- Class W 1.06% 1.06% - ----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.04% for the year ended July 31, 2008), will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.72% for Class I, 1.52% for Class R2, 1.27% for Class R3, 0.88% for Class R4, 0.77% for Class R5 and 1.17% for Class W. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JULY 31, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 4/24/03) -13.40% +2.17% +6.73% +8.09% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -14.07% +1.43% +5.89% +7.25% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -14.11% +1.42% +5.90% +7.25% - ----------------------------------------------------------------------- Class I (inception 7/15/04) -12.98% +2.60% N/A +5.67% - ----------------------------------------------------------------------- Class R2 (inception 12/11/06) -13.51% N/A N/A -6.65% - ----------------------------------------------------------------------- Class R3 (inception 12/11/06) -13.26% N/A N/A -6.40% - ----------------------------------------------------------------------- Class R4 (inception 4/24/03) -13.26% +2.37% +6.89% +8.28% - ----------------------------------------------------------------------- Class R5 (inception 12/11/06) -13.09% N/A N/A -6.13% - ----------------------------------------------------------------------- Class W (inception 12/1/06) -13.52% N/A N/A -5.63% - ----------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -18.38% +0.17% +5.48% +6.87% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -18.14% +0.28% +5.57% +7.11% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -14.93% +1.42% +5.90% +7.25% - -----------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
AT JUNE 30, 2008 SINCE Without sales charge 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 4/24/03) -15.36% +4.05% +6.98% +8.55% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -16.04% +3.21% +6.14% +7.69% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -16.08% +3.21% +6.15% +7.70% - ----------------------------------------------------------------------- Class I (inception 7/15/04) -15.08% +4.37% N/A +6.15% - ----------------------------------------------------------------------- Class R2 (inception 12/11/06) -15.33% N/A N/A -5.98% - ----------------------------------------------------------------------- Class R3 (inception 12/11/06) -15.22% N/A N/A -5.82% - ----------------------------------------------------------------------- Class R4 (inception 4/24/03) -15.21% +4.20% +7.17% +8.74% - ----------------------------------------------------------------------- Class R5 (inception 12/11/06) -15.05% N/A N/A -5.53% - ----------------------------------------------------------------------- Class W (inception 12/1/06) -15.47% N/A N/A -5.01% - ----------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -20.25% +2.04% +5.73% +7.30% - ----------------------------------------------------------------------- Class B (inception 4/24/03) -20.01% +2.04% +5.83% +7.55% - ----------------------------------------------------------------------- Class C (inception 4/24/03) -16.87% +3.21% +6.15% +7.70% - -----------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, RiverSource Disciplined Equity Fund (the Fund) Class A shares declined 13.40% (excluding sales charge) for the 12 months ended July 31, 2008. The Fund underperformed the unmanaged Standard & Poor's 500 Index (S&P 500 Index), which fell 11.09%, as well as the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which declined 10.11%, for the same period. SIGNIFICANT PERFORMANCE FACTORS The annual period was a most challenging one, characterized by heightened concerns about weakness in the economy, ongoing turmoil in the housing and financial markets, a credit crunch and soaring commodity prices. As a result, equity volatility increased as the year progressed, peaking in March with the collapse of Bear Stearns and rearing its head again in June. Given the extreme pressure on the financial system, it makes sense that the financials sector, the largest weighting in the S&P 500 Index, performed worst. The resulting equity market decline was only partially mitigated by the impressive double-digit gains SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Consumer Discretionary 10.1% - ------------------------------------------------ Consumer Staples 11.3% - ------------------------------------------------ Energy 15.6% - ------------------------------------------------ Financials 20.0% - ------------------------------------------------ Health Care 16.9% - ------------------------------------------------ Industrials 7.6% - ------------------------------------------------ Information Technology 10.3% - ------------------------------------------------ Materials 5.6% - ------------------------------------------------ Telecommunication Services 0.9% - ------------------------------------------------ Utilities 0.7% - ------------------------------------------------ Other(2) 1.0% - ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. The 1.0% is due to security lending activity. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- generated by the energy sector, as crude oil prices surged past $140 per barrel before falling back a bit to end July at just over $124 per barrel. The Fund's performance resulted from the three quantitative investment models we employ in selecting stocks for the Fund's portfolio: momentum, value and quality. During the 12-month period, the momentum and quality models outperformed the S&P 500 Index, but not enough to offset the underperformance of the value model. The momentum model is designed, in part, to capture investor sentiment over the near to mid term, and it indeed did that, taking a strong lead during these challenging months. The quality model was intended to serve, in part, as a defensive measure during equity market corrections when investor risk aversion increases, and it, too, performed strongly. The value model was challenged primarily by exposure to financials and select consumer discretionary names. However, the value model performed well when the beaten-up financials sector rallied somewhat in January 2008 and again in July 2008. We believe that the style diversification provided by the three quantitative models is advantageous over the long-term, even though the Fund may experience underperformance in the short term. TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets) - ---------------------------------------------------------------------
Johnson & Johnson 4.9% - ------------------------------------------------ Pfizer 4.8% - ------------------------------------------------ Chevron 4.5% - ------------------------------------------------ Citigroup 3.0% - ------------------------------------------------ Wal-Mart Stores 2.8% - ------------------------------------------------ Apple 2.7% - ------------------------------------------------ Occidental Petroleum 2.6% - ------------------------------------------------ Monsanto 2.6% - ------------------------------------------------ Exxon Mobil 2.6% - ------------------------------------------------ Intel 2.3% - ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Following a specific, disciplined process, we do not make sector or industry bets based on economic or equity market outlooks. That said, the Fund's quantitative models led to a bias toward quality stocks, which boosted results during the period, as these stocks performed comparatively well. At the same time, the Fund's models positioned the equity portfolios toward the cheapest P/E stocks and toward the mega-cap, or largest cap stocks, both of which detracted from results, as these equity sectors posted weak results. Stock selection within the mega-cap segment of the market, however, proved effective, contributing to the Fund's results. Overall, sector allocation contributed to the Fund's performance, with sizable weightings in energy, health care and materials and only modest positions in industrials and telecommunications particularly helpful. Partially offsetting these positives were the detracting effects of having moderate allocations to the strongly performing consumer staples and utilities sectors and a significant exposure to the weaker financials and consumer discretionary sectors. Because we use a bottom-up approach, it is not surprising that most of the Fund's underperformance came from stock selection. Specifically, stock selection in the financials sector detracted most, as it did to a lesser extent in consumer discretionary, health care and energy. This more than offset the combined effect of positive stock selection in industrials, materials and telecommunications. Among individual holdings, information technology company APPLE, selected by the momentum model, contributed most to the Fund's During the 12-month period, the momentum and quality models outperformed the S&P 500 Index, but not enough to offset the underperformance of the value model. - -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- return. Other strong positive contributors included chemicals firm MONSANTO, selected by the momentum model; pharmaceutical company JOHNSON & JOHNSON, selected by the quality and momentum models; and energy companies OCCIDENTAL PETROLEUM, favored by the momentum model, and CHEVRON, initially chosen by the value model and then a quality model pick. Stocks that detracted from the Fund's return included four financials companies, each selected by the value model, namely FANNIE MAE, CITIGROUP, FREDDIE MAC and WASHINGTON MUTUAL. Other poor performers during the period were pharmaceutical giant PFIZER, a value and quality model choice, and retailer HOME DEPOT, also a value and quality model selection. At the end of July, the Fund's largest individual stock holdings were pharmaceutical companies JOHNSON & JOHNSON and PFIZER, the former a quality and momentum model choice and the latter a quality and value model pick; energy company CHEVRON, a quality model selection; information technology company APPLE, selected by the momentum model; and retailing giant WAL-MART STORES, a momentum and quality model pick. CHANGES TO THE FUND'S PORTFOLIO As a result of quantitative models-driven stock selection during the period, the Fund's sector allocations changed somewhat. For example, the Fund's exposure to financials, health care and materials increased relative to the S&P 500 Index. The Fund's positions in utilities and telecommunications decreased. Our risk models limit the size of individual holdings, as well as sector and industry allocations, relative to the S&P 500 Index. For instance, the Fund's weightings by sector and industry can never be more than 6% overweighted or underweighted relative to the S&P 500 Index. We also apply additional risk measures that impose constraints on market capitalization, price, quality, turnover, transaction costs and other variables. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- OUR FUTURE STRATEGY We intend to continue seeking optimal returns for the Fund through the style diversification offered by our three quantitative investment models. We are convinced of the merit of our multifaceted, disciplined approach to managing risk in the portfolio and believe this combination of style diversification and rigorous risk management will allow us to maintain the high quality of the Fund's portfolio in whatever market conditions lie ahead. (PHOTO - Dimitris Bertsimas) (PHOTO - Gina Mourtzinou) Dimitris Bertsimas, Ph.D. Gina Mourtzinou, Ph.D. Senior Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource fund. - -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Disciplined Equity Fund Class A shares (from 5/1/03 to 7/31/08)* as compared to the performance of two widely cited performance indices, the Standard & Poor's 500 Index and the Lipper Large-Cap Core Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5.75%, while such charges are not reflected in the performance of the indices. Returns for the Fund include the reinvestment of any distribution paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The table below and the chart on the facing page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. Also see "Past Performance" in the Fund's current prospectus. * Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. COMPARATIVE RESULTS - --------------------------------------------------------------------------------
Results at July 31, 2008 SINCE 1 YEAR 3 YEARS 5 YEARS INCEPTION(3) RIVERSOURCE DISCIPLINED EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $8,162 $10,051 $13,057 $14,202 - ---------------------------------------------------------------------------------------------- Average annual total return -18.38% +0.17% +5.48% +6.87% - ---------------------------------------------------------------------------------------------- S&P 500 INDEX(1) Cumulative value of $10,000 $8,891 $10,880 $14,045 $15,236 - ---------------------------------------------------------------------------------------------- Average annual total return -11.09% +2.85% +7.03% +8.35% - ---------------------------------------------------------------------------------------------- LIPPER LARGE-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $8,989 $10,966 $13,579 $14,602 - ---------------------------------------------------------------------------------------------- Average annual total return -10.11% +3.12% +6.31% +7.48% - ----------------------------------------------------------------------------------------------
Results for other share classes can be found on pages 4 and 5. - -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED EQUITY FUND LINE GRAPH)
RIVERSOURCE DISCIPLINED EQUITY FUND CLASS A LIPPER LARGE-CAP (INCLUDES SALES S&P 500 CORE FUNDS CHARGE) INDEX(1) INDEX(2) ----------------------- ------------------ ------------------ 5/1/03 $ 9,425 $10,000 $10,000 7/03 10,254 10,849 10,755 7/04 11,483 12,278 11,832 7/05 13,315 14,003 13,318 7/06 14,147 14,756 13,984 7/07 16,399 17,136 16,244 7/08 14,202 15,236 14,602
(1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. (3) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group data is from May 1, 2003. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended July 31, 2008. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.20 $4.46 .94% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.19 $4.72 .94% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 906.20 $8.06 1.70% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.41 $8.52 1.70% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 906.00 $8.01 1.69% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.46 $8.47 1.69% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 912.30 $2.76 .58% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.98 $2.92 .58% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 908.80 $6.64 1.40% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.90 $7.02 1.40% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.40 $5.46 1.15% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.14 $5.77 1.15% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 910.60 $3.85 .81% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.84 $4.07 .81% - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 911.90 $3.04 .64% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.68 $3.22 .64% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 908.50 $4.89 1.03% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.74 $5.17 1.03% - ------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). (b) Based on the actual return for the six months ended July 31, 2008: -8.98% for Class A, -9.38% for Class B, -9.40% for Class C, -8.77% for Class I, -9.12% for Class R2, -8.96% for Class R3, -8.94% for Class R4, -8.81% for Class R5 and -9.15% for Class W. - -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2008 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (99.3%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.8%) General Dynamics 150,467 $13,412,629 United Technologies 170,133 10,885,109 --------------- Total 24,297,738 - ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) CH Robinson Worldwide 104,757 5,049,287 United Parcel Service Cl B 29,657 1,870,764 --------------- Total 6,920,051 - ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.7%) Johnson Controls 666,450 20,100,132 - ------------------------------------------------------------------------------------- AUTOMOBILES (0.6%) Ford Motor 1,207,269(b) 5,794,891 General Motors 561,121(d) 6,211,609 Harley-Davidson 144,208 5,456,831 --------------- Total 17,463,331 - ------------------------------------------------------------------------------------- BEVERAGES (2.6%) Coca-Cola 523,483 26,959,375 Coca-Cola Enterprises 139,108 2,355,098 Pepsi Bottling Group 80,083 2,230,312 PepsiCo 690,410 45,953,689 --------------- Total 77,498,474 - ------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.4%) Biogen Idec 170,084(b) 11,865,060 Gilead Sciences 566,217(b) 30,564,394 --------------- Total 42,429,454 - ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.2%) Masco 390,239 6,435,041 - ------------------------------------------------------------------------------------- CAPITAL MARKETS (3.2%) Charles Schwab 175,448 4,016,005 E*TRADE Financial 256,004(b) 773,132 Goldman Sachs Group 25,923 4,770,869 Lehman Brothers Holdings 433,434 7,515,746 Merrill Lynch & Co 719,901 19,185,362 Morgan Stanley 998,145 39,406,764 State Street 238,016 17,051,466 T Rowe Price Group 28,175 1,686,274 --------------- Total 94,405,618 - ------------------------------------------------------------------------------------- CHEMICALS (4.6%) Air Products & Chemicals 55,173 5,253,021 Ashland 8,000 334,160 Dow Chemical 471,165 15,694,506 Ecolab 67,323 3,009,338 Monsanto 650,758 77,511,786 PPG Inds 66,308 4,020,917 Praxair 254,218 23,827,853 Sigma-Aldrich 99,276 6,030,024 --------------- Total 135,681,605 - ------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.6%) BB&T 447,110(d) 12,528,022 Comerica 171,854 4,935,647 Fifth Third Bancorp 368,605 5,149,412 First Horizon Natl 264,891(d) 2,489,975 Huntington Bancshares 363,386 2,550,970 KeyCorp 218,200 2,302,010 Marshall & Ilsley 55,025 836,380 Natl City 934,379(d) 4,419,613 SunTrust Banks 64,075 2,630,920 Synovus Financial 135,983(d) 1,293,198 US Bancorp 128,076 3,920,406 Wachovia 285,836 4,936,388 --------------- Total 47,992,941 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL SERVICES & SUPPLIES (0.1%) Avery Dennison 38,795 $1,707,368 RR Donnelley & Sons 79,664 2,127,029 --------------- Total 3,834,397 - ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.1%) Juniper Networks 104,860(b) 2,729,506 - ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.2%) Apple 513,868(b) 81,679,319 IBM 34,285 4,387,794 Lexmark Intl Cl A 180,264(b) 6,323,661 QLogic 139,178(b) 2,622,114 --------------- Total 95,012,888 - ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) Fluor 35,437 2,882,800 Jacobs Engineering Group 46,748(b) 3,615,490 --------------- Total 6,498,290 - ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.1%) SLM 101,227(b) 1,734,019 - ------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 157,293 6,309,022 - ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.1%) H&R Block 128,936 3,137,013 - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (5.5%) Bank of America 819,279 26,954,279 CIT Group 293,875 2,492,060 Citigroup 4,776,349 89,269,962 CME Group 10,890 3,921,816 JPMorgan Chase & Co 1,027,716 41,756,101 --------------- Total 164,394,218 - ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%) Embarq 90,976 4,163,972 Verizon Communications 706,965 24,065,088 --------------- Total 28,229,060 - ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.5%) Duke Energy 113,096 1,988,228 FirstEnergy 187,110 13,761,940 --------------- Total 15,750,168 - ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) Emerson Electric 124,001 6,038,849 - ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.6%) BJ Services 67,770 1,992,438 Cameron Intl 68,834(b) 3,287,512 ENSCO Intl 20,563 1,421,726 Nabors Inds 113,617(b,c) 4,142,476 Natl Oilwell Varco 82,932(b) 6,520,943 Smith Intl 877 65,231 Transocean 113,792(b) 15,479,125 Weatherford Intl 396,020(b) 14,941,835 --------------- Total 47,851,286 - ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (3.7%) Costco Wholesale 183,079 11,475,392 Safeway 318,606 8,513,152 SUPERVALU 79,252 2,030,436 Walgreen 155,755 5,348,627 Wal-Mart Stores 1,428,204 83,721,318 --------------- Total 111,088,925 - ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.5%) Archer-Daniels-Midland 133,678 3,827,201 Dean Foods 27,032(b) 575,782 HJ Heinz 77,259 3,892,308 Sara Lee 476,830 6,513,498 --------------- Total 14,808,789 - ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Becton Dickinson & Co 52,477 4,455,822 CR Bard 61,637 5,722,379 Varian Medical Systems 97,154(b) 5,829,240 --------------- Total 16,007,441 - ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.1%) Aetna 110,399 4,527,463 Cardinal Health 193,112 10,375,908 CIGNA 511,572 18,938,395 Express Scripts 312,689(b) 22,057,082 Health Management Associates Cl A 67,300(b) 413,895 Humana 103,989(b) 4,566,157 Laboratory Corp of America Holdings 9,029(b) 610,180 Medco Health Solutions 554,391(b) 27,486,706
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) Quest Diagnostics 37,962 $2,018,060 Tenet Healthcare 456,110(b) 2,640,877 --------------- Total 93,634,723 - ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.2%) Intl Game Technology 192,159 4,171,772 McDonald's 493,202 29,488,548 Wendy's Intl 50,234 1,152,870 Wyndham Worldwide 46,479 833,833 --------------- Total 35,647,023 - ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Black & Decker 29,679 1,781,334 Centex 168,771 2,477,558 DR Horton 693,693 7,713,867 KB Home 68,347 1,202,224 Lennar Cl A 165,396 2,001,292 Pulte Homes 202,526 2,472,842 Snap-On 23,267 1,309,699 Stanley Works 13,005 578,462 --------------- Total 19,537,278 - ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (3.5%) Colgate-Palmolive 392,107 29,121,787 Kimberly-Clark 257,974 14,918,636 Procter & Gamble 898,023 58,802,546 --------------- Total 102,842,969 - ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.5%) 3M 664,986 46,808,365 Textron 180,304 7,837,815 Tyco Intl 422,577(c) 18,830,031 --------------- Total 73,476,211 - ------------------------------------------------------------------------------------- INSURANCE (7.9%) ACE 378,651(c) 19,197,606 AFLAC 447,992 24,912,835 Allstate 913,087 42,202,881 Ambac Financial Group 288,197 726,256 American Intl Group 803,418 20,929,039 Assurant 27,878 1,676,025 Chubb 428,603 20,590,088 Cincinnati Financial 28,900 804,576 Genworth Financial Cl A 656,721 10,487,834 Lincoln Natl 18,186 867,472 Marsh & McLennan Companies 236,739 6,687,877 MBIA 209,475(d) 1,242,187 Progressive 1,404,343 28,437,946 Prudential Financial 81,341 5,610,089 Safeco 97,345 6,440,345 Torchmark 89,376 5,188,277 Travelers Companies 639,459 28,212,931 Unum Group 358,253 8,655,392 XL Capital Cl A 94,342(c) 1,687,778 --------------- Total 234,557,434 - ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Amazon.com 61,740(b) 4,713,232 - ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.7%) Google Cl A 46,428(b) 21,995,265 - ------------------------------------------------------------------------------------- IT SERVICES (1.6%) Affiliated Computer Services Cl A 18,684(b) 900,569 Automatic Data Processing 78,311 3,344,663 MasterCard Cl A 86,337 21,079,178 Paychex 98,702 3,249,270 Total System Services 65,805 1,288,462 Western Union 593,498 16,404,285 --------------- Total 46,266,427 - ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.5%) Brunswick 100,213 1,292,748 Eastman Kodak 232,404 3,402,395 Mattel 530,174 10,629,988 --------------- Total 15,325,131 - ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.3%) Applied Biosystems 96,483(g) 3,563,117 Waters 59,289(b) 4,028,095 --------------- Total 7,591,212 - ------------------------------------------------------------------------------------- MACHINERY (1.4%) Deere & Co 337,116 23,652,058 Illinois Tool Works 99,790 4,675,162 Ingersoll-Rand Cl A 296,130(c) 10,660,680 Manitowoc 41,277 1,088,062 Parker Hannifin 19,313 1,191,226 --------------- Total 41,267,188 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 19
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MEDIA (0.8%) CBS Cl B 836,744 $13,689,132 Gannett 498,635 9,035,266 Meredith 14,134 361,265 New York Times Cl A 109,515(d) 1,378,794 --------------- Total 24,464,457 - ------------------------------------------------------------------------------------- METALS & MINING (1.0%) Freeport-McMoRan Copper & Gold 37,306 3,609,356 Newmont Mining 264,476 12,684,269 Nucor 251,492 14,390,372 --------------- Total 30,683,997 - ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.2%) Family Dollar Stores 102,849 2,396,382 Kohl's 85,519(b) 3,584,101 --------------- Total 5,980,483 - ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.2%) NiSource 121,389 2,073,324 TECO Energy 83,991 1,558,033 Xcel Energy 89,446 1,794,287 --------------- Total 5,425,644 - ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (14.0%) Anadarko Petroleum 273,837 15,857,901 Apache 49,069 5,504,070 Chevron 1,592,569 134,667,634 ConocoPhillips 213,132 17,395,834 CONSOL Energy 146,591 10,904,904 Devon Energy 48,553 4,607,194 EOG Resources 152,412 15,321,978 Exxon Mobil 962,007 77,374,223 Hess 54,510 5,527,314 Marathon Oil 363,777 17,996,048 Massey Energy 64,559 4,793,506 Murphy Oil 110,749 8,830,018 Occidental Petroleum 1,003,658 79,118,360 Peabody Energy 262,364 17,748,925 Sunoco 29,899 1,214,198 Tesoro 98,048 1,513,861 --------------- Total 418,375,968 - ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Estee Lauder Companies Cl A 46,161 2,035,700 - ------------------------------------------------------------------------------------- PHARMACEUTICALS (11.6%) Allergan 56,596 2,939,030 Barr Pharmaceuticals 9,508(b) 627,338 Eli Lilly & Co 295,088 13,901,596 Forest Laboratories 149,667(b) 5,314,675 Johnson & Johnson 2,120,920 145,219,392 King Pharmaceuticals 400,546(b) 4,610,284 Merck & Co 772,283 25,408,111 Mylan 138,890(b) 1,801,403 Pfizer 7,750,509 144,702,003 --------------- Total 344,523,832 - ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) HCP 198,201 7,149,110 Public Storage 99,036 8,110,058 --------------- Total 15,259,168 - ------------------------------------------------------------------------------------- ROAD & RAIL (1.8%) Burlington Northern Santa Fe 118,327 12,321,391 CSX 248,524 16,795,252 Norfolk Southern 72,837 5,238,437 Ryder System 35,293 2,327,926 Union Pacific 208,552 17,193,027 --------------- Total 53,876,033 - ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.4%) Intel 3,083,693 68,427,147 MEMC Electronic Materials 44,937(b) 2,076,539 NVIDIA 95,822(b) 1,096,204 Xilinx 54,132 1,344,098 --------------- Total 72,943,988 - ------------------------------------------------------------------------------------- SOFTWARE (2.4%) BMC Software 153,194(b) 5,038,551 Electronic Arts 70,423(b) 3,040,865 Microsoft 1,151,519 29,617,069 Oracle 1,507,562(b) 32,457,809 --------------- Total 70,154,294 - ------------------------------------------------------------------------------------- SPECIALTY RETAIL (4.0%) Abercrombie & Fitch Cl A 47,279 2,610,746 AutoNation 173,695(b) 1,792,532 AutoZone 41,363(b) 5,389,185 Bed Bath & Beyond 172,209(b) 4,792,576 Best Buy 144,404 5,735,727
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SPECIALTY RETAIL (CONT.) GameStop Cl A 92,505(b) $3,747,378 Gap 368,056 5,933,063 Home Depot 2,249,714 53,610,686 Lowe's Companies 1,222,095 24,832,970 Office Depot 149,209(b) 1,014,621 RadioShack 168,700 2,813,916 Sherwin-Williams 53,160 2,830,770 Staples 28,256 635,760 TJX Companies 93,120 3,139,075 --------------- Total 118,879,005 - ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.0%) Coach 206,729(b) 5,273,657 Jones Apparel Group 116,009 1,941,991 Liz Claiborne 229,550 3,000,219 Nike Cl B 250,207 14,682,146 VF 80,201 5,740,787 --------------- Total 30,638,800 - ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.3%) Fannie Mae 1,336,093 15,365,070 Freddie Mac 794,150 6,488,206 Hudson City Bancorp 416,370 7,602,916 MGIC Investment 217,148(d) 1,389,747 Sovereign Bancorp 259,714 2,472,477 Washington Mutual 1,140,168(d) 6,077,095 --------------- Total 39,395,511 - ------------------------------------------------------------------------------------- TOBACCO (1.0%) Altria Group 377,005 7,672,052 Philip Morris Intl 377,005 19,472,308 UST 30,691 1,614,654 --------------- Total 28,759,014 - ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.1%) WW Grainger 42,704 3,822,435 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $3,449,006,497) $2,958,720,678 - ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.0%)(e) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 2.54% 29,160,041(f) $29,160,041 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $29,160,041) $29,160,041 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,478,166,538)(h) $2,987,880,719 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the value of foreign securities represented 1.8% of net assets. (d) At July 31, 2008, security was partially or fully on loan. See Note 5 to the financial statements. (e) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 1.0% of net assets. See Note 5 to the financial statements. (f) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2008. (g) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 21 NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (h) At July 31, 2008, the cost of securities for federal income tax purposes was $3,482,874,307 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $182,589,649 Unrealized depreciation (677,583,237) - ------------------------------------------------------------ Net unrealized depreciation $(494,993,588) - ------------------------------------------------------------
The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. - -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FINANCIAL STATEMENTS ----------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $3,449,006,497) $2,958,720,678 Affiliated money market fund (identified cost $29,160,041) 29,160,041 - ----------------------------------------------------------------------------- Total investments in securities (identified cost $3,478,166,538) 2,987,880,719 Capital shares receivable 7,901,741 Dividends receivable 3,662,482 Receivable for investment securities sold 18,579,000 - ----------------------------------------------------------------------------- Total assets 3,018,023,942 - ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 4,942,098 Payable for investment securities purchased 5,434,457 Payable upon return of securities loaned 28,947,000 Accrued investment management services fees 47,412 Accrued distribution fees 17,809 Accrued transfer agency fees 8,141 Accrued administrative services fees 4,325 Accrued plan administration services fees 874 Other accrued expenses 245,899 - ----------------------------------------------------------------------------- Total liabilities 39,648,015 - ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $2,978,375,927 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 23 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) JULY 31, 2008
REPRESENTED BY Capital stock -- $.01 par value $ 5,066,590 Additional paid-in capital 3,372,897,811 Undistributed net investment income 26,278,639 Accumulated net realized gain (loss) 64,376,402 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (490,243,515) - ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $2,978,375,927 - ----------------------------------------------------------------------------- *Including securities on loan, at value $ 26,940,910 - -----------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,067,408,739 181,520,585 $5.88(1) Class B $ 35,383,368 6,102,723 $5.80 Class C $ 2,787,743 482,134 $5.78 Class I $ 391,424,906 66,059,325 $5.93 Class R2 $ 3,886 661 $5.88 Class R3 $ 3,892 661 $5.89 Class R4 $ 126,215,819 21,367,300 $5.91 Class R5 $ 3,897 661 $5.90 Class W $1,355,143,677 231,124,956 $5.86 - ----------------------------------------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $6.24. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008
INVESTMENT INCOME Income: Dividends $ 73,023,497 Interest 34,939 Income distributions from affiliated money market fund 2,535,607 Fee income from securities lending 371,237 - ---------------------------------------------------------------------------- Total income 75,965,280 - ---------------------------------------------------------------------------- Expenses: Investment management services fees 17,556,244 Distribution fees Class A 3,199,228 Class B 550,860 Class C 31,395 Class R2 22 Class R3 11 Class W 3,483,017 Transfer agency fees Class A 1,263,544 Class B 61,169 Class C 3,295 Class R2 3 Class R3 3 Class R4 71,684 Class R5 3 Class W 2,786,414 Administrative services fees 1,701,542 Plan administration services fees Class R2 11 Class R3 11 Class R4 358,419 Compensation of board members 63,212 Custodian fees 246,979 Printing and postage 231,535 Registration fees 174,925 Professional fees 73,045 Other 117,553 - ---------------------------------------------------------------------------- Total expenses 31,974,124 Expenses waived/reimbursed by the Investment Manager and its affiliates (101,556) Earnings and bank fee credits on cash balances (79,613) - ---------------------------------------------------------------------------- Total net expenses 31,792,955 - ---------------------------------------------------------------------------- Investment income (loss) -- net 44,172,325 - ----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 25 STATEMENT OF OPERATIONS (CONTINUED) YEAR ENDED JULY 31, 2008
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ 112,424,784 Futures contracts (8,587,777) - ---------------------------------------------------------------------------- Net realized gain (loss) on investments 103,837,007 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (641,572,651) - ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (537,735,644) - ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(493,563,319) - ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2008 2007 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 44,172,325 $ 26,328,359 Net realized gain (loss) on investments 103,837,007 175,329,400 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (641,572,651) 99,972,248 - --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (493,563,319) 301,630,007 - --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (11,230,396) (11,770,748) Class B -- (119,376) Class C (4,379) (7,167) Class I (5,698,153) (4,503,510) Class R2 (28) (53) Class R3 (40) (53) Class R4 (1,390,578) (2,093,617) Class R5 (54) (54) Class W (14,867,518) (4,357) Net realized gain Class A (68,772,061) (98,698,411) Class B (3,058,960) (5,457,193) Class C (169,022) (199,900) Class I (24,176,366) (28,282,528) Class R2 (244) (338) Class R3 (244) (338) Class R4 (7,584,972) (15,612,336) Class R5 (244) (338) Class W (74,056,615) (27,397) - --------------------------------------------------------------------------------------------- Total distributions (211,009,874) (166,777,714) - ---------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 27 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2008 2007 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 49,740,163 $ 88,546,740 Class B shares 5,505,096 11,644,836 Class C shares 976,461 962,793 Class I shares 120,762,575 268,920,269 Class R2 shares -- 5,000 Class R3 shares -- 5,000 Class R4 shares 25,111,692 96,913,115 Class R5 shares -- 5,000 Class W shares 1,465,443,768 847,280,579 Reinvestment of distributions at net asset value Class A shares 74,058,485 101,787,281 Class B shares 3,022,150 5,504,829 Class C shares 167,943 204,516 Class I shares 29,873,023 32,784,089 Class R4 shares 8,975,550 17,705,953 Class W shares 88,923,836 31,356 Payments for redemptions Class A shares (215,746,354) (248,119,981) Class B shares (24,117,349) (34,806,536) Class C shares (1,059,851) (749,148) Class I shares (108,422,258) (138,117,054) Class R4 shares (37,030,416) (203,796,200) Class W shares (622,614,805) (82,651,517) - --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 863,569,709 764,060,920 - --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 158,996,516 898,913,213 Net assets at beginning of year 2,819,379,411 1,920,466,198 - --------------------------------------------------------------------------------------------- Net assets at end of year $2,978,375,927 $2,819,379,411 - --------------------------------------------------------------------------------------------- Undistributed net investment income $ 26,278,639 $ 15,309,316 - ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Disciplined Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 29 VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of - -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At July 31, 2008, and for the year then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures are valued daily based upon the last sale price at the close of market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. At July 31, 2008, the Fund had no outstanding futures contracts. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 31 The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. At July 31, 2008, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than- not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of REIT distributions and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. - -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT On the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $11,856 and accumulated net realized gain has been increased by $11,856. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2008 2007* - ----------------------------------------------------------------- CLASS A Distributions paid from: Ordinary income.................... $29,513,520 $55,821,524 Long-term capital gain............. 50,488,937 54,647,635 CLASS B Distributions paid from: Ordinary income.................... 813,265 2,555,014 Long-term capital gain............. 2,245,695 3,021,555 CLASS C Distributions paid from: Ordinary income.................... 49,313 96,386 Long-term capital gain............. 124,088 110,681 CLASS I Distributions paid from: Ordinary income.................... 12,125,448 17,126,482 Long-term capital gain............. 17,749,071 15,659,556 CLASS R2 Distributions paid from: Ordinary income.................... 93 204 Long-term capital gain............. 179 187 CLASS R3 Distributions paid from: Ordinary income.................... 105 204 Long-term capital gain............. 179 187 CLASS R4 Distributions paid from: Ordinary income.................... 3,407,046 9,061,667 Long-term capital gain............. 5,568,504 8,644,286 CLASS R5 Distributions paid from: Ordinary income.................... 119 205 Long-term capital gain............. 179 187 CLASS W Distributions paid from: Ordinary income.................... 34,555,495 16,585 Long-term capital gain............. 54,368,638 15,169
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006 (inception Date) to July 31, 2007. Class W is for the period from Dec. 1, 2006 (inception date) to July 31, 2007. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 33 At July 31, 2008, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ 26,316,607 Undistributed accumulated long-term gain....... $ 69,084,171 Unrealized appreciation (depreciation)......... $(494,989,252)
RECENT ACCOUNTING PRONOUNCEMENTS In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. The application of SFAS 157 will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The adoption of SFAS 157 is not anticipated to have a material impact on the Fund's financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $1,361,345 for the year ended July 31, 2008. The management fee for the year ended July 31, 2008 was 0.53% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the year ended July 31, 2008 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended July 31, 2008, other expenses paid to this company were $12,086. COMPENSATION OF BOARD MEMBERS Compensation of board members includes, for a former Board Chair, compensation as well as retirement benefits. Certain other aspects of a former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 35 TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor) for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise Financial Services, Inc. also served as a principal underwriter and distributor to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A, Class R3 and Class W shares, a fee at annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $923,000 and $23,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of July 31, 2008, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGE Sales charges received by the Distributor for distributing Fund shares were $384,412 for Class A, $28,089 for Class B and $320 for Class C for the year ended July 31, 2008. - -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2008, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class R2............................................ 1.16% Class R3............................................ 0.90 Class R4............................................ 0.84
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R4.......................................... $99,480
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.......................................... $ 11 Class R3.......................................... 11 Class R4.......................................... 2,054
Under an agreement which was effective until July 31, 2008, the Investment Manager and its affiliates contractually agreed to waive certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, would not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.09% Class B............................................. 1.85 Class C............................................. 1.85 Class I............................................. 0.78 Class R2............................................ 1.58 Class R3............................................ 1.33 Class R4............................................ 0.88 Class R5............................................ 0.83 Class W............................................. 1.23
Effective August 1, 2008, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 37 performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.05% Class B............................................. 1.81 Class C............................................. 1.81 Class I............................................. 0.72 Class R2............................................ 1.52 Class R3............................................ 1.27 Class R4............................................ 0.88 Class R5............................................ 0.77 Class W............................................. 1.17
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the year ended July 31, 2008, the Fund's custodian and transfer agency fees were reduced by $79,613 as a result of earnings and bank fee credits from overnight cash balances. The Fund pays custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,581,232,117 and $1,875,992,176, respectively, for the year ended July 31, 2008. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------ Class A 7,609,621 10,923,080 (32,329,627) (13,796,926) Class B 826,089 449,725 (3,897,874) (2,622,060) Class C 150,658 25,066 (161,175) 14,549 Class I 17,804,029 4,380,209 (16,813,974) 5,370,264 Class R4 3,752,567 1,317,996 (5,442,436) (371,873) Class W 213,069,694 13,134,983 (98,243,751) 127,960,926 - ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT
YEAR ENDED JULY 31, 2007 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ------------------------------------------------------------------------------------ Class A 12,174,430 14,582,705 (34,507,399) (7,750,264) Class B 1,639,136 796,647 (4,750,576) (2,314,793) Class C 135,752 29,640 (105,911) 59,481 Class I 37,783,228 4,670,098 (18,989,372) 23,463,954 Class R2(a) 661 -- -- 661 Class R3(a) 661 -- -- 661 Class R4 13,970,887 2,529,422 (27,927,795) (11,427,486) Class R5(a) 661 -- -- 661 Class W(b) 114,252,036 4,492 (11,092,498) 103,164,030 - ------------------------------------------------------------------------------------
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. 5. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, the Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. The Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Fund under the Investment Management Services Agreement pursuant to which the Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. At July 31, 2008, securities valued at $26,940,910 were on loan to brokers. For collateral, the Fund received $28,947,000 in cash. Cash collateral received is invested in an affiliated money market fund and short- term securities, including U.S. government securities or other high-grade debt obligations, which are included in the Portfolio of Investments. Income from securities lending amounted to $371,237 for the year ended July 31, 2008. Expenses paid to the Investment Manager as securities lending agent were $9,660 for the year ended July 31, 2008, which are included in other expenses on the Statement of Operations. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 39 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $1,215,814,562 and $1,194,979,908, respectively, for the year ended July 31, 2008. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 18, 2007, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $500 million. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility, a Fund paid interest on its outstanding borrowings at a rate equal to either the higher of the federal funds effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund had no borrowings during the year ended July 31, 2008. 8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. - -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 41 9. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.22 $6.74 $6.70 $5.95 $5.44 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09(b) .08(b) .06 .04 .02 Net gains (losses) (both realized and unrealized) (1.00) .97 .35 .90 .63 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.91) 1.05 .41 .94 .65 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.06) (.03) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.43) (.57) (.37) (.19) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.22 $6.74 $6.70 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,067 $1,410 $1,368 $28 $13 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .96% 1.05% 1.05% 1.35% 1.91% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .96% 1.03% 1.02% 1.25% 1.13% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.35% 1.13% .95% .84% .65% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (13.4- Total return(g) 0%) 15.92% 6.25% 15.95% 11.99% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.12 $6.65 $6.62 $5.90 $5.43 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .02 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .34 .86 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .35 .88 .59 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.01) (.01) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.37) (.52) (.32) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.80 $7.12 $6.65 $6.62 $5.90 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $35 $62 $73 $9 $3 - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.82% 1.85% 2.13% 2.73% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.82% 2.04% 1.95% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .37% .20% .06% (.16%) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (14.0- Total return(g) 7%) 15.18% 5.42% 15.03% 10.95% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 43 CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.11 $6.65 $6.62 $5.90 $5.43 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .03(b) .01 .01 (.02) Net gains (losses) (both realized and unrealized) (.99) .96 .35 .87 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.95) .99 .36 .88 .59 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.02) (.02) -- -- Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.38) (.53) (.33) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.78 $7.11 $6.65 $6.62 $5.90 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $3 $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.72% 1.81% 1.84% 2.13% 2.73% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) 1.72% 1.79% 1.81% 2.06% 1.95% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) .59% .36% .20% .02% (.17%) - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (14.1- Total return(g) 1%) 15.14% 5.51% 15.03% 10.96% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (g) Total return does not reflect payment of a sales charge. - -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004(b) Net asset value, beginning of period $7.27 $6.78 $6.73 $5.96 $5.99 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11(c) .11(c) .08 .04 .02 Net gains (losses) (both realized and unrealized) (.99) .97 .36 .92 (.05) - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.88) 1.08 .44 .96 (.03) - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.08) (.08) (.03) -- Distributions from realized gains (.37) (.51) (.31) (.16) -- - -------------------------------------------------------------------------------------------------------------- Total distributions (.46) (.59) (.39) (.19) -- - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.93 $7.27 $6.78 $6.73 $5.96 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $391 $441 $252 $82 $9 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .61% .70% .72% .91% 1.27%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .61% .67% .70% .91% .93%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.69% 1.47% 1.41% 1.19% 5.35%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - -------------------------------------------------------------------------------------------------------------- Total return (12.98%) 16.29% 6.73% 16.29% (.50%)(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from July 15, 2004 (inception date) to July 31, 2004. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 45 CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.21 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .23 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.41) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.88 $7.21 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.41% 1.49%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.16% 1.48%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.15% .55%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.51%) 3.31%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.22 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .09 .04 Net gains (losses) (both realized and unrealized) (.99) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.90) .24 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.43) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.89 $7.22 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.15% 1.24%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .90% 1.22%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss)(f) 1.41% .81%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.26%) 3.46%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 47 CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.25 $6.76 $6.71 $5.95 $5.45 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .10(b) .09(b) .07 .05 .03 Net gains (losses) (both realized and unrealized) (1.00) .98 .36 .91 .61 - --------------------------------------------------------------------------------------------------------- Total from investment operations (.90) 1.07 .43 .96 .64 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.07) (.07) (.04) (.02) Distributions from realized gains (.37) (.51) (.31) (.16) (.12) - --------------------------------------------------------------------------------------------------------- Total distributions (.44) (.58) (.38) (.20) (.14) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.91 $7.25 $6.76 $6.71 $5.95 - --------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $126 $158 $224 $-- $-- - --------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .91% .95% .87% 1.18% 1.76% - --------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(e),(f) .84% .87% .84% 1.06% .98% - --------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.47% 1.29% 1.10% 1.03% .78% - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% 137% 64% 64% - --------------------------------------------------------------------------------------------------------- (13.2- Total return 6%) 16.15% 6.48% 16.25% 11.87% - ---------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. - -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.24 $7.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .11 .06 Net gains (losses) (both realized and unrealized) (1.00) .20 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.89) .26 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.45) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.90 $7.24 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .66% .75%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .66% .74%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.66% 1.28%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.09%) 3.76%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 49 CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2008 2007(b) Net asset value, beginning of period $7.22 $7.46 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .08 .03 Net gains (losses) (both realized and unrealized) (1.00) .32 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (.92) .35 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.08) Distributions from realized gains (.37) (.51) - -------------------------------------------------------------------------------------------------------------- Total distributions (.44) (.59) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.86 $7.22 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,355 $745 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.06% 1.18%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.06% 1.13%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.22% .59%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 62% - -------------------------------------------------------------------------------------------------------------- Total return (13.52%) 5.01%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. - -------------------------------------------------------------------------------- 50 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE DISCIPLINED EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Disciplined Equity Fund (the Fund) (one of the portfolios constituting the RiverSource Large Cap Series, Inc.) as of July 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for the periods presented through July 31, 2006, were audited by other auditors whose report dated September 20, 2006, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2008, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 51 In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Disciplined Equity Fund of the RiverSource Large Cap Series, Inc. at July 31, 2008, the results of its operations for the year then ended, and changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 22, 2008 - -------------------------------------------------------------------------------- 52 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100% Dividends Received Deduction for corporations................ 100% U.S. Government Obligations.................................. 0.00% CAPITAL GAIN DISTRIBUTION - the Fund designates $130,545,470 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 53 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 104 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 54 - ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None 901 S. Marquette Ave. 1999 Minnesota Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 53 - ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley College Age 57 - ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 73 - ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 72 - ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Board member since President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. 2002 and Chair of College Inc. (manufactures Minneapolis, MN 55402 the Board since 2007 irrigation systems) Age 69 - ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 54 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 55 - ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc. Minneapolis, MN 55402 Biotech (biotechnology); Age 64 Healthways, Inc. (health management programs) - ------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President, Financial Center Vice President since Chairman of the Board and Chief Investment Officer, Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director, Age 47 President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board, Chief Executive Officer and President, RiverSource Distributors, Inc. since 2006; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001- 2005 - ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com/funds. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 55 The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center since 2006; Director and Vice President -- Asset Minneapolis, MN 55474 Management, Products and Marketing, RiverSource Age 42 Distributors, Inc. since 2006; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002-2004 - -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 44 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 - -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company 5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice Center Minneapolis, MN President -- Operations and Compliance, RiverSource 55474 Investments, LLC, 2004-2006; Director of Product Age 42 Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 Minneapolis, MN 55474 Age 53 - -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. since 2006; Vice Minneapolis, MN 55474 President, General Counsel and Secretary, Ameriprise Age 49 Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 - -------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, 172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006; Center Director -- Mutual Funds, Voyageur Asset Management, Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset Age 47 Management, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 56 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer, 2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti- Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003- Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer, Age 44 American Express Centurion Bank, 2000-2003 - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 57 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement") RiverSource Investments provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. RiverSource Investments prepared detailed reports for the Board and its Contracts Committee in March and April 2008, including reports based on data provided by independent organizations to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees) reviews information prepared by RiverSource Investments addressing the services RiverSource Investments provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts, Investment Review and Compliance Committees in determining whether to continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting, independent legal counsel to the Independent Directors reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by RiverSource Investments: The Board analyzed various reports and presentations it had received detailing the services performed by RiverSource Investments, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by RiverSource Investments, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, particularly in the areas of trading systems, new product initiatives, legal and compliance. Further, in connection with the Board's evaluation of the overall package of services provided by RiverSource Investments, the Board considered the quality of the administrative and transfer agency services provided by RiverSource Investments' affiliates to the Fund. The Board also reviewed the financial condition of RiverSource Investments (and its affiliates) and each entity's ability to carry out its responsibilities under the IMS Agreement. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by RiverSource Investments). The Board concluded that the services - -------------------------------------------------------------------------------- 58 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT - -------------------------------------------------------------------------------- being performed under the IMS Agreement were of a reasonably high quality, particularly in light of recent market conditions. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that RiverSource Investments and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered: (i) detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund; and (ii) a report detailing the Fund's performance over various periods (including since inception), recent Fund inflows (and outflows) and a comparison of the Fund's net assets from December 2006 to December 2007. The Board observed that the Fund's investment performance was appropriate in light of the particular management style and market conditions involved Comparative Fees, Costs of Services Provided and the Profits Realized By RiverSource Investments and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to RiverSource Investments' profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) was below the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT 59 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered the expected profitability of RiverSource Investments and its affiliates in connection with RiverSource Investments providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to RiverSource Investments and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by RiverSource Investments as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 10, 2008, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement. PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote all proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 60 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2008 ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS. ADVANCED ALPHA(SM) STRATEGIES RiverSource 120/20 Contrarian Equity Fund RiverSource 130/30 U.S. Equity Fund RiverSource Absolute Return Currency and Income Fund Threadneedle Global Extended Alpha Fund ADVICE-BUILT(SM) SOLUTIONS RIVERSOURCE INCOME BUILDER SERIES RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE PORTFOLIO BUILDER SERIES RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Total Equity Fund RIVERSOURCE RETIREMENT PLUS(R) SERIES RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE STRATEGIC ALLOCATION FUND RIVERSOURCE BALANCED FUND SINGLE-STRATEGY FUNDS GROWTH FUNDS RiverSource Partners Aggressive Growth Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Global Technology Fund RiverSource Growth Fund RiverSource Mid Cap Growth Fund RiverSource Partners Small Cap Growth Fund BLEND FUNDS RiverSource Disciplined Equity Fund RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Large Cap Equity Fund RiverSource Precious Metals and Mining Fund RiverSource S&P 500 Index Fund* RiverSource Small Cap Advantage Fund RiverSource Partners Small Cap Equity Fund RiverSource Small Company Index Fund VALUE FUNDS RiverSource Disciplined Large Cap Value Fund RiverSource Disciplined Small Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Dividend Opportunity Fund RiverSource Equity Value Fund RiverSource Partners Fundamental Value Fund RiverSource Large Cap Value Fund RiverSource Mid Cap Value Fund RiverSource Real Estate Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Value Fund GLOBAL/INTERNATIONAL FUNDS RiverSource Disciplined International Equity Fund Threadneedle Emerging Markets Fund Threadneedle European Equity Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund RiverSource Partners International Select Growth Fund Threadneedle International Opportunity Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund
- -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT TAXABLE INCOME FUNDS RiverSource Cash Management Fund** RiverSource Diversified Bond Fund RiverSource Emerging Markets Bond Fund RiverSource Floating Rate Fund RiverSource Global Bond Fund RiverSource High Yield Bond Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RiverSource Short Duration U.S. Government Fund RiverSource Strategic Income Allocation Fund RiverSource U.S. Government Mortgage Fund TAX-EXEMPT FUNDS RiverSource California Tax-Exempt Fund RiverSource Intermediate Tax-Exempt Fund RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund RiverSource Tax-Exempt High Income Fund RiverSource Tax-Exempt Money Market 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 & Poors(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 MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE ANNUAL REPORT RIVERSOURCE DISCIPLINED EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. These companies are part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6263 H (9/08)
EX-99.17(L) 17 c50349f.txt Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE LARGE CAP EQUITY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED JANUARY 31, 2009 RIVERSOURCE LARGE CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. (SINGLE STRATEGY FUNDS ICON) LETTER TO SHAREHOLDERS --------------------------------------------------------- (PHOTO - BANNIGAN - LEWIS) Patrick T. Bannigan (left) Stephen R. Lewis, Jr. (right) Dear Fellow Shareholders, 2008 was an unprecedented year in many ways. Investors watched the precipitous decline in all the major U.S. and international equity indexes as concerns about the economy gave way to fear and selling of securities. In response to substantial losses in the markets and weakening economic indicators, the government stepped in swiftly and aggressively to encourage liquidity and credit availability in an attempt to make credit markets function. By the end of the calendar year, these actions still needed time to gain traction in the markets. During a severe economic environment like the one we are experiencing, it is essential that investors try not to let short-term losses in the market distract from a long-term investment plan. Such discipline may be easier said than done in the presence of negative news in the media. However, the financial choices you make today -- practicing patience or locking in losses -- will influence your portfolio's performance. GETTING BACK ON TRACK Whether you look at the glass as half empty or half full, every broad based market decline creates investment opportunities. The financial markets are expected to recover, although it is impossible to know when. In the meantime, make sure your portfolio is positioned to benefit from the next sources of growth. Market recoveries often occur before the reported end of a recession. If you wait for validation of economic recovery before reinvesting in the markets, you may well miss out on market returns associated with an economic rebound. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT - --------------------------------------------------------------------------------
TIME ELAPSED BETWEEN BEAR MARKET AND BEAR MARKET RECESSION RETURNS RECESSION ENDED END DATES MISSED* - ----------------------------------------------------------------- August 1929 - March 1933 June 1932 9 months 39.21% August 1957 - April 1958 December 1957 4 months 9.94% December 1969 - November 1970 June 1970 5 months 21.81% November 1973 - March 1975 September 1974 6 months 34.47% July 1981 - November 1982 July 1982 4 months 31.72% July 1990 - March 1991 October 1990 5 months 25.33% - -----------------------------------------------------------------
* S&P 500(R) Index total returns for the number of months between the recession and bear market end dates. Be sure your portfolio is on track today. Talk with your financial professional about opportunities that have been created in the markets and take advantage of our solutions and strategies that can help position portfolios for the next market recovery cycle. OUR FAMILY OF FUNDS We also want to share some good news with our fellow shareholders. Last November, RiverSource Investments, a wholly- owned subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated. Seligman's long heritage of investing and exceptional wealth of experience is a valuable addition to RiverSource Investments. Along with RiverSource and Threadneedle, Seligman joins our comprehensive family of mutual funds we offer investors. For more information about any of our RiverSource Funds, go online to RiverSource.com or call (888) 791-3380. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 5 p.m. Central time. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT LETTER TO SHAREHOLDERS (continued) --------------------------------------------- In addition, we are excited to welcome John Maher and Leroy Richie to the RiverSource Funds' Boards of Directors. Mr. Maher and Mr. Richie join us from the Seligman Funds' Boards of Directors. The acquisition of Seligman creates several new opportunities for RiverSource Funds' shareholders, including access to talented portfolio managers and competitive mutual fund solutions to help you reach your investment goals. We hope you are as excited by these opportunities as we are. Thank you for investing with us. /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. Asset allocation, diversification, and dollar cost averaging do not assure a profit or protect against loss and past performance is no guarantee of future results. Standard & Poor's 500 Index (S&P 500 Index) is an unmanaged list of common stocks and is frequently used as a general measure of U.S. market performance. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 8 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 25 Statement of Operations............ 27 Statements of Changes in Net Assets........................... 29 Financial Highlights............... 31 Notes to Financial Statements...... 39 Proxy Voting....................... 56
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Large Cap Equity Fund (the Fund) Class A shares declined 39.47% (excluding sales charge) for the semiannual period ended Jan. 31, 2009. > The Fund underperformed its benchmarks, the Standard & Poor's 500 Index (S&P 500 Index), which declined 33.95% and the Russell 1000(R) Index (Russell Index), which declined 34.71% in the same six-month period. > The Fund's peer group, the Lipper Large-Cap Core Funds Index, fell 33.98% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) - --------------------------------------------------------------------------------
Since inception 6 months* 1 year 3 years 5 years 3/28/02 - ------------------------------------------------------------------------- RiverSource Large Cap Equity Fund Class A (excluding sales charge) -39.47% -45.50% -15.96% -7.68% -5.47% - ------------------------------------------------------------------------- Russell 1000 Index (unmanaged)(1) -34.71% -39.04% -12.03% -4.05% -2.56% - ------------------------------------------------------------------------- S&P 500 Index (unmanaged)(2) -33.95% -38.63% -11.78% -4.24% -2.86% - ------------------------------------------------------------------------- Lipper Large-Cap Core Funds Index(3) -33.98% -38.34% -11.95% -4.55% -3.40% - -------------------------------------------------------------------------
* Not annualized. 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. - -------------------------------------------------------------------------------- 2 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -39.47% -45.50% -15.96% -7.68% -5.47% - --------------------------------------------------------------------------- Class B (inception 3/28/02) -39.64% -45.89% -16.62% -8.37% -6.21% - --------------------------------------------------------------------------- Class C (inception 3/28/02) -39.39% -45.79% -16.53% -8.32% -6.14% - --------------------------------------------------------------------------- Class I (inception 3/4/04) -39.23% -45.24% -15.59% N/A -7.69% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -39.26% -45.49% N/A N/A -25.50% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -39.17% -45.29% N/A N/A -25.29% - --------------------------------------------------------------------------- Class R4 (inception 3/28/02) -39.24% -45.43% -15.78% -7.47% -5.28% - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -39.21% -45.27% N/A N/A -25.27% - --------------------------------------------------------------------------- With sales charge Class A (inception 3/28/02) -43.00% -48.67% -17.60% -8.75% -6.30% - --------------------------------------------------------------------------- Class B (inception 3/28/02) -42.57% -48.53% -17.56% -8.67% -6.21% - --------------------------------------------------------------------------- Class C (inception 3/28/02) -39.98% -46.31% -16.53% -8.32% -6.14% - ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION Class A (inception 3/28/02) -32.82% -42.40% -12.07% -5.37% -3.92% - --------------------------------------------------------------------------- Class B (inception 3/28/02) -32.94% -42.70% -12.71% -6.05% -4.65% - --------------------------------------------------------------------------- Class C (inception 3/28/02) -33.05% -42.78% -12.72% -6.07% -4.63% - --------------------------------------------------------------------------- Class I (inception 3/4/04) -32.57% -42.03% -11.64% N/A -5.60% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -32.81% -42.32% N/A N/A -22.21% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -32.57% -42.11% N/A N/A -21.97% - --------------------------------------------------------------------------- Class R4 (inception 3/28/02) -32.81% -42.27% -11.93% -5.19% -3.74% - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -32.66% -42.21% N/A N/A -21.99% - --------------------------------------------------------------------------- With sales charge Class A (inception 3/28/02) -36.70% -45.76% -13.77% -6.49% -4.77% - --------------------------------------------------------------------------- Class B (inception 3/28/02) -36.20% -45.49% -13.70% -6.36% -4.65% - --------------------------------------------------------------------------- Class C (inception 3/28/02) -33.70% -43.33% -12.72% -6.07% -4.63% - ---------------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. *Not annualized. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - -------------------------------------------------------------------------------- Style Matrix
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Net fund and acquired Total fund Net fund fund fees expenses expenses(a) and expenses(b) - -------------------------------------------------------- Class A 1.03% 0.96% 0.98% - -------------------------------------------------------- Class B 1.79% 1.73% 1.75% - -------------------------------------------------------- Class C 1.79% 1.72% 1.74% - -------------------------------------------------------- Class I 0.57% 0.54% 0.56% - -------------------------------------------------------- Class R2 1.39% 1.34% 1.36% - -------------------------------------------------------- Class R3 1.14% 1.09% 1.11% - -------------------------------------------------------- Class R4 0.87% 0.82% 0.84% - -------------------------------------------------------- Class R5 0.67% 0.59% 0.61% - --------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.08% for the year ended July 31, 2008), will not exceed 1.04% for Class A, 1.81% for Class B, 1.80% for Class C, 0.62% for Class I, 1.42% for Class R2, 1.17% for Class R3, 0.90% for Class R4 and 0.67% for Class R5. (b) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of acquired funds in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, was 0.02% for the year ended July 31, 2008. - -------------------------------------------------------------------------------- 6 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION(1) (at Jan. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Consumer Discretionary 11.4% - ------------------------------------------------ Consumer Staples 11.7% - ------------------------------------------------ Energy 14.2% - ------------------------------------------------ Financials 11.5% - ------------------------------------------------ Health Care 16.0% - ------------------------------------------------ Industrials 8.8% - ------------------------------------------------ Information Technology 10.2% - ------------------------------------------------ Materials 2.4% - ------------------------------------------------ Telecommunication Services 0.4% - ------------------------------------------------ Utilities 1.8% - ------------------------------------------------ Other(2) 11.6% - ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 11.6%, 8.7% is due to security lending activity and 2.9% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. TOP TEN HOLDINGS (at Jan. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Wal-Mart Stores 4.6% - ------------------------------------------------ Pfizer 4.4% - ------------------------------------------------ Chevron 4.2% - ------------------------------------------------ Johnson & Johnson 4.1% - ------------------------------------------------ Home Depot 2.2% - ------------------------------------------------ JPMorgan Chase & Co 2.2% - ------------------------------------------------ Exxon Mobil 2.1% - ------------------------------------------------ IBM 1.6% - ------------------------------------------------ Microsoft 1.6% - ------------------------------------------------ PepsiCo 1.4% - ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Jan. 31, 2009. 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. - -------------------------------------------------------------------------------- 8 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING AUG. 1, 2008 JAN. 31, 2009 THE PERIOD(A) THE PERIOD(B) - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 605.30 $3.46 $3.50 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.76 $4.36 $4.41 - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 603.60 $6.55 $6.59 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.90 $8.24 $8.29 - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 606.10 $6.52 $6.56 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.95 $8.19 $8.24 - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 607.70 $1.77 $1.81 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.86 $2.23 $2.28 - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 607.40 $5.00 $5.04 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.85 $6.28 $6.33 - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 608.30 $3.99 $4.03 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.10 $5.01 $5.06 - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 607.60 $2.90 $2.94 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.46 $3.65 $3.70 - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 607.90 $1.81 $1.85 - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.81 $2.28 $2.33 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES - ---------------------------------------------------------------------- Class A .86% .01% .87% - ---------------------------------------------------------------------- Class B 1.63% .01% 1.64% - ---------------------------------------------------------------------- Class C 1.62% .01% 1.63% - ---------------------------------------------------------------------- Class I .44% .01% .45% - ---------------------------------------------------------------------- Class R2 1.24% .01% 1.25% - ---------------------------------------------------------------------- Class R3 .99% .01% 1.00% - ---------------------------------------------------------------------- Class R4 .72% .01% .73% - ---------------------------------------------------------------------- Class R5 .45% .01% .46% - ----------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended Jan. 31, 2009: -39.47% for Class A, -39.64% for Class B, -39.39% for Class C, -39.23% for Class I, -39.26% for Class R2, -39.17% for Class R3, -39.24% for Class R4 and -39.21% for Class R5. - -------------------------------------------------------------------------------- 10 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JAN. 31, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (96.8%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.8%) AeroVironment 8,500(b,f) $315,010 American Science & Engineering 3,213 250,614 Ceradyne 25,331(b,f) 578,053 General Dynamics 172,255(f) 9,772,027 Rockwell Collins 33,368 1,257,306 United Technologies 99,020 4,751,970 --------------- Total 16,924,980 - ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) CH Robinson Worldwide 95,986 4,413,437 Hub Group Cl A 16,373(b) 371,667 Pacer Intl 46,242(f) 397,681 --------------- Total 5,182,785 - ------------------------------------------------------------------------------------- AIRLINES (0.4%) Alaska Air Group 31,558(b) 831,869 Allegiant Travel 8,541(b,f) 305,426 AMR 30,335(b) 180,190 Continental Airlines Cl B 14,891(b) 200,582 Delta Air Lines 59,755(b) 412,310 Hawaiian Holdings 65,225(b) 265,466 JetBlue Airways 37,430(b) 210,731 SkyWest 71,912 1,125,423 Southwest Airlines 502,569(f) 3,533,059 UAL 73,227(b) 691,263 US Airways Group 81,594(b) 462,638 --------------- Total 8,218,957 - ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Cooper Tire & Rubber 56,651(f) 264,560 Exide Technologies 62,946(b) 228,494 Fuel Systems Solutions 7,302(b,f) 190,874 Goodyear Tire & Rubber 194,518(b) 1,200,176 Johnson Controls 65,605 820,719 --------------- Total 2,704,823 - ------------------------------------------------------------------------------------- AUTOMOBILES (0.1%) Ford Motor 249,800(b,f) 467,126 General Motors 62,539(f) 188,242 Harley-Davidson 164,139(f) 1,999,213 --------------- Total 2,654,581 - ------------------------------------------------------------------------------------- BEVERAGES (2.9%) Brown-Forman Cl B 56,384 2,560,397 Coca-Cola 631,980 26,998,186 PepsiCo 653,531 32,826,862 --------------- Total 62,385,445 - ------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.6%) Amgen 405,762(b) 22,256,046 Cephalon 45,699(b,f) 3,527,049 CV Therapeutics 32,590(b) 510,034 Emergent BioSolutions 13,873(b,f) 304,235 Genentech 14,017(b) 1,138,741 Gilead Sciences 524,678(b) 26,637,901 Myriad Genetics 19,227(b) 1,433,757 NPS Pharmaceuticals 36,398(b) 227,124 Vertex Pharmaceuticals 8,688(b,f) 287,138 --------------- Total 56,322,025 - ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) American Woodmark 16,024(f) 241,161 Insteel Inds 27,417(f) 211,111 Masco 291,531 2,279,772 Owens Corning 7,565(b) 100,917 Trex 11,677(b,f) 172,703 --------------- Total 3,005,664 - ------------------------------------------------------------------------------------- CAPITAL MARKETS (1.5%) Goldman Sachs Group 133,369 10,766,879 Knight Capital Group Cl A 24,027(b) 433,207 Morgan Stanley 1,011,014(f) 20,452,814 Stifel Financial 11,707(b,f) 410,213 SWS Group 45,991(f) 673,768 --------------- Total 32,736,881 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CHEMICALS (1.5%) Ashland 21,801 $174,844 Balchem 10,066(f) 224,774 CF Inds Holdings 28,881 1,357,407 Dow Chemical 1,772,219 20,540,017 Ecolab 19,484 661,677 EI du Pont de Nemours & Co 108,801 2,498,071 Innophos Holdings 15,945 241,248 OM Group 16,873(b,f) 326,999 PPG Inds 77,165 2,899,861 Sigma-Aldrich 56,009 2,020,805 Solutia 48,200(b,f) 188,462 Stepan 6,925(f) 254,078 Westlake Chemical 14,332(f) 195,918 WR Grace & Co 100,680(b) 580,924 --------------- Total 32,165,085 - ------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.1%) BancFirst 6,108(f) 217,567 BB&T 292,392(f) 5,786,437 Comerica 125,875 2,097,078 Community Trust Bancorp 6,575 183,903 Fifth Third Bancorp 606,788 1,450,223 First BanCorp 15,522(c,f) 110,361 First Citizens BancShares Cl A 949 132,727 First Financial 7,250(f) 240,338 First Financial Bankshares 9,490(f) 421,261 Home BancShares 8,731(f) 179,771 Intl Bancshares 20,109(f) 366,386 KeyCorp 343,879 2,503,439 MainSource Financial Group 17,647(f) 172,411 Marshall & Ilsley 204,955(f) 1,170,293 Popular 18,530(c,f) 50,772 Republic Bancorp Cl A 11,372(f) 204,696 SunTrust Banks 146,867 1,800,589 TowneBank 11,883 247,642 Trico Bancshares 9,961(f) 200,615 Trustmark 13,543 274,923 UMB Financial 10,116 391,894 Wells Fargo & Co 268,910(f) 5,082,399 Wilshire Bancorp 33,656(f) 230,880 Zions Bancorporation 9,592(f) 143,113 --------------- Total 23,659,718 - ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.9%) ABM Inds 9,515(f) 141,298 Avery Dennison 48,390(f) 1,172,490 Clean Harbors 5,723(b,f) 306,238 HNI 20,631(f) 272,536 Kimball Intl Cl B 44,536 306,853 Republic Services 248,682 6,430,916 RR Donnelley & Sons 80,980 790,365 Sykes Enterprises 13,650(b) 228,092 Tetra Tech 6,789(b) 157,708 United Stationers 7,598(b,f) 212,820 Waste Management 282,337 8,806,090 --------------- Total 18,825,406 - ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.4%) 3Com 129,413(b) 301,532 Airvana 49,195(b) 250,403 ARRIS Group 40,980(b) 291,778 Cisco Systems 489,238(b) 7,323,893 Corning 747,258(f) 7,554,778 InterDigital 28,749(b,f) 929,455 Motorola 133,924 593,283 NETGEAR 21,473(b,f) 238,780 QUALCOMM 328,496 11,349,536 Tekelec 18,199(b) 226,032 --------------- Total 29,059,470 - ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.5%) Adaptec 83,576(b,f) 233,177 Apple 120,797(b) 10,887,434 Dell 831,979(b) 7,903,801 Electronics for Imaging 26,387(b,f) 234,580 Hewlett-Packard 338,952 11,778,582 IBM 414,283 37,969,036 Lexmark Intl Cl A 207,679(b) 4,917,839 NCR 18,658(b,f) 234,158 Western Digital 26,046(b) 382,355 --------------- Total 74,540,962 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CONSTRUCTION & ENGINEERING (0.3%) EMCOR Group 21,413(b,f) $440,894 Fluor 66,753 2,596,691 Foster Wheeler 2,749(b) 54,898 Granite Construction 36,466(f) 1,284,333 Michael Baker 3,799(b) 132,813 Perini 48,557(b,f) 1,012,413 --------------- Total 5,522,042 - ------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (--%) Vulcan Materials 3,181(f) 157,332 - ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.2%) Advanta Cl B 88,512(f) 69,039 American Express 60,682 1,015,210 Discover Financial Services 80,265(f) 573,895 SLM 248,814(b,f) 2,848,920 --------------- Total 4,507,064 - ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (--%) Rock-Tenn Cl A 25,329(f) 789,505 - ------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 106,374 3,406,095 - ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.5%) Apollo Group Cl A 20,567(b) 1,675,388 Career Education 4,579(b,f) 99,822 Corinthian Colleges 37,035(b,f) 691,814 H&R Block 372,711 7,726,298 Regis 22,824 256,770 Universal Technical Institute 12,637(b,f) 221,527 --------------- Total 10,671,619 - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.8%) Apollo Management LP 1,406,500(d,e) 2,109,750 Bank of America 3,728,404 24,532,898 Citigroup 6,585,055(f) 23,376,945 JPMorgan Chase & Co 1,969,323 50,237,430 KKR Financial Holdings LLC 563,202 799,747 Life Partners Holdings 6,727(f) 255,626 Moody's 6,357(f) 136,167 --------------- Total 101,448,563 - ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) CenturyTel 45,084(f) 1,223,580 Embarq 106,239 3,794,856 Frontier Communications 134,518 1,090,941 Qwest Communications Intl 87,185 280,736 Shenandoah Telecommunications 8,904(f) 217,080 --------------- Total 6,607,193 - ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.1%) Entergy 43,933(f) 3,354,724 Exelon 142,513(f) 7,727,055 FirstEnergy 141,478(f) 7,072,485 Hawaiian Electric Inds 20,076 435,248 Pinnacle West Capital 1,445 48,364 Portland General Electric 20,589 400,456 Southern 149,523 5,001,544 --------------- Total 24,039,876 - ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.3%) American Superconductor 10,335(b,f) 167,220 Emerson Electric 138,702(f) 4,535,556 Encore Wire 14,462 238,768 Energy Conversion Devices 10,231(b,f) 257,514 GrafTech Intl 25,000(b) 200,250 --------------- Total 5,399,308 - ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.3%) Anixter Intl 14,075(b) 379,744 Arrow Electronics 34,712(b,f) 661,958 Avnet 35,573(b) 705,057 Benchmark Electronics 82,459(b) 968,069 Ingram Micro Cl A 49,358(b) 605,623 Insight Enterprises 47,127(b,f) 244,118 Jabil Circuit 365,781 2,128,844 L-1 Identity Solutions 16,308(b) 118,233 Methode Electronics 32,965(f) 152,298 SYNNEX 23,322(b,f) 357,993
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (CONT.) Tyco Electronics 65,715(c,f) $930,524 --------------- Total 7,252,461 - ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (2.0%) Baker Hughes 96,051 3,200,419 BASiC Energy Services 52,684(b) 505,766 BJ Services 228,552 2,514,072 Complete Production Services 30,311(b) 194,294 ENSCO Intl 149,498 4,090,265 GulfMark Offshore 12,678(b) 303,511 Halliburton 554,230 9,560,469 Helmerich & Payne 14,600 327,916 Lufkin Inds 8,971 313,536 Nabors Inds 270,635(b,c,f) 2,963,453 Natl Oilwell Varco 200,633(b) 5,304,737 Newpark Resources 39,801(b) 167,562 Noble 139,883(f) 3,797,823 Oil States Intl 7,333(b) 134,267 Parker Drilling 149,991(b,f) 317,981 Patterson-UTI Energy 28,165 269,257 Pioneer Drilling 40,209(b,f) 199,839 Rowan Companies 84,835 1,074,011 Smith Intl 45,574 1,034,530 Tidewater 6,622 275,541 Unit 7,740(b,f) 193,036 Weatherford Intl 586,296(b) 6,466,845 --------------- Total 43,209,130 - ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (5.7%) Casey's General Stores 12,446(f) 264,478 Costco Wholesale 34,790(f) 1,566,594 Ingles Markets Cl A 17,188(f) 245,101 Nash Finch 8,093 348,242 Pantry 11,709(b,f) 194,721 SUPERVALU 121,694 2,134,513 SYSCO 119,812 2,670,609 Walgreen 242,493(f) 6,646,733 Wal-Mart Stores 2,280,221 107,444,013 Winn-Dixie Stores 44,499(b,f) 611,416 --------------- Total 122,126,420 - ------------------------------------------------------------------------------------- FOOD PRODUCTS (2.3%) Bunge 5,267(f) 226,165 Cal-Maine Foods 11,403(f) 308,793 Campbell Soup 93,880(f) 2,851,136 Darling Intl 42,476(b) 194,965 Dean Foods 78,795(b) 1,523,895 Diamond Foods 7,437(f) 190,982 Flowers Foods 33,535(f) 720,667 Fresh Del Monte Produce 16,371(b,c,f) 394,541 General Mills 405,435 23,981,480 Hershey 14,498(f) 540,485 J&J Snack Foods 7,348 256,519 JM Smucker 79,073(f) 3,570,146 Kellogg 100,341 4,383,898 Lance 11,712(f) 220,537 Ralcorp Holdings 17,045(b) 1,009,405 Sanderson Farms 8,480 306,806 Sara Lee 505,990 5,075,080 TreeHouse Foods 17,104(b,f) 451,375 Tyson Foods Cl A 189,641(f) 1,678,323 --------------- Total 47,885,198 - ------------------------------------------------------------------------------------- GAS UTILITIES (0.3%) Atmos Energy 8,037 197,308 Laclede Group 9,965(f) 452,311 New Jersey Resources 25,623(f) 1,027,226 Nicor 32,666 1,117,504 Piedmont Natural Gas 25,754 667,286 Questar 73,004(f) 2,480,677 --------------- Total 5,942,312 - ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.9%) Becton Dickinson & Co 94,068 6,835,922 Covidien 200,575(c,f) 7,690,045 CryoLife 19,446(b,f) 160,235 Cyberonics 11,792(b) 181,479 Greatbatch 9,720(b,f) 226,476 Immucor 7,503(b) 207,908 St. Jude Medical 32,370(b) 1,177,297 STERIS 35,623(f) 947,572 Thoratec 29,234(b,f) 846,909 Volcano 28,992(b) 378,925 --------------- Total 18,652,768 - ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.2%) Almost Family 4,966(b,f) 153,151
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) AMERIGROUP 31,195(b) $872,524 Cardinal Health 93,991(g) 3,538,761 CIGNA 460,711 7,997,943 Coventry Health Care 16,443(b) 248,783 DaVita 39,752(b) 1,868,344 Gentiva Health Services 12,919(b) 326,592 HealthSpring 60,412(b) 1,052,377 Humana 19,622(b) 744,262 Kindred Healthcare 60,238(b) 817,430 Landauer 5,797(f) 397,558 LHC Group 6,103(b) 162,401 Magellan Health Services 26,612(b) 963,887 Molina Healthcare 21,468(b) 376,549 Omnicare 9,838(f) 275,070 Quest Diagnostics 71,854 3,545,995 Tenet Healthcare 606,612(b) 649,075 UnitedHealth Group 48,487 1,373,637 Universal American Financial 25,232(b,f) 249,040 Universal Health Services Cl B 3,693 139,780 --------------- Total 25,753,159 - ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.3%) Bob Evans Farms 6,334(f) 111,225 Darden Restaurants 28,115(f) 737,175 Intl Game Technology 86,368(f) 915,501 McDonald's 426,834 24,764,910 Panera Bread Cl A 2,788(b,f) 130,980 Starwood Hotels & Resorts Worldwide 23,901(f) 361,383 Wyndham Worldwide 168,588 1,033,444 --------------- Total 28,054,618 - ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.6%) Black & Decker 39,371(f) 1,138,216 Centex 133,790 1,138,553 DR Horton 201,667 1,201,935 Garmin 15,642(c,f) 274,204 Harman Intl Inds 72,907(f) 1,173,074 KB Home 54,179(f) 578,090 Leggett & Platt 102,924(f) 1,285,521 Lennar Cl A 134,250 1,032,383 Natl Presto Inds 8,400 563,976 Newell Rubbermaid 40,565 327,765 NVR 401(b) 170,862 Pulte Homes 111,267 1,129,360 Ryland Group 16,765(f) 261,534 Snap-On 32,903 993,013 Stanley Works 8,721 272,618 Toll Brothers 6,345(b) 107,992 Whirlpool 51,835(f) 1,732,843 --------------- Total 13,381,939 - ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.8%) Clorox 32,837 1,646,776 Kimberly-Clark 85,492 4,400,273 Procter & Gamble 576,352 31,411,184 --------------- Total 37,458,233 - ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%) Calpine 8,553(b) 63,378 Constellation Energy Group 104,964(f) 2,760,553 Dynegy Cl A 466,585(b) 984,494 --------------- Total 3,808,425 - ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.3%) 3M 217,362 11,691,902 Seaboard 471 473,355 Textron 93,093 840,630 Tredegar 16,209 267,449 Tyco Intl 654,427(c,g) 13,756,055 --------------- Total 27,029,391 - ------------------------------------------------------------------------------------- INSURANCE (4.5%) AFLAC 147,289 3,418,578 Allied World Assurance Holdings 6,869(c) 258,961 Allstate 1,197,191(g) 25,943,129 American Financial Group 11,304 191,942 Aon 103,317 3,827,895 Arch Capital Group 6,237(b,c,f) 375,156 Aspen Insurance Holdings 66,891(c) 1,478,291 Assurant 56,546 1,492,814
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INSURANCE (CONT.) Axis Capital Holdings 20,174(c) $489,421 Chubb 140,797(f) 5,995,136 Cincinnati Financial 12,519 274,542 Employers Holdings 36,927 499,992 Everest Re Group 5,516(c) 347,508 Hartford Financial Services Group 158,284(f) 2,083,017 HCC Insurance Holdings 14,014 328,068 IPC Holdings 33,187(c,f) 851,578 Marsh & McLennan Companies 440,703 8,518,789 Montpelier Re Holdings 71,187(c) 1,006,584 Odyssey Re Holdings 25,577(f) 1,203,398 PartnerRe 6,873(c) 450,388 Platinum Underwriters Holdings 45,109(c,f) 1,254,481 Progressive 1,242,638(b) 15,098,052 RenaissanceRe Holdings 8,305(c) 371,150 RLI 12,392 700,024 Travelers Companies 434,027 16,770,803 Validus Holdings 48,236(c,f) 1,100,746 WR Berkley 19,445 514,904 Zenith Natl Insurance 29,120 816,525 --------------- Total 95,661,872 - ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (--%) NutriSystem 41,148(f) 530,398 PetMed Express 10,222(b) 147,606 Ticketmaster Entertainment 26,034(b) 154,902 --------------- Total 832,906 - ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.1%) Ariba 38,540(b,f) 294,446 EarthLink 70,156(b,f) 528,274 ModusLink Global Solutions 71,828(b) 167,359 RealNetworks 67,312(b) 189,820 --------------- Total 1,179,899 - ------------------------------------------------------------------------------------- IT SERVICES (1.4%) Affiliated Computer Services Cl A 103,970(b) 4,768,064 Automatic Data Processing 202,289(f) 7,349,159 Ciber 52,635(b,f) 229,489 Computer Sciences 17,530(b) 645,805 Convergys 13,435(b,f) 101,166 CSG Systems Intl 22,398(b) 324,771 Integral Systems 17,756(b) 194,073 ManTech Intl Cl A 21,514(b,f) 1,153,796 MasterCard Cl A 39,332 5,340,499 NCI Cl A 8,433(b) 252,990 Paychex 127,898 3,106,642 Perot Systems Cl A 28,231(b,f) 366,721 SAIC 36,100(b,f) 712,614 Total System Services 21,811 276,127 Western Union 345,685(f) 4,722,057 --------------- Total 29,543,973 - ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.4%) Brunswick 79,223(f) 220,240 Eastman Kodak 257,081(f) 1,164,577 Hasbro 117,369 2,832,114 JAKKS Pacific 40,483(b,f) 742,458 Mattel 253,773 3,601,039 --------------- Total 8,560,428 - ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.1%) Luminex 15,394(b) 313,576 PerkinElmer 125,550(f) 1,584,440 Sequenom 19,260(b,f) 426,802 --------------- Total 2,324,818 - ------------------------------------------------------------------------------------- MACHINERY (1.2%) Cummins 100,950 2,420,781 Deere & Co 92,031 3,197,157 Dover 77,239(f) 2,184,319 Eaton 74,070 3,260,561 Flowserve 30,090 1,604,098 Force Protection 68,911(b) 414,155 FreightCar America 7,315 140,082 Gardner Denver 8,822(b) 192,055 Illinois Tool Works 154,278 5,038,720 Ingersoll-Rand Cl A 183,012(c) 2,966,625 Joy Global 9,129(f) 190,157 Manitowoc 146,341 804,876 Mueller Inds 51,804 1,042,296
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 16 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MACHINERY (CONT.) NACCO Inds Cl A 8,300(f) $265,517 Pall 49,291 1,285,016 Terex 16,330(b,f) 193,347 Wabtec 28,621(f) 856,627 --------------- Total 26,056,389 - ------------------------------------------------------------------------------------- MEDIA (3.1%) CBS Cl B 608,287 3,479,402 Comcast Cl A 1,292,482(f) 18,934,862 DIRECTV Group 209,156(b) 4,580,516 DreamWorks Animation SKG Cl A 3,854(b) 84,595 Gannett 501,357 2,892,830 Marvel Entertainment 14,171(b) 389,844 Meredith 86,571(f) 1,382,539 New York Times Cl A 266,866(f) 1,326,324 News Corp Cl A 283,178(f) 1,809,507 Sirius XM Radio 15,046,171(b) 1,805,541 Time Warner Cable Cl A 59,461(b,f) 1,107,758 Virgin Media 5,987,186(e) 27,181,825 WorldSpace Cl A 263,942(b) 3,167 --------------- Total 64,978,710 - ------------------------------------------------------------------------------------- METALS & MINING (1.0%) AK Steel Holding 137,071(f) 1,106,163 Alcoa 48,086 374,590 AM Castle & Co 26,449(f) 223,759 Cliffs Natural Resources 14,804(f) 343,009 Compass Minerals Intl 5,450 327,927 Freeport-McMoRan Copper & Gold 42,418(f) 1,066,389 Horsehead Holding 25,185(b) 99,733 Kaiser Aluminum 8,262(f) 205,228 Nucor 314,082(f) 12,811,404 Olympic Steel 15,484 245,731 Reliance Steel & Aluminum 15,731(f) 348,127 RTI Intl Metals 9,465(b) 125,979 Timminco 510,164(b,c,f) 1,441,189 United States Steel 112,157(f) 3,368,074 Worthington Inds 22,881 230,183 --------------- Total 22,317,485 - ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.7%) Big Lots 80,289(b,f) 1,079,887 Dillard's Cl A 53,223(f) 231,520 Dollar Tree 8,846(b) 377,813 Family Dollar Stores 175,923(f) 4,885,382 Fred's Cl A 33,104(f) 339,647 JC Penney 51,311(f) 859,459 Kohl's 113,484(b,f) 4,165,998 Macy's 83,729 749,375 Nordstrom 82,493(f) 1,046,836 Sears Holdings 8,132(b,f) 332,761 --------------- Total 14,068,678 - ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.4%) CH Energy Group 3,442 174,096 DTE Energy 2,526 87,147 MDU Resources Group 10,592 210,675 PG&E 80,109 3,097,815 TECO Energy 120,193 1,443,518 Vectren 7,668 197,758 Wisconsin Energy 51,986(f) 2,317,536 --------------- Total 7,528,545 - ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (13.6%) Apache 176,609 13,245,675 Cabot Oil & Gas 55,530(f) 1,526,520 Chesapeake Energy 289,099 4,570,655 Chevron 1,385,499 97,705,390 Cimarex Energy 13,126(f) 326,050 Clayton Williams Energy 5,179(b) 206,124 Comstock Resources 20,170(b,f) 769,082 ConocoPhillips 584,206 27,767,311 CONSOL Energy 85,435 2,328,958 Contango Oil & Gas 5,181(b,f) 231,073 EOG Resources 112,266(f) 7,608,267 EXCO Resources 18,093(b) 183,463 Exxon Mobil 625,884 47,867,608 Frontier Oil 14,907(f) 212,872 Frontline 4,642(c,f) 132,343 Goodrich Petroleum 7,657(b) 221,287 Gran Tierra Energy 87,228(b,c) 246,855 Hess 127,604(f) 7,096,058 James River Coal 16,847(b) 228,445 Marathon Oil 412,818 11,241,034 Massey Energy 92,601 1,405,683
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (CONT.) McMoRan Exploration 30,874(b) $206,547 Murphy Oil 111,186 4,912,197 Newfield Exploration 7,467(b) 143,292 Noble Energy 103,023 5,040,915 Occidental Petroleum 312,463(f) 17,044,857 Peabody Energy 136,760 3,419,000 Penn Virginia 11,931(f) 245,779 Petrohawk Energy 3,969(b,f) 78,229 PetroQuest Energy 24,474(b,f) 154,920 Pioneer Natural Resources 141,145 2,066,363 Plains Exploration & Production 7,946(b,f) 167,820 Range Resources 33,648 1,205,944 Rosetta Resources 43,026(b) 261,168 Southwestern Energy 218,764(b) 6,923,881 Spectra Energy 479,403 6,956,138 St. Mary Land & Exploration 10,285(f) 199,015 Stone Energy 22,251(b) 190,914 Sunoco 42,251(f) 1,957,066 Swift Energy 45,994(b,f) 704,628 Tesoro 77,808(f) 1,340,632 USEC 77,943(b) 396,730 VAALCO Energy 46,283(b,f) 347,585 Valero Energy 204,530 4,933,264 Western Refining 23,140 269,812 Williams Companies 202,174 2,860,762 World Fuel Services 7,441(f) 251,283 --------------- Total 287,399,494 - ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (--%) Wausau Paper 39,145(f) 372,269 - ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Estee Lauder Companies Cl A 87,587(f) 2,299,159 - ------------------------------------------------------------------------------------- PHARMACEUTICALS (12.8%) Abbott Laboratories 122,292 6,779,868 Eli Lilly & Co 283,187 10,426,945 Forest Laboratories 430,301(b) 10,774,737 Johnson & Johnson 1,636,996 94,438,299 King Pharmaceuticals 793,580(b) 6,935,889 Merck & Co 508,625 14,521,244 Mylan 123,475(b,f) 1,398,972 Par Pharmaceutical Companies 19,731(b) 242,889 Pfizer 7,072,211 103,112,837 Schering-Plough 434,393 7,627,941 Valeant Pharmaceuticals Intl 36,414(b,f) 790,184 ViroPharma 92,903(b) 1,114,836 VIVUS 21,562(b) 105,869 Watson Pharmaceuticals 46,739(b,f) 1,275,040 Wyeth 266,933 11,470,111 --------------- Total 271,015,661 - ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (0.1%) Administaff 15,452 325,883 Heidrick & Struggles Intl 15,205 231,116 Huron Consulting Group 4,487(b) 224,260 Kelly Services Cl A 32,477 294,242 Korn/Ferry Intl 21,781(b,f) 204,741 Manpower 8,767 249,509 TrueBlue 49,670(b,f) 422,195 --------------- Total 1,951,946 - ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.2%) American Campus Communities 11,424(f) 244,131 BRE Properties Cl A 3,175(f) 80,613 Capstead Mtge 26,825 286,223 Digital Realty Trust 3,469(f) 110,661 Equity Residential 144,231 3,451,449 Health Care REIT 5,787(f) 218,806 Investors Real Estate Trust 22,612 224,989 Liberty Property Trust 7,850 157,000 UDR 9,138(f) 107,190 --------------- Total 4,881,062 - ------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (--%) Avatar Holdings 8,745(b) 226,933 St. Joe 6,506(b,f) 156,469 --------------- Total 383,402 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 18 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ROAD & RAIL (3.8%) Arkansas Best 33,461 $782,653 Burlington Northern Santa Fe 314,011 20,803,229 Con-way 3,857 84,970 CSX 417,739(f) 12,097,721 Genesee & Wyoming Cl A 10,684(b,f) 290,284 Kansas City Southern 6,630(b,f) 120,401 Norfolk Southern 452,461 17,356,404 Old Dominion Freight Line 10,109(b,f) 253,534 Ryder System 84,319 2,848,296 Saia 26,543(b) 283,745 Union Pacific 566,518 24,807,822 Werner Enterprises 18,060 270,900 --------------- Total 79,999,959 - ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.0%) Altera 281,189 4,324,687 Amkor Technology 141,788(b,f) 328,948 Atmel 32,711(b,f) 109,255 Infineon Technologies 806,777(b,c,f) 718,921 Infineon Technologies ADR 614,065(b,c) 528,096 Intel 1,283,714 16,559,910 Lam Research 26,944(b,f) 544,538 Linear Technology 203,498(f) 4,765,923 LSI 406,802(b,f) 1,293,630 MEMC Electronic Materials 152,983(b) 2,080,569 Microchip Technology 121,743 2,309,465 MKS Instruments 29,302(b,f) 411,693 Natl Semiconductor 114,937(f) 1,165,461 NVIDIA 21,718(b,f) 172,658 OmniVision Technologies 40,728(b) 272,470 Sigma Designs 26,295(b,f) 268,735 Silicon Image 79,753(b,f) 292,694 Spansion Cl A 1,738,038(b) 116,449 Teradyne 33,804(b) 162,597 Xilinx 290,253(f) 4,890,763 Zoran 33,505(b) 199,020 --------------- Total 41,516,482 - ------------------------------------------------------------------------------------- SOFTWARE (2.5%) BMC Software 41,845(b,f) 1,059,934 Compuware 240,368(b) 1,562,392 Intuit 47,822(b) 1,083,168 Microsoft 2,175,020 37,192,842 Oracle 659,566(b,f) 11,100,496 Quality Systems 8,208(f) 305,994 Red Hat 6,267(b,f) 91,812 Salesforce.com 47,195(b,f) 1,255,859 Take-Two Interactive Software 20,438 143,475 TeleCommunication Systems Cl A 31,053(b) 222,339 --------------- Total 54,018,311 - ------------------------------------------------------------------------------------- SPECIALTY RETAIL (4.8%) Aaron Rents 24,988(f) 546,238 Abercrombie & Fitch Cl A 121,228 2,163,920 Advance Auto Parts 4,756 155,664 Aeropostale 18,721(b,f) 395,200 American Eagle Outfitters 12,985 116,995 Asbury Automotive Group 38,005(f) 136,058 AutoNation 212,973(b,f) 1,976,389 AutoZone 23,871(b,f) 3,172,217 Barnes & Noble 14,133(f) 232,064 Bed Bath & Beyond 193,604(b,f) 4,497,421 Best Buy 125,015 3,502,920 Blockbuster Cl A 261,540(b,f) 333,464 Brown Shoe 35,184(f) 165,013 Cato Cl A 27,254(f) 360,570 Chico's FAS 96,855(b) 383,546 Children's Place Retail Stores 22,270(b,f) 418,899 Collective Brands 48,547(b) 517,996 Dress Barn 37,279(b,f) 321,345 Finish Line Cl A 51,549 244,858 Foot Locker 60,996(f) 448,931 Gap 290,846 3,280,743 Group 1 Automotive 34,272(f) 341,692 Home Depot 2,397,534 51,618,906 Hot Topic 49,620(b,f) 423,755 Jo-Ann Stores 18,977(b,f) 242,336
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SPECIALTY RETAIL (CONT.) Jos A Bank Clothiers 19,777(b,f) $543,076 Limited Brands 133,601 1,058,120 Lowe's Companies 749,982(g) 13,702,170 Men's Wearhouse 37,223(f) 433,648 Monro Muffler Brake 6,976 169,308 Office Depot 499,362(b) 1,078,622 PetSmart 9,435(f) 177,095 RadioShack 165,444(f) 1,895,988 Rent-A-Center 43,584(b) 647,222 Ross Stores 9,891(f) 290,993 Sherwin-Williams 45,446 2,170,047 Stage Stores 34,037 243,365 Staples 100,397 1,600,328 Tiffany & Co 51,022(f) 1,058,707 Urban Outfitters 3,466(b,f) 54,000 Wet Seal Cl A 86,206(b,f) 224,998 --------------- Total 101,344,827 - ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.7%) Carter's 26,542(b,f) 450,949 Coach 320,745(b,f) 4,682,876 Jones Apparel Group 143,519 496,576 Liz Claiborne 253,530(f) 557,766 Nike Cl B 79,319 3,589,185 Polo Ralph Lauren 27,092(f) 1,111,585 Skechers USA Cl A 24,247(b,f) 241,500 Steven Madden 16,880(b) 293,374 VF 65,686(f) 3,679,730 --------------- Total 15,103,541 - ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.2%) Capitol Federal Financial 2,312 95,717 First Niagara Financial Group 42,786 558,785 Freddie Mac 112,515 66,946 Hudson City Bancorp 224,552 2,604,804 NewAlliance Bancshares 12,085(f) 132,814 Ocwen Financial 34,121(b) 303,677 People's United Financial 22,442 367,151 Trustco Bank NY 23,917 160,244 United Financial Bancorp 17,441 239,116 --------------- Total 4,529,254 - ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.3%) Beacon Roofing Supply 27,278(b) 347,249 Fastenal 74,300(f) 2,539,574 GATX 3,343(f) 80,566 Rush Enterprises Cl A 27,585(b,f) 251,024 Watsco 12,534 414,249 WESCO Intl 16,458(b) 303,156 WW Grainger 37,197(f) 2,713,521 --------------- Total 6,649,339 - ------------------------------------------------------------------------------------- WATER UTILITIES (--%) Aqua America 5,838 121,080 California Water Service Group 4,243 184,571 --------------- Total 305,651 - ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.2%) Sprint Nextel 1,283,585(b) 3,119,112 USA Mobility 37,213(b) 393,341 --------------- Total 3,512,453 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,692,173,898) $2,059,825,946 - ------------------------------------------------------------------------------------- MONEY MARKET FUND (3.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.47% 65,890,575(h) $65,890,575 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $65,890,575) $65,890,575 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 20 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (9.6%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 203,391,339 $203,391,339 - ----------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $203,391,339) $203,391,339 - ----------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,961,455,812)(i) $2,329,107,860 =================================================================
INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JAN. 31, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ------------------------------------------------------------------------------------ Russell 2000 Mini Index 234 $10,356,840 March 2009 $(124,593) S&P 500 Index 285 58,603,125 March 2009 (7,248,513) - ------------------------------------------------------------------------------------ Total $(7,373,106) - ------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2009, the value of foreign securities represented 1.9% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Jan. 31, 2009, the value of these securities amounted to $2,109,750 or 0.1% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). Information concerning such security holdings at Jan. 31, 2008, is as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------------------- Apollo Management LP* 08-02-07 thru 09-30-08 $30,730,942 Virgin Media 07-26-07 thru 08-06-08 101,975,398
* Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) At Jan. 31, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (g) At Jan. 31, 2009, investments in securities included securities valued at $11,992,828 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (h) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Jan. 31, 2009. (i) At Jan. 31, 2009, the cost of securities for federal income tax purposes was approximately $2,961,456,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $44,376,000 Unrealized depreciation (676,724,000) ------------------------------------------------------------ Net unrealized depreciation $(632,348,000) ------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 22 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 ----------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - ------------------------------------------------------------------------------------ Investments in securities $2,329,107,860 $-- $-- $2,329,107,860 Other financial instruments* (7,373,106) -- -- (7,373,106) - ------------------------------------------------------------------------------------ Total $2,321,734,754 $-- $-- $2,321,734,754 - ------------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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. - -------------------------------------------------------------------------------- 24 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JAN. 31, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $2,692,173,898) $ 2,059,825,946 Affiliated money market fund (identified cost $65,890,575) 65,890,575 Investments of cash collateral received for securities on loan (identified cost $203,391,339) 203,391,339 - ---------------------------------------------------------------------------------- Total investments in securities (identified cost $2,961,455,812) 2,329,107,860 Cash 22,382 Foreign currency holdings (identified cost $652) 637 Capital shares receivable 437,979 Dividends receivable 3,595,532 Receivable for investment securities sold 130,663,058 - ---------------------------------------------------------------------------------- Total assets 2,463,827,448 - ---------------------------------------------------------------------------------- LIABILITIES Capital shares payable 2,380,003 Payable for investment securities purchased 128,505,375 Payable upon return of securities loaned 203,391,339 Variation margin payable on futures contracts 1,729,515 Accrued investment management services fees 34,994 Accrued distribution fees 19,269 Accrued transfer agency fees 23,709 Accrued administrative services fees 3,200 Accrued plan administration services fees 495 Other accrued expenses 656,515 - ---------------------------------------------------------------------------------- Total liabilities 336,744,414 - ---------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 2,127,083,034 - ---------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 8,112,130 Additional paid-in capital 4,419,558,829 Excess of distributions over net investment income (11,741,239) Accumulated net realized gain (loss) (1,649,118,429) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (639,728,257) - ---------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 2,127,083,034 - ---------------------------------------------------------------------------------- *Including securities on loan, at value $ 190,109,786 - ----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 25 STATEMENT OF ASSETS AND LIABILITIES (continued) ------------------------------- JAN. 31, 2009 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $1,767,428,770 673,576,511 $2.62(1) Class B $ 231,221,979 89,152,064 $2.59 Class C $ 11,202,974 4,332,812 $2.59 Class I $ 28,634,991 10,885,950 $2.63 Class R2 $ 2,177 822 $2.65 Class R3 $ 2,175 822 $2.65 Class R4 $ 70,551,113 26,500,389 $2.66 Class R5 $ 18,038,855 6,763,671 $2.67 - -------------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $2.78. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 26 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS ------------------------------------------------------- JAN. 31, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 38,823,381 Income distributions from affiliated money market fund 736,103 Fee income from securities lending 180,077 Less foreign taxes withheld (17,909) - ---------------------------------------------------------------------------------- Total income 39,721,652 - ---------------------------------------------------------------------------------- Expenses: Investment management services fees 5,880,940 Distribution fees Class A 3,118,876 Class B 1,601,985 Class C 77,364 Class R2 7 Class R3 4 Transfer agency fees Class A 3,943,510 Class B 546,009 Class C 25,521 Class R2 1 Class R3 1 Class R4 32,997 Class R5 737 Administrative services fees 771,189 Plan administration services fees Class R2 4 Class R3 4 Class R4 164,984 Compensation of board members 47,231 Custodian fees 199,560 Printing and postage 580,700 Registration fees 17,240 Professional fees 42,299 Other 30,173 - ---------------------------------------------------------------------------------- Total expenses 17,081,336 Expenses waived/reimbursed by the Investment Manager and its affiliates (3,023,996) Earnings and bank fee credits on cash balances (27,696) - ---------------------------------------------------------------------------------- Total net expenses 14,029,644 - ---------------------------------------------------------------------------------- Investment income (loss) -- net 25,692,008 - ----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 27 STATEMENT OF OPERATIONS (continued) ------------------------------------------- JAN. 31, 2009 (UNAUDITED)
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $(1,237,189,207) Foreign currency transactions 38,078,697 Futures contracts (24,847,973) Options contracts written (4,792,289) - ---------------------------------------------------------------------------------- Net realized gain (loss) on investments (1,228,750,772) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (298,686,651) - ---------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (1,527,437,423) - ---------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(1,501,745,415) - ----------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 28 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 25,692,008 $ 65,487,946 Net realized gain (loss) on investments (1,228,750,772) (20,362,259) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (298,686,651) (865,038,637) - ---------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,501,745,415) (819,912,950) - ---------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (73,410,953) (36,389,921) Class B (5,489,205) -- Class C (317,848) -- Class I (1,247,239) (866,696) Class R2 (88) (32) Class R3 (97) (44) Class R4 (4,396,983) (2,588,075) Class R5 (105) -- Net realized gain Class A (11,674,647) (503,800,045) Class B (1,552,503) (85,854,373) Class C (75,828) (3,230,993) Class I (166,927) (7,554,314) Class R2 (14) (539) Class R3 (14) (539) Class R4 (654,100) (31,125,821) Class R5 (14) (539) - ---------------------------------------------------------------------------------------------------- Total distributions (98,986,565) (671,411,931) - ----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 29 STATEMENTS OF CHANGES IN NET ASSETS (continued) -------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 38,712,056 $ 211,484,181 Class B shares 8,833,689 33,647,160 Class C shares 1,029,455 2,226,679 Class I shares 6,815,859 10,561,864 Class R4 shares 11,759,682 34,516,064 Class R5 shares 20,568,962 -- Reinvestment of distributions at net asset value Class A shares 82,326,997 523,659,899 Class B shares 6,986,555 85,230,086 Class C shares 385,379 3,174,765 Class I shares 1,413,924 8,419,823 Class R4 shares 5,050,991 33,713,417 Payments for redemptions Class A shares (407,989,877) (1,190,365,828) Class B shares (48,792,757) (315,875,480) Class C shares (2,783,016) (8,714,618) Class I shares (848,883) (30,081,251) Class R4 shares (55,775,946) (150,506,498) Class R5 shares (360,970) (26,533,250) - ---------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (332,667,900) (775,442,987) - ---------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,933,399,880) (2,266,767,868) Net assets at beginning of period 4,060,482,914 6,327,250,782 - ---------------------------------------------------------------------------------------------------- Net assets at end of period $ 2,127,083,034 $ 4,060,482,914 - ---------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (11,741,239) $ 47,429,271 - ----------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 30 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $4.52 $6.05 $5.40 $5.26 $4.64 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .07(b) .06(b) .06 .04 Net gains (losses) (both realized and unrealized) (1.80) (.90) .79 .12 .61 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.77) (.83) .85 .18 .65 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.11) (.05) (.06) (.04) (.02) Distributions from realized gains (.02) (.65) (.14) -- (.01) - -------------------------------------------------------------------------------------------------------------- Total distributions (.13) (.70) (.20) (.04) (.03) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.62 $4.52 $6.05 $5.40 $5.26 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,767 $3,389 $5,039 $5,461 $1,030 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.07%(e) 1.03% 1.09% 1.06% 1.16% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .86%(e) .97% 1.09% 1.06% 1.11% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.78%(e) 1.31% .99% 1.08% .79% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% 116% 128% - -------------------------------------------------------------------------------------------------------------- Total return(h) (39.47%)(i) (15.40%) 15.79% 3.51% 13.99% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.96% for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $4.41 $5.91 $5.29 $5.15 $4.56 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) .03(b) .01(b) .02 -- Net gains (losses) (both realized and unrealized) (1.76) (.88) .76 .12 .60 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.74) (.85) .77 .14 .60 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) -- (.01) -- -- Distributions from realized gains (.02) (.65) (.14) -- (.01) - -------------------------------------------------------------------------------------------------------------- Total distributions (.08) (.65) (.15) -- (.01) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.59 $4.41 $5.91 $5.29 $5.15 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $231 $433 $833 $1,169 $472 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.84%(e) 1.79% 1.86% 1.84% 1.93% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.63%(e) 1.73% 1.86% 1.84% 1.88% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.01%(e) .56% .23% .28% .02% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% 116% 128% - -------------------------------------------------------------------------------------------------------------- Total return(h) (39.64%)(i) (15.97%) 14.71% 2.72% 13.09% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 32 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $4.41 $5.92 $5.30 $5.16 $4.57 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(b) .03(b) .01(b) .02 -- Net gains (losses) (both realized and unrealized) (1.75) (.89) .77 .12 .60 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.73) (.86) .78 .14 .60 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) -- (.02) -- -- Distributions from realized gains (.02) (.65) (.14) -- (.01) - -------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.65) (.16) -- (.01) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.59 $4.41 $5.92 $5.30 $5.16 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $11 $21 $32 $35 $9 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) 1.83%(e) 1.79% 1.86% 1.84% 1.93% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) 1.62%(e) 1.73% 1.86% 1.84% 1.88% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.03%(e) .55% .23% .28% .02% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% 116% 128% - -------------------------------------------------------------------------------------------------------------- Total return(h) (39.39%)(i) (16.11%) 14.80% 2.71% 13.06% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 1.72% for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 33 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $4.55 $6.09 $5.44 $5.31 $4.67 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .09(b) .09(b) .10 .05 Net gains (losses) (both realized and unrealized) (1.81) (.90) .78 .12 .63 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.77) (.81) .87 .22 .68 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.08) (.08) (.09) (.03) Distributions from realized gains (.02) (.65) (.14) -- (.01) - -------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.73) (.22) (.09) (.04) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.63 $4.55 $6.09 $5.44 $5.31 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $39 $68 $105 $43 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .51%(e) .57% .63% .59% .70% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .44%(e) .57% .63% .59% .65% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.21%(e) 1.74% 1.44% 1.53% 1.24% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% 116% 128% - -------------------------------------------------------------------------------------------------------------- Total return (39.23%)(h) (15.02%) 16.13% 4.06% 14.64% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.56% for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 34 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $4.55 $6.08 $6.08 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 .06 .03 Net gains (losses) (both realized and unrealized) (1.81) (.90) .19 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.78) (.84) .22 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.04) (.08) Distributions from realized gains (.02) (.65) (.14) - -------------------------------------------------------------------------------------------------------------- Total distributions (.12) (.69) (.22) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.65 $4.55 $6.08 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.28%(f) 1.39% 1.44%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .98%(f) 1.14% 1.44%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.70%(f) 1.15% .67%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% - -------------------------------------------------------------------------------------------------------------- Total return (39.26%)(i) (15.45%) 3.71%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.96% for the six months ended Jan. 31, 2009. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $4.56 $6.09 $6.08 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 .08 .04 Net gains (losses) (both realized and unrealized) (1.80) (.90) .19 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.77) (.82) .23 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.06) (.08) Distributions from realized gains (.02) (.65) (.14) - -------------------------------------------------------------------------------------------------------------- Total distributions (.14) (.71) (.22) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.65 $4.56 $6.09 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.05%(f) 1.14% 1.19%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .73%(f) .89% 1.19%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.94%(f) 1.40% .92%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% - -------------------------------------------------------------------------------------------------------------- Total return (39.17%)(i) (15.19%) 3.88%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.71% for the six months ended Jan. 31, 2009. Earnings and bank fee credits for the year ended July 31, 2008 were less than 0.01% of average net assets. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 36 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $4.58 $6.13 $5.47 $5.28 $4.66 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .08(b) .07(b) .09 .04 Net gains (losses) (both realized and unrealized) (1.82) (.92) .79 .12 .61 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.78) (.84) .86 .21 .65 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.06) (.06) (.02) (.02) Distributions from realized gains (.02) (.65) (.14) -- (.01) - -------------------------------------------------------------------------------------------------------------- Total distributions (.14) (.71) (.20) (.02) (.03) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.66 $4.58 $6.13 $5.47 $5.28 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $71 $179 $330 $1,069 $-- - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c),(d) .80%(e) .87% .90% .81% .95% - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d),(f),(g) .72%(e) .82% .89% .81% .90% - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.97%(e) 1.46% 1.14% 1.41% 1.08% - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% 116% 128% - -------------------------------------------------------------------------------------------------------------- Total return (39.24%)(h) (15.40%) 15.80% 4.03% 14.06% - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.81% for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 37 FINANCIAL HIGHLIGHTS (continued) ----------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $4.61 $6.11 $6.08 - -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .01 .08 .06 Net gains (losses) (both realized and unrealized) (1.80) (.93) .19 - -------------------------------------------------------------------------------------------------------------- Total from investment operations (1.79) (.85) .25 - -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) -- (.08) Distributions from realized gains (.02) (.65) (.14) - -------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.65) (.22) - -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $2.67 $4.61 $6.11 - -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $18 $-- $25 - -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .58%(f) .67% .70%(f) - -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .45%(f) .67% .70%(f) - -------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.09%(f) 1.21% 1.44%(f) - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 80% 68% 66% - -------------------------------------------------------------------------------------------------------------- Total return (39.21%)(i) (15.38%) 4.24%(i) - --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits for the six months ended Jan. 31, 2009 were less than 0.01% of average net assets. The ratio of net expenses after expense waiver/reimbursement and after reduction for earnings and bank fee credits was 0.66% for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 38 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO JAN. 31, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Large Cap Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4 and Class R5 shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At Jan. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds, owned 100% of Class I shares and the Investment Manager owned 100% of Class R2 and Class R3 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- VALUATION OF SECURITIES Effective Aug. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock - -------------------------------------------------------------------------------- 40 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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, which approximates fair value. ILLIQUID SECURITIES At Jan. 31, 2009, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Jan. 31, 2009 was $29,291,575 representing 1.38% of net assets. Certain illiquid securities may be valued by management at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the New York Stock Exchange. The Fund will realize a gain or loss when the option - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At Jan. 31, 2009, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Jan. 31, 2009, foreign currency holdings were entirely comprised of European monetary units. The Fund may enter into forward foreign currency contracts for operational purposes. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the - -------------------------------------------------------------------------------- 42 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- counterparty will not complete its contract obligations. At Jan. 31, 2009, the Fund had no outstanding forward foreign currency contracts. TOTAL RETURN EQUITY SWAP TRANSACTIONS The Fund may enter into swap agreements to gain exposure to the total return on a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Under the terms of a total return equity swap agreement, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. The notional amounts of swap contracts are not recorded in the financial statements. Swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk associated with the investment in the underlying securities and also the risk of the counterparty not fulfilling its obligations under the agreement. At Jan. 31, 2009, the Fund had no outstanding total return equity swap contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures and options contracts, foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, re-characterization of REIT distributions, investments in partnerships, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45". The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At Jan. 31, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 - -------------------------------------------------------------------------------- 44 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of Jan. 31, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. SECURITY LITIGATION SETTLEMENTS Litigation proceeds from Enron Corp. related to portfolio securities no longer included in the portfolio are recorded as realized gains. Proceeds received during the six months ended Jan. 31, 2009 were $589,084. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $2,700,703 for the six months ended Jan. 31, 2009. The management fee for the six months ended Jan. 31, 2009 was 0.39% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the six months ended Jan. 31, 2009 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended Jan. 31, 2009, other expenses paid to this company were $14,607. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. - -------------------------------------------------------------------------------- 46 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- DISTRIBUTION FEES The Fund has an agreement with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $11,663,000 and $169,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $970,964 for Class A, $188,560 for Class B and $799 for Class C for the six months ended Jan. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended Jan. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class A............................................. 0.86% Class B............................................. 1.63 Class C............................................. 1.62 Class I............................................. 0.44 Class R2............................................ 0.98 Class R3............................................ 0.73 Class R4............................................ 0.72 Class R5............................................ 0.45
- -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A......................................... $1,810,132 Class B......................................... 237,081 Class C......................................... 11,378 Class R4........................................ 12,742
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2........................................... $ 4 Class R3........................................... 4 Class R4........................................... 917
The management fees waived/reimbursed at the Fund level were $951,738. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.04% Class B............................................. 1.81 Class C............................................. 1.80 Class I............................................. 0.62 Class R2............................................ 1.42 Class R3............................................ 1.17 Class R4............................................ 0.90 Class R5............................................ 0.67
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. BANK FEE CREDITS During the six months ended Jan. 31, 2009, the Fund's transfer agency fees were reduced by $27,696 as a result of bank fee credits from overnight cash balances. CUSTODIAN FEES Effective Dec. 15, 2008, the fund pays custodian fees to JPMorgan Chase Bank, N.A. Prior to Dec. 15, 2008, the Fund paid custodian fees amounting to $160,746 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. - -------------------------------------------------------------------------------- 48 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,374,454,240 and $2,722,612,153, respectively, for the six months ended Jan. 31, 2009. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED JAN. 31, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------- Class A 11,615,736 28,486,839 (117,055,540) (76,952,965) Class B 2,675,934 2,442,851 (14,086,006) (8,967,221) Class C 304,494 135,221 (808,411) (368,696) Class I 2,085,809 489,247 (252,037) 2,323,019 Class R4 3,446,396 1,723,888 (17,774,327) (12,604,043) Class R5 6,886,248 -- (123,399) 6,762,849 - ---------------------------------------------------------------------------------- YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------- Class A 43,972,212 98,990,509 (225,955,886) (82,993,165) Class B 6,351,542 16,421,985 (65,543,343) (42,769,816) Class C 430,927 611,708 (1,682,294) (639,659) Class I 2,016,152 1,585,654 (6,198,548) (2,596,742) Class R4 6,389,837 6,289,817 (27,462,232) (14,782,578) Class R5 -- -- (4,152,231) (4,152,231) - ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers on behalf of the Fund. Pursuant to the Agreement, all loaned securities are initially collateralized in an amount equivalent to 102% (for securities denominated in U.S. dollars) or 105% (for all other securities) of the value of the loaned securities, including accrued interest in the case of fixed income securities. Collateral is maintained over the life of the loan thereafter in an amount not less than 100% of the market value of loaned - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- securities, as determined at the close of each business day, except to the extent that a collateral shortfall is due to a diminution in the market value of authorized investments in which cash collateral is invested. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Collateral is either in the form of cash or U.S. government securities. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed on the Portfolio of Investments and the value of cash collateral received at period end is disclosed on the Statement of Assets and Liabilities along with the related obligation to return the collateral upon return of the securities loaned. At Jan. 31, 2009, securities valued at $190,109,786 were on loan secured by cash collateral of $203,391,339 invested in short-term securities or cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $98,787 earned from securities lending from Dec. 1, 2008 through Jan. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, RiverSource Investments, LLC served as securities lending agent for the Fund under the Securities Lending Agency Agreement pursuant to which the Fund agreed to reimburse RiverSource Investments, LLC for expenses incurred by it in connection with the lending program. Expenses paid to RiverSource Investments, LLC as securities lending agent were $8,577 through Nov. 30, 2008 and are included in other expenses on the Statement of Operations. Cash collateral received on loaned securities had been invested in an affiliated money market fund. Income of $81,290 earned from securities lending from Aug. 1, 2008 through Nov. 30, 2008 is included in the Statement of Operations. - -------------------------------------------------------------------------------- 50 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 6. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written during the six months ended Jan. 31, 2009, are as follows:
PUTS CALLS CONTRACTS PREMIUMS CONTRACTS PREMIUMS - --------------------------------------------------------------------------- Balance July 31, 2008 3,427 $ 2,454,994 16,411 $ 1,328,757 Opened 21,362 4,207,566 75,902 6,191,236 Closed (24,789) (6,662,560) (44,412) (5,545,057) Expired -- -- (47,901) (1,974,936) - --------------------------------------------------------------------------- Balance Jan. 31, 2009 -- $ -- -- $ -- - ---------------------------------------------------------------------------
7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash fund aggregated $869,988,866 and $928,435,784, respectively, for the six months ended Jan. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at Jan. 31, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 16, 2008, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended Jan. 31, 2009. Under the prior credit facility which was effective until Oct. 15, 2008, the Fund had entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permitted collective borrowings up to $500 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matured no later than 60 days after the date of borrowing. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. 9. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, the Fund had a capital loss carry-over of $91,172,850 at July 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2011 $60,717,128 $20,982,455 $9,473,267
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post-October loss of $143,836,621 that is treated for income tax purposes as occurring on Aug. 1, 2008. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. - -------------------------------------------------------------------------------- 52 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman Advisors, Inc. (which is now know as RiverSource Fund Distributors, Inc.), relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine - -------------------------------------------------------------------------------- 54 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. - -------------------------------------------------------------------------------- RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 55 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. - -------------------------------------------------------------------------------- 56 RIVERSOURCE LARGE CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT NOTES -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS. ADVANCED ALPHA(SM) STRATEGIES RiverSource 120/20 Contrarian Equity Fund RiverSource Absolute Return Currency and Income Fund Threadneedle Global Extended Alpha Fund ADVICE-BUILT(SM) SOLUTIONS RIVERSOURCE INCOME BUILDER SERIES RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE PORTFOLIO BUILDER SERIES RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Total Equity Fund RIVERSOURCE RETIREMENT PLUS(R) SERIES RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE STRATEGIC ALLOCATION FUND RIVERSOURCE BALANCED FUND SINGLE-STRATEGY FUNDS GROWTH FUNDS RiverSource Partners Aggressive Growth Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Global Technology Fund RiverSource Growth Fund RiverSource Mid Cap Growth Fund RiverSource Partners Small Cap Growth Fund BLEND FUNDS RiverSource Disciplined Equity Fund RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Large Cap Equity Fund RiverSource Precious Metals and Mining Fund RiverSource Recovery and Infrastructure Fund RiverSource S&P 500 Index Fund* RiverSource Small Cap Advantage Fund RiverSource Partners Small Cap Equity Fund RiverSource Small Company Index Fund VALUE FUNDS RiverSource Disciplined Large Cap Value Fund RiverSource Disciplined Small Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Dividend Opportunity Fund RiverSource Equity Value Fund RiverSource Partners Fundamental Value Fund RiverSource Large Cap Value Fund RiverSource Mid Cap Value Fund RiverSource Real Estate Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Value Fund GLOBAL/INTERNATIONAL FUNDS RiverSource Disciplined International Equity Fund Threadneedle Emerging Markets Fund Threadneedle European Equity Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund RiverSource Partners International Select Growth Fund Threadneedle International Opportunity Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund
- -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT TAXABLE INCOME FUNDS RiverSource Cash Management Fund** RiverSource Diversified Bond Fund RiverSource Emerging Markets Bond Fund RiverSource Floating Rate Fund RiverSource Global Bond Fund RiverSource High Yield Bond Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RiverSource Short Duration U.S. Government Fund RiverSource Strategic Income Allocation Fund RiverSource U.S. Government Mortgage Fund TAX-EXEMPT FUNDS RiverSource California Tax-Exempt Fund RiverSource Intermediate Tax-Exempt Fund RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund RiverSource Tax-Exempt High Income Fund RiverSource Tax-Exempt Money Market 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 & Poors(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 MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT RIVERSOURCE LARGE CAP EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6255 H (4/09)
EX-99.17(M) 18 c50349c.txt Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED EQUITY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED JANUARY 31, 2009 RIVERSOURCE DISCIPLINED EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) LETTER TO SHAREHOLDERS --------------------------------------------------------- (PHOTO - BANNIGAN - LEWIS) Patrick T. Bannigan (left) Stephen R. Lewis, Jr. (right) Dear Fellow Shareholders, 2008 was an unprecedented year in many ways. Investors watched the precipitous decline in all the major U.S. and international equity indexes as concerns about the economy gave way to fear and selling of securities. In response to substantial losses in the markets and weakening economic indicators, the government stepped in swiftly and aggressively to encourage liquidity and credit availability in an attempt to make credit markets function. By the end of the calendar year, these actions still needed time to gain traction in the markets. During a severe economic environment like the one we are experiencing, it is essential that investors try not to let short-term losses in the market distract from a long-term investment plan. Such discipline may be easier said than done in the presence of negative news in the media. However, the financial choices you make today -- practicing patience or locking in losses -- will influence your portfolio's performance. GETTING BACK ON TRACK Whether you look at the glass as half empty or half full, every broad based market decline creates investment opportunities. The financial markets are expected to recover, although it is impossible to know when. In the meantime, make sure your portfolio is positioned to benefit from the next sources of growth. Market recoveries often occur before the reported end of a recession. If you wait for validation of economic recovery before reinvesting in the markets, you may well miss out on market returns associated with an economic rebound. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT - --------------------------------------------------------------------------------
TIME ELAPSED BETWEEN BEAR MARKET AND BEAR MARKET RECESSION RETURNS RECESSION ENDED END DATES MISSED* - ----------------------------------------------------------------- August 1929 - March 1933 June 1932 9 months 39.21% August 1957 - April 1958 December 1957 4 months 9.94% December 1969 - November 1970 June 1970 5 months 21.81% November 1973 - March 1975 September 1974 6 months 34.47% July 1981 - November 1982 July 1982 4 months 31.72% July 1990 - March 1991 October 1990 5 months 25.33% - -----------------------------------------------------------------
* S&P 500(R) Index total returns for the number of months between the recession and bear market end dates. Be sure your portfolio is on track today. Talk with your financial professional about opportunities that have been created in the markets and take advantage of our solutions and strategies that can help position portfolios for the next market recovery cycle. OUR FAMILY OF FUNDS We also want to share some good news with our fellow shareholders. Last November, RiverSource Investments, a wholly- owned subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated. Seligman's long heritage of investing and exceptional wealth of experience is a valuable addition to RiverSource Investments. Along with RiverSource and Threadneedle, Seligman joins our comprehensive family of mutual funds we offer investors. For more information about any of our RiverSource Funds, go online to RiverSource.com or call (888) 791-3380. Customer Service Representatives are available to answer your questions Monday through Friday from 8 a.m. to 5 p.m. Central time. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT LETTER TO SHAREHOLDERS (continued) --------------------------------------------- In addition, we are excited to welcome John Maher and Leroy Richie to the RiverSource Funds' Boards of Directors. Mr. Maher and Mr. Richie join us from the Seligman Funds' Boards of Directors. The acquisition of Seligman creates several new opportunities for RiverSource Funds' shareholders, including access to talented portfolio managers and competitive mutual fund solutions to help you reach your investment goals. We hope you are as excited by these opportunities as we are. Thank you for investing with us. /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. Asset allocation, diversification, and dollar cost averaging do not assure a profit or protect against loss and past performance is no guarantee of future results. Standard & Poor's 500 Index (S&P 500 Index) is an unmanaged list of common stocks and is frequently used as a general measure of U.S. market performance. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 8 Portfolio of Investments........... 11 Statement of Assets and Liabilities...................... 19 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 23 Financial Highlights............... 25 Notes to Financial Statements...... 34 Proxy Voting....................... 49
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY - -------------------------------------------------------------------------------- > RiverSource Disciplined Equity Fund (the Fund) Class A shares declined 36.05% (excluding sales charge) for the six months ended Jan. 31, 2009. > The Fund underperformed the unmanaged Standard & Poor's 500 Index (S&P 500 Index), which fell 33.95% for the same period. > The Fund also underperformed the Lipper Large-Cap Core Funds Index, representing the Fund's peer group, which declined 33.98%, for the same period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) - --------------------------------------------------------------------------------
Since inception 6 months* 1 year 3 years 5 years 4/24/03 - --------------------------------------------------------------------------- RiverSource Disciplined Equity Fund Class A (excluding sales charge) -36.05% -41.79% -13.95% -5.24% -0.64% - --------------------------------------------------------------------------- S&P 500 Index (unmanaged)(1) -33.95% -38.63% -11.78% -4.24% +0.22% - --------------------------------------------------------------------------- Lipper Large-Cap Core Funds Index(2) -33.98% -38.34% -11.95% -4.55% -0.54% - ---------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. - -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- (1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION - --------------------------------------------------------------------------- Class A (inception 4/24/03) -36.05% -41.79% -13.95% -5.24% -0.64% - --------------------------------------------------------------------------- Class B (inception 4/24/03) -36.36% -42.33% -14.63% -6.00% -1.43% - --------------------------------------------------------------------------- Class C (inception 4/24/03) -36.26% -42.26% -14.61% -6.00% -1.40% - --------------------------------------------------------------------------- Class I (inception 7/15/04) -36.07% -41.52% -13.58% N/A -4.76% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -36.15% -41.97% N/A N/A -23.05% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -36.03% -41.76% N/A N/A -22.84% - --------------------------------------------------------------------------- Class R4 (inception 4/24/03) -36.05% -41.77% -13.84% -5.12% -0.48% - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -35.97% -41.61% N/A N/A -22.64% - --------------------------------------------------------------------------- Class W (inception 12/1/06) -36.10% -41.94% N/A N/A -22.21% - --------------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -39.74% -45.10% -15.63% -6.37% -1.67% - --------------------------------------------------------------------------- Class B (inception 4/24/03) -39.43% -45.11% -15.59% -6.30% -1.56% - --------------------------------------------------------------------------- Class C (inception 4/24/03) -36.88% -42.81% -14.61% -6.00% -1.40% - ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS INCEPTION - --------------------------------------------------------------------------- Class A (inception 4/24/03) -29.09% -38.74% -9.10% -2.59% +1.44% - --------------------------------------------------------------------------- Class B (inception 4/24/03) -29.24% -39.16% -9.76% -3.31% +0.68% - --------------------------------------------------------------------------- Class C (inception 4/24/03) -29.26% -39.20% -9.79% -3.31% +0.67% - --------------------------------------------------------------------------- Class I (inception 7/15/04) -28.85% -38.47% -8.78% N/A -2.30% - --------------------------------------------------------------------------- Class R2 (inception 12/11/06) -29.15% -38.77% N/A N/A -19.27% - --------------------------------------------------------------------------- Class R3 (inception 12/11/06) -28.90% -38.56% N/A N/A -19.04% - --------------------------------------------------------------------------- Class R4 (inception 4/24/03) -29.12% -38.72% -9.00% -2.43% +1.60% - --------------------------------------------------------------------------- Class R5 (inception 12/11/06) -29.00% -38.55% N/A N/A -18.91% - --------------------------------------------------------------------------- Class W (inception 12/1/06) -29.13% -38.89% N/A N/A -18.48% - --------------------------------------------------------------------------- With sales charge Class A (inception 4/24/03) -33.13% -42.25% -10.87% -3.74% +0.37% - --------------------------------------------------------------------------- Class B (inception 4/24/03) -32.65% -42.09% -10.78% -3.61% +0.54% - --------------------------------------------------------------------------- Class C (inception 4/24/03) -29.94% -39.79% -9.79% -3.31% +0.67% - ---------------------------------------------------------------------------
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. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX - --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) - --------------------------------------------------------------------------------
Total Net fund fund expenses expenses(a) - ----------------------------------------- Class A 0.96% 0.96% - ----------------------------------------- Class B 1.72% 1.72% - ----------------------------------------- Class C 1.72% 1.72% - ----------------------------------------- Class I 0.61% 0.61% - ----------------------------------------- Class R2 1.41% 1.41% - ----------------------------------------- Class R3 1.15% 1.15% - ----------------------------------------- Class R4 0.91% 0.84% - ----------------------------------------- Class R5 0.66% 0.66% - ----------------------------------------- Class W 1.06% 1.06% - -----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.04% for the year ended July 31, 2008), will not exceed 1.05% for Class A, 1.81% for Class B, 1.81% for Class C, 0.72% for Class I, 1.52% for Class R2, 1.27% for Class R3, 0.88% for Class R4, 0.77% for Class R5 and 1.17% for Class W. - -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION(1) (at Jan. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Consumer Discretionary 10.3% - ------------------------------------------------ Consumer Staples 13.3% - ------------------------------------------------ Energy 15.6% - ------------------------------------------------ Financials 12.7% - ------------------------------------------------ Health Care 16.2% - ------------------------------------------------ Industrials 8.0% - ------------------------------------------------ Information Technology 10.6% - ------------------------------------------------ Materials 2.9% - ------------------------------------------------ Telecommunication Services 0.4% - ------------------------------------------------ Utilities 0.8% - ------------------------------------------------ Other(2) 9.2% - ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 9.2%, 7.3% is due to security lending activity and 1.9% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. TOP TEN HOLDINGS (at Jan. 31, 2009; % of portfolio assets) - ---------------------------------------------------------------------
Chevron 5.7% - ------------------------------------------------ Johnson & Johnson 4.7% - ------------------------------------------------ Wal-Mart Stores 4.4% - ------------------------------------------------ Pfizer 4.4% - ------------------------------------------------ Home Depot 2.4% - ------------------------------------------------ IBM 2.2% - ------------------------------------------------ Exxon Mobil 2.2% - ------------------------------------------------ Intel 1.8% - ------------------------------------------------ PepsiCo 1.7% - ------------------------------------------------ Comcast Cl A 1.5% - ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE --------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Jan. 31, 2009. 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. - -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED AUG. 1, 2008 JAN. 31, 2009 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class A - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 639.50 $4.03 .98% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.16 $4.96 .98% - ------------------------------------------------------------------------------------------ Class B - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 636.40 $7.14 1.74% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.34 $8.80 1.74% - ------------------------------------------------------------------------------------------ Class C - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 637.40 $7.14 1.74% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.34 $8.80 1.74% - ------------------------------------------------------------------------------------------ Class I - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 641.00 $2.43 .59% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.11 $2.99 .59% - ------------------------------------------------------------------------------------------ Class R2 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 638.50 $5.63 1.37% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.93 1.37% - ------------------------------------------------------------------------------------------ Class R3 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 639.70 $4.69 1.14% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.35 $5.77 1.14% - ------------------------------------------------------------------------------------------ Class R4 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 639.50 $3.33 .81% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,021.01 $4.10 .81% - ------------------------------------------------------------------------------------------ Class R5 - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 640.30 $2.51 .61% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,022.01 $3.09 .61% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 9 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED AUG. 1, 2008 JAN. 31, 2009 THE PERIOD(A) EXPENSE RATIO - ------------------------------------------------------------------------------------------ Class W - ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 639.00 $4.27 1.04% - ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.85 $5.27 1.04% - ------------------------------------------------------------------------------------------
(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 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Jan. 31, 2009: -36.05% for Class A, -36.36% for Class B, -36.26% for Class C, -36.07% for Class I, -36.15% for Class R2, -36.03% for Class R3, -36.05% for Class R4, -35.97% for Class R5 and -36.10% for Class W. - -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JAN. 31, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.1%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.6%) General Dynamics 144,205 $8,180,750 United Technologies 64,197 3,080,814 --------------- Total 11,261,564 - ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.2%) CH Robinson Worldwide 92,540 4,254,989 - ------------------------------------------------------------------------------------- AIRLINES (0.1%) Southwest Airlines 273,867(e) 1,925,285 - ------------------------------------------------------------------------------------- AUTOMOBILES (0.3%) Ford Motor 1,518,855(b,e) 2,840,260 General Motors 561,121(e) 1,688,974 Harley-Davidson 144,208(e) 1,756,453 --------------- Total 6,285,687 - ------------------------------------------------------------------------------------- BEVERAGES (3.2%) Brown-Forman Cl B 42,720 1,939,915 Coca-Cola 568,927 24,304,561 PepsiCo 690,410 34,679,295 --------------- Total 60,923,771 - ------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.4%) Amgen 397,145(b) 21,783,403 Cephalon 51,854(b,e) 4,002,092 Gilead Sciences 365,720(b) 18,567,604 --------------- Total 44,353,099 - ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) Masco 274,495 2,146,551 - ------------------------------------------------------------------------------------- CAPITAL MARKETS (1.6%) E*TRADE Financial 256,004(b,e) 291,845 Goldman Sachs Group 74,459 6,011,075 Morgan Stanley 998,145 20,192,472 State Street 155,918(e) 3,628,212 T Rowe Price Group 28,175 777,067 --------------- Total 30,900,671 - ------------------------------------------------------------------------------------- CHEMICALS (2.0%) CF Inds Holdings 31,771 1,493,237 Dow Chemical 1,666,654 19,316,519 Ecolab 34,297 1,164,726 EI du Pont de Nemours & Co 125,659 2,885,131 PPG Inds 66,308(e) 2,491,855 Praxair 157,495(e) 9,805,639 --------------- Total 37,157,107 - ------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.6%) Banco Santander ADR 83,264(c) 652,792 BB&T 289,577(e) 5,730,729 Comerica 118,453 1,973,427 Fifth Third Bancorp 601,610 1,437,848 First Horizon Natl 181,074(e) 1,723,826 Huntington Bancshares 363,386(e) 1,046,552 KeyCorp 328,985 2,395,011 Marshall & Ilsley 169,248(e) 966,406 PNC Financial Services Group 351,414 11,427,982 SunTrust Banks 164,950 2,022,287 Synovus Financial 135,983(e) 538,493 Wells Fargo & Co 56,909 1,075,580 --------------- Total 30,990,933 - ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.9%) Avery Dennison 38,795(e) 940,003 Republic Services 243,219 6,289,643 RR Donnelley & Sons 79,664 777,521 Waste Management 264,866 8,261,170 --------------- Total 16,268,337 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMUNICATIONS EQUIPMENT (1.0%) Corning 734,439(e) $7,425,178 Motorola 248,544 1,101,050 QUALCOMM 297,886(e) 10,291,962 --------------- Total 18,818,190 - ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.9%) Apple 155,131(b) 13,981,957 Dell 817,705(b,e) 7,768,198 IBM 494,262 45,299,111 Lexmark Intl Cl A 180,264(b) 4,268,652 QLogic 139,178(b,e) 1,575,495 --------------- Total 72,893,413 - ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.2%) American Express 68,310 1,142,826 SLM 210,091(b,e) 2,405,542 --------------- Total 3,548,368 - ------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 104,179 3,335,812 - ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.4%) H&R Block 391,532 8,116,458 - ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (3.7%) Bank of America 3,198,568 21,046,577 CIT Group 293,875 819,911 Citigroup 5,968,599(e) 21,188,526 JPMorgan Chase & Co 1,027,716 26,217,036 --------------- Total 69,272,050 - ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) Embarq 97,099 3,468,376 Frontier Communications 173,926 1,410,540 --------------- Total 4,878,916 - ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.6%) FirstEnergy 121,190 6,058,289 Southern 146,152 4,888,784 --------------- Total 10,947,073 - ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.3%) Emerson Electric 155,014 5,068,958 - ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.2%) FLIR Systems 132,734(b) 3,314,368 Tyco Electronics 80,159(c) 1,135,051 --------------- Total 4,449,419 - ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.7%) BJ Services 200,667 2,207,337 ENSCO Intl 84,641 2,315,778 Halliburton 535,561 9,238,428 Nabors Inds 236,334(b,c,e) 2,587,857 Natl Oilwell Varco 197,191(b) 5,213,730 Noble 146,159(e) 3,968,217 Smith Intl 50,852 1,154,340 Weatherford Intl 430,448(b) 4,747,841 --------------- Total 31,433,528 - ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (5.7%) Costco Wholesale 88,113 3,967,728 Safeway 216,984 4,649,967 SUPERVALU 79,252 1,390,080 SYSCO 103,485 2,306,681 Walgreen 155,755(e) 4,269,245 Wal-Mart Stores 1,914,179 90,196,115 --------------- Total 106,779,816 - ------------------------------------------------------------------------------------- FOOD PRODUCTS (2.3%) Archer-Daniels-Midland 133,678 3,660,104 Campbell Soup 74,438(e) 2,260,682 Dean Foods 27,032(b,e) 522,799 General Mills 388,802(e) 22,997,637 HJ Heinz 77,259 2,819,954 JM Smucker 66,166 2,987,395 Kellogg 91,146 3,982,169 Sara Lee 351,117 3,521,704 Tyson Foods Cl A 112,926(e) 999,395 --------------- Total 43,751,839 - ------------------------------------------------------------------------------------- GAS UTILITIES (0.1%) Questar 71,190(e) 2,419,036 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE EQUIPMENT & SUPPLIES (0.7%) Becton Dickinson & Co 52,477 $3,813,504 Covidien 182,195(c) 6,985,356 Varian Medical Systems 52,680(b,e) 1,956,008 --------------- Total 12,754,868 - ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.7%) Cardinal Health 71,711 2,699,919 CIGNA 399,133 6,928,948 Quest Diagnostics 59,390 2,930,897 Tenet Healthcare 456,110(b,e) 488,038 --------------- Total 13,047,802 - ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.4%) Intl Game Technology 117,047(e) 1,240,698 McDonald's 423,142 24,550,699 Wyndham Worldwide 46,479 284,916 --------------- Total 26,076,313 - ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) Black & Decker 29,679(e) 858,020 Centex 121,143 1,030,927 DR Horton 313,448 1,868,150 KB Home 36,839(e) 393,072 Leggett & Platt 116,545 1,455,647 Lennar Cl A 85,838 660,094 Pulte Homes 111,499 1,131,715 Snap-On 47,778 1,441,940 Stanley Works 13,005 406,536 --------------- Total 9,246,101 - ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (2.6%) Colgate-Palmolive 212,124 13,796,545 Kimberly-Clark 79,020 4,067,159 Procter & Gamble 563,360 30,703,120 --------------- Total 48,566,824 - ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) Constellation Energy Group 94,112 2,475,145 Dynegy Cl A 200,023(b) 422,049 --------------- Total 2,897,194 - ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.4%) 3M 233,882 12,580,512 Textron 114,451 1,033,493 Tyco Intl 577,631(c) 12,141,804 --------------- Total 25,755,809 - ------------------------------------------------------------------------------------- INSURANCE (6.3%) ACE 224,162(c) 9,786,913 AFLAC 239,320 5,554,617 Allstate 913,087 19,786,594 Ambac Financial Group 288,197(e) 328,545 American Intl Group 1,536,860 1,967,181 Aon 101,123 3,746,607 Assurant 63,505 1,676,532 Chubb 186,118 7,924,904 Cincinnati Financial 28,900 633,777 Genworth Financial Cl A 656,721 1,523,593 Hartford Financial Services Group 200,394(e) 2,637,185 Lincoln Natl 120,907 1,829,323 Marsh & McLennan Companies 383,572 7,414,447 MBIA 209,475(b,e) 808,574 MetLife 374,982 10,773,233 Progressive 1,189,984(b) 14,458,306 Prudential Financial 200,346 5,158,910 Torchmark 66,836(e) 2,005,080 Travelers Companies 454,944 17,579,036 Unum Group 120,100 1,700,616 XL Capital Cl A 210,930(c) 611,697 --------------- Total 117,905,670 - ------------------------------------------------------------------------------------- IT SERVICES (1.0%) Affiliated Computer Services Cl A 57,245(b) 2,625,256 Automatic Data Processing 183,752(e) 6,675,709
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) IT SERVICES (CONT.) MasterCard Cl A 28,772(e) $3,906,662 Paychex 98,702(e) 2,397,472 Total System Services 17,806 225,424 Western Union 151,118 2,064,272 --------------- Total 17,894,795 - ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.4%) Brunswick 100,213(e) 278,592 Eastman Kodak 232,404(e) 1,052,790 Hasbro 92,091(e) 2,222,156 Mattel 221,386 3,141,467 --------------- Total 6,695,005 - ------------------------------------------------------------------------------------- MACHINERY (1.3%) Cummins 95,151 2,281,721 Deere & Co 154,045 5,351,523 Dover 34,526 976,395 Eaton 77,917 3,429,906 Flowserve 23,515 1,253,585 Illinois Tool Works 99,790 3,259,141 Ingersoll-Rand Cl A 250,754(c) 4,064,722 Manitowoc 41,277(e) 227,024 Pall 21,838 569,317 Parker Hannifin 58,170 2,222,676 --------------- Total 23,636,010 - ------------------------------------------------------------------------------------- MEDIA (2.4%) CBS Cl B 599,908 3,431,474 Comcast Cl A 2,148,695 31,478,381 DIRECTV Group 204,716(b) 4,483,280 Gannett 498,635(e) 2,877,124 Meredith 14,134(e) 225,720 New York Times Cl A 109,515(e) 544,290 News Corp Cl A 259,074 1,655,483 --------------- Total 44,695,752 - ------------------------------------------------------------------------------------- METALS & MINING (1.1%) AK Steel Holding 105,674(e) 852,789 Alcoa 474,946 3,699,829 Freeport-McMoRan Copper & Gold 63,591(e) 1,598,678 Nucor 278,500(e) 11,360,015 United States Steel 107,701 3,234,261 --------------- Total 20,745,572 - ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.4%) Big Lots 49,161(b,e) 661,215 Family Dollar Stores 137,895 3,829,345 JC Penney 50,077(e) 838,790 Kohl's 65,693(b,e) 2,411,590 Macy's 66,493 595,112 --------------- Total 8,336,052 - ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (15.1%) Anadarko Petroleum 227,182 8,346,667 Apache 49,069 3,680,175 Cabot Oil & Gas 61,226 1,683,103 Chesapeake Energy 304,346 4,811,710 Chevron 1,644,212 115,949,829 ConocoPhillips 561,368 26,681,821 CONSOL Energy 72,035 1,963,674 Devon Energy 48,553 2,990,865 EOG Resources 104,193 7,061,160 Exxon Mobil 586,725(d) 44,872,728 Hess 134,042(e) 7,454,076 Marathon Oil 363,777 9,905,648 Massey Energy 104,037 1,579,282 Murphy Oil 90,076 3,979,558 Occidental Petroleum 405,601 22,125,535 Peabody Energy 124,318 3,107,950 Pioneer Natural Resources 100,107 1,465,566 Southwestern Energy 203,387(b,e) 6,437,199 Spectra Energy 242,810 3,523,173 Sunoco 54,967(e) 2,546,071 Tesoro 98,048(e) 1,689,367 Valero Energy 170,934(e) 4,122,928 --------------- Total 285,978,085 - ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.1%) Estee Lauder Companies Cl A 92,113(e) 2,417,966 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) PHARMACEUTICALS (13.7%) Bristol-Myers Squibb 373,524 $7,997,149 Eli Lilly & Co 295,088(e) 10,865,140 Forest Laboratories 200,439(b) 5,018,993 Johnson & Johnson 1,640,525 94,641,886 King Pharmaceuticals 400,546(b) 3,500,772 Merck & Co 772,283 22,048,680 Mylan 53,769(b,e) 609,203 Pfizer 6,118,008 89,200,557 Schering-Plough 908,187 15,947,764 Wyeth 235,581 10,122,916 --------------- Total 259,953,060 - ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.2%) Public Storage 58,068(e) 3,592,667 - ------------------------------------------------------------------------------------- ROAD & RAIL (3.6%) Burlington Northern Santa Fe 219,040 14,511,400 CSX 390,872 11,319,653 Norfolk Southern 430,857 16,527,675 Ryder System 54,245(e) 1,832,396 Union Pacific 547,180 23,961,012 --------------- Total 68,152,136 - ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.9%) Altera 284,124 4,369,827 Intel 2,783,428 35,906,221 Linear Technology 166,697(e) 3,904,044 LSI 237,133(b,e) 754,083 MEMC Electronic Materials 144,127(b) 1,960,127 Microchip Technology 138,807 2,633,169 NVIDIA 95,822(b,e) 761,785 Xilinx 255,847 4,311,022 --------------- Total 54,600,278 - ------------------------------------------------------------------------------------- SOFTWARE (2.5%) Microsoft 1,151,519 19,690,975 Oracle 1,507,562(b,e) 25,372,268 Salesforce.com 11,626(b,e) 309,368 Symantec 154,679(b) 2,371,229 --------------- Total 47,743,840 - ------------------------------------------------------------------------------------- SPECIALTY RETAIL (4.7%) Abercrombie & Fitch Cl A 133,207(e) 2,377,745 AutoNation 173,695(b,e) 1,611,890 AutoZone 28,942(b,e) 3,846,102 Bed Bath & Beyond 144,495(b,e) 3,356,619 Best Buy 144,404 4,046,200 Gap 286,082 3,227,005 Home Depot 2,249,714(d) 48,436,343 Limited Brands 114,145(e) 904,028 Lowe's Companies 752,480 13,747,810 Office Depot 149,209(b) 322,291 RadioShack 168,700(e) 1,933,302 Sherwin-Williams 53,160(e) 2,538,390 Staples 28,256 450,401 TJX Companies 76,140 1,478,639 --------------- Total 88,276,765 - ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) Coach 206,729(b) 3,018,243 Jones Apparel Group 116,009 401,391 Liz Claiborne 229,550(e) 505,010 Nike Cl B 51,608 2,335,262 VF 55,629 3,116,337 --------------- Total 9,376,243 - ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.1%) Fannie Mae 1,336,093 809,139 Freddie Mac 794,150 472,519 MGIC Investment 154,094(e) 425,299 --------------- Total 1,706,957 - ------------------------------------------------------------------------------------- TOBACCO (0.4%) Philip Morris Intl 191,327 7,107,798 - ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.2%) Fastenal 47,200(e) 1,613,296 WW Grainger 29,299(e) 2,137,362 --------------- Total 3,750,658 - ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.2%) Sprint Nextel 1,511,110(b) 3,671,997 - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $3,080,078,855) $1,846,763,087 - -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
MONEY MARKET FUND (2.0%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.47% 38,574,554(f) $38,574,554 - ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $38,574,554) $38,574,554 - ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (7.9%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 149,027,673 $149,027,673 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $149,027,673) $149,027,673 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,267,681,082)(g) $2,034,365,314 =====================================================================================
INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JAN. 31, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) - ----------------------------------------------------------------------------------- S&P 500 Index 184 $37,835,000 March 2009 $(2,208,635) - -----------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2009, the value of foreign securities represented 2.0% of net assets. (d) At Jan. 31, 2009, investments in securities included securities valued at $19,236,164 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (e) At Jan. 31, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (f) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at Jan. 31, 2009. (g) At Jan. 31, 2009, the cost of securities for federal income tax purposes was approximately $3,267,681,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,778,000 Unrealized depreciation (1,253,094,000) ------------------------------------------------------------- Net unrealized depreciation $(1,233,316,000) -------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. - -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, it is likely that there may be a range of practices utilized and it may be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 ------------------------------------------------------------ LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL - ------------------------------------------------------------------------------------ Investments in securities $2,034,365,314 $-- $-- $2,034,365,314 Other financial instruments* (2,208,635) -- -- (2,208,635) - ------------------------------------------------------------------------------------ Total $2,032,156,679 $-- $-- $2,032,156,679 - ------------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- 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. - -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JAN. 31, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $3,080,078,855) $ 1,846,763,087 Affiliated money market fund (identified cost $38,574,554) 38,574,554 Investments of cash collateral received for securities on loan (identified cost $149,027,673) 149,027,673 - ----------------------------------------------------------------------------------------- Total investments in securities (identified cost $3,267,681,082) 2,034,365,314 Capital shares receivable 66,185,449 Dividends and accrued interest receivable 2,055,385 Receivable for investment securities sold 93,236,508 - ----------------------------------------------------------------------------------------- Total assets 2,195,842,656 - ----------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 3,547,314 Payable for investment securities purchased 158,103,932 Payable upon return of securities loaned 149,027,673 Variation margin payable on futures contracts 2,517,200 Accrued investment management services fees 31,159 Accrued distribution fees 11,214 Accrued transfer agency fees 8,253 Accrued administrative services fees 2,855 Accrued plan administration services fees 546 Other accrued expenses 267,753 - ----------------------------------------------------------------------------------------- Total liabilities 313,517,899 - ----------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 1,882,324,757 - ----------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 5,262,532 Additional paid-in capital 3,403,669,559 Undistributed net investment income 21,936,708 Accumulated net realized gain (loss) (313,048,070) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,235,495,972) - ----------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 1,882,324,757 - ----------------------------------------------------------------------------------------- *Including securities on loan, at value $ 140,468,510 - -----------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- JAN. 31, 2009 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $620,051,403 173,305,774 $3.58(1) Class B $ 19,832,792 5,570,594 $3.56 Class C $ 1,814,010 512,826 $3.54 Class I $276,904,563 77,058,471 $3.59 Class R2 $ 2,365 661 $3.58 Class R3 $ 2,365 661 $3.58 Class R4 $ 77,831,387 21,684,784 $3.59 Class R5 $ 2,364 661 $3.58 Class W $885,883,508 248,118,779 $3.57 - -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $3.80. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JAN. 31, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 32,351,835 Income distributions from affiliated money market fund 257,424 Fee income from securities lending 353,713 - ----------------------------------------------------------------------------- Total income 32,962,972 - ----------------------------------------------------------------------------- Expenses: Investment management services fees 5,895,042 Distribution fees Class A 1,034,280 Class B 135,737 Class C 11,125 Class R2 8 Class R3 4 Class W 1,278,447 Transfer agency fees Class A 573,318 Class B 21,290 Class C 1,643 Class R2 1 Class R3 1 Class R4 25,031 Class R5 1 Class W 1,022,756 Administrative services fees 614,408 Plan administration services fees Class R2 4 Class R3 4 Class R4 125,156 Compensation of board members 37,256 Custodian fees 89,895 Printing and postage 80,050 Registration fees 64,275 Professional fees 32,297 Other 30,170 - ----------------------------------------------------------------------------- Total expenses 11,072,199 Expenses waived/reimbursed by the Investment Manager and its affiliates (43,631) Earnings and bank fee credits on cash balances (7,886) - ----------------------------------------------------------------------------- Total net expenses 11,020,682 - ----------------------------------------------------------------------------- Investment income (loss) -- net 21,942,290 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 21 STATEMENT OF OPERATIONS (continued) ------------------------------------------- SIX MONTHS ENDED JAN. 31, 2009 (UNAUDITED)
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ (289,383,497) Futures contracts (18,917,134) - ----------------------------------------------------------------------------- Net realized gain (loss) on investments (308,300,631) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (745,252,457) - ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (1,053,553,088) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(1,031,610,798) - -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 21,942,290 $ 44,172,325 Net realized gain (loss) on investments (308,300,631) 103,837,007 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (745,252,457) (641,572,651) - ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,031,610,798) (493,563,319) - ---------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (9,214,668) (11,230,396) Class C (7,117) (4,379) Class I (5,438,440) (5,698,153) Class R2 (33) (28) Class R3 (41) (40) Class R4 (1,326,570) (1,390,578) Class R5 (49) (54) Class W (10,297,303) (14,867,518) Net realized gain Class A (24,419,810) (68,772,061) Class B (803,415) (3,058,960) Class C (70,547) (169,022) Class I (10,144,769) (24,176,366) Class R2 (97) (244) Class R3 (96) (244) Class R4 (2,985,348) (7,584,972) Class R5 (96) (244) Class W (30,699,663) (74,056,615) - ---------------------------------------------------------------------------------------------- Total distributions (95,408,062) (211,009,874) - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS (continued) --------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 21,635,577 $ 49,740,163 Class B shares 1,577,268 5,505,096 Class C shares 405,262 976,461 Class I shares 62,015,970 120,762,575 Class R4 shares 5,399,913 25,111,692 Class W shares 288,169,838 1,465,443,768 Reinvestment of distributions at net asset value Class A shares 31,099,175 74,058,485 Class B shares 793,672 3,022,150 Class C shares 73,505 167,943 Class I shares 15,582,928 29,873,023 Class R4 shares 4,311,918 8,975,550 Class W shares 40,996,838 88,923,836 Payments for redemptions Class A shares (97,184,696) (215,746,354) Class B shares (4,836,168) (24,117,349) Class C shares (363,398) (1,059,851) Class I shares (30,431,811) (108,422,258) Class R4 shares (9,097,585) (37,030,416) Class W shares (299,180,516) (622,614,805) - ---------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 30,967,690 863,569,709 - ---------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,096,051,170) 158,996,516 Net assets at beginning of period 2,978,375,927 2,819,379,411 - ---------------------------------------------------------------------------------------------- Net assets at end of period $ 1,882,324,757 $2,978,375,927 - ---------------------------------------------------------------------------------------------- Undistributed net investment income $ 21,936,708 $ 26,278,639 - ----------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ---------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $5.88 $7.22 $6.74 $6.70 $5.95 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04(b) .09(b) .08(b) .06 .04 Net gains (losses) (both realized and unrealized) (2.14) (1.00) .97 .35 .90 - ------------------------------------------------------------------------------------------------ Total from investment operations (2.10) (.91) 1.05 .41 .94 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.06) (.06) (.06) (.03) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - ------------------------------------------------------------------------------------------------ Total distributions (.20) (.43) (.57) (.37) (.19) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $3.58 $5.88 $7.22 $6.74 $6.70 - ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $620 $1,067 $1,410 $1,368 $28 - ------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c),(d) .98%(e) .96% 1.05% 1.05% 1.35% - ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reim- bursement(d),(f),(g) .98%(e) .96% 1.03% 1.02% 1.25% - ------------------------------------------------------------------------------------------------ Net investment income (loss) 1.88%(e) 1.35% 1.13% .95% .84% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 58% 62% 137% 64% - ------------------------------------------------------------------------------------------------ Total return(h) (36.05%)(i) (13.40%) 15.92% 6.25% 15.95% - ------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $5.80 $7.12 $6.65 $6.62 $5.90 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .04(b) .03(b) .01 .02 Net gains (losses) (both realized and unrealized) (2.12) (.99) .96 .34 .86 - ------------------------------------------------------------------------------------------------ Total from investment operations (2.09) (.95) .99 .35 .88 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income -- -- (.01) (.01) -- Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - ------------------------------------------------------------------------------------------------ Total distributions (.15) (.37) (.52) (.32) (.16) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $3.56 $5.80 $7.12 $6.65 $6.62 - ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $20 $35 $62 $73 $9 - ------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c),(d) 1.74%(e) 1.72% 1.82% 1.85% 2.13% - ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reim- bursement(d),(f),(g) 1.74%(e) 1.72% 1.79% 1.82% 2.04% - ------------------------------------------------------------------------------------------------ Net investment income (loss) 1.12%(e) .59% .37% .20% .06% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 58% 62% 137% 64% - ------------------------------------------------------------------------------------------------ Total return(h) (36.36%)(i) (14.07%) 15.18% 5.42% 15.03% - ------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006 2005 Net asset value, beginning of period $5.78 $7.11 $6.65 $6.62 $5.90 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(b) .04(b) .03(b) .01 .01 Net gains (losses) (both realized and unrealized) (2.11) (.99) .96 .35 .87 - ------------------------------------------------------------------------------------------------ Total from investment operations (2.08) (.95) .99 .36 .88 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.01) (.02) (.02) -- Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - ------------------------------------------------------------------------------------------------ Total distributions (.16) (.38) (.53) (.33) (.16) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $3.54 $5.78 $7.11 $6.65 $6.62 - ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $3 $3 $-- - ------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c),(d) 1.74%(e) 1.72% 1.81% 1.84% 2.13% - ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reim- bursement(d),(f),(g) 1.74%(e) 1.72% 1.79% 1.81% 2.06% - ------------------------------------------------------------------------------------------------ Net investment income (loss) 1.10%(e) .59% .36% .20% .02% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 58% 62% 137% 64% - ------------------------------------------------------------------------------------------------ Total return(h) (36.26%)(i) (14.11%) 15.14% 5.51% 15.03% - ------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Total return does not reflect payment of a sales charge. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $5.93 $7.27 $6.78 $6.73 $5.96 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05(b) .11(b) .11(b) .08 .04 Net gains (losses) (both realized and unrealized) (2.17) (.99) .97 .36 .92 - ------------------------------------------------------------------------------------------------ Total from investment operations (2.12) (.88) 1.08 .44 .96 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.09) (.08) (.08) (.03) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - ------------------------------------------------------------------------------------------------ Total distributions (.22) (.46) (.59) (.39) (.19) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $3.59 $5.93 $7.27 $6.78 $6.73 - ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $277 $391 $441 $252 $82 - ------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c),(d) .59%(e) .61% .70% .72% .91% - ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reim- bursement(d),(f),(g) .59%(e) .61% .67% .70% .91% - ------------------------------------------------------------------------------------------------ Net investment income (loss) 2.26%(e) 1.69% 1.47% 1.41% 1.19% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 58% 62% 137% 64% - ------------------------------------------------------------------------------------------------ Total return (36.07%)(h) (12.98%) 16.29% 6.73% 16.29% - ------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.88 $7.21 $7.57 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .08 .03 Net gains (losses) (both realized and unrealized) (2.15) (1.00) .20 - ----------------------------------------------------------------------------------------------- Total from investment operations (2.11) (.92) .23 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.04) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------- Total distributions (.19) (.41) (.59) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.88 $7.21 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.37%(f) 1.41% 1.49%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reim- bursement(e),(g),(h) 1.11%(f) 1.16% 1.48%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 1.78%(f) 1.15% .55%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------- Total return (36.15%)(i) (13.51%) 3.31%(i) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.89 $7.22 $7.57 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .09 .04 Net gains (losses) (both realized and unrealized) (2.15) (.99) .20 - ----------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.90) .24 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.06) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------- Total distributions (.21) (.43) (.59) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.89 $7.22 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.14%(f) 1.15% 1.24%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reim- bursement(e),(g),(h) .87%(f) .90% 1.22%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 1.99%(f) 1.41% .81%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------- Total return (36.03%)(i) (13.26%) 3.46%(i) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(i) 2008 2007 2006 2005 Net asset value, beginning of period $5.91 $7.25 $6.76 $6.71 $5.95 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05(b) .10(b) .09(b) .07 .05 Net gains (losses) (both realized and unrealized) (2.16) (1.00) .98 .36 .91 - ------------------------------------------------------------------------------------------------ Total from investment operations (2.11) (.90) 1.07 .43 .96 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.07) (.07) (.07) (.04) Distributions from realized gains (.15) (.37) (.51) (.31) (.16) - ------------------------------------------------------------------------------------------------ Total distributions (.21) (.44) (.58) (.38) (.20) - ------------------------------------------------------------------------------------------------ Net asset value, end of period $3.59 $5.91 $7.25 $6.76 $6.71 - ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $78 $126 $158 $224 $-- - ------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c),(d) .89%(e) .91% .95% .87% 1.18% - ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reim- bursement(d),(f),(g) .81%(e) .84% .87% .84% 1.06% - ------------------------------------------------------------------------------------------------ Net investment income (loss) 2.05%(e) 1.47% 1.29% 1.10% 1.03% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 35% 58% 62% 137% 64% - ------------------------------------------------------------------------------------------------ Total return (36.05%)(h) (13.26%) 16.15% 6.48% 16.25% - ------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (g) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (h) Not annualized. (i) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 31 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.90 $7.24 $7.57 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .05 .11 .06 Net gains (losses) (both realized and unrealized) (2.15) (1.00) .20 - ----------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.89) .26 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.08) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------- Total distributions (.22) (.45) (.59) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $3.58 $5.90 $7.24 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .61%(f) .66% .75%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reim- bursement(e),(g),(h) .61%(f) .66% .74%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 2.25%(f) 1.66% 1.28%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------- Total return (35.97%)(i) (13.09%) 3.76%(i) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $5.86 $7.22 $7.46 - ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .04 .08 .03 Net gains (losses) (both realized and unrealized) (2.14) (1.00) .32 - ----------------------------------------------------------------------------------------------- Total from investment operations (2.10) (.92) .35 - ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.07) (.08) Distributions from realized gains (.15) (.37) (.51) - ----------------------------------------------------------------------------------------------- Total distributions (.19) (.44) (.59) - ----------------------------------------------------------------------------------------------- Net asset value, end of period $3.57 $5.86 $7.22 - ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $886 $1,355 $745 - ----------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.04%(f) 1.06% 1.18%(f) - ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reim- bursement(e),(g),(h) 1.04%(f) 1.06% 1.13%(f) - ----------------------------------------------------------------------------------------------- Net investment income (loss) 1.80%(f) 1.22% .59%(f) - ----------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 58% 62% - ----------------------------------------------------------------------------------------------- Total return (36.10%)(i) (13.52%) 5.01%(i) - -----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO JAN. 31, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Disciplined Equity Fund (the Fund) is a series of RiverSource Large Cap Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies listed on U.S. exchanges with market capitalizations greater than $5 billion at the time of purchase. The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4, Class R5 and Class W shares. - - Class A shares are sold with a front-end sales charge. - - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - - Class C shares may be subject to a CDSC. - - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Jan. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares and the Investment Manager owned 100% of Class R2, Class R3 and Class R5 shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, - -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES Effective Aug. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. 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. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost, which approximates fair value. 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 (OTC 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. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the New York Stock Exchange. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At Jan. 31, 2009, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of - -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 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 and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the counterparty will not complete its contract obligations. At Jan. 31, 2009, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of REIT distributions and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45". The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At Jan. 31, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. - -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of Jan. 31, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.60% to 0.375% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Large-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $823,118 for the six months ended Jan. 31, 2009. The management fee for the six months ended Jan. 31, 2009 was 0.51% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the six months ended Jan. 31, 2009 was 0.05% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended Jan. 31, 2009, other expenses paid to this company were $9,182. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. - -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund 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. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $794,000 and $24,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGE Sales charges received by the Distributor for distributing Fund shares were $127,507 for Class A, $9,742 for Class B and $168 for Class C for the six months ended Jan. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended Jan. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive adjustment, were as follows: Class A............................................. 0.98% Class B............................................. 1.74 Class R2............................................ 1.11 Class R3............................................ 0.87 Class R4............................................ 0.81
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $659 Class B........................................... 844 Class R4.......................................... 25,031
- -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2.......................................... $4 Class R3.......................................... 4 Class R4.......................................... 17,089
The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.05% Class B............................................. 1.81 Class C............................................. 1.81 Class I............................................. 0.72 Class R2............................................ 1.52 Class R3............................................ 1.27 Class R4............................................ 0.88 Class R5............................................ 0.77 Class W............................................. 1.17
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the six months ended Jan. 31, 2009, the Fund's transfer agency fees were reduced by $7,886 as a result of bank fee credits from overnight cash balances. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. Prior to Dec. 15, 2008, the Fund paid custodian fees amounting to $80,093 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $810,453,672 and $889,997,817, respectively, for the six months ended Jan. 31, 2009. Realized gains and losses are determined on an identified cost basis. - -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED JAN. 31, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------- Class A 4,912,041 7,833,545 (20,960,397) (8,214,811) Class B 344,354 200,930 (1,077,413) (532,129) Class C 88,401 18,704 (76,413) 30,692 Class I 13,540,925 3,905,496 (6,447,275) 10,999,146 Class R4 1,188,589 1,083,396 (1,954,501) 317,484 Class W 67,432,096 10,352,737 (60,791,010) 16,993,823 - ---------------------------------------------------------------------------------- YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) - ---------------------------------------------------------------------------------- Class A 7,609,621 10,923,080 (32,329,627) (13,796,926) Class B 826,089 449,725 (3,897,874) (2,622,060) Class C 150,658 25,066 (161,175) 14,549 Class I 17,804,029 4,380,209 (16,813,974) 5,370,264 Class R4 3,752,567 1,317,996 (5,442,436) (371,873) Class W 213,069,694 13,134,983 (98,243,751) 127,960,926 - ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers on behalf of the Fund. Pursuant to the Agreement, all loaned securities are initially collateralized in an amount equivalent to 102% (for securities denominated in U.S. dollars) or 105% (for all other securities) of the value of the loaned securities, including accrued interest in the case of fixed income securities. Collateral is maintained over the life of the loan thereafter in an amount not less than 100% of the market value of loaned securities, as determined at the close of each business day, except to the extent that a collateral shortfall is due to a diminution in the market value of authorized investments in which cash collateral is invested. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Collateral is either in the form of cash or U.S. government securities. Cash collateral received is invested by the - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed on the Portfolio of Investments and the value of cash collateral received at period end is disclosed on the Statement of Assets and Liabilities along with the related obligation to return the collateral upon return of the securities loaned. At Jan. 31, 2009, securities valued at $140,468,510 were on loan secured by cash collateral of $149,027,673 invested in short-term securities or cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $136,882 earned from securities lending from Dec. 1, 2008 through Jan. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, RiverSource Investments, LLC served as securities lending agent for the Fund under the Securities Lending Agency Agreement pursuant to which the Fund agreed to reimburse RiverSource Investments, LLC for expenses incurred by it in connection with the lending program. Expenses paid to RiverSource Investments, LLC as securities lending agent were $8,054 through Nov. 30, 2008 and are included in other expenses on the Statement of Operations. Cash collateral received on loaned securities had been invested in an affiliated money market fund. Income of $216,831 earned from securities lending from Feb. 1, 2008 through Nov. 30, 2008 is included in the Statement of Operations. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource - -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Short-Term Cash Fund aggregated $312,879,084 and $303,464,571, respectively, for the six months ended Jan. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Jan. 31, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 16, 2008, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended Jan. 31, 2009. Under the prior credit facility which was effective until Oct. 15, 2008, the Fund had entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permitted collective borrowings up to $500 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matured no later than 60 days after the date of borrowing. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); - -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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. - -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 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. - -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2009 SEMIANNUAL REPORT 49 THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS. ADVANCED ALPHA(SM) STRATEGIES RiverSource 120/20 Contrarian Equity Fund RiverSource Absolute Return Currency and Income Fund Threadneedle Global Extended Alpha Fund ADVICE-BUILT(SM) SOLUTIONS RIVERSOURCE INCOME BUILDER SERIES RiverSource Income Builder Basic Income Fund RiverSource Income Builder Enhanced Income Fund RiverSource Income Builder Moderate Income Fund RIVERSOURCE PORTFOLIO BUILDER SERIES RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Total Equity Fund RIVERSOURCE RETIREMENT PLUS(R) SERIES RiverSource Retirement Plus 2010 Fund RiverSource Retirement Plus 2015 Fund RiverSource Retirement Plus 2020 Fund RiverSource Retirement Plus 2025 Fund RiverSource Retirement Plus 2030 Fund RiverSource Retirement Plus 2035 Fund RiverSource Retirement Plus 2040 Fund RiverSource Retirement Plus 2045 Fund RIVERSOURCE STRATEGIC ALLOCATION FUND RIVERSOURCE BALANCED FUND SINGLE-STRATEGY FUNDS GROWTH FUNDS RiverSource Partners Aggressive Growth Fund RiverSource Disciplined Large Cap Growth Fund RiverSource Global Technology Fund RiverSource Growth Fund RiverSource Mid Cap Growth Fund RiverSource Partners Small Cap Growth Fund BLEND FUNDS RiverSource Disciplined Equity Fund RiverSource Disciplined Small and Mid Cap Equity Fund RiverSource Large Cap Equity Fund RiverSource Precious Metals and Mining Fund RiverSource Recovery and Infrastructure Fund RiverSource S&P 500 Index Fund* RiverSource Small Cap Advantage Fund RiverSource Partners Small Cap Equity Fund RiverSource Small Company Index Fund VALUE FUNDS RiverSource Disciplined Large Cap Value Fund RiverSource Disciplined Small Cap Value Fund RiverSource Diversified Equity Income Fund RiverSource Dividend Opportunity Fund RiverSource Equity Value Fund RiverSource Partners Fundamental Value Fund RiverSource Large Cap Value Fund RiverSource Mid Cap Value Fund RiverSource Real Estate Fund RiverSource Partners Select Value Fund RiverSource Partners Small Cap Value Fund GLOBAL/INTERNATIONAL FUNDS RiverSource Disciplined International Equity Fund Threadneedle Emerging Markets Fund Threadneedle European Equity Fund Threadneedle Global Equity Fund Threadneedle Global Equity Income Fund RiverSource Partners International Select Growth Fund Threadneedle International Opportunity Fund RiverSource Partners International Select Value Fund RiverSource Partners International Small Cap Fund
- -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT TAXABLE INCOME FUNDS RiverSource Cash Management Fund** RiverSource Diversified Bond Fund RiverSource Emerging Markets Bond Fund RiverSource Floating Rate Fund RiverSource Global Bond Fund RiverSource High Yield Bond Fund RiverSource Income Opportunities Fund RiverSource Inflation Protected Securities Fund RiverSource Limited Duration Bond Fund RiverSource Short Duration U.S. Government Fund RiverSource Strategic Income Allocation Fund RiverSource U.S. Government Mortgage Fund TAX-EXEMPT FUNDS RiverSource California Tax-Exempt Fund RiverSource Intermediate Tax-Exempt Fund RiverSource Minnesota Tax-Exempt Fund RiverSource New York Tax-Exempt Fund RiverSource Tax-Exempt Bond Fund RiverSource Tax-Exempt High Income Fund RiverSource Tax-Exempt Money Market 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 & Poors(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 MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. - -------------------------------------------------------------------------------- THIS PAGE IS NOT PART OF THE SEMIANNUAL REPORT RIVERSOURCE DISCIPLINED EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6274 G (4/09)
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