N-CSR 1 c59942nvcsr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-1629 RIVERSOURCE DIMENSIONS SERIES, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: July 31 Date of reporting period: July 31, 2010 ITEM 1. REPORTS TO STOCKHOLDERS. Annual Report and Prospectus (COLUMBIA MANAGEMENT LOGO) RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -------------------------------------------------------------------------------- ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2010 (Prospectus also enclosed) RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 6 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 17 Statement of Assets and Liabilities...................... 31 Statement of Operations............ 32 Statements of Changes in Net Assets........................... 33 Financial Highlights............... 34 Notes to Financial Statements...... 39 Report of Independent Registered Public Accounting Firm........... 54 Federal Income Tax Information..... 56 Board Members and Officers......... 57 Approval of Investment Management Services Agreement............... 63 Proxy Voting....................... 66
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND. -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) Class A shares gained 19.04% (excluding sales charge) for the 12-month period ended July 31, 2010. > The Fund underperformed its benchmark, the Russell 2500(TM) Index, which rose 21.77% for the same period. > The Fund also underperformed the Lipper Mid-Cap Core Funds Index, representing the Fund's peer group, which advanced 20.69%, for the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2010) --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 5/18/06 ------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity Fund Class A (excluding sales charge) +19.04% -7.96% -5.50% ------------------------------------------------------------------- Russell 2500 Index (unmanaged) +21.77% -4.00% -0.11% ------------------------------------------------------------------- Lipper Mid-Cap Core Funds Index (unmanaged) +20.69% -4.07% +0.57% -------------------------------------------------------------------
(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 intermediary, columbiamanagement.com or calling 800.345.6611. 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 fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. 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. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT JULY 31, 2010 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 5/18/06) +19.04% -7.96% -5.50% -------------------------------------------------------------------- Class B (inception 5/18/06) +18.00% -8.69% -6.22% -------------------------------------------------------------------- Class C (inception 5/18/06) +18.00% -8.69% -6.24% -------------------------------------------------------------------- Class I (inception 5/18/06) +19.45% -7.55% -5.12% -------------------------------------------------------------------- Class R4 (inception 5/18/06) +19.23% -7.66% -5.24% -------------------------------------------------------------------- Class W (inception 12/1/06) +19.00% -7.98% -7.11% -------------------------------------------------------------------- With sales charge Class A (inception 5/18/06) +12.19% -9.76% -6.82% -------------------------------------------------------------------- Class B (inception 5/18/06) +13.00% -9.61% -6.67% -------------------------------------------------------------------- Class C (inception 5/18/06) +17.00% -8.69% -6.24% --------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 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 R4 and Class W shares. Class I and Class R4 are available to qualifying institutional investors only. Class W shares are offered through qualifying discretionary accounts. -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) --------------------------------------------------------------------------------
Equity Style Value Blend Growth Large X Medium Size Small
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of period end. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- Effective May 1, 2010, Brian Condon and Alfred Alley III joined Gina Mourtzinou as co-portfolio managers of RiverSource Disciplined Small and Mid Cap Equity Fund. Effective July 3, 2010, Mr. Condon and Mr. Alley III became sole portfolio managers of RiverSource Disciplined Small and Mid Cap Equity Fund. Dear Shareholder, RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) Class A shares gained 19.04% (excluding sales charge) for the 12-month period ended July 31, 2010. The Fund underperformed its benchmark, the Russell 2500(R) Index (Russell Index), which rose 21.77%, as well as the Lipper Mid-Cap Core Funds Index, representing the Fund's peer group, which advanced 20.69%, for the same period. SIGNIFICANT PERFORMANCE FACTORS Against a strengthening economic backdrop supported by generally positive data, the equity market rally that had begun in mid-March 2009 SECTOR BREAKDOWN(1) (at July 31, 2010) ---------------------------------------------------------------------
Consumer Discretionary 14.5% ------------------------------------------------ Consumer Staples 3.0% ------------------------------------------------ Energy 5.9% ------------------------------------------------ Financials 20.4% ------------------------------------------------ Health Care 11.1% ------------------------------------------------ Industrials 13.8% ------------------------------------------------ Information Technology 15.5% ------------------------------------------------ Materials 7.1% ------------------------------------------------ Telecommunication Services 1.6% ------------------------------------------------ Utilities 5.5% ------------------------------------------------ Other(2) 1.6% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- continued with little interruption until May 2010. As investor risk aversion had abated significantly, lower quality stocks led the way during these months. The rally then stalled in May and June of 2010 as worries heightened about the sovereign debt crisis in Europe and about the trajectory of the nascent global economic recovery. Investors questioned whether the recovery could be sustained without the tremendous fiscal and monetary stimulus injected into the economy since the 2008 credit crisis, as several government and Federal Reserve programs expired in March and April 2010. Further, unemployment and housing data indicated persistent weakness. Investors also were uncertain about how much of the first quarter 2010 rebound in corporate earnings was attributable merely to rebuilding of inventories. The potential of a "double-dip" recession or even deflation became of heightened concern. Equity market volatility rose. That said, by the end of the annual period, a strong start to the second quarter 2010 earnings reporting season buoyed the equity market as did an overall improvement in risk sentiment. The release of the results of the European bank stress tests on July 23 also had a positive impact on equity markets broadly. TOP TEN HOLDINGS(1) (at July 31, 2010) ---------------------------------------------------------------------
DST Systems, Inc. 1.2% ------------------------------------------------ Ryder System, Inc. 1.1% ------------------------------------------------ Raymond James Financial, Inc. 1.1% ------------------------------------------------ Cree, Inc. 1.1% ------------------------------------------------ The Finish Line, Inc., Class A 1.0% ------------------------------------------------ F5 Networks, Inc. 1.0% ------------------------------------------------ Mirant Corp. 1.0% ------------------------------------------------ Murphy Oil Corp. 0.9% ------------------------------------------------ International Bancshares Corp. 0.9% ------------------------------------------------ Domino's Pizza, Inc. 0.9% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- The Fund's performance was primarily driven by the two quantitative-based investment themes we employed in selecting stocks for the Fund's portfolio -- valuation and momentum. During the 12-month period, the momentum theme outperformed the Russell Index, but not enough to offset the underperformance of the valuation theme. The momentum theme, designed in part to capture investor sentiment over the near to mid term, benefited from exposure to materials and information technology stocks. The valuation theme, which favors cheaper price-to-earnings ratio (P/E) stocks, started the annual period with solid performance but weakened later in the period as market volatility heightened. The valuation theme was hurt most by consumer-oriented stocks. It is important to remember that the themes we used take turns in leading performance over time, demonstrating the advantages of employing style diversification. Such variance in performance supports our research indicating that the style diversification provided by the very different quantitative-based themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. At the same time, we are continuously looking for ways to improve our investment process and to enhance the efficacy of the quantitative-based themes we use in the Fund. Following a specific, disciplined process, we do not make sector or industry bets based on economic or equity market outlooks. That said, the Fund's quantitative-based themes further led to various sector weightings that, together, contributed modestly to results. A sizable weighting in consumer discretionary, one of the better performing sectors in the Russell Index during the period, and having only modest position in utilities, one of the weaker performing sectors in the Russell Index during the period, helped most. The primary detractors from a sector allocation perspective were the Fund's significant exposure to the lagging consumer staples sector and having a less- than-Russell Index position in the stronger financials sector. Because we use a bottom-up approach, it is not surprising that most of the Fund's results were due to stock selection. Specifically, stock selection in the utilities, industrials and financials sectors detracted. This more than offset the combined effect of strong stock selection in health care, materials and information technology. -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- Among individual holdings, the stocks that contributed most favorably to the Fund's return during the annual period included digital electronics manufacturer 3COM (selected by the momentum theme and acquired on April 12, 2010 by Hewlett- Packard), chemical manufacturer W R GRACE & CO. (also a choice of the momentum theme), household appliances manufacturer WHIRLPOOL (selected by the valuation theme), multi-line insurance company GENWORTH FINANCIAL (chosen by the valuation and momentum themes), and printer manufacturer LEXMARK INTERNATIONAL (a momentum pick). Stocks that detracted most from the Fund's annual results were each selected by the valuation model. These were commercial bank INTERNATIONAL BANCSHARES, food and beverage company DEAN FOODS, independent power producer MIRANT, financial services company SWS GROUP and therapeutics developer ISIS PHARMACEUTICALS. At the end of July, the Fund's largest individual stock holdings included computer services firm DST SYSTEMS (a momentum theme choice), transportation services company RYDER SYSTEM (selected by the momentum theme), financial services company RAYMOND JAMES FINANCIAL (a valuation theme pick), semiconductor manufacturer CREE (selected by the momentum theme), and athletic and leisure apparel and shoe retailer THE FINISH LINE (a choice of the valuation theme). CHANGES TO THE FUND'S PORTFOLIO As a result of quantitative-based theme-driven stock selection during the period, the portfolio's sector allocations changed somewhat. For example, the Fund's exposure to information At the same time, we are continuously looking for ways to improve our investment process and to enhance the efficacy of the quantitative-based themes we use in the Fund. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- technology increased but remained a less-than-Russell Index position in the sector. The Fund's allocation to financials decreased but remained greater than the Russell Index. Toward the end of the annual period, we began bringing the Fund's sector allocation more in line with that of the benchmark index, a shift primarily driven by our new management team's sector-neutral investment process. In managing risk associated with small- and mid-cap investing, we use a proprietary risk management system that allows us to manage the Fund's exposure to several key factors, including industry, sector, market capitalization and portfolio turnover. During the period, we used these and other techniques in an effort to reduce the expected risk of the portfolio and to avoid large deviations in exposure from the Russell Index. Perhaps the biggest change made was that a new portfolio management team was put in place toward the end of the annual period. The Fund's principal investment strategies remained based on quantitative analysis, using similar investment themes. However, while we continue to use computer-based models to analyze stocks within sectors, the new team's models are somewhat different from those previously used. We seek to maintain sector weighting neutrality overall relative to the benchmark index, and the models drive stock selection by focusing on factors within three themes -- quality, valuation and catalyst. Quality-theme factors include profitability as well as strength and sustainability measures, such as return on assets, return on equity, receivables, reserve management and cash flow accruals. Valuation-theme factors measure profitability-at-a-reasonable-price and growth-at-a-reasonable-price and include cash flow, operating income, sales, earnings, book value and risk- adjusted return. Catalyst-theme factors include long-term and short-term momentum measures and estimate revisions. Given all of these changes, the Fund's portfolio turnover rate for the annual period was 107%. OUR FUTURE STRATEGY We hold a cautious view regarding prospects for the financial markets over the remainder of 2010. After a solid run over the 12 months ended July 31, 2010, we believe stocks appeared to be closer to fair value than -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- they had been one year prior. At the same time, however, we expect volatility to remain somewhat heightened. We believe the U.S. economy will continue to recover, albeit at a relatively slow pace, and that inflation should remain under control. Given this view, we intend to use our quantitative-based themes, as described above, in our stock selection process, seeking to position the Fund's portfolio to take advantage of what we consider a beneficial shift in underlying market dynamics. At the same time, we believe our use of multiple investment disciplines can potentially serve the Fund well in all investment environments over the long term, and the diversified portfolio is well positioned for most potential market conditions. Whether there is a surge in small- and mid-cap stocks or a downturn, the combination of themes should, in our view, help us deliver value relative to the Russell Index over extended periods of time. We are convinced of the merit of our multifaceted, disciplined approach to managing risk in the portfolio. We believe this combination of style diversification and rigorous risk management will allow us to maintain the high quality of the Fund's portfolio in whatever market conditions lie ahead. Brian Condon, CFA(R) Alfred Alley III, 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 Columbia Management Investment Advisers, LLC* (the Investment Manager) or any subadviser to the Fund or any other person in the Investment Manager or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and the Investment Manager disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of the Fund. * Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia Management Investment Advisers, LLC. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Disciplined Small and Mid Cap Equity Fund Class A shares (from 5/18/06 to 7/31/10) as compared to the performance of the Russell 2500 Index and the Lipper Mid-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 initial 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 distributions 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 intermediary or visiting columbiamanagement.com or calling 800.345.6611. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at July 31, 2010 SINCE INCEPTION 1 YEAR 3 YEARS 5/18/06 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,219 $7,348 $7,432 --------------------------------------------------------------------------------- Average annual total return +12.19% -9.76% -6.82% --------------------------------------------------------------------------------- RUSSELL 2500 INDEX(1) Cumulative value of $10,000 $12,177 $8,847 $9,954 --------------------------------------------------------------------------------- Average annual total return +21.77% -4.00% -0.11% --------------------------------------------------------------------------------- LIPPER MID-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $12,069 $8,828 $10,239 --------------------------------------------------------------------------------- Average annual total return +20.69% -4.07% +0.57% ---------------------------------------------------------------------------------
Results for other share classes can be found on page 4. -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND LINE GRAPH)
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND CLASS A LIPPER MID-CAP (INCLUDES SALES RUSSELL 2500 CORE FUNDS CHARGE) ($7,432) INDEX(1) ($9,954) INDEX(2) ($10,239) ----------------------- ----------------- ------------------ 5/18/06 $ 9,425 $10,000 $10,000 7/06 8,898 9,735 9,807 10/06 9,455 10,589 10,519 1/07 10,191 11,278 11,190 4/07 10,401 11,665 11,746 7/07 9,533 11,249 11,599 10/07 9,732 11,935 12,223 1/08 8,505 10,454 10,847 4/08 8,535 10,635 11,129 7/08 8,395 10,302 10,575 10/08 5,803 7,487 7,639 1/09 5,143 6,404 6,674 4/09 5,493 7,194 7,461 7/09 6,243 8,174 8,484 10/09 6,473 8,481 8,951 1/10 6,880 9,143 9,615 4/10 8,083 10,821 11,127 7/10 7,432 9,954 10,239
(1) The Russell 2500 Index, an unmanaged index, measures the performance of the 2,500 smallest companies in the Russell 3000 Index, which represents approximately 16% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Mid-Cap Core Funds Index includes the 30 largest mid-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 ongoing expenses of any funds in which the Fund 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 ongoing expenses charged by 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, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. You can also estimate the direct and indirect expenses you paid over the period by using the number in the first line under the heading "Direct and indirect expenses paid during the period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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. -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING FEB. 1, 2010 JULY 31, 2010 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,080.20 $ 6.95(d) $ 7.21(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.74(d) $ 6.99(d) ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,076.10 $10.92(d) $11.18(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.41 $10.60(d) $10.85(d) ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,076.10 $10.87(d) $11.13(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.46 $10.55(d) $10.80(d) ------------------------------------------------------------------------------------------ Class I ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,083.00 $ 4.41 $ 4.67 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.69 $ 4.28 $ 4.53 ------------------------------------------------------------------------------------------ Class R4 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,081.60 $ 5.97 $ 6.23 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.20 $ 5.79 $ 6.04 ------------------------------------------------------------------------------------------ Class W ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,080.50 $ 6.74 $ 7.00 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.45 $ 6.54 $ 6.79 ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES ---------------------------------------------------------------------- Class A 1.34% .05% 1.39% ---------------------------------------------------------------------- Class B 2.11% .05% 2.16% ---------------------------------------------------------------------- Class C 2.10% .05% 2.15% ---------------------------------------------------------------------- Class I .85% .05% .90% ---------------------------------------------------------------------- Class R4 1.15% .05% 1.20% ---------------------------------------------------------------------- Class W 1.30% .05% 1.35% ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class as indicated above, plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended July 31, 2010: +8.02% for Class A, +7.61% for Class B, +7.61% for Class C, +8.30% for Class I, +8.16% for Class R4 and +8.05% for Class W. (d) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Sept. 30, 2011, unless sooner terminated at the sole 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 1.39% for Class A, 2.14% for Class B and 2.14% for Class C. Any amounts waived will not be reimbursed by the Fund. This change is effective Oct. 1, 2010. Had this change been in place for the entire six month period ended July 31, 2010, the actual direct expenses paid would have been $6.90 for Class A, $10.77 for Class B and $10.77 for Class C; the hypothetical direct expenses paid would have been $6.69 for Class A, $10.45 for Class B and $10.45 for Class C. Additionally, had this change been in place for the entire six month period ended July 31, 2010, the actual direct and indirect expenses paid would have been $7.16 for Class A, $11.02 for Class B and $11.02 for Class C; the hypothetical direct and indirect expenses paid would have been $6.94 for Class A, $10.70 for Class B and $10.70 for Class C. -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2010 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.9%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.9%) Astronics Corp. 4,400(b,d) $70,400 BE Aerospace, Inc. 5,145(b) 151,263 Ceradyne, Inc. 12,801(b) 297,623 Esterline Technologies Corp. 2,894(b) 148,549 LMI Aerospace, Inc. 12,900(b) 222,138 Triumph Group, Inc. 4,422(d) 335,630 --------------- Total 1,225,603 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.4%) Atlas Air Worldwide Holdings, Inc. 10,010(b,d) 585,385 ------------------------------------------------------------------------------------- AIRLINES (1.3%) Alaska Air Group, Inc. 12,304(b) 634,763 Allegiant Travel Co. 4,661(d) 206,902 Continental Airlines, Inc., Class B 23,581(b) 589,997 Hawaiian Holdings, Inc. 36,341(b,d) 218,046 Skywest, Inc. 14,978(d) 186,476 --------------- Total 1,836,184 ------------------------------------------------------------------------------------- AUTO COMPONENTS (1.3%) Autoliv, Inc. 13,331(b,c,d) 765,733 Cooper Tire & Rubber Co. 16,254(d) 351,249 Tenneco, Inc. 13,857(b,d) 382,453 TRW Automotive Holdings Corp. 10,859(b) 381,042 --------------- Total 1,880,477 ------------------------------------------------------------------------------------- BEVERAGES (0.2%) Boston Beer Co., Inc., Class A 3,600(b) 249,696 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.6%) Cephalon, Inc. 3,516(b,d) 199,533 Cubist Pharmaceuticals, Inc. 10,413(b,d) 224,712 Incyte Corp., Ltd. 11,841(b,d) 154,170 Nabi Biopharmaceuticals 22,000(b) 125,840 PDL BioPharma, Inc. 30,900(d) 192,198 --------------- Total 896,453 ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.5%) AAON, Inc. 8,900(d) 221,254 Apogee Enterprises, Inc. 19,482(d) 219,367 Quanex Building Products Corp. 11,796 207,492 --------------- Total 648,113 ------------------------------------------------------------------------------------- CAPITAL MARKETS (3.6%) Apollo Investment Corp. 59,380 599,738 Ares Capital Corp. 36,786 515,372 BGC Partners, Inc., Class A 42,381(d) 229,705 GFI Group, Inc. 22,904(d) 134,905 Investment Technology Group, Inc. 5,931(b) 93,176 Jefferies Group, Inc. 3,103(d) 76,613 Knight Capital Group, Inc., Class A 23,808(b,d) 342,359 MF Global Holdings Ltd. 23,932(b,d) 153,883 MVC Capital, Inc. 7,749(d) 99,342 optionsXpress Holdings, Inc. 7,299(b,d) 113,864 Raymond James Financial, Inc. 57,154(d) 1,524,868 SWS Group, Inc. 48,965(d) 426,975 TICC Capital Corp. 91,500(d) 802,455 --------------- Total 5,113,255 ------------------------------------------------------------------------------------- CHEMICALS (4.4%) Ashland, Inc. 11,548 587,216 Cabot Corp. 5,038 148,621 CF Industries Holdings, Inc. 9,263 752,063 Cytec Industries, Inc. 8,176 408,146 Eastman Chemical Co. 3,128 195,938 Hawkins, Inc. 6,800(d) 220,728 Huntsman Corp. 39,932 418,088 Innophos Holdings, Inc. 11,922(d) 349,434 Lubrizol Corp. 3,245 303,375 NewMarket Corp. 3,761 403,142 Olin Corp. 30,073(d) 610,482 OM Group, Inc. 10,630(b,d) 287,010 PolyOne Corp. 24,288(b,d) 250,409
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CHEMICALS (CONT.) Stepan Co. 5,549(d) $366,289 WR Grace & Co. 37,938(b,d) 973,868 --------------- Total 6,274,809 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.7%) Bancfirst Corp. 4,720(d) 194,370 CVB Financial Corp. 11,711(d) 119,218 East West Bancorp, Inc. 33,145(d) 516,731 First Financial Bancorp 58,284(d) 926,716 International Bancshares Corp. 75,598(d) 1,310,868 Republic Bancorp, Inc., Class A 2,700 66,906 TowneBank 14,586(d) 224,624 Trico Bancshares 10,072(d) 190,059 Wintrust Financial Corp. 4,934(d) 153,546 Zions Bancorporation 9,533 211,537 --------------- Total 3,914,575 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (1.9%) Consolidated Graphics, Inc. 12,620(b) 542,282 Deluxe Corp. 3,500 72,030 Herman Miller, Inc. 10,765(d) 185,158 Kimball International, Inc., Class B 24,290(d) 151,570 RR Donnelley & Sons Co. 27,390 462,069 Standard Parking Corp. 5,200(b,d) 88,712 Steelcase, Inc., Class A 29,467(d) 203,617 The Brink's Co. 22,478 492,268 US Ecology, Inc. 13,200(d) 195,228 United Stationers, Inc. 5,008(b,d) 271,183 --------------- Total 2,664,117 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.9%) Blue Coat Systems, Inc. 8,233(b,d) 180,303 F5 Networks, Inc. 16,095(b) 1,413,624 JDS Uniphase Corp. 13,742(b) 149,101 Netgear, Inc. 9,591(b,d) 230,184 Plantronics, Inc. 13,793(d) 413,376 Tellabs, Inc. 47,291 330,091 --------------- Total 2,716,679 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.5%) Lexmark International, Inc., Class A 8,484(b) 311,787 NCR Corp. 26,010(b) 356,337 --------------- Total 668,124 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (1.6%) Comfort Systems USA, Inc. 24,370(d) 278,062 EMCOR Group, Inc. 33,476(b,d) 870,711 KBR, Inc. 30,645 685,835 Layne Christensen Co. 8,275(b,d) 208,613 The Shaw Group, Inc. 8,035(b) 257,441 --------------- Total 2,300,662 ------------------------------------------------------------------------------------- CONSUMER FINANCE (1.1%) Cash America International, Inc. 8,828(d) 295,738 Discover Financial Services 31,881 486,823 Ezcorp, Inc., Class A 13,220(b,d) 263,078 Nelnet, Inc., Class A 23,000(d) 463,680 --------------- Total 1,509,319 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.3%) Rock-Tenn Co., Class A 7,350(d) 391,167 ------------------------------------------------------------------------------------- DISTRIBUTORS (0.1%) Core-Mark Holding Co., Inc. 5,920(b,d) 180,678 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.9%) Corinthian Colleges, Inc. 14,138(b,d) 128,656 Lincoln Educational Services Corp. 10,100(b) 213,009 Pre-Paid Legal Services, Inc. 8,019(b,d) 393,412 Regis Corp. 17,357(d) 264,347 Sotheby's 9,217 250,057 --------------- Total 1,249,481 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.1%) Life Partners Holdings, Inc. 7,000(d) 121,450 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) DIVERSIFIED TELECOMMUNICATION SERVICES (1.2%) Alaska Communications Systems Group, Inc. 41,200(d) $381,512 CenturyLink, Inc. 17,323 617,045 Qwest Communications International, Inc. 128,046 724,741 --------------- Total 1,723,298 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (2.4%) DPL, Inc. 50,600 1,280,686 Edison International 33,227 1,101,475 El Paso Electric Co. 46,700(b) 1,004,050 --------------- Total 3,386,211 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.8%) EnerSys 12,131(b) 293,813 General Cable Corp. 8,078(b,d) 214,390 GrafTech International Ltd. 32,855(b,d) 515,166 Powell Industries, Inc. 5,200(b,d) 170,872 --------------- Total 1,194,241 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (2.3%) Anixter International, Inc. 13,027(b,d) 629,465 Arrow Electronics, Inc. 11,100(b) 275,169 Avnet, Inc. 9,011(b) 226,627 Benchmark Electronics, Inc. 14,414(b) 240,714 Electro Rent Corp. 20,600 284,280 Ingram Micro, Inc., Class A 6,266(b) 103,577 Insight Enterprises, Inc. 18,381(b,d) 267,811 Jabil Circuit, Inc. 19,847 287,980 Littelfuse, Inc. 8,894(b,d) 316,715 Methode Electronics, Inc. 19,678(d) 210,161 Plexus Corp. 7,141(b,d) 208,517 SYNNEX Corp. 9,983(b,d) 263,451 --------------- Total 3,314,467 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (2.2%) Atwood Oceanics, Inc. 11,487(b) 312,446 Gulfmark Offshore, Inc., Class A 7,271(b,d) 214,058 Helmerich & Payne, Inc. 12,433(d) 503,909 Lufkin Industries, Inc. 13,734 564,605 Oil States International, Inc. 7,538(b) 346,296 Rowan Companies, Inc. 20,868(b) 527,126 SEACOR Holdings, Inc. 2,858(b) 236,700 Superior Energy Services, Inc. 12,247(b) 279,109 Unit Corp. 4,876(b) 199,428 --------------- Total 3,183,677 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.4%) BJ's Wholesale Club, Inc. 15,623(b) 711,628 Nash Finch Co. 5,099(d) 200,493 Ruddick Corp. 12,569(d) 445,571 Spartan Stores, Inc. 12,197(d) 175,149 The Pantry, Inc. 9,367(b,d) 168,606 Winn-Dixie Stores, Inc. 28,298(b,d) 277,603 --------------- Total 1,979,050 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Cal-Maine Foods, Inc. 8,223(d) 259,765 Chiquita Brands International, Inc. 15,968(b,d) 234,410 Dean Foods Co. 6,325(b) 72,485 Fresh Del Monte Produce, Inc. 19,703(b,c,d) 410,610 --------------- Total 977,270 ------------------------------------------------------------------------------------- GAS UTILITIES (0.6%) Chesapeake Utilities Corp. 6,700 222,708 Energen Corp. 3,212 142,741 Oneok, Inc. 2,747 127,818 Questar Corp. 6,310 103,800 The Laclede Group, Inc. 5,366 187,488 UGI Corp. 4,400 118,624 --------------- Total 903,179 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.5%) Hill-Rom Holdings, Inc. 10,953(d) 361,887 Intuitive Surgical, Inc. 2,951(b) 969,020 Medical Action Industries, Inc. 7,400(b) 101,380 ResMed, Inc. 2,616(b,d) 171,845 Sirona Dental Systems, Inc. 6,081(b) 187,173 STERIS Corp. 6,849(d) 217,730 Thoratec Corp. 3,938(b) 144,840 --------------- Total 2,153,875 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (5.5%) America Service Group, Inc. 6,700 $118,188 AMERIGROUP Corp. 18,284(b,d) 653,836 Assisted Living Concepts, Inc., Class A 8,600(b) 270,556 Bio-Reference Labs, Inc. 20,000(b,d) 419,400 Centene Corp. 21,848(b,d) 465,581 CIGNA Corp. 20,163 620,214 Health Net, Inc. 15,514(b) 365,355 Healthspring, Inc. 31,969(b,d) 601,017 Humana, Inc. 26,566(b) 1,249,133 Kindred Healthcare, Inc. 27,824(b,d) 370,059 Landauer, Inc. 2,900(d) 182,033 Lincare Holdings, Inc. 13,450(d) 319,572 Magellan Health Services, Inc. 22,468(b,d) 945,678 Molina Healthcare, Inc. 11,081(b,d) 330,325 The Providence Service Corp. 8,700(b) 125,280 Triple-S Management Corp., Series B 14,760(b,c,d) 293,429 Universal American Corp. 33,692(b,d) 564,004 --------------- Total 7,893,660 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (0.4%) Computer Programs & Systems, Inc. 7,400(d) 332,778 Medidata Solutions, Inc. 11,400(b,d) 171,912 --------------- Total 504,690 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.3%) Brinker International, Inc. 5,124 80,549 Domino's Pizza, Inc. 101,300(b,d) 1,295,627 Wyndham Worldwide Corp. 15,669 400,030 --------------- Total 1,776,206 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.0%) American Greetings Corp., Class A 13,283(d) 272,169 Garmin Ltd. 16,586(c,d) 472,867 National Presto Industries, Inc. 1,045(d) 106,580 Tupperware Brands Corp. 15,345 604,439 --------------- Total 1,456,055 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.8%) Constellation Energy Group, Inc. 25,016 790,506 Mirant Corp. 121,906(b) 1,337,308 NRG Energy, Inc. 22,078(b) 500,729 --------------- Total 2,628,543 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.5%) Raven Industries, Inc. 9,000(d) 315,270 Seaboard Corp. 222(d) 336,996 --------------- Total 652,266 ------------------------------------------------------------------------------------- INSURANCE (5.9%) Allied World Assurance Co. Holdings Ltd. 7,393(c) 368,319 American Equity Investment Life Holding Co. 43,800(d) 473,040 American Financial Group, Inc. 15,861 467,424 Arch Capital Group Ltd. 4,193(b,c) 328,144 Argo Group International Holdings Ltd. 10,766(c) 335,253 Aspen Insurance Holdings Ltd. 8,687(c) 237,589 Axis Capital Holdings Ltd. 6,056 188,766 CNA Surety Corp. 8,227(b,d) 141,916 Endurance Specialty Holdings Ltd. 7,608(c) 293,593 FBL Financial Group, Inc., Class A 16,300(d) 369,847 First American Financial Corp. 7,465 110,109 First Mercury Financial Corp. 7,800 89,388 HCC Insurance Holdings, Inc. 11,492 300,171 Horace Mann Educators Corp. 27,760 466,923 Montpelier Re Holdings Ltd. 15,112(c,d) 245,721 National Financial Partners Corp. 22,382(b) 240,159 PartnerRe Ltd. 9,044(c) 654,514 Platinum Underwriters Holdings Ltd. 21,057(c,d) 822,907 ProAssurance Corp. 13,219(b) 786,662 Protective Life Corp. 14,447 324,913
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INSURANCE (CONT.) RenaissanceRe Holdings Ltd. 6,430(c,d) $367,925 Safety Insurance Group, Inc. 7,026(d) 275,419 StanCorp Financial Group, Inc. 6,908 260,363 Validus Holdings Ltd. 7,180(c) 178,351 --------------- Total 8,327,416 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Blue Nile, Inc. 3,200(b,d) 162,880 Overstock.com, Inc. 6,900(b,d) 136,413 --------------- Total 299,293 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.8%) Earthlink, Inc. 65,986(d) 582,657 GSI Commerce, Inc. 5,237(b,d) 117,937 IAC/InterActiveCorp. 8,387(b) 209,675 NIC, Inc. 19,200(d) 142,464 Travelzoo, Inc. 5,900(b) 91,804 --------------- Total 1,144,537 ------------------------------------------------------------------------------------- IT SERVICES (4.5%) Acxiom Corp. 62,753(b,d) 962,631 Cognizant Technology Solutions Corp., Class A 7,055(b) 384,921 Convergys Corp. 27,350(b,d) 305,500 CoreLogic, Inc. 7,465 149,524 CSG Systems International, Inc. 48,059(b,d) 906,393 DST Systems, Inc. 39,200 1,610,335 Heartland Payment Systems, Inc. 12,806(d) 202,079 SAIC, Inc. 50,307(b,d) 836,605 TeleTech Holdings, Inc. 15,100(b) 209,890 Total System Services, Inc. 60,100 896,091 --------------- Total 6,463,969 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.5%) Brunswick Corp. 9,676(d) 163,718 Jakks Pacific, Inc. 19,935(b,d) 314,574 Polaris Industries, Inc. 4,548(d) 271,516 --------------- Total 749,808 ------------------------------------------------------------------------------------- MACHINERY (3.5%) AGCO Corp. 11,567(b,d) 402,069 Alamo Group, Inc. 11,900(d) 278,817 Blount International, Inc. 18,800(b) 200,220 Bucyrus International, Inc. 8,488 528,123 Chart Industries, Inc. 17,509(b) 311,835 EnPro Industries, Inc. 3,093(b,d) 92,635 FreightCar America, Inc. 6,680(d) 165,864 LB Foster Co., Class A 5,957(b,d) 182,165 Mueller Industries, Inc. 11,774 291,053 Navistar International Corp. 4,870(b,d) 251,828 Nordson Corp. 11,671(d) 735,857 Oshkosh Corp. 14,100(b) 484,758 Terex Corp. 13,561(b,d) 267,694 The Manitowoc Co., Inc. 16,561(d) 171,572 Timken Co. 11,030(d) 370,829 WABCO Holdings, Inc. 6,938(b) 268,362 --------------- Total 5,003,681 ------------------------------------------------------------------------------------- MEDIA (1.5%) DISH Network Corp., Class A 31,258 627,660 Gannett Co., Inc. 19,777 260,661 Lamar Advertising Co., Class A 4,322(b,d) 118,207 Liberty Media Corp. -- Capital, Series A 5,612(b,e) 261,744 The Interpublic Group of Companies, Inc. 48,485(b) 443,153 Valassis Communications, Inc. 12,400(b) 428,668 --------------- Total 2,140,093 ------------------------------------------------------------------------------------- METALS & MINING (0.7%) Carpenter Technology Corp. 6,638(d) 231,998 Kaiser Aluminum Corp. 4,120 168,920 Walter Energy, Inc. 5,448 388,442 Worthington Industries, Inc. 12,909(d) 184,986 --------------- Total 974,346 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.3%) Big Lots, Inc. 4,249(b,d) 145,783 Dillard's, Inc., Class A 12,797(d) 296,123 --------------- Total 441,906 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MULTI-UTILITIES (0.6%) Integrys Energy Group, Inc. 17,914(d) $848,228 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.6%) Cimarex Energy Co. 6,484 446,553 Forest Oil Corp. 8,272(b) 236,496 Frontline Ltd. 7,726(c,d) 236,416 Green Plains Renewable Energy, Inc. 30,200(b) 279,652 James River Coal Co. 11,800(b,d) 206,618 Massey Energy Co. 8,931 273,110 Murphy Oil Corp. 24,009(g) 1,314,493 Patriot Coal Corp. 9,274(b,d) 111,844 QEP Resources, Inc. 6,310(b) 217,190 Rosetta Resources, Inc. 11,224(b,d) 247,714 SM Energy Co. 9,404 389,514 Swift Energy Co. 8,629(b) 223,750 Whiting Petroleum Corp. 5,986(b,d) 526,828 World Fuel Services Corp. 16,263(d) 423,651 --------------- Total 5,133,829 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.7%) Clearwater Paper Corp. 6,603(b,d) 406,943 Domtar Corp. 10,974(c) 641,979 International Paper Co. 20,758 502,344 KapStone Paper and Packaging Corp. 10,878(b,d) 124,444 Neenah Paper, Inc. 21,000(d) 376,740 Schweitzer-Mauduit International, Inc. 6,946 367,652 --------------- Total 2,420,102 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.5%) Inter Parfums, Inc. 4,900 85,505 Nu Skin Enterprises, Inc., Class A 12,353(d) 351,813 Nutraceutical International Corp. 4,800(b,d) 75,600 Revlon, Inc., Class A 9,600(b,d) 120,384 --------------- Total 633,302 ------------------------------------------------------------------------------------- PHARMACEUTICALS (3.1%) Endo Pharmaceuticals Holdings, Inc. 37,289(b) 895,309 Forest Laboratories, Inc. 30,980(b) 859,695 Impax Laboratories, Inc. 14,068(b,d) 230,575 Medicis Pharmaceutical Corp., Class A 9,418 238,746 Par Pharmaceutical Companies, Inc. 13,881(b,d) 366,458 Perrigo Co. 13,604 761,960 Questcor Pharmaceuticals, Inc. 26,215(b,d) 294,919 Valeant Pharmaceuticals International 8,912(b,d) 501,924 Viropharma, Inc. 15,989(b) 210,575 --------------- Total 4,360,161 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (0.2%) Administaff, Inc. 12,253 319,313 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (6.2%) American Capital Agency Corp. 45,599(d) 1,254,883 Annaly Capital Management, Inc. 67,971 1,182,694 Anworth Mortgage Asset Corp. 31,416(d) 218,970 Apartment Investment & Management Co., Class A 24,001 515,301 Capstead Mortgage Corp. 41,049(d) 480,273 CBL & Associates Properties, Inc. 67,552(d) 950,457 Cogdell Spencer, Inc. 37,800(d) 280,854 Developers Diversified Realty Corp. 7,086 80,426 Extra Space Storage, Inc. 9,960 154,480 Glimcher Realty Trust 66,900 444,885 Hatteras Financial Corp. 3,968(d) 117,612 Hospitality Properties Trust 12,368 252,926 Lexington Realty Trust 18,028 115,920 Medical Properties Trust, Inc. 26,053(d) 258,967 MFA Financial, Inc. 42,426(d) 311,407 Saul Centers, Inc. 12,900(d) 545,670 SL Green Realty Corp. 3,708 223,370 Sovran Self Storage, Inc. 3,107(d) 114,338 Sun Communities, Inc. 24,900(d) 724,590 Sunstone Hotel Investors, Inc. 19,689(b,d) 203,190
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) REAL ESTATE INVESTMENT TRUSTS (REITS) (CONT.) The Macerich Co. 6,488(d) $268,928 UDR, Inc. 6,615(d) 139,643 --------------- Total 8,839,784 ------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.5%) CB Richard Ellis Group, Inc., Class A 16,611(b) 282,387 Jones Lang LaSalle, Inc. 6,294 487,533 --------------- Total 769,920 ------------------------------------------------------------------------------------- ROAD & RAIL (1.5%) Kansas City Southern 14,030(b) 514,901 Ryder System, Inc. 36,500 1,593,955 --------------- Total 2,108,856 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.2%) Atheros Communications, Inc. 22,901(b) 605,502 Cavium Networks, Inc. 2,331(b,d) 62,541 Cree, Inc. 21,141(b,d) 1,497,629 Micrel, Inc. 99,200(d) 964,224 Monolithic Power Systems, Inc. 12,491(b,d) 220,091 Omnivision Technologies, Inc. 21,473(b,d) 479,063 Sigma Designs, Inc. 13,255(b) 135,731 Skyworks Solutions, Inc. 24,891(b,d) 436,339 Volterra Semiconductor Corp. 8,669(b,d) 195,226 --------------- Total 4,596,346 ------------------------------------------------------------------------------------- SOFTWARE (2.2%) ArcSight, Inc. 7,072(b,d) 176,871 Blackbaud, Inc. 9,819(d) 232,612 Deltek, Inc. 16,800(b) 126,000 JDA Software Group, Inc. 8,188(b) 192,418 Manhattan Associates, Inc. 31,500(b) 846,090 MicroStrategy, Inc., Class A 2,867(b) 237,932 Renaissance Learning, Inc. 12,200 169,580 Sourcefire, Inc. 8,381(b,d) 178,851 Taleo Corp., Class A 8,657(b,d) 212,962 TIBCO Software, Inc. 35,261(b) 478,139 Ultimate Software Group, Inc. 7,100(b,d) 229,046 --------------- Total 3,080,501 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (5.5%) Abercrombie & Fitch Co., Class A 6,301 232,759 American Eagle Outfitters, Inc. 10,503(d) 129,292 AnnTaylor Stores Corp. 13,601(b) 238,562 Cabela's, Inc. 6,196(b,d) 96,596 Collective Brands, Inc. 10,930(b,d) 175,099 DSW, Inc., Class A 29,470(b,d) 784,196 Foot Locker, Inc. 8,223 111,751 Genesco, Inc. 11,899(b,d) 324,724 HOT Topic, Inc. 29,515(d) 156,134 Jo-Ann Stores, Inc. 16,158(b,d) 676,859 OfficeMax, Inc. 22,563(b,d) 322,425 PetSmart, Inc. 10,279 319,163 RadioShack Corp. 4,729 101,863 Rent-A-Center, Inc. 23,999(b) 527,738 Signet Jewelers Ltd. 8,977(b,c,d) 267,245 Stage Stores, Inc. 11,163(d) 122,793 The Cato Corp., Class A 10,990(d) 255,847 The Childrens Place Retail Stores, Inc. 8,374(b,d) 350,452 The Dress Barn, Inc. 28,108(b) 694,267 The Finish Line, Inc., Class A 99,489 1,423,687 The Men's Wearhouse, Inc. 19,398(d) 377,485 Williams-Sonoma, Inc. 3,391(d) 90,574 --------------- Total 7,779,511 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.8%) Cherokee, Inc. 7,900(d) 155,077 Deckers Outdoor Corp. 14,994(b,d) 763,045 Fossil, Inc. 9,786(b,d) 387,526 Jones Apparel Group, Inc. 15,451(d) 269,465 Quiksilver, Inc. 29,498(b,d) 131,856 Skechers U.S.A., Inc., Class A 7,880(b,d) 292,269 Steven Madden Ltd. 4,072(b) 157,301 The Warnaco Group, Inc. 8,083(b) 337,627 True Religion Apparel, Inc. 5,302(b,d) 130,323 --------------- Total 2,624,489 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.2%) Astoria Financial Corp. 19,311(d) 255,678 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TOBACCO (0.3%) Universal Corp. 8,686(d) $385,224 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.7%) Applied Industrial Technologies, Inc. 2,700 75,600 H&E Equipment Services, Inc. 20,609(b,d) 179,298 RSC Holdings, Inc. 41,300(b) 322,966 TAL International Group, Inc. 14,800 398,712 --------------- Total 976,576 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.3%) Telephone & Data Systems, Inc. 5,481 187,067 USA Mobility, Inc. 20,952 310,718 --------------- Total 497,785 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $123,981,165) $139,327,569 ------------------------------------------------------------------------------------- MUTUAL FUND (0.1%) SHARES VALUE(a) CAPITAL MARKETS Kayne Anderson Energy Development Co. 4,800(d) $72,432 ------------------------------------------------------------------------------------- TOTAL MUTUAL FUND (Cost: $70,123) $72,432 ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.7%) SHARES VALUE(a) Columbia Short-Term Cash Fund, 0.279% 2,356,008(f) $2,356,008 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $2,356,008) $2,356,008 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (23.9%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) CERTIFICATES OF DEPOSIT (2.8%) Commerzbank AG 08-09-10 0.450% $1,000,000 $1,000,000 Dexia Credit Local 08-16-10 0.630 1,000,009 1,000,009 DZ Bank AG 08-09-10 0.470 1,000,000 1,000,000 Landesbank Hessen Thuringen 08-06-10 0.440 999,634 999,634 --------------- Total 3,999,643 ------------------------------------------------------------------------------------- EFFECTIVE PRINCIPAL ISSUER YIELD AMOUNT VALUE(a) REPURCHASE AGREEMENTS (21.1%)(h) Cantor Fitzgerald & Co. dated 07-30-10, matures 08-02-10, repurchase price $15,000,287 0.230% $15,000,000 $15,000,000 Pershing LLC dated 07-30-10, matures 08-02-10, repurchase price $8,000,207 0.310 8,000,000 8,000,000 UBS Securities LLC dated 07-30-10, matures 08-02-10, repurchase price $7,008,680 0.210 7,008,557 7,008,557 --------------- Total 30,008,557 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $34,008,200) $34,008,200 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $160,415,496)(i) $175,764,209 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2010
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ E-Mini S&P MidCap 400 Index 15 $1,138,200 Sept. 2010 $15,783 Russell 2000 Mini Index 17 1,104,320 Sept. 2010 23,720 ------------------------------------------------------------------------------------ Total $39,503 ------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2010, the value of foreign securities, excluding short-term securities, represented 4.86% of net assets. (d) At July 31, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (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) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2010. (g) At July 31, 2010, investments in securities included securities valued at $520,125 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (h) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
CANTOR FITZGERALD & CO. (0.230%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Discount Notes $340 Fannie Mae Grantor Trust 3,085 Fannie Mae Interest Strip 169,649 Fannie Mae Pool 1,583,703 Fannie Mae Principal Strip 14,436 Fannie Mae REMICS 1,258,270 Fannie Mae Whole Loan 202
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
CANTOR FITZGERALD & CO. (0.230%) (CONTINUED) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Federal Farm Credit Bank $323,874 Federal Home Loan Bank Discount Notes 333,033 Federal Home Loan Banks 2,409,570 Federal Home Loan Mortgage Corp 206,770 Federal National Mortgage Association 548,890 FHLMC Structured Pass Through Securities 468,445 Freddie Mac Coupon Strips 1,092 Freddie Mac Discount Notes 79,968 Freddie Mac Non Gold Pool 696,029 Freddie Mac Reference REMIC 12,061 Freddie Mac REMICS 755,647 Freddie Mac Strips 101,276 Ginnie Mae I Pool 1,004,460 Ginnie Mae II Pool 888,431 Government National Mortgage Association 298,759 United States Treasury Bill 3,222,435 United States Treasury Inflation Indexed Bonds 128,486 United States Treasury Strip Coupon 749,448 United States Treasury Strip Principal 41,641 ----------------------------------------------------------- Total market value of collateral securities $15,300,000 ----------------------------------------------------------- PERSHING LLC (0.310%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Benchmark REMIC $20,768 Fannie Mae Pool 3,295,358 Fannie Mae REMICS 311,237 Federal Farm Credit Bank 28,053 Federal Home Loan Banks 85,065 Federal Home Loan Mortgage Corp 5,528 Federal National Mortgage Association 541 Freddie Mac Gold Pool 886,247 Freddie Mac Non Gold Pool 99,018 Freddie Mac REMICS 287,305 Ginnie Mae I Pool 179,516 Ginnie Mae II Pool 361,003 Government National Mortgage Association 93,521 United States Treasury Inflation Indexed Bonds 164,428 United States Treasury Note/Bond 1,702,280 United States Treasury Strip Coupon 233,388 United States Treasury Strip Principal 406,744 ----------------------------------------------------------- Total market value of collateral securities $8,160,000 -----------------------------------------------------------
-------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
UBS SECURITIES LLC (0.210%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Interest Strip $1,592,777 Fannie Mae Principal Strip 304,243 Federal Farm Credit Bank 843,972 Federal Home Loan Mortgage Corp 2,990,474 Freddie Mac Strips 1,417,281 ----------------------------------------------------------- Total market value of collateral securities $7,148,747 -----------------------------------------------------------
(i) At July 31, 2010, the cost of securities for federal income tax purposes was $161,000,845 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,219,523 Unrealized depreciation (4,456,159) ----------------------------------------------------------- Net unrealized appreciation $14,763,364 -----------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of July 31, 2010:
FAIR VALUE AT JULY 31, 2010 ------------------------------------------------------------------ LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Equity Securities Common Stocks $139,327,569 $-- $-- $139,327,569 --------------------------------------------------------------------------------------------- Total Equity Securities 139,327,569 -- -- 139,327,569 --------------------------------------------------------------------------------------------- Other Mutual Fund 72,432 -- -- 72,432 Affiliated Money Market Fund(c) 2,356,008 -- -- 2,356,008 Investments of Cash Collateral Received for Securities on Loan -- 34,008,200 -- 34,008,200 --------------------------------------------------------------------------------------------- Total Other 2,428,440 34,008,200 -- 36,436,640 --------------------------------------------------------------------------------------------- Investments in Securities 141,756,009 34,008,200 -- 175,764,209 Other Financial Instruments(d) 39,503 -- -- 39,503 --------------------------------------------------------------------------------------------- Total $141,795,512 $34,008,200 $-- $175,803,712 ---------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at July 31, 2010. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 800.SEC.0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling 800.345.6611. -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JULY 31, 2010
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $124,051,288) $139,400,001 Affiliated money market fund (identified cost $2,356,008) 2,356,008 Investments of cash collateral received for securities on loan Short-term securities (identified cost $3,999,643) 3,999,643 Repurchase agreements (identified cost $30,008,557) 30,008,557 ------------------------------------------------------------------------------- Total investments in securities (identified cost $160,415,496) 175,764,209 Capital shares receivable 340,773 Dividends and accrued interest receivable 43,602 Receivable for investment securities sold 827,608 Variation margin receivable on futures contracts 10,090 ------------------------------------------------------------------------------- Total assets 176,986,282 ------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 319 Capital shares payable 546,688 Payable upon return of securities loaned 34,008,200 Accrued investment management services fees 2,733 Accrued distribution fees 811 Accrued transfer agency fees 761 Accrued administrative services fees 234 Other accrued expenses 61,996 ------------------------------------------------------------------------------- Total liabilities 34,621,742 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $142,364,540 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 192,516 Additional paid-in capital 134,945,251 Undistributed net investment income 105,501 Accumulated net realized gain (loss) (8,266,944) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 15,388,216 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $142,364,540 ------------------------------------------------------------------------------- *Value of securities on loan $ 33,100,425 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 9,570,996 1,291,322 $7.41(1) Class B $ 586,284 81,313 $7.21 Class C $ 205,141 28,435 $7.21 Class I $ 27,121,153 3,643,387 $7.44 Class R4 $ 8,952 1,206 $7.42 Class W $104,872,014 14,205,922 $7.38 ------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $7.86. 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 DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 31 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED JULY 31, 2010
INVESTMENT INCOME Income: Dividends $ 1,938,106 Income distributions from affiliated money market fund 4,690 Income from securities lending -- net 105,671 ------------------------------------------------------------------------------ Total income 2,048,467 ------------------------------------------------------------------------------ Expenses: Investment management services fees 851,036 Distribution fees Class A 25,573 Class B 9,144 Class C 2,729 Class W 265,113 Transfer agency fees Class A 27,442 Class B 2,600 Class C 751 Class R4 4 Class W 216,254 Administrative services fees 83,767 Plan administration services fees -- Class R4 22 Compensation of board members 4,122 Custodian fees 12,007 Printing and postage 68,155 Registration fees 42,767 Professional fees 23,549 Other 11,570 ------------------------------------------------------------------------------ Total expenses 1,646,605 ------------------------------------------------------------------------------ Investment income (loss) -- net 401,862 ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 29,735,673 Futures contracts 1,205,849 ------------------------------------------------------------------------------ Net realized gain (loss) on investments 30,941,522 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,553,953) ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 23,387,569 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $23,789,431 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED JULY 31, 2010 2009 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 401,862 $ 434,794 Net realized gain (loss) on investments 30,941,522 (21,892,627) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,553,953) 26,269,090 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 23,789,431 4,811,257 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (25,228) -- Class I (135,774) (76,661) Class R4 (37) (28) Class W (129,029) (331,470) Tax return of capital Class I -- (14,347) Class R4 -- (4) Class W -- (77,411) --------------------------------------------------------------------------------------------- Total distributions (290,068) (499,921) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 1,785,414 6,309,131 Class B shares 92,807 674,807 Class C shares 42,960 208,691 Class I shares 13,189,458 30,487,874 Class W shares 50,394,571 167,849,227 Reinvestment of distributions at net asset value Class A shares 24,217 -- Class I shares 135,727 90,986 Class R4 shares 6 6 Class W shares 129,025 408,872 Conversions from Class B to Class A Class A shares 198,363 246,654 Class B shares (198,363) (246,654) Payments for redemptions Class A shares (4,359,977) (8,114,777) Class B shares (402,814) (285,979) Class C shares (171,195) (63,129) Class I shares (10,291,319) (21,030,480) Class W shares (91,749,873) (60,828,360) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (41,180,993) 115,706,869 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (17,681,630) 120,018,205 Net assets at beginning of year 160,046,170 40,027,965 --------------------------------------------------------------------------------------------- Net assets at end of year $142,364,540 $160,046,170 --------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 105,501 $ (8,527) ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 33 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED JULY 31, CLASS A -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.24 $8.39 $9.55 $8.95 $9.48 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .01 .00(b) .05 -- Net gains (losses) (both realized and unrealized) 1.18 (2.16) (1.14) .59 (.53) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.19 (2.15) (1.14) .64 (.53) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) -- (.02) (.04) -- Tax return of capital -- -- (.00)(b) -- -- ----------------------------------------------------------------------------------------------------------- Total distributions (.02) -- (.02) (.04) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.41 $6.24 $8.39 $9.55 $8.95 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.04% (25.63%) (11.94%) 7.12% (5.59%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.30% 1.40% 1.32% 1.67% 5.83%(d) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.30% 1.29% 1.20% 1.29% 1.26%(d) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .17% .18% .05% .52% .01%(d) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $10 $10 $17 $18 $9 ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 107% 104% 56% 84% 14% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS B -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.11 $8.27 $9.47 $8.93 $9.48 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.03) (.06) (.04) (.01) Net gains (losses) (both realized and unrealized) 1.14 (2.13) (1.14) .62 (.54) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.10 (2.16) (1.20) .58 (.55) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- (.04) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.21 $6.11 $8.27 $9.47 $8.93 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.00% (26.12%) (12.67%) 6.43% (5.80%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.06% 2.17% 2.09% 2.12% 6.64%(d) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.06% 2.08% 1.97% 2.06% 2.07%(d) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (.60%) (.60%) (.71%) (.41%) (.37%)(d) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $1 $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 107% 104% 56% 84% 14% -----------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS C -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.11 $8.27 $9.47 $8.93 $9.48 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.03) (.06) (.04) (.01) Net gains (losses) (both realized and unrealized) 1.14 (2.13) (1.14) .61 (.54) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.10 (2.16) (1.20) .57 (.55) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- (.03) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.21 $6.11 $8.27 $9.47 $8.93 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.00% (26.12%) (12.67%) 6.37% (5.80%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 2.05% 2.16% 2.08% 2.16% 6.61%(d) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 2.05% 2.07% 1.96% 2.06% 2.04%(d) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (.59%) (.56%) (.72%) (.40%) (.78%)(d) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 107% 104% 56% 84% 14% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 35 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED JULY 31, CLASS I -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.27 $8.41 $9.57 $8.95 $9.48 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .04 .05 .08 -- Net gains (losses) (both realized and unrealized) 1.17 (2.16) (1.16) .59 (.53) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.22 (2.12) (1.11) .67 (.53) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) (.04) (.05) -- Tax return of capital -- (.00)(b) (.01) -- -- ----------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) (.05) (.05) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.44 $6.27 $8.41 $9.57 $8.95 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.45% (25.15%) (11.63%) 7.48% (5.59%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement .79% .85% .91% .95% 5.58%(d) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) .79% .85% .84% .95% 1.01%(d) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .68% .68% .50% .80% .19%(d) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $27 $21 $15 $39 $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 107% 104% 56% 84% 14% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS R4 -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.25 $8.42 $9.56 $8.95 $9.48 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .03 .04 .07 -- Net gains (losses) (both realized and unrealized) 1.17 (2.17) (1.14) .58 (.53) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.20 (2.14) (1.10) .65 (.53) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.03) (.03) (.04) -- Tax return of capital -- (.00)(b) (.01) -- -- ----------------------------------------------------------------------------------------------------------- Total distributions (.03) (.03) (.04) (.04) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.42 $6.25 $8.42 $9.56 $8.95 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 19.23% (25.41%) (11.48%) 7.30% (5.59%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.08% 1.17% 1.23% 1.68% 5.69%(d) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e) 1.08% 1.01% .84% 1.15% 1.12%(d) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .39% .47% .42% .71% .21%(d) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 107% 104% 56% 84% 14% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 37 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED JULY 31, CLASS W --------------------------------------------- PER SHARE DATA 2010 2009 2008 2007(f) Net asset value, beginning of period $6.21 $8.36 $9.54 $9.79 ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .01 .01 -- Net gains (losses) (both realized and unrealized) 1.16 (2.14) (1.17) (.20) ------------------------------------------------------------------------------------------------ Total from investment operations 1.18 (2.13) (1.16) (.20) ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.02) (.01) (.05) Tax return of capital -- (.00)(b) (.01) -- ------------------------------------------------------------------------------------------------ Total distributions (.01) (.02) (.02) (.05) ------------------------------------------------------------------------------------------------ Net asset value, end of period $7.38 $6.21 $8.36 $9.54 ------------------------------------------------------------------------------------------------ TOTAL RETURN 19.00% (25.47%) (12.13%) (2.06%) ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS(c) Gross expenses prior to expense waiver/reimbursement 1.24% 1.29% 1.34% 1.60%(d) ------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(e) 1.24% 1.29% 1.31% 1.32%(d) ------------------------------------------------------------------------------------------------ Net investment income (loss) .23% .28% .08% .03%(d) ------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA Net assets, end of period (in millions) $105 $128 $7 $57 ------------------------------------------------------------------------------------------------ Portfolio turnover rate 107% 104% 56% 84% ------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (b) Rounds to less than $0.01 per share. (c) Expense ratios include the impact of a performance incentive adjustment, if any. 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 underlying funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (d) Annualized. (e) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (f) For the period from Dec. 1, 2006 (when shares became publicly available) to July 31, 2007. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) is a series of RiverSource Dimensions Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation's Board of Directors (the Board). The Fund invests primarily in equity securities of companies with market capitalizations of up to $5 billion or that fall within the range of companies that comprise the Russell 2500(TM) Index at the time of investment. The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares. - Class A shares are offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Effective Sept. 7, 2010, the Fund no longer accepts investments from new or existing investors in the Fund's Class B shares, except that (i) dividend and/or capital gain distributions may continue to be reinvested in Class B shares of the Fund and (ii) shareholders invested in Class B shares of the Fund may exchange those shares for Class B shares of other Columbia, Columbia Acorn, RiverSource, Seligman and Threadneedle funds offering such shares. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. - Class W shares are offered without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At July 31, 2010, Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and affiliated funds- of-funds owned 100% of Class I shares. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price from the primary exchange. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE 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 NYSE, 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 -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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 NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- FUTURES TRANSACTIONS The Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. The Fund may also buy and write put and call options on these futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Upon entering into futures contracts, the Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, 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. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JULY 31, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Net assets -- unrealiz- ed appreciation on Equity contracts investments $39,503* N/A N/A -------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the current day's variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------ RISK EXPOSURE CATEGORY FUTURES ------------------------------------------------------------------ Equity contracts $1,205,849 ------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Equity contracts $28,412 -----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FUTURES The gross notional amount of long contracts outstanding was approximately $2.2 million at July 31, 2010. The monthly average gross notional amount for long contracts was $2.2 million for the year ended July 31, 2010. The fair value of such contracts at July 31, 2010 is set forth in the table above. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.70% to 0.475% as the Fund's net 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 Mid-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the index. -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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 $126,252 for the year ended July 31, 2010. The management fee for the year ended July 31, 2010 was 0.61% 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. The fee for the year ended July 31, 2010 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended July 31, 2010, other expenses paid to this company were $443. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or certain other funds managed by the Investment Manager. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. The Fund paid 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 Transfer Agent also charged an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. The Fund also paid the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R4 shares and an annual asset-based fee at a rate of 0.20% of the Fund's average daily net assets attributable to Class W shares. The Transfer Agent charged an annual fee of $5 per inactive account, charged on a -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- pro rata basis for the 12 month period from the date the account becomes inactive. The Transfer Agent also received reimbursement for certain out-of- pocket expenses. These fees are included in the transfer agency fees in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund paid an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund paid 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 W 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $53,000 for Class B shares. This amount is based on the most recent information available as of April 30, 2010, 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, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $24,414 for Class A and $1,307 for Class B for the year ended July 31, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES Under an agreement which is effective until Sept. 30, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- adjustment, will not exceed the following percentage of the class' average daily net assets: Class A.............................................. 1.40% Class B.............................................. 2.17 Class C.............................................. 2.16 Class I.............................................. 0.95 Class R4............................................. 1.25 Class W.............................................. 1.40
For the year ended July 31, 2010, the waiver was not invoked since the Fund's expenses were below the cap amount. Effective Oct. 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until Sept. 30, 2011, unless sooner terminated at the sole 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 class' average daily net assets: Class A.............................................. 1.39% Class B.............................................. 2.14 Class C.............................................. 2.14 Class I.............................................. 0.94 Class R4............................................. 1.24 Class W.............................................. 1.39
* 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $147,970,383 and $190,225,431, respectively, for the year ended July 31, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
YEAR ENDED JULY 31, 2010 2009 ------------------------------------------------------------------- CLASS A Sold 247,014 1,123,483 Converted from Class B* 26,770 39,528 Reinvested distributions 3,392 -- Redeemed (605,057) (1,539,579) ------------------------------------------------------------------- Net increase (decrease) (327,881) (376,568) ------------------------------------------------------------------- CLASS B Sold 13,336 121,575 Converted to Class A* (27,512) (40,369) Redeemed (56,800) (50,038) ------------------------------------------------------------------- Net increase (decrease) (70,976) 31,168 ------------------------------------------------------------------- CLASS C Sold 5,839 38,661 Redeemed (24,245) (11,505) ------------------------------------------------------------------- Net increase (decrease) (18,406) 27,156 ------------------------------------------------------------------- CLASS I Sold 1,784,276 5,323,223 Reinvested distributions 18,983 16,573 Redeemed (1,475,547) (3,840,456) ------------------------------------------------------------------- Net increase (decrease) 327,712 1,499,340 ------------------------------------------------------------------- CLASS R4 Reinvested distributions 1 1 ------------------------------------------------------------------- Net increase (decrease) 1 1 ------------------------------------------------------------------- CLASS W Sold 6,840,609 31,029,459 Reinvested distributions 18,147 74,885 Redeemed (13,252,234) (11,322,377) ------------------------------------------------------------------- Net increase (decrease) (6,393,478) 19,781,967 -------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At July 31, 2010, securities valued at $33,100,425 were on loan, secured by cash collateral of $34,008,200 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $105,671 earned from securities lending for the year ended July 31, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in Columbia Short-Term Cash Fund (formerly known as RiverSource Short-Term Cash Fund), a money market fund established for the exclusive use of certain funds managed by the Investment Manager and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of Columbia Short-Term Cash Fund aggregated $58,782,082 and $56,426,074, respectively, for the year ended July 31, 2010. The income distributions received with respect to the Fund's investment in Columbia Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in Columbia Short-Term Cash Fund at July 31, 2010, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds managed by the Investment Manager, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the year ended July 31, 2010. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of real estate investment trust (REIT) distributions, 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 were recorded by the Fund. -------------------------------------------------------------------------------- 50 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $2,234 and accumulated net realized loss has been decreased by $3,222 resulting in a net reclassification adjustment to decrease paid-in capital by $5,456. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2010 2009 ---------------------------------------------------------------- Ordinary income............................. $290,068 $408,159 Long-term capital gain...................... -- -- Tax return of capital....................... -- 91,762
At July 31, 2010, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................... $ 108,375 Undistributed accumulated long-term gain......... $ -- Accumulated realized loss........................ $(7,615,730) Unrealized appreciation (depreciation)........... $14,734,128
For federal income tax purposes, the Fund had a capital loss carry-over of $7,615,730 at July 31, 2010, that if not offset by capital gains will expire in 2017. For the year ended July 31, 2010, $13,819,504 of capital loss carry-over was utilized and/or expired unused. 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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements other than as noted below. The Board of Directors of the Fund has approved in principle the proposed merger of the Fund into Columbia Mid Cap Value Fund. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 12. 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 (now known as legacy RiverSource) 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 (the District Court). In response to defendants' motion to dismiss the complaint, the District 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 (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 -------------------------------------------------------------------------------- 52 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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 Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 53 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund), (one of the portfolios constituting the RiverSource Dimensions Series, Inc.) as of July 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four 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 period ended 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, 2010, 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. -------------------------------------------------------------------------------- 54 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Disciplined Small and Mid Cap Equity Fund of the RiverSource Dimensions Series, Inc. at July 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 20, 2010 -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 55 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, 2010
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Qualified Dividend Income for individuals.................... 100% Dividends Received Deduction for corporations................ 100% U.S. Government Obligations.................................. 0.00%
The Fund 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. -------------------------------------------------------------------------------- 56 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each Board member oversees 150 Columbia, RiverSource, Seligman and Threadneedle funds. Under current Board policy, members generally serve until the next regular shareholders' meeting, until he or she reaches the mandatory retirement age established by the Board, or the fifteenth anniversary of the first Board meeting they attended as members of the Board. INDEPENDENT BOARD MEMBERS*
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 1/11/06 Attorney Minneapolis, MN 55402 Age 56 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource and Threadneedle Funds, 1999-2006; None 901 S. Marquette Ave. 1/5/99 former Governor of Minnesota Minneapolis, MN 55402 Age 76 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 7/11/07 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 3/1/85 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 11/1/05 Insurance; Hapoalim Minneapolis, MN 55402 Securities USA, Inc. Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures Minneapolis, MN 55402 Board member irrigation systems) Age 71 since 1/1/02 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 57 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member Retired President and Chief Executive Officer and None 901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 67 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 11/1/04 real estate and asset management company) Minneapolis, MN 55402 Age 58 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 69 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 66 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
* Mr. Laikind may be deemed, as a technical matter, an interested person of RiverSource International Managers Series, Inc. and RiverSource Variable Series Trust because he serves as an independent director of a broker-dealer that has executed transactions for subadvisers to certain of the funds. -------------------------------------------------------------------------------- 58 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member Chairman of the Board, Columbia Management Investment None 53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC) Financial Center Vice President since since May 2010 (previously President, Chairman of the Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010); Age 50 Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Chief Executive Officer, U.S. Asset Management & President -- Annuities, Ameriprise Financial, Inc. since May 2010 (previously President -- U.S. Asset Management and Chief Investment Officer, 2005-April 2010 and Senior Vice President -- Chief Investment Officer, 2001-2005); Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Director, Columbia Management Investment Distributors, Inc. (formerly RiverSource Fund Distributors, Inc.) since May 2010 (previously Chairman of the Board and Chief Executive Officer, 2008-April 2010); Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 ------------------------------------------------------------------------------------------------------------------------------
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the investment manager or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling 800.345.6611; contacting your financial intermediary; or visiting columbiamanagement.com. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 59 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- 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 FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers, Boston, MA 02111 LLC since May 2010; President, Columbia Funds since Age 46 2009 (previously Senior Vice President and Chief Financial Officer, June 2008 -- January 2009); President, Atlantic Funds and Nations Funds since 2009; Managing Director of Columbia Management Advisors, LLC, December 2004 -- April 2010; Treasurer, Columbia Funds, October 2003 -- May 2008; Treasurer, the Liberty Funds, Stein Roe Funds and Liberty All-Star Funds, December 2000 -- December 2006; Senior Vice President -- Columbia Management Advisors, LLC, April 2003 -- December 2004; President, Columbia Funds, Liberty Funds and Stein Roe Funds, February 2004 -- October 2004 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer, 5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly Center Minneapolis, MN RiverSource Investments, LLC) since May 2010 55474 (previously Chief Administrative Officer, 2009 -- April Age 45 2010 and Vice President -- Asset Management and Trust Company Services, 2006-2009 and Vice President -- Operations and Compliance, 2004-2006); Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment 105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund Financial Center Distributors, Inc.) and of Seligman Data Corp. since Minneapolis, MN 55474 2008; Vice President -- Investment Accounting, Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial Officer, RiverSource Distributors, Inc. since 2006 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 60 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia 5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly Center Secretary since RiverSource Investments, LLC) since June 2005; Vice Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management, Age 51 Ameriprise Financial, Inc. since May 2010 (previously Vice President and Chief Counsel -- Asset Management, 2005-April 2010 and Vice President -- Asset Management Compliance, 2004-2005); Senior Vice President, Secretary and Chief Legal Officer, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Vice President, Chief Counsel and Assistant Secretary, Columbia Management Investment Distributors, Inc. (formerly RiverSource Fund Distributors, Inc.) since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Chief Counsel, RiverSource Distributors, Inc. since 2006; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Michael A. Jones Vice President since Director and President, Columbia Management Investment 100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director, Boston, MA 02110 Columbia Management Investment Distributors, Inc. since Age 51 May 2010; Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Manager, Chairman, Chief Executive Officer and President, Columbia Management Advisors, LLC, 2007 -- April 2010; Chief Executive Officer, President and Director, Columbia Management Distributors, Inc., 2006 -- April 2010; former Co-President and Senior Managing Director, Robeco Investment Management -------------------------------------------------------------------------------------------------------- Colin Moore Vice President since Chief Investment Officer, Columbia Management One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations Age 52 Funds since May 2010; Manager, Managing Director and Chief Investment Officer, Columbia Management Advisors, LLC, 2007- April 2010; Head of Equities, Columbia Management Advisors, LLC, 2002-Sept. 2007 -------------------------------------------------------------------------------------------------------- Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010; Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007; Age 46 Senior Vice President and Chief Compliance Officer, Atlantic Funds and Nations Funds since 2007; Director (Columbia Management Group, LLC and Investment Product Group Compliance), Bank of America, June 2005 -- April 2010; Director of Corporate Compliance and Conflicts Officer, MFS Investment Management (investment management), August 2004 -- May 2005 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 61 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money since 2008 Laundering Officer, Ameriprise Financial, Inc. since 2005; Compliance Director, Ameriprise Financial, Inc., 2004-2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 62 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, 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"), Columbia Management provides investment advice and other services to the Fund and all funds branded Columbia, RiverSource, Seligman and Threadneedle. 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. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's proposed revised expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors, including in an executive session without management, 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 Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 63 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. 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 Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management 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 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. The Board observed that the Fund's investment performance reflected the interrelationship of market conditions with the particular investment strategies employed by the portfolio -------------------------------------------------------------------------------- 64 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- management team. Further, the Board noted measures taken to address the Fund's performance, including the anticipated change in portfolio managers for the Fund. In this regard, the Board reviewed a detailed report illustrating the performance and track record of the new portfolio managers expected to assume responsibilities for the Fund upon the close of the Columbia Transaction. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management 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 Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). 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 legacy RiverSource Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed revised expense caps/waivers) approximated the peer group's median expense ratio shown in the reports. The Board also considered the Fund's performance incentive adjustment and noted its continued appropriateness. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various legacy RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the legacy RiverSource Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT 65 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the legacy RiverSource 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 Columbia Management 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 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.345.6611; contacting your financial intermediary; visiting columbiamanagement.com; 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 columbiamanagement.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 66 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2010 ANNUAL REPORT RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND P.O. Box 8081 Boston, MA 02266-8081 COLUMBIAMANAGEMENT.COM This report must be accompanied or preceded by the Fund's current prospectus. The Fund is distributed by Columbia Management Investment Distributors, Inc. member FINRA, and managed by Columbia Management Investment Advisers, LLC. (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6505 G (9/10)
Annual Report and Prospectus (COLUMBIA MANAGEMENT LOGO) RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -------------------------------------------------------------------------------- ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 2010 (Prospectus also enclosed) RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. This annual report includes a prospectus that describes in detail the Fund's objective, investment strategy, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 6 The Fund's Long-term Performance... 14 Fund Expenses Example.............. 16 Portfolio of Investments........... 20 Statement of Assets and Liabilities...................... 33 Statement of Operations............ 35 Statements of Changes in Net Assets........................... 37 Financial Highlights............... 38 Notes to Financial Statements...... 46 Report of Independent Registered Public Accounting Firm........... 61 Federal Income Tax Information..... 63 Board Members and Officers......... 64 Approval of Investment Management Services Agreement............... 70 Proxy Voting....................... 73
SEE THE FUND'S PROSPECTUS FOR RISKS ASSOCIATED WITH INVESTING IN THE FUND. -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Disciplined Small Cap Value Fund (the Fund) Class A shares gained 18.33% (excluding sales charge) for the 12-month period ended July 31, 2010. > The Fund underperformed its benchmark, the unmanaged Russell 2000(R) Value Index, which rose 20.11% for the same period. > The Fund also underperformed the Lipper Small-Cap Value Funds Index, representing the Fund's peer group, which advanced 21.11%, for the same period. ANNUALIZED TOTAL RETURNS (for period ended July 31, 2010) --------------------------------------------------------------------------------
SINCE INCEPTION 1 YEAR 3 YEARS 2/16/2006 ------------------------------------------------------------------ RiverSource Disciplined Small Cap Value Fund Class A (excluding sales charge) +18.33% -6.39% -4.40% ------------------------------------------------------------------ Russell 2000 Value Index (unmanaged) +20.11% -4.97% -1.67% ------------------------------------------------------------------ Lipper Small-Cap Value Funds Index (unmanaged) +21.11% -3.96% -0.40% ------------------------------------------------------------------
(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 intermediary, visiting columbiamanagement.com or calling 800.345.6611. 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 fees and expenses. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. 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. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT JULY 31, 2010 SINCE Without sales charge 1 YEAR 3 YEARS INCEPTION Class A (inception 2/16/06) +18.33% -6.39% -4.40% -------------------------------------------------------------------- Class B (inception 2/16/06) +17.42% -7.08% -5.14% -------------------------------------------------------------------- Class C (inception 2/16/06) +17.49% -7.09% -5.13% -------------------------------------------------------------------- Class I (inception 2/16/06) +18.78% -6.02% -4.06% -------------------------------------------------------------------- Class R2(a) (inception 12/11/06) +17.78% -6.63% -7.46% -------------------------------------------------------------------- Class R3 (inception 12/11/06) +18.22% -6.35% -7.20% -------------------------------------------------------------------- Class R4(b) (inception 2/16/06) +18.38% -6.14% -4.20% -------------------------------------------------------------------- Class R5(b) (inception 12/11/06) +18.79% -6.06% -6.89% -------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) +11.53% -8.22% -5.66% -------------------------------------------------------------------- Class B (inception 2/16/06) +12.42% -8.00% -5.56% -------------------------------------------------------------------- Class C (inception 2/16/06) +16.49% -7.09% -5.13% --------------------------------------------------------------------
Class A share performance reflects the maximum initial sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second year 4%; third and fourth years 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 qualifying institutional investors only. (a) Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares. (b) Effective July 23, 2010, the Fund no longer offers Class R4 or Class R5 shares. -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- MORNINGSTAR STYLE BOX(TM) --------------------------------------------------------------------------------
Equity Style Value Blend Growth Large Medium Size X Small
The Morningstar Style Box(TM) is based on the fund's portfolio holdings as of period end. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar. (C)2010 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers, may not be copied or distributed and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------ At July 31, 2010, approximately 93% of the Fund's shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (Columbia Management). As a result of asset allocation decisions by Columbia Management, it is possible that RiverSource Disciplined Small Cap Value Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds (see page 55, Class I capital share transactions for related activity during the most recent fiscal period). Columbia Management seeks to minimize the impact of these transactions by structuring them over a reasonable period of time. RiverSource Disciplined Small Cap Value Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds. For more information on the Fund's expenses, see the discussions beginning on pages 16 and 51. Effective May 1, 2010 Brian Condon and Alfred Alley III joined Gina Mourtzinou as co-portfolio managers. Effective July 3, 2010, Mr. Condon and Mr. Alley III became sole portfolio managers of RiverSource Disciplined Small Cap Value Fund. Dear Shareholder, RiverSource Disciplined Small Cap Value Fund (the Fund) Class A shares gained 18.33% (excluding sales charge) for the 12-month period ended July 31, 2010. The Fund underperformed its benchmark, the unmanaged Russell 2000(R) Value Index (Russell Index), which rose 20.11%, as well as the Lipper Small-Cap Value Funds Index, representing the Fund's peer group, which advanced 21.11%, for the same period. -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS Against a strengthening economic backdrop supported by generally positive data, the equity market rally that had begun in mid-March 2009 continued with little interruption until May 2010. As investor risk aversion had abated significantly, lower quality stocks led the way during these months. The rally then stalled in May and June of 2010 as worries heightened about the sovereign debt crisis in Europe and about the trajectory of the nascent global economic recovery. Investors questioned whether the recovery could be sustained without the tremendous fiscal and monetary stimulus injected into the economy since the 2008 credit crisis, as several government and Federal Reserve programs expired in March and April 2010. Further, unemployment and housing data indicated persistent weakness. Investors also were uncertain about how much of the first quarter 2010 rebound in corporate earnings was attributable merely to rebuilding of inventories. The potential of a "double-dip" recession or even deflation became of heightened concern. Equity market volatility rose. By the end of the annual period, a strong start to the second quarter SECTOR BREAKDOWN(1) (at July 31, 2010) ---------------------------------------------------------------------
Consumer Discretionary 9.8% ------------------------------------------------ Consumer Staples 3.3% ------------------------------------------------ Energy 6.4% ------------------------------------------------ Financials 37.6% ------------------------------------------------ Health Care 5.6% ------------------------------------------------ Industrials 13.4% ------------------------------------------------ Information Technology 9.2% ------------------------------------------------ Materials 5.2% ------------------------------------------------ Telecommunication Services 0.8% ------------------------------------------------ Utilities 6.2% ------------------------------------------------ Other(2) 2.5% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- 2010 earnings reporting season buoyed the equity market as did an overall improvement in risk sentiment. The release of the results of the European bank stress tests on July 23 also had a positive impact on equity markets broadly. The Fund's performance was primarily driven by the quantitative-based investment themes we employed in selecting stocks for the Fund's portfolio. During the 12- month period, the momentum theme outperformed the Russell Index, but not enough to offset the underperformance of the valuation theme. The momentum theme, designed in part to capture investor sentiment over the near to mid term, benefited from exposure to information technology stocks. The valuation theme, which favors cheaper price-to-earnings ratio (P/E) stocks, started the annual period with solid performance but weakened later in the period as market volatility heightened. The valuation theme was hurt most by financials stocks. It is important to remember that the themes we used take turns in leading performance over time, demonstrating the advantages of employing style diversification. Such variance in performance supports our research indicating that the style diversification provided by the very different quantitative-based themes is a significant TOP TEN HOLDINGS(1) (at July 31, 2010) ---------------------------------------------------------------------
Platinum Underwriters Holdings Ltd. 1.3% ------------------------------------------------ ProAssurance Corp. 1.3% ------------------------------------------------ Ares Capital Corp. 1.3% ------------------------------------------------ Apollo Investment Corp. 1.2% ------------------------------------------------ SVB Financial Group 1.2% ------------------------------------------------ EMCOR Group, Inc. 1.2% ------------------------------------------------ Rent-A-Center, Inc. 1.2% ------------------------------------------------ CNO Financial Group, Inc. 1.1% ------------------------------------------------ Magellan Health Services, Inc. 1.1% ------------------------------------------------ Capstead Mortgage Corp. 1.0% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). 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. -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- investment advantage over the long term, even though the Fund may experience underperformance in the short term. At the same time, we are continuously looking for ways to improve our investment process and to enhance the efficacy of the quantitative-based themes we use in the Fund. Following a specific, disciplined process, we do not make sector or industry bets based on economic or equity market outlooks. The Fund's quantitative-based themes further led to various sector weightings that, together, contributed to results. Having only modest exposure to utilities and financials, each of which lagged the Russell Index during the annual period, benefitted results most. The primary detractors from a sector allocation perspective were the Fund's significant exposures to the lagging consumer staples and energy sectors. Because we use a bottom-up approach, it is not surprising that most of the Fund's results were due to stock selection. Specifically, stock selection in the financials, utilities and industrials sectors detracted. This more than offset the combined effect of strong stock selection in health care, information technology and telecommunication services. Individual stocks that contributed most favorably to the Fund's return during the annual period included chemical manufacturer W R GRACE & CO. (also a choice of the momentum theme), auto and air freight transportation company ATLAS AIR WORLDWIDE (another momentum selection), and managed health care services provider MAGELLAN HEALTH SERVICES (selected by the valuation theme). Our research continues to indicate that the style diversification provided by the very different quantitative-based themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- Among individual holdings, the stocks that detracted most from the Fund's annual results were silver and gold miner COEUR D'ALENE MINES (a valuation theme selection), food retailer WINN-DIXIE STORES (chosen by the valuation theme), appliance retailer CONN'S (another valuation theme pick), and financial services company KNIGHT CAPITAL GROUP (selected by the valuation theme). At the end of July, the Fund's largest individual stock holdings were each financials-related companies and each chosen by the valuation theme. These top holdings at the end of the annual period were property and casualty insurance company PROASSURANCE, reinsurance company PLATINUM UNDERWRITERS, commercial bank SVB FINANCIAL, and investment companies ARES CAPITAL and APOLLO INVESTMENT. CHANGES TO THE FUND'S PORTFOLIO As a result of quantitative-based theme-driven stock selection during the period, the portfolio's sector allocations changed somewhat. Most notably, the Fund's exposure to information technology increased but remained a less-than- Russell Index position in the sector. The Fund's allocation to financials decreased but remained greater than the Russell Index. Toward the end of the annual period, we began bringing the Fund's sector allocation more in line with that of the benchmark index, a shift primarily driven by our new management team's sector-neutral investment process. In managing risk associated with small-cap investing, we use a proprietary risk management system that allows us to manage the Fund's exposure to several key factors, including industry, sector, market capitalization and portfolio turnover. During the period, we used these and other techniques in an effort to reduce the expected risk of the portfolio and to avoid large deviations in exposure from the Russell Index. Perhaps the biggest change made was that a new portfolio management team was put in place toward the end of the annual period. The Fund's principal investment strategies remained based on quantitative analysis, using similar investment themes. However, while we continue to use computer-based models to analyze stocks within sectors, the new team's models are somewhat different from those previously used. We seek to maintain sector weighting neutrality overall relative to the benchmark -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- index, and the models drive stock selection by focusing on factors within three themes -- quality, valuation and catalyst. Quality-theme factors include profitability as well as strength and sustainability measures, such as return on assets, return on equity, receivables, reserve management and cash flow accruals. Valuation-theme factors measure profitability-at-a-reasonable-price and growth-at-a-reasonable-price and include cash flow, operating income, sales, earnings, book value and risk-adjusted return. Catalyst-theme factors include long-term and short-term momentum measures and estimate revisions. Given all of these changes, the Fund's portfolio turnover rate for the annual period was 114%. OUR FUTURE STRATEGY We hold a cautious view regarding prospects for the financial markets over the remainder of 2010. After a solid run over the 12 months ended July 31, 2010, we believe stocks appeared to be closer to fair value than they had been one year prior. At the same time, however, we expect volatility to remain somewhat heightened. We believe the U.S. economy will continue to recover, albeit at a relatively slow pace, and that inflation should remain under control. Given this view, we intend to use our quantitative-based themes, as described above, in our stock selection process, seeking to position the Fund's portfolio to take advantage of what we consider a beneficial shift in underlying market dynamics. At the same time, we believe our use of multiple investment disciplines serves the Fund well in all investment environments over the long term, and the portfolio is well positioned for most potential market conditions. Whether there is a surge in small-cap stocks or a downturn, the combination of themes should, in our view, help us deliver value relative to the Russell Index over extended periods of time. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 11 MANAGER COMMENTARY (continued) ------------------------------------------------- We are convinced that our multifaceted, disciplined approach may assist in managing risk in the portfolio. We believe this combination of style diversification and rigorous risk management will allow us to maintain the high quality of the Fund's portfolio in whatever market conditions lie ahead. Brian Condon, CFA(R) Alfred Alley III, 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 Columbia Management Investment Advisers, LLC* (the Investment Manager) or any subadviser to the Fund or any other person in the Investment Manager or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and the Investment Manager disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of the Fund. * Effective May 1, 2010, RiverSource Investments, LLC became known as Columbia Management Investment Advisers, LLC. -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in RiverSource Disciplined Small Cap Value Fund Class A shares (from 2/16/06 to 7/31/10) as compared to the performance of the Russell 2000 Value Index and the Lipper Small-Cap Value Funds Index. In comparing the Fund's Class A shares to these indices, you should take into account the fact that the Fund's performance reflects the maximum initial 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 distributions 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 intermediary or visiting columbiamanagement.com. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at July 31, 2010 SINCE INCEPTION 1 YEAR 3 YEARS 2/16/06 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND (INCLUDES SALES CHARGE) Class A Cumulative value of $10,000 $11,153 $7,731 $7,713 --------------------------------------------------------------------------------- Average annual total return +11.53% -8.22% -5.66% --------------------------------------------------------------------------------- RUSSELL 2000 VALUE INDEX(1) Cumulative value of $10,000 $12,011 $8,582 $9,279 --------------------------------------------------------------------------------- Average annual total return +20.11% -4.97% -1.67% --------------------------------------------------------------------------------- LIPPER SMALL-CAP VALUE FUNDS INDEX(2) Cumulative value of $10,000 $12,111 $8,858 $9,825 --------------------------------------------------------------------------------- Average annual total return +21.11% -3.96% -0.40% ---------------------------------------------------------------------------------
Results for other share classes can be found on page 4. -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND LINE GRAPH)
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND CLASS A RUSSELL 2000 LIPPER SMALL-CAP (INCLUDES SALES VALUE INDEX(1) VALUE FUNDS CHARGE) ($7,713) ($9,279) INDEX(2) ($9,825) ----------------------- -------------- ----------------- 2/16/06 $ 9,425 $10,000 $10,000 4/06 9,969 10,495 10,495 7/06 9,010 10,043 9,771 10/06 9,692 10,976 10,530 1/07 10,326 11,558 11,148 4/07 10,213 11,674 11,535 7/07 9,405 10,814 11,092 10/07 9,443 11,201 11,285 1/08 8,389 9,852 9,966 4/08 8,506 9,907 10,083 7/08 8,486 9,738 9,722 10/08 6,422 7,781 7,445 1/09 5,265 6,260 6,243 4/09 5,683 6,800 7,061 7/09 6,518 7,726 8,113 10/09 6,664 7,933 8,486 1/10 7,068 8,547 9,070 4/10 8,319 10,365 10,821 7/10 7,713 9,279 9,825
(1) The Russell 2000 Value Index, an unmanaged index, measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Small-Cap Value Funds Index includes the 30 largest small-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 15 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments; and (ii) ongoing costs, which may include management fees; distribution and service (Rule 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 ongoing expenses of any funds in which the Fund 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 ongoing expenses charged by 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, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 "Direct expenses paid during the period" to estimate the expenses you paid on your account during this period. You can also estimate the direct and indirect expenses you paid over the period by using the number in the first line under the heading "Direct and indirect expenses paid during the period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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. -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 17 FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING FEB. 1, 2010 JULY 31, 2010 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,091.30 $ 6.99(d) $ 8.39(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.74(d) $ 8.10(d) ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,087.00 $11.19(d) $12.59(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.21 $10.80(d) $12.15(d) ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,087.00 $11.13(d) $12.54(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.26 $10.75(d) $12.10(d) ------------------------------------------------------------------------------------------ Class I ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,095.40 $ 4.91(d) $ 6.32(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.24 $ 4.73(d) $ 6.09(d) ------------------------------------------------------------------------------------------ Class R2 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,089.90 $ 9.01(d) $10.42(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.31 $ 8.70(d) $10.05(d) ------------------------------------------------------------------------------------------ Class R3 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,092.80 $ 7.72(d) $ 9.13(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.55 $ 7.44(d) $ 8.80(d) ------------------------------------------------------------------------------------------ Class R4 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,092.70 $ 6.42(d) $ 7.83(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.80 $ 6.19(d) $ 7.55(d) ------------------------------------------------------------------------------------------ Class R5 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,094.10 $ 5.12(d) $ 6.53(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.04 $ 4.94(d) $ 6.30(d) ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES ---------------------------------------------------------------------- Class A 1.34% .27% 1.61% ---------------------------------------------------------------------- Class B 2.15% .27% 2.42% ---------------------------------------------------------------------- Class C 2.14% .27% 2.41% ---------------------------------------------------------------------- Class I .94% .27% 1.21% ---------------------------------------------------------------------- Class R2 1.73% .27% 2.00% ---------------------------------------------------------------------- Class R3 1.48% .27% 1.75% ---------------------------------------------------------------------- Class R4 1.23% .27% 1.50% ---------------------------------------------------------------------- Class R5 .98% .27% 1.25% ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class as indicated above, plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended July 31, 2010: +9.13% for Class A, +8.70% for Class B, +8.70 for Class C, +9.54% for Class I, +8.99% for Class R2, +9.28% for Class R3, +9.27% for Class R4 and +9.41% for Class R5. (d) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Sept. 30, 2011, unless sooner terminated at the sole 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 1.43% for Class A, 2.18% for Class B, 2.18% for Class C, 1.01% for Class I, 1.68% for Class R2, 1.56% for Class R3, 1.31% for Class R4 and 1.06% for Class R5. Any amounts waived will not be reimbursed by the Fund. This change is effective Oct. 1, 2010. Had this change been in place for the entire six month period ended July 31, 2010, the actual direct expenses paid would have been $6.88 for Class A, $10.77 for Class B, $10.77 for Class C, $4.70 for Class I, $8.18 for Class R2, $7.57 for Class R3, $6.26 for Class R4 and $4.96 for Class R5; the hypothetical direct expenses paid would have been $6.64 for Class A, $10.40 for Class B, $10.40 for Class C, $4.53 for Class I, $7.90 for Class R2, $7.29 for Class R3, $6.04 for Class R4 and $4.78 for Class R5. Additionally, had this change been in place for the entire six month period ended July 31, 2010, the actual direct and indirect expenses paid would have been $8.29 for Class A, $12.18 for Class B, $12.18 for Class C, $6.11 for Class I, $9.59 for Class R2, $8.97 for Class R3, $7.67 for Class R4 and $6.37 for Class R5; the hypothetical direct and indirect expenses paid would have been $8.00 for Class A, $11.75 for Class B, $11.75 for Class C, $5.89 for Class I, $9.25 for Class R2, $8.65 for Class R3, $7.40 for Class R4 and $6.14 for Class R5. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JULY 31, 2010 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.1%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.5%) Ceradyne, Inc. 8,211(b) $190,906 Esterline Technologies Corp. 2,773(b) 142,338 Ladish Co., Inc. 4,650(b) 136,757 Triumph Group, Inc. 3,923(d) 297,755 --------------- Total 767,756 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (1.1%) Atlas Air Worldwide Holdings, Inc. 7,958(b,d) 465,383 Pacer International, Inc. 9,986(b,d) 82,285 --------------- Total 547,668 ------------------------------------------------------------------------------------- AIRLINES (1.8%) Alaska Air Group, Inc. 9,470(b) 488,558 Skywest, Inc. 31,983 398,188 US Airways Group, Inc. 4,700(b) 50,995 --------------- Total 937,741 ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.4%) Exide Technologies 14,347(b,d) 86,369 Tenneco, Inc. 4,562(b,d) 125,911 --------------- Total 212,280 ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.9%) AO Smith Corp. 1,265 69,170 Apogee Enterprises, Inc. 15,650 176,219 Griffon Corp. 4,872(b,d) 66,064 Insteel Industries, Inc. 7,523(d) 69,889 Quanex Building Products Corp. 4,351 76,534 --------------- Total 457,876 ------------------------------------------------------------------------------------- CAPITAL MARKETS (6.7%) Apollo Investment Corp. 62,023(d) 626,432 Ares Capital Corp. 46,337 649,181 BGC Partners, Inc., Class A 39,213(d) 212,534 Capital Southwest Corp. 600(d) 53,292 Cohen & Steers, Inc. 5,245(d) 116,964 Hercules Technology Growth Capital, Inc. 9,943(d) 104,004 Knight Capital Group, Inc., Class A 17,467(b,d) 251,175 MCG Capital 22,500(d) 130,275 MVC Capital, Inc. 7,424 95,176 Oppenheimer Holdings, Inc., Class A 7,155(d) 204,848 PennantPark Investment Corp. 19,874(d) 208,876 Prospect Capital Corp. 6,138 59,600 Sanders Morris Harris Group, Inc. 9,300(d) 51,150 SWS Group, Inc. 20,581(d) 179,466 TICC Capital Corp. 46,700(d) 409,559 Westwood Holdings Group, Inc. 2,887(d) 104,596 --------------- Total 3,457,128 ------------------------------------------------------------------------------------- CHEMICALS (3.0%) Ferro Corp. 8,406(b,d) 89,692 HB Fuller Co. 2,704(d) 55,270 Innophos Holdings, Inc. 12,445 364,763 Innospec, Inc. 9,414(b,c) 103,554 Minerals Technologies, Inc. 1,136 59,265 Olin Corp. 12,566 255,090 OM Group, Inc. 5,212(b) 140,724 PolyOne Corp. 15,297(b) 157,712 WR Grace & Co. 12,645(b) 324,597 --------------- Total 1,550,667 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (9.7%) 1st Source Corp. 2,900(d) 53,331 Ameris Bancorp 9,846(b) 96,885 Arrow Financial Corp. 3,240(d) 81,713 Bancfirst Corp. 3,023 124,487 Boston Private Financial Holdings, Inc. 9,200(d) 60,812 Camden National Corp. 3,298(d) 103,063
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL BANKS (CONT.) Century Bancorp, Inc., Class A 2,702(d) $58,039 Enterprise Financial Services Corp. 5,600 57,344 First Bancorp 19,211(d) 320,632 First Commonwealth Financial Corp. 13,800(d) 73,140 First Community Bancshares, Inc. 4,200 61,782 First Financial Bancorp 9,548(d) 151,813 First Financial Corp. 2,400(d) 68,088 First Merchants Corp. 10,200 88,536 German American Bancorp, Inc. 3,296(d) 55,208 Great Southern Bancorp, Inc. 13,659(d) 299,542 Heartland Financial USA 3,500 61,810 Heritage Financial Corp. 3,888(b,d) 57,737 International Bancshares Corp. 12,471(d) 216,247 Lakeland Bancorp, Inc. 6,300(d) 56,511 MainSource Financial Group, Inc. 29,328(d) 221,133 Nara Bancorp, Inc. 9,154(b) 65,634 National Bankshares, Inc. 4,466(d) 115,580 NBT Bancorp, Inc. 5,565(d) 122,875 Northrim BanCorp, Inc. 10,136 178,394 OmniAmerican Bancorp, Inc. 4,500(b,d) 51,570 Oriental Financial Group, Inc. 3,900(c,d) 55,224 PacWest Bancorp 2,696 56,427 Peoples Bancorp, Inc. 6,000(d) 103,500 Republic Bancorp, Inc., Class A 10,319(d) 255,705 SVB Financial Group 14,240(b,d) 615,025 The First of Long Island Corp. 2,118(d) 54,602 Trico Bancshares 6,425(d) 121,240 Trustmark Corp. 8,569(d) 188,518 UMB Financial Corp. 4,313(d) 162,255 Virginia Commerce Bancorp, Inc. 9,900(b,d) 63,459 West Bancorporation, Inc. 10,387(b,d) 69,489 Wilshire Bancorp, Inc. 16,066(d) 120,977 Wintrust Financial Corp. 6,793 211,398 --------------- Total 4,979,725 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (1.1%) Consolidated Graphics, Inc. 2,314(b) 99,433 Deluxe Corp. 2,500 51,450 Kimball International, Inc., Class B 18,984 118,459 Steelcase, Inc., Class A 9,402(d) 64,968 United Stationers, Inc. 2,177(b) 117,885 Viad Corp. 4,828 96,077 --------------- Total 548,272 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.6%) Oplink Communications, Inc. 4,601(b,d) 74,122 Plantronics, Inc. 8,349 250,220 --------------- Total 324,342 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.3%) Intevac, Inc. 6,032(b,d) 66,352 Super Micro Computer, Inc. 5,143(b,d) 74,265 --------------- Total 140,617 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.7%) Comfort Systems USA, Inc. 22,454 256,200 EMCOR Group, Inc. 22,889(b) 595,343 Granite Construction, Inc. 8,201(d) 190,673 Layne Christensen Co. 6,374(b) 160,689 Sterling Construction Co., Inc. 6,836(b) 84,698 Tutor Perini Corp. 4,662(b,d) 89,883 --------------- Total 1,377,486 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 21 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CONSUMER FINANCE (1.1%) Cash America International, Inc. 7,870(d) $263,645 Credit Acceptance Corp. 2,956(b) 165,477 Nelnet, Inc., Class A 3,700 74,592 World Acceptance Corp. 1,809(b,d) 74,947 --------------- Total 578,661 ------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Core-Mark Holding Co., Inc. 3,936(b) 120,127 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.3%) Regis Corp. 8,713(d) 132,699 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.4%) Compass Diversified Holdings 3,558(d) 53,619 PHH Corp. 8,389(b,d) 167,025 --------------- Total 220,644 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%) Consolidated Communications Holdings, Inc. 3,946(d) 68,897 IDT Corp., Class B 16,800(b,d) 311,136 --------------- Total 380,033 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (3.1%) Central Vermont Public Service Corp. 7,100(d) 150,804 Cleco Corp. 11,924(d) 340,430 IDACORP, Inc. 12,800 450,816 UIL Holdings Corp. 13,100 356,975 Unisource Energy Corp. 9,900(d) 319,572 --------------- Total 1,618,597 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.7%) EnerSys 6,684(b) 161,886 Woodward Governor Co. 7,069 213,767 --------------- Total 375,653 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (3.9%) Agilysys, Inc. 7,000 55,510 Anixter International, Inc. 5,850(b,d) 282,671 Benchmark Electronics, Inc. 3,075(b) 51,353 Coherent, Inc. 4,875(b,d) 180,473 CTS Corp. 10,294(d) 96,249 Electro Rent Corp. 7,400 102,120 Gerber Scientific, Inc. 9,900(b,d) 56,826 Insight Enterprises, Inc. 6,548(b) 95,404 Littelfuse, Inc. 7,171(b,d) 255,359 Measurement Specialties, Inc. 10,000(b,d) 167,000 Methode Electronics, Inc. 7,792(d) 83,219 Plexus Corp. 6,232(b,d) 181,974 Rogers Corp. 3,391(b,d) 104,951 SYNNEX Corp. 8,771(b,d) 231,467 TTM Technologies, Inc. 7,143(b,d) 73,216 --------------- Total 2,017,792 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (3.3%) Bristow Group, Inc. 4,106(b) 137,264 Cal Dive International, Inc. 62,393(b) 369,366 Dawson Geophysical Co. 7,179(b,d) 167,342 Gulfmark Offshore, Inc., Class A 4,283(b,d) 126,092 Lufkin Industries, Inc. 9,796 402,713 Matrix Service Co. 8,518(b) 82,539 Natural Gas Services Group, Inc. 4,605(b,d) 76,213 PHI, Inc. 6,100(b) 96,929 T-3 Energy Services, Inc. 2,935(b,d) 74,432 Tetra Technologies, Inc. 6,314(b) 65,792 Union Drilling, Inc. 12,700(b,d) 75,311 --------------- Total 1,673,993 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (2.1%) Nash Finch Co. 3,471(d) $136,480 Ruddick Corp. 11,031 391,048 Spartan Stores, Inc. 10,377 149,014 The Andersons, Inc. 1,514 52,036 The Pantry, Inc. 5,451(b,d) 98,118 Weis Markets, Inc. 3,249(d) 116,477 Winn-Dixie Stores, Inc. 15,665(b,d) 153,674 --------------- Total 1,096,847 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.1%) Alico, Inc. 2,500 60,900 ------------------------------------------------------------------------------------- GAS UTILITIES (2.0%) Chesapeake Utilities Corp. 4,400 146,256 Nicor, Inc. 4,040 176,912 Southwest Gas Corp. 13,400 431,078 The Laclede Group, Inc. 2,397 83,751 WGL Holdings, Inc. 5,600 202,048 --------------- Total 1,040,045 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Cantel Medical Corp. 9,400(d) 149,272 Medical Action Industries, Inc. 8,800(b) 120,560 --------------- Total 269,832 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.5%) Assisted Living Concepts, Inc., Class A 6,700(b) 210,782 Cross Country Healthcare, Inc. 10,200(b,d) 90,576 Healthspring, Inc. 27,881(b) 524,163 Kindred Healthcare, Inc. 21,849(b) 290,592 Magellan Health Services, Inc. 13,489(b) 567,752 Molina Healthcare, Inc. 5,353(b,d) 159,573 Triple-S Management Corp., Series B 9,722(b,c,d) 193,273 Universal American Corp. 15,258(b) 255,419 --------------- Total 2,292,130 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.1%) Biglari Holdings, Inc. 241(b,d) 70,011 Domino's Pizza, Inc. 7,400(b,d) 94,646 Red Robin Gourmet Burgers, Inc. 3,848(b,d) 82,116 Ruby Tuesday, Inc. 30,100(b,d) 307,622 --------------- Total 554,395 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) American Greetings Corp., Class A 5,190(d) 106,343 CSS Industries, Inc. 4,029(d) 72,603 La-Z-Boy, Inc. 10,600(b) 90,736 --------------- Total 269,682 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.1%) Oil-Dri Corp. of America 3,000 65,640 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.8%) Seaboard Corp. 195(d) 296,010 Standex International Corp. 3,661 109,903 --------------- Total 405,913 ------------------------------------------------------------------------------------- INSURANCE (7.6%) American Equity Investment Life Holding Co. 4,700 50,760 AMERISAFE, Inc. 9,961(b,d) 178,900 CNA Surety Corp. 6,751(b,d) 116,455 CNO Financial Group, Inc. 106,692(b,d) 572,936 Employers Holdings, Inc. 25,808(d) 401,056 FBL Financial Group, Inc., Class A 3,300 74,877 First Mercury Financial Corp. 4,500 51,570 Greenlight Capital Re Ltd., Series A 5,459(b,c,d) 140,788 Horace Mann Educators Corp. 21,998 370,006 Meadowbrook Insurance Group, Inc. 18,841(d) 172,584 Montpelier Re Holdings Ltd. 16,466(c,d) 267,737
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 23 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INSURANCE (CONT.) National Financial Partners Corp. 18,883(b) $202,615 Platinum Underwriters Holdings Ltd. 16,744(c,d) 654,355 ProAssurance Corp. 10,973(b) 653,003 --------------- Total 3,907,642 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.0%) Earthlink, Inc. 59,969(d) 529,526 ------------------------------------------------------------------------------------- IT SERVICES (1.0%) Acxiom Corp. 3,912(b,d) 60,010 CSG Systems International, Inc. 4,004(b) 75,515 TeleTech Holdings, Inc. 10,400(b) 144,560 Unisys Corp. 8,203(b) 221,564 --------------- Total 501,649 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.3%) Jakks Pacific, Inc. 5,647(b,d) 89,109 Sport Supply Group, Inc. 4,416 59,793 --------------- Total 148,902 ------------------------------------------------------------------------------------- MACHINERY (1.2%) Altra Holdings, Inc. 7,397(b,d) 107,257 American Railcar Industries, Inc. 5,010(b,d) 68,387 FreightCar America, Inc. 5,336(d) 132,492 LB Foster Co., Class A 3,937(b,d) 120,393 Mueller Industries, Inc. 3,687 91,143 Robbins & Myers, Inc. 3,168 75,145 --------------- Total 594,817 ------------------------------------------------------------------------------------- MARINE (0.4%) American Commercial Lines, Inc. 2,048(b,d) 49,459 Genco Shipping & Trading Ltd. 3,697(b) 61,740 International Shipholding Corp. 3,567(d) 88,961 --------------- Total 200,160 ------------------------------------------------------------------------------------- MEDIA (0.5%) EW Scripps Co., Class A 9,440(b,d) 74,198 Valassis Communications, Inc. 4,900(b) 169,393 --------------- Total 243,591 ------------------------------------------------------------------------------------- METALS & MINING (1.1%) AM Castle & Co. 3,729(b,d) 55,077 AMCOL International Corp. 2,625(d) 78,645 Brush Engineered Materials, Inc. 2,775(b) 66,184 Coeur d'Alene Mines Corp. 3,873(b,d) 58,986 Haynes International, Inc. 1,908 64,223 Kaiser Aluminum Corp. 1,697 69,577 Olympic Steel, Inc. 4,373(d) 111,206 RTI International Metals, Inc. 2,496(b,d) 70,836 --------------- Total 574,734 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.6%) Dillard's, Inc., Class A 10,567(d) 244,521 Retail Ventures, Inc. 8,086(b,d) 78,353 --------------- Total 322,874 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.8%) Avista Corp. 18,900 395,388 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.2%) ATP Oil & Gas Corp. 6,015(b,d) 63,518 Clayton Williams Energy, Inc. 1,215(b) 54,080 Cloud Peak Energy, Inc. 4,094(b,d) 62,843 CVR Energy, Inc. 9,600(b,d) 77,760 Golar LNG Ltd. 7,445(c) 80,257 Green Plains Renewable Energy, Inc. 7,000(b) 64,820 Knightsbridge Tankers Ltd. 6,225(c) 116,159 Miller Petroleum, Inc. 18,400(b,d) 91,816 Patriot Coal Corp. 11,004(b,d) 132,708 Penn Virginia Corp. 8,758(d) 166,402 Petroleum Development Corp. 9,896(b,d) 288,369
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (CONT.) Rex American Resources Corp. 3,100(b,d) $49,755 Rosetta Resources, Inc. 11,926(b) 263,207 Swift Energy Co. 1,983(b) 51,419 Western Refining, Inc. 11,469(b,d) 60,786 --------------- Total 1,623,899 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.1%) Clearwater Paper Corp. 5,437(b) 335,082 KapStone Paper and Packaging Corp. 13,844(b) 158,375 PH Glatfelter Co. 5,946 67,963 --------------- Total 561,420 ------------------------------------------------------------------------------------- PHARMACEUTICALS (0.6%) Medicis Pharmaceutical Corp., Class A 2,991 75,822 Par Pharmaceutical Companies, Inc. 9,380(b) 247,632 --------------- Total 323,454 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (0.2%) Diamond Management & Technology Consultants, Inc. 8,805 95,534 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (11.3%) American Capital Agency Corp. 18,518 509,615 Anworth Mortgage Asset Corp. 39,526(d) 275,496 Associated Estates Realty Corp. 5,084(d) 70,363 Capstead Mortgage Corp. 45,270(d) 529,660 CBL & Associates Properties, Inc. 33,100(d) 465,717 Chesapeake Lodging Trust 3,700(b) 64,713 Cogdell Spencer, Inc. 8,442 62,724 Colonial Properties Trust 21,300 343,356 Cypress Sharpridge Investments, Inc. 34,230(d) 451,836 Extra Space Storage, Inc. 4,997 77,503 First Potomac Realty Trust 4,285(d) 66,418 Glimcher Realty Trust 38,500 256,025 Hatteras Financial Corp. 11,402(d) 337,955 Invesco Mortgage Capital, Inc. 2,610(d) 53,114 LaSalle Hotel Properties 13,200(d) 313,104 Lexington Realty Trust 55,400 356,222 MFA Financial, Inc. 42,891(d) 314,820 Mid-America Apartment Communities, Inc. 2,936 165,825 Omega Healthcare Investors, Inc. 8,798(d) 193,380 One Liberty Properties, Inc. 8,800(d) 136,928 Resource Capital Corp. 50,500(d) 308,050 Sovran Self Storage, Inc. 1,588(d) 58,438 Sun Communities, Inc. 3,817(d) 111,075 Terreno Realty Corp. 6,400(b) 115,200 U-Store-It Trust 8,700 70,209 Walter Investment Management Corp. 3,139(d) 54,211 --------------- Total 5,761,957 ------------------------------------------------------------------------------------- ROAD & RAIL (0.2%) Celadon Group, Inc. 4,246(b) 66,407 Werner Enterprises, Inc. 2,500 57,575 --------------- Total 123,982 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.8%) Cabot Microelectronics Corp. 2,000(b,d) 65,380 Micrel, Inc. 27,400 266,328 Omnivision Technologies, Inc. 4,249(b,d) 94,795 --------------- Total 426,503 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 25 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SOFTWARE (1.6%) Fair Isaac Corp. 16,300(d) $388,754 JDA Software Group, Inc. 7,559(b) 177,637 TIBCO Software, Inc. 18,276(b) 247,823 --------------- Total 814,214 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (5.0%) America's Car-Mart, Inc. 2,353(b) 54,778 Brown Shoe Co., Inc. 3,626(d) 53,012 Build-A-Bear Workshop, Inc. 9,576(b,d) 57,935 Cabela's, Inc. 4,702(b,d) 73,304 Collective Brands, Inc. 7,258(b,d) 116,273 Conn's, Inc. 10,787(b,d) 56,740 DSW, Inc., Class A 5,921(b,d) 157,558 Genesco, Inc. 8,959(b,d) 244,491 Group 1 Automotive, Inc. 3,467(b,d) 96,105 HOT Topic, Inc. 12,825 67,844 Jo-Ann Stores, Inc. 10,212(b,d) 427,781 Rent-A-Center, Inc. 26,473(b) 582,140 Shoe Carnival, Inc. 3,413(b,d) 71,844 Stage Stores, Inc. 9,037 99,407 The Dress Barn, Inc. 5,957(b) 147,138 The Finish Line, Inc., Class A 8,334 119,260 The Men's Wearhouse, Inc. 8,049(d) 156,634 --------------- Total 2,582,244 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.0%) Jones Apparel Group, Inc. 7,671 133,782 Perry Ellis International, Inc. 2,400(b,d) 53,736 Quiksilver, Inc. 30,017(b,d) 134,177 Skechers U.S.A., Inc., Class A 3,104(b) 115,127 Unifirst Corp. 1,672 73,501 --------------- Total 510,323 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.1%) BankFinancial Corp. 5,800(d) 51,504 Federal Agricultural Mortgage Corp., Class C 9,300 138,942 Flushing Financial Corp. 5,500 68,585 Northwest Bancshares, Inc. 4,381(d) 53,142 Ocwen Financial Corp. 13,769(b) 145,400 Radian Group, Inc. 13,100 112,660 --------------- Total 570,233 ------------------------------------------------------------------------------------- TOBACCO (0.9%) Universal Corp. 10,884(d) 482,705 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.0%) Aircastle Ltd. 15,600 142,583 H&E Equipment Services, Inc. 9,814(b,d) 85,382 TAL International Group, Inc. 2,000 53,880 Textainer Group Holdings Ltd. 3,696(c,d) 100,901 United Rentals, Inc. 8,825(b,d) 116,314 --------------- Total 499,060 ------------------------------------------------------------------------------------- WATER UTILITIES (0.3%) Consolidated Water 5,800(c) 69,832 SJW Corp. 3,800(d) 94,582 --------------- Total 164,414 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) USA Mobility, Inc. 3,700 54,871 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $47,105,204) $50,489,237 ------------------------------------------------------------------------------------- MONEY MARKET FUND (2.5%) SHARES VALUE(a) Columbia Short-Term Cash Fund, 0.279% 1,269,720(f) $1,269,720 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $1,269,720) $1,269,720 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (24.8%) EFFECTIVE PRINCIPAL ISSUER YIELD AMOUNT VALUE(a) REPURCHASE AGREEMENTS(E) Barclays Capital, Inc. dated 07-30-10, matures 08-02-10, repurchase price $5,000,129 0.310% $5,000,000 $5,000,000 Cantor Fitzgerald & Co. dated 07-30-10, matures 08-02-10, repurchase price $5,000,096 0.230 5,000,000 5,000,000 UBS Securities LLC dated 07-30-10, matures 08-02-10, repurchase price $2,755,292 0.210 2,755,244 2,755,244 --------------- Total 12,755,244 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $12,755,244) $12,755,244 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $61,130,168)(g) $64,514,201 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. INVESTMENTS IN DERIVATIVES At July 31, 2010, $60,000 was held in a margin deposit account as collateral to cover initial margin requirements on open stock index futures contracts. FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2010
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ Russell 2000 Mini Index 8 $519,680 Sept. 2010 $28,462 ------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At July 31, 2010, the value of foreign securities, excluding short-term securities, represented 3.46% of net assets. (d) At July 31, 2010, security was partially or fully on loan. See Note 7 to the financial statements. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 27 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
BARCLAYS CAPITAL, INC. (0.310%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Rabobank Nederland $5,250,000 ----------------------------------------------------------- Total market value of collateral securities $5,250,000 ----------------------------------------------------------- CANTOR FITZGERALD & CO. (0.230%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Discount Notes $113 Fannie Mae Grantor Trust 1,028 Fannie Mae Interest Strip 56,550 Fannie Mae Pool 527,901 Fannie Mae Principal Strip 4,812 Fannie Mae REMICS 419,423 Fannie Mae Whole Loan 67 Federal Farm Credit Bank 107,958 Federal Home Loan Bank Discount Notes 111,011 Federal Home Loan Banks 803,190 Federal Home Loan Mortgage Corp 68,923 Federal National Mortgage Association 182,963 FHLMC Structured Pass Through Securities 156,148 Freddie Mac Coupon Strips 364 Freddie Mac Discount Notes 26,656 Freddie Mac Non Gold Pool 232,010 Freddie Mac Reference REMIC 4,020 Freddie Mac REMICS 251,883 Freddie Mac Strips 33,759 Ginnie Mae I Pool 334,820 Ginnie Mae II Pool 296,144 Government National Mortgage Association 99,586 United States Treasury Bill 1,074,145 United States Treasury Inflation Indexed Bonds 42,829 United States Treasury Strip Coupon 249,816 United States Treasury Strip Principal 13,881 ----------------------------------------------------------- Total market value of collateral securities $5,100,000 -----------------------------------------------------------
-------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
UBS SECURITIES LLC (0.210%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Interest Strip $626,161 Fannie Mae Principal Strip 119,606 Federal Farm Credit Bank 331,787 Federal Home Loan Mortgage Corp 1,175,632 Freddie Mac Strips 557,170 ----------------------------------------------------------- Total market value of collateral securities $2,810,356 -----------------------------------------------------------
(f) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at July 31, 2010. (g) At July 31, 2010, the cost of securities for federal income tax purposes was $61,471,025 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $4,986,095 Unrealized depreciation (1,942,919) ---------------------------------------------------------- Net unrealized appreciation $3,043,176 ----------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 29 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of July 31, 2010:
FAIR VALUE AT JULY 31, 2010 ----------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Equity Securities Common Stocks $50,489,237 $-- $-- $50,489,237 --------------------------------------------------------------------------------------------- Total Equity Securities 50,489,237 -- -- 50,489,237 --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 1,269,720 -- -- 1,269,720 Investments of Cash Collateral Received for Securities on Loan -- 12,755,244 -- 12,755,244 --------------------------------------------------------------------------------------------- Total Other 1,269,720 12,755,244 -- 14,024,964 --------------------------------------------------------------------------------------------- Investments in Securities 51,758,957 12,755,244 -- 64,514,201 Other Financial Instruments(d) 28,462 -- -- 28,462 --------------------------------------------------------------------------------------------- Total $51,787,419 $12,755,244 $-- $64,542,663 ---------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at July 31, 2010. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 31 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY 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 800.SEC.0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling 800.345.6611. -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JULY 31, 2010
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $47,105,204) $50,489,237 Affiliated money market fund (identified cost $1,269,720) 1,269,720 Investments of cash collateral received for securities on loan Repurchase agreements (identified cost $12,755,244) 12,755,244 ------------------------------------------------------------------------------ Total investments in securities (identified cost $61,130,168) 64,514,201 Capital shares receivable 29,947 Dividends and accrued interest receivable 27,763 Receivable for investment securities sold 1,785,805 Variation margin receivable on futures contracts 2,160 Margin deposits on futures contracts 60,000 ------------------------------------------------------------------------------ Total assets 66,419,876 ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 43,937 Payable for investment securities purchased 2,118,309 Payable upon return of securities loaned 12,755,244 Accrued investment management services fees 1,203 Accrued distribution fees 32 Accrued transfer agency fees 27 Accrued administrative services fees 113 Other accrued expenses 55,552 ------------------------------------------------------------------------------ Total liabilities 14,974,417 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $51,445,459 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 33 STATEMENT OF ASSETS AND LIABILITIES (continued) -------------------------------- JULY 31, 2010
REPRESENTED BY Capital stock -- $.01 par value $ 65,009 Additional paid-in capital 54,093,866 Undistributed net investment income 461,738 Accumulated net realized gain (loss) (6,587,649) Unrealized appreciation (depreciation) on investments 3,412,495 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $51,445,459 ------------------------------------------------------------------------------ *Value of securities on loan $12,373,802 ------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 3,483,311 441,264 $7.89(1) Class B $ 141,730 18,276 $7.75 Class C $ 120,243 15,510 $7.75 Class I $47,679,790 6,023,250 $7.92 Class R2 $ 3,587 455 $7.88 Class R3 $ 5,300 672 $7.89 Class R4 $ 7,899 1,000 $7.90 Class R5 $ 3,599 455 $7.91 -----------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $8.37. 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. -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED JULY 31, 2010
INVESTMENT INCOME Income: Dividends $ 897,622 Income distributions from affiliated money market fund 2,567 Income from securities lending -- net 71,788 Foreign taxes withheld (16) ----------------------------------------------------------------------------- Total income 971,961 ----------------------------------------------------------------------------- Expenses: Investment management services fees 375,114 Distribution fees Class A 19,337 Class B 2,362 Class C 1,006 Class R2 17 Class R3 12 Transfer agency fees Class A 9,420 Class B 396 Class C 172 Class R2 1 Class R3 3 Class R4 4 Class R5 1 Administrative services fees 40,614 Plan administration services fees Class R2 8 Class R3 12 Class R4 19 Compensation of board members 1,492 Custodian fees 9,315 Printing and postage 27,925 Registration fees 48,303 Professional fees 20,537 Other 6,562 ----------------------------------------------------------------------------- Total expenses 562,632 Expenses waived/reimbursed by the Investment Manager and its affiliates (58,290) ----------------------------------------------------------------------------- Total net expenses 504,342 ----------------------------------------------------------------------------- Investment income (loss) -- net 467,619 -----------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 35 STATEMENT OF OPERATIONS (continued) -------------------------------------------- YEAR ENDED JULY 31, 2010
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $8,005,642 Futures contracts 377,599 ----------------------------------------------------------------------------- Net realized gain (loss) on investments 8,383,241 Net change in unrealized appreciation (depreciation) on investments (169,568) ----------------------------------------------------------------------------- Net gain (loss) on investments 8,213,673 ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $8,681,292 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED JULY 31, 2010 2009 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 467,619 $ 377,135 Net realized gain (loss) on investments 8,383,241 (11,082,938) Net change in unrealized appreciation (depreciation) on investments (169,568) 7,316,289 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 8,681,292 (3,389,514) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (74,218) (28,406) Class C (52) -- Class I (324,851) (220,730) Class R2 (10) (1) Class R3 (25) (10) Class R4 (52) (42) Class R5 (31) (17) --------------------------------------------------------------------------------------------- Total distributions (399,239) (249,206) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 422,161 2,450,687 Class B shares 2,214 205,267 Class C shares 34,489 56,304 Class I shares 22,147,944 35,465,513 Class R3 shares 674 724 Reinvestment of distributions at net asset value Class A shares 26,528 11,018 Class C shares 47 -- Class I shares 324,780 220,690 Class R3 shares 7 Conversions from Class B to Class A Class A shares 28,004 79,994 Class B shares (28,004) (79,994) Payments for redemptions Class A shares (9,055,896) (1,511,682) Class B shares (135,187) (115,767) Class C shares (4,551) (18,418) Class I shares (23,989,375) (15,688,017) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (10,226,165) 21,076,319 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,944,112) 17,437,599 Net assets at beginning of year 53,389,571 35,951,972 --------------------------------------------------------------------------------------------- Net assets at end of year $ 51,445,459 $ 53,389,571 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 461,738 $ 365,594 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 37 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. For periods ended 2007 and after, per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of sales charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED JULY 31, CLASS A -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.71 $8.76 $10.00 $9.77 $10.22 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .04 .04 .14 .02 Net gains (losses) (both realized and unrealized) 1.19 (2.07) (1.01) .29 (.47) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.23 (2.03) (.97) .43 (.45) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) (.05) (.01) -- Distributions from realized gains -- -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) (.27) (.20) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.89 $6.71 $8.76 $10.00 $9.77 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.33% (23.18%) (9.67%) 4.29% (4.40%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.39% 1.60% 1.54% 1.73% 3.27%(c) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.29% 1.42% 1.24% 1.35% 1.40%(c) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .60% .61% .44% 1.30% .55%(c) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $11 $13 $14 $11 ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% 40% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS B -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.60 $8.65 $9.90 $9.73 $10.22 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.01) (.02) .05 -- Net gains (losses) (both realized and unrealized) 1.16 (2.04) (1.01) .31 (.49) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.15 (2.05) (1.03) .36 (.49) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from realized gains -- -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.75 $6.60 $8.65 $9.90 $9.73 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 17.42% (23.70%) (10.47%) 3.51% (4.79%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.20% 2.37% 2.29% 2.38% 4.05%(c) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.09% 2.18% 2.00% 2.11% 2.18%(c) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (.18%) (.14%) (.27%) .49% (.17%)(c) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $1 $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% 40% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 39 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED JULY 31, CLASS C -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.60 $8.65 $9.90 $9.73 $10.22 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01) (.01) (.03) .05 -- Net gains (losses) (both realized and unrealized) 1.16 (2.04) (1.00) .31 (.49) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.15 (2.05) (1.03) .36 (.49) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(e) -- (.00)(e) -- -- Distributions from realized gains -- -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Total distributions (.00)(e) -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.75 $6.60 $8.65 $9.90 $9.73 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 17.49% (23.70%) (10.43%) 3.51% (4.79%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 2.23% 2.36% 2.29% 2.47% 4.05%(c) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 2.10% 2.17% 2.00% 2.11% 2.18%(c) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) (.16%) (.13%) (.29%) .43% (.22%)(c) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% 40% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS I -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.73 $8.78 $10.03 $9.78 $10.22 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .06 .07 .15 .03 Net gains (losses) (both realized and unrealized) 1.19 (2.07) (1.02) .32 (.47) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.26 (2.01) (.95) .47 (.44) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.04) (.08) (.03) -- Distributions from realized gains -- -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Total distributions (.07) (.04) (.30) (.22) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.92 $6.73 $8.78 $10.03 $9.78 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.78% (22.83%) (9.46%) 4.69% (4.31%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.05% 1.22% 1.22% 1.19% 3.00%(c) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) .93% 1.04% .92% 1.05% 1.13%(c) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .99% .98% .79% 1.43% .91%(c) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $48 $42 $23 $25 $3 ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% 40% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 41 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED JULY 31, CLASS R2 -------------------------------------------- PER SHARE DATA 2010 2009 2008 2007(f) Net asset value, beginning of period $6.71 $8.75 $9.97 $10.99 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .02 .02 .06 Net gains (losses) (both realized and unrealized) 1.17 (2.06) (1.00) (.86) ----------------------------------------------------------------------------------------------- Total from investment operations 1.19 (2.04) (.98) (.80) ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.00)(e) (.02) (.03) Distributions from realized gains -- -- (.22) (.19) ----------------------------------------------------------------------------------------------- Total distributions (.02) (.00)(e) (.24) (.22) ----------------------------------------------------------------------------------------------- Net asset value, end of period $7.88 $6.71 $8.75 $9.97 ----------------------------------------------------------------------------------------------- TOTAL RETURN 17.78% (23.28%) (9.82%) (7.40%) ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.80% 2.04% 2.03% 1.85%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.71% 1.71% 1.46% 1.80%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) .22% .31% .23% .77%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS R3 -------------------------------------------- PER SHARE DATA 2010 2009 2008 2007(f) Net asset value, beginning of period $6.71 $8.76 $9.99 $10.99 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .04 .04 .07 Net gains (losses) (both realized and unrealized) 1.19 (2.07) (1.00) (.85) ----------------------------------------------------------------------------------------------- Total from investment operations 1.22 (2.03) (.96) (.78) ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.02) (.05) (.03) Distributions from realized gains -- -- (.22) (.19) ----------------------------------------------------------------------------------------------- Total distributions (.04) (.02) (.27) (.22) ----------------------------------------------------------------------------------------------- Net asset value, end of period $7.89 $6.71 $8.76 $9.99 ----------------------------------------------------------------------------------------------- TOTAL RETURN 18.22% (23.11%) (9.65%) (7.21%) ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.62% 1.80% 1.79% 1.58%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.48% 1.46% 1.21% 1.55%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) .45% .58% .48% 1.02%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% -----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 43 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED JULY 31, CLASS R4 -------------------------------------------------------- PER SHARE DATA 2010 2009 2008 2007 2006(a) Net asset value, beginning of period $6.72 $8.78 $10.00 $9.77 $10.22 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .05 .07 .17 .02 Net gains (losses) (both realized and unrealized) 1.18 (2.07) (1.00) .28 (.47) ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.23 (2.02) (.93) .45 (.45) ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.04) (.07) (.03) -- Distributions from realized gains -- -- (.22) (.19) -- ----------------------------------------------------------------------------------------------------------- Total distributions (.05) (.04) (.29) (.22) -- ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.90 $6.72 $8.78 $10.00 $9.77 ----------------------------------------------------------------------------------------------------------- TOTAL RETURN 18.38% (22.92%) (9.27%) 4.42% (4.40%) ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.35% 1.56% 1.52% 1.83% 3.12%(c) ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.23% 1.22% .97% 1.26% 1.25%(c) ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .69% .80% .73% 1.60% .69%(c) ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% 40% -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED JULY 31, CLASS R5 -------------------------------------------- PER SHARE DATA 2010 2009 2008 2007(f) Net asset value, beginning of period $6.72 $8.77 $10.02 $10.99 ----------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .06 .07 .11 Net gains (losses) (both realized and unrealized) 1.19 (2.07) (1.02) (.86) ----------------------------------------------------------------------------------------------- Total from investment operations 1.26 (2.01) (.95) (.75) ----------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.04) (.08) (.03) Distributions from realized gains -- -- (.22) (.19) ----------------------------------------------------------------------------------------------- Total distributions (.07) (.04) (.30) (.22) ----------------------------------------------------------------------------------------------- Net asset value, end of period $7.91 $6.72 $8.77 $10.02 ----------------------------------------------------------------------------------------------- TOTAL RETURN 18.79% (22.90%) (9.50%) (6.93%) ----------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.07% 1.27% 1.28% 1.09%(c) ----------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) .96% 1.10% .97% 1.05%(c) ----------------------------------------------------------------------------------------------- Net investment income (loss) .96% .92% .72% 1.53%(c) ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- ----------------------------------------------------------------------------------------------- Portfolio turnover rate 114% 98% 87% 127% -----------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (b) Expense ratios include the impact of a performance incentive adjustment, if any. 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 reported expense ratios. (c) Annualized. (d) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (e) Rounds to less than $0.01 per share. (f) For the period from Dec. 11, 2006 (when shares became publicly available) to July 31, 2007. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION RiverSource Disciplined Small Cap Value Fund (the Fund) is a series of RiverSource Dimensions Series, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Corporation has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Corporation's Board of Directors (the Board). The Fund invests primarily in small capitalization equity securities of companies with market capitalizations that fall within the range of companies that comprise the Russell 2000 Value Index at the time of investment. 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 offered with a front-end sales charge, which may be waived under certain circumstances. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares one month after the completion of the eighth year of ownership if originally purchased in a RiverSource fund on or after May 21, 2005 or originally purchased in a Seligman fund on or after June 13, 2009. Class B shares originally purchased in a RiverSource fund prior to May 21, 2005 will convert to Class A shares in the ninth calendar year of ownership. Class B shares originally purchased in a Seligman fund prior to June 13, 2009 will convert to Class A shares in the month prior to the ninth year of ownership. Effective September 7, 2010, the Fund no longer accepts investments from new or existing investors in the Fund's Class B shares, except that (i) dividend and/or capital gain distributions may continue to be reinvested in Class B shares of the Fund and (ii) shareholders invested in Class B shares of the Fund may exchange those shares for Class B shares of other Columbia, Columbia Acorn, RiverSource, Seligman and Threadneedle funds offering such shares. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are offered without a front-end sales charge or CDSC to qualifying institutional investors. Effective July 23, 2010, the Fund no longer offers Class R4 and Class R5 shares. Effective Sept. 7, 2010, Class R2 shares were renamed Class R shares. At July 31, 2010, Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and affiliated funds- of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R2, Class R4 and Class R5 shares. At July 31, -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 2010, the Investment Manager and affiliated funds-of-funds owned approximately 93% of the total outstanding Fund 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price from the primary exchange. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE 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 NYSE, 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 -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 47 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 NYSE. The fair value of a security is likely to be different from the quoted or published price, if available. 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. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 -------------------------------------------------------------------------------- 48 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. 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 tax returns filed for the last three years. 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 normally 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. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FUTURES TRANSACTIONS The Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange to produce incremental earnings, hedge existing positions or protect against market changes in the value of equities, interest rates or foreign currencies. The Fund may also buy and write put and call options on these -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 49 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- futures contracts. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Upon entering into futures contracts, the Fund bears the risk of interest rates, exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, 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. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JULY 31, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Net assets -- unrealiz- ed appreciation on Equity contracts investments $28,462* N/A N/A -------------------------------------------------------------------------------------------
* Includes cumulative appreciation (depreciation) of futures contracts as reported in the Futures Contracts Outstanding table following the Portfolio of Investments. Only the current day's variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- 50 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Equity contracts $377,599 -----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY FUTURES ----------------------------------------------------------------- Equity contracts $24,545 -----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FUTURES The gross notional amount of long contracts outstanding was approximately $500,000 at July 31, 2010. The monthly average gross notional amount for these contracts was $1.3 million for the year ended July 31, 2010. The fair value of such contracts at July 31, 2010 is set forth in the table above. 4. 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 an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.85% to 0.725% as the Fund's net 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 Small-Cap Value Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $56,412 for the year ended July 31, 2010. The management fee for the year ended July 31, 2010 was 0.74% 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 an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the year ended July 31, 2010 was 0.08% of the Fund's average daily net assets. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 51 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended July 31, 2010, other expenses paid to this company were $144. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or certain other funds managed by the Investment Manager. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. The Fund paid 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 Transfer Agent also charged an annual fee of $3 per account serviced directly by the Fund or its designated agent for Class A, Class B and Class C shares. The Fund also paid 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 charged an annual fee of $5 per inactive account, charged on a pro rata basis for the 12 month period from the date the account becomes inactive. The Transfer Agent also received reimbursement for certain out-of-pocket expenses. These fees are included in the transfer agency fees in the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund paid an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of -------------------------------------------------------------------------------- 52 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- Distribution pursuant to Rule 12b-1, the Fund paid 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, of the 1.00% fee, up to 0.75% is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $17,000 and $2,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of April 30, 2010, 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, including front-end and CDSCs, received by the Distributor for distributing Fund shares were $5,474 for Class A and $33 for Class B for the year ended July 31, 2010. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended July 31, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class A.............................................. 1.29% Class B.............................................. 2.09 Class C.............................................. 2.10 Class I.............................................. 0.93 Class R2............................................. 1.71 Class R3............................................. 1.48 Class R4............................................. 1.23 Class R5............................................. 0.96
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class R3.............................................. $1
The management fees waived/reimbursed at the Fund level were $58,289. Under an agreement which is effective until Sept. 30, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 53 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- adjustment, will not exceed the following percentage of the class' average daily net assets: Class A.............................................. 1.49% Class B.............................................. 2.26 Class C.............................................. 2.25 Class I.............................................. 1.04 Class R2............................................. 1.84 Class R3............................................. 1.59 Class R4............................................. 1.34 Class R5............................................. 1.09
Effective Oct. 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Sept. 30, 2011, unless sooner terminated at the sole 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 class' average daily net assets: Class A.............................................. 1.43% Class B.............................................. 2.18 Class C.............................................. 2.18 Class I.............................................. 1.01 Class R2............................................. 1.68 Class R3............................................. 1.56
* 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $55,750,456 and $66,132,085, respectively, for the year ended July 31, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 54 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
YEAR ENDED JULY 31, 2010 2009 ------------------------------------------------------------------ CLASS A Sold 55,100 390,536 Converted from Class B* 3,549 11,922 Reinvested distributions 3,537 1,852 Redeemed (1,223,853) (252,101) ------------------------------------------------------------------ Net increase (decrease) (1,161,667) 152,209 ------------------------------------------------------------------ CLASS B Sold 298 30,986 Converted to Class A* (3,613) (12,120) Redeemed (17,917) (19,523) ------------------------------------------------------------------ Net increase (decrease) (21,232) (657) ------------------------------------------------------------------ CLASS C Sold 4,466 7,429 Reinvested distributions 6 -- Redeemed (632) (2,110) ------------------------------------------------------------------ Net increase (decrease) 3,840 5,319 ------------------------------------------------------------------ CLASS I Sold 2,898,254 6,190,809 Reinvested distributions 43,304 37,091 Redeemed (3,203,531) (2,542,749) ------------------------------------------------------------------ Net increase (decrease) (261,973) 3,685,151 ------------------------------------------------------------------ CLASS R3 Sold 89 127 Reinvested distributions 1 -- ------------------------------------------------------------------ Net increase (decrease) 90 127 ------------------------------------------------------------------
* Automatic conversion of Class B shares to Class A shares based on the original purchase date. 7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 55 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At July 31, 2010, securities valued at $12,373,802 were on loan, secured by cash collateral of $12,755,244 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $71,788 earned from securities lending for the year ended July 31, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in Columbia Short-Term Cash Fund (formerly known as RiverSource Short-Term Cash Fund), a money market fund established for the exclusive use of certain funds managed by the Investment Manager and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of Columbia Short-Term Cash Fund aggregated $35,608,211 and $34,600,580, respectively, for the year ended July 31, 2010. The income distributions received with respect to the Fund's investment in Columbia Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in Columbia Short-Term Cash Fund at July 31, 2010, can be found in the Portfolio of Investments. 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for -------------------------------------------------------------------------------- 56 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. 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 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. Prior to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds managed by the Investment Manager, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the year ended July 31, 2010. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, passive foreign investment company (PFIC) holdings, re-characterization of real estate investment trust (REIT) distributions and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Fund. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $27,764 and accumulated net realized loss has been increased by $27,764. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 57 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- The tax character of distributions paid for the years indicated was as follows:
YEAR ENDED JULY 31, 2010 2009 ---------------------------------------------------------------- Ordinary income............................. $399,239 $249,206 Long-term capital gain...................... -- --
At July 31, 2010 the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income.................... $ 478,802 Undistributed accumulated long-term gain......... $ -- Accumulated realized loss........................ $(6,228,634) Unrealized appreciation (depreciation)........... $ 3,036,416
For federal income tax purposes, the Fund had a capital loss carry-over of $6,228,634 at July 31, 2010, that if not offset by capital gains will expire in 2017. For the year ended July 31, 2010, $559,116 of capital loss carry-over was utilized and/or expired unused. 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. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements other than as noted below. The Board of Directors of the Fund has approved in principle the proposed merger of the Fund into Columbia Small Cap Value Fund I. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. 12. 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 (now known as legacy RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs -------------------------------------------------------------------------------- 58 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- 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 (the District Court). In response to defendants' motion to dismiss the complaint, the District 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 (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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 funds' Boards of Directors/Trustees. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 59 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 60 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of RiverSource Disciplined Small Cap Value Fund (the Fund) (one of the portfolios constituting the RiverSource Dimensions Series, Inc.), as of July 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four 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 period ended 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, 2010, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 61 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of RiverSource Disciplined Small Cap Value Fund of the RiverSource Dimensions Series, Inc. at July 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota September 20, 2010 -------------------------------------------------------------------------------- 62 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 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, 2010
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%
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 63 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each Board member oversees 150 Columbia, RiverSource, Seligman and Threadneedle funds. Under current Board policy, members generally serve until the next regular shareholders' meeting, until he or she reaches the mandatory retirement age established by the Board, or the fifteenth anniversary of the first Board meeting they attended as members of the Board. INDEPENDENT BOARD MEMBERS*
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 1/11/06 Attorney Minneapolis, MN 55402 Age 56 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource and Threadneedle Funds, 1999-2006; None 901 S. Marquette Ave. 1/5/99 former Governor of Minnesota Minneapolis, MN 55402 Age 76 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 7/11/07 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 11/1/04 University; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 3/1/85 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 11/1/05 Insurance; Hapoalim Minneapolis, MN 55402 Securities USA, Inc. Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 1/1/07, College Inc. (manufactures Minneapolis, MN 55402 Board member irrigation systems) Age 71 since 1/1/02 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 64 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member Retired President and Chief Executive Officer and None 901 S. Marquette Ave. since 12/10/08 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 67 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 11/1/04 real estate and asset management company) Minneapolis, MN 55402 Age 58 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. since 11/11/08 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 69 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 11/13/02 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 66 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
* Mr. Laikind may be deemed, as a technical matter, an interested person of RiverSource International Managers Series, Inc. and RiverSource Variable Series Trust because he serves as an independent director of a broker-dealer that has executed transactions for subadvisers to certain of the funds. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 65 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH THE INVESTMENT MANAGER*
OTHER PRESENT OR NAME, POSITION HELD PAST DIRECTORSHIPS ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION (WITHIN PAST 5 AGE LENGTH OF SERVICE DURING PAST FIVE YEARS YEARS) ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member Chairman of the Board, Columbia Management Investment None 53600 Ameriprise since 11/7/01, Advisers, LLC (formerly RiverSource Investments, LLC) Financial Center Vice President since since May 2010 (previously President, Chairman of the Minneapolis, MN 55474 2002 Board and Chief Investment Officer, 2001-April 2010); Age 50 Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Chief Executive Officer, U.S. Asset Management & President -- Annuities, Ameriprise Financial, Inc. since May 2010 (previously President -- U.S. Asset Management and Chief Investment Officer, 2005-April 2010 and Senior Vice President -- Chief Investment Officer, 2001-2005); Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Director, Columbia Management Investment Distributors, Inc. (formerly RiverSource Fund Distributors, Inc.) since May 2010 (previously Chairman of the Board and Chief Executive Officer, 2008-April 2010); Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 ------------------------------------------------------------------------------------------------------------------------------
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the investment manager or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling 800.345.6611; contacting your financial intermediary; or visiting columbiamanagement.com. -------------------------------------------------------------------------------- 66 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- J. Kevin Connaughton President since Senior Vice President and General Manager -- Mutual One Financial Center 5/1/10 Fund Products, Columbia Management Investment Advisers, Boston, MA 02111 LLC since May 2010; President, Columbia Funds since Age 46 2009 (previously Senior Vice President and Chief Financial Officer, June 2008 -- January 2009); President, Atlantic Funds and Nations Funds since 2009; Managing Director of Columbia Management Advisors, LLC, December 2004 -- April 2010; Treasurer, Columbia Funds, October 2003 -- May 2008; Treasurer, the Liberty Funds, Stein Roe Funds and Liberty All-Star Funds, December 2000 -- December 2006; Senior Vice President -- Columbia Management Advisors, LLC, April 2003 -- December 2004; President, Columbia Funds, Liberty Funds and Stein Roe Funds, February 2004 -- October 2004 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Senior Vice President and Chief Operating Officer, 5228 Ameriprise Financial 12/5/06 Columbia Management Investment Advisers, LLC (formerly Center Minneapolis, MN RiverSource Investments, LLC) since May 2010 55474 (previously Chief Administrative Officer, 2009 -- April Age 45 2010 and Vice President -- Asset Management and Trust Company Services, 2006-2009 and Vice President -- Operations and Compliance, 2004-2006); Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Chief Financial Officer, Columbia Management Investment 105 Ameriprise 7/10/02 Distributors, Inc. (formerly RiverSource Fund Financial Center Distributors, Inc.) and of Seligman Data Corp. since Minneapolis, MN 55474 2008; Vice President -- Investment Accounting, Age 55 Ameriprise Financial, Inc. since 2002; Chief Financial Officer, RiverSource Distributors, Inc. since 2006 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 67 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Chief Legal Officer and Assistant Secretary, Columbia 5228 Ameriprise Financial General Counsel and Management Investment Advisers, LLC (formerly Center Secretary since RiverSource Investments, LLC) since June 2005; Vice Minneapolis, MN 55474 12/5/06 President and Lead Chief Counsel -- Asset Management, Age 51 Ameriprise Financial, Inc. since May 2010 (previously Vice President and Chief Counsel -- Asset Management, 2005-April 2010 and Vice President -- Asset Management Compliance, 2004-2005); Senior Vice President, Secretary and Chief Legal Officer, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Vice President, Chief Counsel and Assistant Secretary, Columbia Management Investment Distributors, Inc. (formerly RiverSource Fund Distributors, Inc.) since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Chief Counsel, RiverSource Distributors, Inc. since 2006; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Michael A. Jones Vice President since Director and President, Columbia Management Investment 100 Federal Street 5/1/10 Advisers, LLC since May 2010; President and Director, Boston, MA 02110 Columbia Management Investment Distributors, Inc. since Age 51 May 2010; Senior Vice President, Atlantic Funds, Columbia Funds and Nations Funds since May 2010; Manager, Chairman, Chief Executive Officer and President, Columbia Management Advisors, LLC, 2007 -- April 2010; Chief Executive Officer, President and Director, Columbia Management Distributors, Inc., 2006 -- April 2010; former Co-President and Senior Managing Director, Robeco Investment Management -------------------------------------------------------------------------------------------------------- Colin Moore Vice President since Chief Investment Officer, Columbia Management One Financial Center 5/1/10 Investment Advisers, LLC since May 2010; Senior Vice Boston, MA 02111 President, Atlantic Funds, Columbia Funds and Nations Age 52 Funds since May 2010; Manager, Managing Director and Chief Investment Officer, Columbia Management Advisors, LLC, 2007- April 2010; Head of Equities, Columbia Management Advisors, LLC, 2002-Sept. 2007 -------------------------------------------------------------------------------------------------------- Linda Wondrack Chief Compliance Vice President and Chief Compliance Officer, Columbia One Financial Center Officer since 5/1/10 Management Investment Advisers, LLC since May 2010; Boston, MA 02111 Chief Compliance Officer, Columbia Funds since 2007; Age 46 Senior Vice President and Chief Compliance Officer, Atlantic Funds and Nations Funds since 2007; Director (Columbia Management Group, LLC and Investment Product Group Compliance), Bank of America, June 2005 -- April 2010; Director of Corporate Compliance and Conflicts Officer, MFS Investment Management (investment management), August 2004 -- May 2005 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 68 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUNDS AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer and Center since 11/9/05 and Identity Theft Prevention Officer, Columbia Management Minneapolis, MN 55474 Identity Theft Investment Distributors, Inc. (formerly RiverSource Age 46 Prevention Officer Fund Distributors, Inc.) since 2008; Anti-Money since 2008 Laundering Officer, Ameriprise Financial, Inc. since 2005; Compliance Director, Ameriprise Financial, Inc., 2004-2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 69 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, 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"), Columbia Management provides investment advice and other services to the Fund and all funds branded Columbia, RiverSource, Seligman and Threadneedle. 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. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's proposed revised expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors, including in an executive session without management, 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 Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive -------------------------------------------------------------------------------- 70 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. 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 Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management 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 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. The Board observed that the Fund's investment performance reflected the interrelationship of market conditions with the particular investment strategies employed by the portfolio -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 71 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- management team. Further, the Board noted measures taken to address the Fund's performance, including the anticipated change in portfolio managers for the Fund. In this regard, the Board reviewed a detailed report illustrating the performance and track record of the new portfolio managers expected to assume responsibilities for the Fund upon the close of the Columbia Transaction. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management 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 Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). 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 legacy RiverSource Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund (excluding the effect of a performance incentive adjustment), with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed revised 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. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various legacy RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the legacy RiverSource Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment -------------------------------------------------------------------------------- 72 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT -------------------------------------------------------------------------------- management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the legacy RiverSource 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 Columbia Management 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 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.345.6611; contacting your financial intermediary; visiting columbiamanagement.com; 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 columbiamanagement.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2010 ANNUAL REPORT 73 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND P.O. Box 8081 Boston, MA 02266-8081 COLUMBIAMANAGEMENT.COM This report must be accompanied or preceded by the Fund's current prospectus. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC (C)2010 Columbia Management Investment Advisers, LLC. All (COLUMBIA MANAGEMENT LOGO) rights reserved. S-6397 G (9/10)
Item 2. Code of Ethics. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were no waivers, including any implicit waivers, from a provision of the code of ethics described in 2(a) above that relates to one or more of the items set forth in paragraph (b) of this item's instructions. Item 3. Audit Committee Financial Expert. The Registrant's board of directors has determined that independent directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services (a) Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP for professional services rendered for the audits of the annual financial statements for RiverSource Dimensions Series, Inc. were as follows: 2010 - $40,254 2009 - $40,142 (b) Audit-Related Fees. The fees for the year ended July 31, to Ernst & Young LLP for additional audit-related services rendered related to the semiannual financial statement review and the 2010 transfer agent 17Ad-13 review for RiverSource Dimensions Series, Inc. were as follows: 2010 - $865 2009 - $750 (c) Tax Fees. The fees for the year ended July 31, to Ernst & Young LLP for tax compliance related services rendered for RiverSource Dimensions Series, Inc. were as follows: 2010 - $6,392 2009 - $6,360 (d) All Other Fees. The fees for the year ended July 31, to Ernst & Young LLP for additional professional services rendered for RiverSource Dimensions Series, Inc. were as follows: 2010 - $0 2009 - $0 (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by Ernst & Young LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2010 and 2009 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP by the registrant for non-audit fees and by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2010 - $2,118,218 2009 - $829,596 (h) 100% of the services performed in item (g) above during 2010 and 2009 were pre-approved by the Ameriprise Financial Audit Committee and/or the RiverSource Mutual Funds Audit Committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The registrant's "Schedule 1 - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors. Item 11. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There was no change in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR, is attached as Exhibit 99.CODE ETH. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Dimensions Series, Inc. By /s/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date October 7, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date October 7, 2010 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date October 7, 2010