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)