N-CSRS 1 c49570nvcsrs.txt N-CSRS 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: 7/31 Date of reporting period: 1/31 Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED JANUARY 31, 2009 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY FUNDS ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 23 Notes to Financial Statements...... 29 Proxy Voting....................... 44
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) Class A shares declined 38.74% (excluding sales charge) for the six-month period ended Jan. 31, 2009. > The Fund underperformed its benchmark, the Russell 2500(R) Index, which fell 37.83% for the same period. > The Fund also underperformed the Lipper Mid-Cap Core Funds Index, representing the Fund's peer group, which declined 36.88%, for the same period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) --------------------------------------------------------------------------------
Since inception 6 months* 1 year 5/18/06 ------------------------------------------------------------------- RiverSource Disciplined Small and Mid Cap Equity Fund Class A (excluding sales charge) -38.74% -39.53% -20.05% ------------------------------------------------------------------- Russell 2500 Index (unmanaged)(1) -37.83% -38.74% -15.17% ------------------------------------------------------------------- Lipper Mid-Cap Core Funds Index(2) -36.88% -38.47% -13.90% -------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index. (1) The Russell 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 -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 5/18/06) -38.74% -39.53% -20.05% -------------------------------------------------------------------- Class B (inception 5/18/06) -38.94% -39.95% -20.65% -------------------------------------------------------------------- Class C (inception 5/18/06) -38.94% -39.95% -20.67% -------------------------------------------------------------------- Class I (inception 5/18/06) -38.52% -39.24% -19.74% -------------------------------------------------------------------- Class R4 (inception 5/18/06) -38.66% -39.31% -19.81% -------------------------------------------------------------------- Class W (inception 12/1/06) -38.67% -39.54% -25.54% -------------------------------------------------------------------- With sales charge Class A (inception 5/18/06) -42.25% -43.02% -21.79% -------------------------------------------------------------------- Class B (inception 5/18/06) -41.99% -42.95% -21.84% -------------------------------------------------------------------- Class C (inception 5/18/06) -39.55% -40.55% -20.67% --------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 5/18/06) -31.69% -35.78% -17.49% -------------------------------------------------------------------- Class B (inception 5/18/06) -31.99% -36.33% -18.13% -------------------------------------------------------------------- Class C (inception 5/18/06) -31.99% -36.33% -18.15% -------------------------------------------------------------------- Class I (inception 5/18/06) -31.46% -35.48% -17.17% -------------------------------------------------------------------- Class R4 (inception 5/18/06) -31.52% -35.54% -17.24% -------------------------------------------------------------------- Class W (inception 12/1/06) -31.58% -35.83% -22.73% -------------------------------------------------------------------- With sales charge Class A (inception 5/18/06) -35.63% -39.47% -19.34% -------------------------------------------------------------------- Class B (inception 5/18/06) -35.40% -39.52% -19.39% -------------------------------------------------------------------- Class C (inception 5/18/06) -32.67% -36.97% -18.15% --------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are available to institutional investors only. Class W shares are offered through qualifying discretionary accounts. * Not annualized. -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE X SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) --------------------------------------------------------------------------------
Total fund Net fund expenses expenses(a) ----------------------------------------- Class A 1.32% 1.23% ----------------------------------------- Class B 2.09% 2.00% ----------------------------------------- Class C 2.08% 1.99% ----------------------------------------- Class I 0.91% 0.79% ----------------------------------------- Class R4 1.23% 1.09% ----------------------------------------- Class W 1.34% 1.24% -----------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.13% for the year ended July 31, 2008), will not exceed 1.36% for Class A, 2.13% for Class B, 2.12% for Class C, 0.92% for Class I, 1.22% for Class R4 and 1.37% for Class W. Investments in small- and mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- SECTOR DIVERSIFICATION(1) (at Jan. 31, 2009; % of portfolio assets) ---------------------------------------------------------------------
Consumer Discretionary 15.0% ------------------------------------------------ Consumer Staples 5.1% ------------------------------------------------ Energy 9.3% ------------------------------------------------ Financials 16.1% ------------------------------------------------ Health Care 12.2% ------------------------------------------------ Industrials 14.9% ------------------------------------------------ Information Technology 11.7% ------------------------------------------------ Materials 4.0% ------------------------------------------------ Telecommunication Services 0.9% ------------------------------------------------ Utilities 3.1% ------------------------------------------------ Other(2) 7.7% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 7.7%, 5.7% is due to security lending activity and 2.0% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. TOP TEN HOLDINGS (at Jan. 31, 2009; % of portfolio assets) ---------------------------------------------------------------------
Aspen Insurance Holdings 1.1% ------------------------------------------------ Myriad Genetics 0.9% ------------------------------------------------ Platinum Underwriters Holdings 0.9% ------------------------------------------------ Validus Holdings 0.8% ------------------------------------------------ ManTech Intl Cl A 0.8% ------------------------------------------------ ViroPharma 0.8% ------------------------------------------------ Odyssey Re Holdings 0.7% ------------------------------------------------ SkyWest 0.7% ------------------------------------------------ Perini 0.7% ------------------------------------------------ Mueller Inds 0.7% ------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE --------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Jan. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED AUG. 1, 2008 JAN. 31, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 612.60 $ 5.17 1.28% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.48 1.28% ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 610.60 $ 8.32 2.06% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.74 $10.40 2.06% ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 610.60 $ 8.32 2.06% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.74 $10.40 2.06% ------------------------------------------------------------------------------------------ Class I ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 614.80 $ 3.56 .88% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.66 $ 4.46 .88% ------------------------------------------------------------------------------------------ Class R4 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 613.40 $ 4.61 1.14% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.35 $ 5.77 1.14% ------------------------------------------------------------------------------------------ Class W ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 613.30 $ 5.18 1.28% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.48 1.28% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Jan. 31, 2009: -38.74% for Class A, -38.94% for Class B, -38.94% for Class C, -38.52% for Class I, -38.66% for Class R4 and -38.67% for Class W. -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------ JAN. 31, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (87.2%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.9%) AeroVironment 11,648(b,e) $431,675 American Science & Engineering 4,466 348,348 Axsys Technologies 3,956(b) 168,921 Ceradyne 26,738(b) 610,161 --------------- Total 1,559,105 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.6%) CH Robinson Worldwide 5,415 248,982 Hub Group Cl A 19,026(b) 431,890 Pacer Intl 43,929 377,789 --------------- Total 1,058,661 ------------------------------------------------------------------------------------- AIRLINES (2.3%) Alaska Air Group 31,828(b) 838,986 Allegiant Travel 8,932(b) 319,408 AMR 33,643(b) 199,839 Continental Airlines Cl B 16,295(b) 219,494 Delta Air Lines 67,345(b) 464,681 Hawaiian Holdings 67,182(b) 273,431 SkyWest 75,305 1,178,523 Southwest Airlines 52,501 369,082 UAL 14,540(b) 137,258 --------------- Total 4,000,702 ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.8%) Autoliv 17,764(c) 326,680 Cooper Tire & Rubber 61,399 286,733 Exide Technologies 52,790(b) 191,628 Fuel Systems Solutions 9,187(b) 240,148 Goodyear Tire & Rubber 27,240(b) 168,071 Lear 206,190(b) 187,633 --------------- Total 1,400,893 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.0%) Cephalon 5,853(b,e) 451,735 CV Therapeutics 33,718(b) 527,687 Emergent BioSolutions 18,800(b,e) 412,284 Myriad Genetics 19,613(b) 1,462,540 NPS Pharmaceuticals 43,419(b) 270,935 Vertex Pharmaceuticals 8,414(b) 278,083 --------------- Total 3,403,264 ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.5%) American Woodmark 16,381 246,535 Insteel Inds 26,792(e) 206,298 Owens Corning 10,618(b) 141,644 Trex 15,209(b) 224,941 --------------- Total 819,418 ------------------------------------------------------------------------------------- CAPITAL MARKETS (1.0%) Broadpoint Securities Group 15,358(b) 34,556 Knight Capital Group Cl A 24,556(b) 442,745 Stifel Financial 15,815(b) 554,158 SWS Group 51,139 749,185 --------------- Total 1,780,644 ------------------------------------------------------------------------------------- CHEMICALS (1.1%) Eastman Chemical 4,522 117,346 Innophos Holdings 16,035 242,610 OM Group 20,370(b,e) 394,770 Solutia 48,664(b) 190,276 Stepan 6,850 251,327 Westlake Chemical 12,362 168,989 WR Grace & Co 105,736(b) 610,096 --------------- Total 1,975,414 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.2%) BancFirst 6,171 219,811 First BanCorp 29,231(c,e) 207,832 First Citizens BancShares Cl A 1,205 168,531 First Financial 9,065 300,505 First Financial Bankshares 13,610(e) 604,149 Intl Bancshares 27,600(e) 502,873 Republic Bancorp Cl A 11,577 208,386
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL BANKS (CONT.) TowneBank 14,586 $303,972 Trico Bancshares 15,002 302,140 Trustmark 15,930 323,379 UMB Financial 8,018 310,617 Wilshire Bancorp 34,347 235,620 Yadkin Valley Financial 5,679 52,190 Zions Bancorporation 10,820(e) 161,434 --------------- Total 3,901,439 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (1.3%) ABM Inds 13,014 193,258 American Ecology 7,693 153,475 Clean Harbors 7,868(b) 421,017 HNI 20,558 271,571 Kimball Intl Cl B 37,006 254,971 Republic Services 9,310 240,757 Sykes Enterprises 18,468(b) 308,600 Tetra Tech 9,696(b) 225,238 United Stationers 9,404(b) 263,406 --------------- Total 2,332,293 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.3%) 3Com 138,185(b) 321,971 ARRIS Group 40,211(b,e) 286,302 InterDigital 28,717(b) 928,420 NETGEAR 26,916(b) 299,306 Tekelec 27,702(b) 344,059 Tellabs 30,358(b) 125,379 --------------- Total 2,305,437 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.2%) Adaptec 111,318(b) 310,577 Electronics for Imaging 36,290(b) 322,618 Lexmark Intl Cl A 21,694(b) 513,714 NCR 18,125(b) 227,469 Western Digital 50,091(b) 735,336 --------------- Total 2,109,714 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (1.5%) EMCOR Group 22,736(b) 468,134 Granite Construction 30,628(e) 1,078,718 Perini 54,669(b) 1,139,849 --------------- Total 2,686,701 ------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.1%) Vulcan Materials 3,466 171,428 ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.4%) Advanta Cl B 122,086(e) 95,227 Discover Financial Services 72,035 515,050 --------------- Total 610,277 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.6%) Pactiv 7,742(b) 167,382 Rock-Tenn Cl A 28,877 900,096 --------------- Total 1,067,478 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (1.1%) Corinthian Colleges 38,181(b,e) 713,221 H&R Block 31,265(f) 648,123 Regis 22,830 256,838 Universal Technical Institute 18,301(b) 320,817 --------------- Total 1,938,999 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.1%) Moody's 8,092 173,331 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%) CenturyTel 4,048 109,863 Embarq 15,324 547,373 Qwest Communications Intl 106,852(e) 344,063 --------------- Total 1,001,299 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.5%) Hawaiian Electric Inds 15,914 345,016 Portland General Electric 26,639 518,128 --------------- Total 863,144 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.7%) American Superconductor 14,500(b,e) 234,610 Encore Wire 8,693 143,521 Energy Conversion Devices 22,614(b) 569,195 GrafTech Intl 43,098(b) 345,215 --------------- Total 1,292,541 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (2.7%) Anixter Intl 16,166(b) $436,159 Arrow Electronics 25,739(b) 490,843 Avnet 26,651(b) 528,223 Benchmark Electronics 86,299(b) 1,013,150 Ingram Micro Cl A 40,233(b) 493,659 Insight Enterprises 52,140(b,e) 270,085 Jabil Circuit 41,031 238,800 L-1 Identity Solutions 18,253(b) 132,334 Methode Electronics 53,446 246,921 Plexus 18,024(b) 260,627 SYNNEX 28,248(b,e) 433,607 Vishay Intertechnology 33,589(b) 99,423 --------------- Total 4,643,831 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (3.5%) BASiC Energy Services 69,392(b) 666,162 BJ Services 35,836 394,196 Bronco Drilling 34,636(b,e) 182,878 Complete Production Services 53,348(b) 341,961 ENSCO Intl 18,813 514,724 GulfMark Offshore 12,798(b) 306,384 Helmerich & Payne 11,462 257,437 Lufkin Inds 12,694 443,655 Nabors Inds 42,453(b,c) 464,860 Newpark Resources 55,160(b) 232,224 Noble 12,731 345,647 Oil States Intl 6,726(b) 123,153 Parker Drilling 199,164(b) 422,228 Patterson-UTI Energy 25,763 246,294 Pioneer Drilling 64,578(b) 320,953 Rowan Companies 12,134 153,616 RPC 16,438 122,299 SEACOR Holdings 1,695(b,e) 110,243 Tidewater 6,396 266,138 Unit 8,826(b) 220,120 --------------- Total 6,135,172 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.6%) Casey's General Stores 22,742(e) 483,268 Ingles Markets Cl A 19,931 284,216 Nash Finch 9,177 394,886 Pantry 10,808(b) 179,737 Safeway 14,965 320,700 SUPERVALU 32,758 574,575 Winn-Dixie Stores 44,889(b,e) 616,775 --------------- Total 2,854,157 ------------------------------------------------------------------------------------- FOOD PRODUCTS (3.0%) Bunge 9,547 409,948 Cal-Maine Foods 11,374 308,008 Darling Intl 56,882(b) 261,088 Dean Foods 9,590(b) 185,471 Flowers Foods 38,364 824,442 Fresh Del Monte Produce 16,557(b,c) 399,024 Hershey 9,627 358,895 Imperial Sugar 10,563 119,996 J&J Snack Foods 7,179 250,619 JM Smucker 6,854 309,458 Lance 16,186 304,782 Ralcorp Holdings 13,571(b) 803,675 Sanderson Farms 7,471 270,301 TreeHouse Foods 14,991(b) 395,612 --------------- Total 5,201,319 ------------------------------------------------------------------------------------- GAS UTILITIES (1.7%) Atmos Energy 6,837 167,848 Laclede Group 15,643 710,036 New Jersey Resources 27,143 1,088,163 Piedmont Natural Gas 39,766 1,030,337 --------------- Total 2,996,384 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.9%) Conmed 9,673(b) 151,382 CryoLife 19,692(b) 162,262 Cyberonics 13,006(b) 200,162 Greatbatch 13,679(b) 318,721 Natus Medical 15,919(b) 123,213 STERIS 28,857 767,596 Thoratec 34,455(b) 998,162 Vision-Sciences 17,885(b) 22,893 Volcano 26,861(b) 351,073 ZOLL Medical 9,850(b) 157,699 --------------- Total 3,253,163 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.9%) Almost Family 6,055(b) 186,736 AMERIGROUP 31,448(b) 879,601
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) CIGNA 33,629 $583,799 Coventry Health Care 16,823(b) 254,532 Gentiva Health Services 13,776(b) 348,257 Health Net 13,954(b,e) 204,147 HealthSpring 59,185(b) 1,031,004 Humana 24,080(b,f) 913,354 Kindred Healthcare 58,062(b) 787,901 Landauer 6,687 458,594 LHC Group 5,286(b) 140,660 Magellan Health Services 27,517(b) 996,666 Molina Healthcare 21,342(b) 374,339 Omnicare 14,323 400,471 Quest Diagnostics 9,090 448,592 Universal American Financial 37,258(b) 367,736 Universal Health Services Cl B 4,749 179,750 --------------- Total 8,556,139 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.3%) Bob Evans Farms 15,791 277,290 Buffalo Wild Wings 6,554(b) 147,203 Panera Bread Cl A 3,401(b,e) 159,779 --------------- Total 584,272 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.4%) American Greetings Cl A 49,848 216,340 DR Horton 15,222 90,723 Helen of Troy 7,671(b,c) 80,315 Leggett & Platt 15,128(e) 188,949 Natl Presto Inds 6,438 432,247 NVR 819(b) 348,968 Pulte Homes 15,369 155,995 Ryland Group 16,930(e) 264,108 Toll Brothers 8,450(b) 143,819 Whirlpool 16,205(f) 541,734 --------------- Total 2,463,198 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.2%) Clorox 5,390 270,309 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) Calpine 11,716(b) 86,816 Constellation Energy Group 6,593(e) 173,395 --------------- Total 260,211 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.5%) Seaboard 496 498,480 Tredegar 18,015 297,248 --------------- Total 795,728 ------------------------------------------------------------------------------------- INSURANCE (8.4%) Allied World Assurance Holdings 6,758(c) 254,777 American Financial Group 10,377 176,201 Amerisafe 31,651(b) 592,823 Arch Capital Group 5,668(b,c) 340,930 Aspen Insurance Holdings 80,102(c) 1,770,254 Axis Capital Holdings 18,336(c) 444,831 Cincinnati Financial 12,717 278,884 Endurance Specialty Holdings 6,853(c) 186,813 Everest Re Group 5,929(c) 373,527 HCC Insurance Holdings 14,212 332,703 IPC Holdings 40,505(c) 1,039,358 Marsh & McLennan Companies 33,488(f) 647,323 Montpelier Re Holdings 55,182(c) 780,273 Odyssey Re Holdings 25,332 1,191,871 PartnerRe 6,248(c) 409,431 Platinum Underwriters Holdings 50,692(c) 1,409,745 Progressive 32,636(b) 396,527 RenaissanceRe Holdings 7,548(c) 337,320 RLI 15,471 873,957 Validus Holdings 55,218(c) 1,260,075 WR Berkley 17,673 467,981 Zenith Natl Insurance 32,899 922,488 --------------- Total 14,488,092 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.3%) NutriSystem 38,716(e) 499,049 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) INTERNET SOFTWARE & SERVICES (0.6%) Ariba 43,024(b,e) $328,703 EarthLink 55,941(b) 421,237 ModusLink Global Solutions 109,968(b) 256,225 --------------- Total 1,006,165 ------------------------------------------------------------------------------------- IT SERVICES (2.7%) Affiliated Computer Services Cl A 9,418(b) 431,909 Ciber 70,141(b) 305,815 Computer Sciences 24,000(b,f) 884,160 CSG Systems Intl 30,572(b) 443,294 Integral Systems 29,868(b) 326,457 ManTech Intl Cl A 23,360(b,e) 1,252,798 Paychex 12,653 307,341 Perot Systems Cl A 29,477(b) 382,906 SAIC 20,574(b) 406,131 --------------- Total 4,740,811 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.7%) Brunswick 90,719(e) 252,199 Hasbro 6,263 151,126 JAKKS Pacific 42,568(b) 780,697 --------------- Total 1,184,022 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.5%) Illumina 5,318(b,e) 145,500 Luminex 20,745(b) 422,576 Sequenom 15,606(b,e) 345,829 --------------- Total 913,905 ------------------------------------------------------------------------------------- MACHINERY (2.2%) Bucyrus Intl 4,072 63,116 Cummins 7,714 184,982 Force Protection 56,704(b) 340,791 FreightCar America 9,230 176,755 Gardner Denver 4,755(b) 103,516 Gorman-Rupp 5,733(e) 146,765 Mueller Inds 54,405 1,094,628 NACCO Inds Cl A 8,256 264,109 Nordson 10,357(e) 312,885 Terex 13,561(b) 160,562 Timken 12,764 190,056 Wabtec 29,105 871,113 --------------- Total 3,909,278 ------------------------------------------------------------------------------------- MEDIA (0.3%) Marvel Entertainment 19,482(b) 535,950 ------------------------------------------------------------------------------------- METALS & MINING (1.7%) Allegheny Technologies 9,003(e) 198,876 AM Castle & Co 27,163 229,799 Cliffs Natural Resources 13,423 311,011 Commercial Metals 24,344(e) 279,956 Compass Minerals Intl 12,900 776,192 Kaiser Aluminum 6,202(e) 154,058 Olympic Steel 15,741 249,810 Reliance Steel & Aluminum 10,284 227,585 Schnitzer Steel Inds Cl A 4,141(e) 162,617 Worthington Inds 31,230 314,174 --------------- Total 2,904,078 ------------------------------------------------------------------------------------- MULTILINE RETAIL (2.1%) Big Lots 12,196(b,e) 164,036 Dillard's Cl A 79,947 347,769 Dollar Tree 10,496(b) 448,284 Family Dollar Stores 19,097 530,324 Fred's Cl A 39,065 400,807 JC Penney 30,271(e) 507,039 Kohl's 19,850(b,f) 728,695 Macy's 31,717 283,867 Sears Holdings 6,895(b,e) 282,143 --------------- Total 3,692,964 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.6%) DTE Energy 6,381 220,145 Integrys Energy Group 2,984 124,582 MDU Resources Group 11,308 224,916 PG&E 6,188 239,290 Vectren 5,880 151,645 --------------- Total 960,578 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (5.4%) BPZ Resources 30,095(b,e) 173,347 Cimarex Energy 12,026 298,726 Clayton Williams Energy 7,281(b) 289,784
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (CONT.) Comstock Resources 22,925(b) $874,129 CONSOL Energy 7,261 197,935 Contango Oil & Gas 5,376(b,e) 239,770 EXCO Resources 59,454(b) 602,864 Frontier Oil 13,637 194,736 GMX Resources 6,647(b) 150,687 Goodrich Petroleum 11,351(b) 328,044 Gran Tierra Energy 83,622(b,c) 236,650 Intl Coal Group 62,955(b,e) 152,351 James River Coal 17,576(b) 238,331 McMoRan Exploration 38,359(b) 256,622 Murphy Oil 9,170 405,131 Penn Virginia 16,561 341,157 PetroQuest Energy 46,406(b,e) 293,750 Rosetta Resources 42,154(b) 255,875 Southwestern Energy 18,128(b) 573,751 St. Mary Land & Exploration 9,404 181,967 Stone Energy 26,106(b) 223,989 Sunoco 13,334 617,631 Swift Energy 45,140(b) 691,545 Tesoro 15,744(e) 271,269 USEC 90,299(b) 459,622 VAALCO Energy 47,449(b) 356,342 World Fuel Services 9,210 311,022 --------------- Total 9,217,027 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Intl Paper 16,538 150,827 Wausau Paper 35,085 333,658 --------------- Total 484,485 ------------------------------------------------------------------------------------- PHARMACEUTICALS (2.2%) Forest Laboratories 32,230(b,f) 807,039 King Pharmaceuticals 53,035(b) 463,526 Par Pharmaceutical Companies 25,245(b) 310,766 Valeant Pharmaceuticals Intl 42,729(b) 927,219 ViroPharma 102,996(b) 1,235,953 VIVUS 34,885(b) 171,285 --------------- Total 3,915,788 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (1.2%) Administaff 15,449 325,820 Heidrick & Struggles Intl 16,746 254,539 Kelly Services Cl A 33,722 305,521 Korn/Ferry Intl 31,666(b) 297,660 Manpower 7,403 210,689 Navigant Consulting 13,471(b) 193,039 TrueBlue 53,674(b) 456,230 --------------- Total 2,043,498 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (1.7%) American Campus Communities 13,122 280,417 Annaly Capital Management 20,082 304,041 Anworth Mtge Asset 47,579 294,990 Capstead Mtge 28,482 303,903 Digital Realty Trust 3,528(e) 112,543 Equity Residential 24,591(f) 588,462 Health Care REIT 5,349(e) 202,246 Liberty Property Trust 14,271 285,420 Public Storage 4,725(e) 292,336 UDR 13,268(e) 155,634 Ventas 5,533 154,205 --------------- Total 2,974,197 ------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.2%) Avatar Holdings 10,137(b) 263,055 St. Joe 5,944(b) 142,953 --------------- Total 406,008 ------------------------------------------------------------------------------------- ROAD & RAIL (1.5%) Arkansas Best 35,184 822,953 Con-way 4,045 89,111 Genesee & Wyoming Cl A 12,817(b) 348,238 Kansas City Southern 6,110(b) 110,958 Old Dominion Freight Line 11,074(b,e) 277,736 Ryder System 7,202 243,284 Saia 33,051(b) 353,315 Werner Enterprises 17,827 267,405 YRC Worldwide 32,549(b,e) 93,741 --------------- Total 2,606,741 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.8%) Altera 16,635(f) $255,846 Amkor Technology 143,260(b) 332,363 Atmel 39,670(b) 132,498 Lam Research 10,411(b) 210,406 Linear Technology 9,240 216,401 MKS Instruments 30,529(b) 428,933 OmniVision Technologies 63,778(b) 426,675 Sigma Designs 35,788(b,e) 365,753 Silicon Image 79,410(b,e) 291,435 Xilinx 15,398 259,456 Zoran 41,856(b) 248,625 --------------- Total 3,168,391 ------------------------------------------------------------------------------------- SOFTWARE (0.7%) Intuit 10,454(b) 236,783 Quality Systems 8,805(e) 328,249 Red Hat 10,024(b) 146,852 Take-Two Interactive Software 44,582 312,966 TeleCommunication Systems Cl A 36,697(b) 262,751 --------------- Total 1,287,601 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (6.7%) Aaron Rents 34,376 751,460 Advance Auto Parts 5,869 192,092 Aeropostale 30,392(b,e) 641,576 American Eagle Outfitters 13,843(e) 124,725 Asbury Automotive Group 72,484 259,493 AutoNation 21,969(b) 203,872 AutoZone 2,151(b) 285,846 Barnes & Noble 9,010(e) 147,944 Bed Bath & Beyond 9,601(b,e) 223,031 Blockbuster Cl A 266,610(b) 339,928 Brown Shoe 53,334 250,136 Cato Cl A 27,488 363,666 Chico's FAS 80,633(b) 319,307 Children's Place Retail Stores 22,616(b) 425,407 Collective Brands 48,982(b) 522,639 Dress Barn 58,454(b) 503,873 Finish Line Cl A 52,136 247,646 Foot Locker 46,946 345,523 Gap 45,741 515,958 Group 1 Automotive 34,728 346,238 Hot Topic 56,284(b) 480,665 Jo-Ann Stores 15,175(b,e) 193,785 Jos A Bank Clothiers 17,768(b,e) 487,909 Limited Brands 19,449 154,036 Men's Wearhouse 41,580 484,407 Office Depot 57,519(b) 124,241 PetSmart 11,306 212,214 RadioShack 25,829 296,000 Rent-A-Center 52,163(b) 774,622 Ross Stores 13,770 405,113 Sherwin-Williams 4,270 203,893 Stage Stores 41,554 297,111 Urban Outfitters 7,630(b) 118,875 Wet Seal Cl A 116,827(b) 304,918 --------------- Total 11,548,149 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) Carter's 27,188(b) 461,924 Skechers USA Cl A 25,541(b) 254,388 Steven Madden 11,391(b) 197,976 --------------- Total 914,288 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.2%) Capitol Federal Financial 3,904 161,626 First Niagara Financial Group 64,195 838,387 Hudson City Bancorp 16,069 186,400 NewAlliance Bancshares 13,582 149,266 Ocwen Financial 40,323(b) 358,875 People's United Financial 14,643 239,559 Trustco Bank NY 27,877 186,776 --------------- Total 2,120,889 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.8%) Beacon Roofing Supply 30,466(b) 387,832 GATX 3,354 80,831 Rush Enterprises Cl A 34,796(b) 316,644 United Rentals 12,634(b) 70,498 Watsco 11,538 381,331 WESCO Intl 9,603(b) 176,887 --------------- Total 1,414,023 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) WIRELESS TELECOMMUNICATION SERVICES (0.3%) USA Mobility 43,861(b) $463,611 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $170,547,512) $151,865,653 ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.47% 3,285,965(d) $3,285,965 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $3,285,965) $3,285,965 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (5.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 9,306,867 $9,306,867 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $9,306,867) $9,306,867 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $183,140,344)(g) $164,458,485 =====================================================================================
INVESTMENTS IN DERIVATIVES FUTURES CONTRACTS OUTSTANDING AT JAN. 31, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ E-Mini S&P MidCap 400 151 $7,509,230 March 2009 $(503,826) Index Russell 2000 Mini Index 321 14,207,460 March 2009 (960,969) ------------------------------------------------------------------------------------ Total $(1,464,795) ------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2009, the value of foreign securities represented 5.9% of net assets. (d) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at Jan. 31, 2009. (e) At Jan. 31, 2009, security was partially or fully on loan. See Note 5 to the financial statements. -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) At Jan. 31, 2009, investments in securities included securities valued at $5,084,251 that were partially pledged as collateral to cover initial margin deposits on open stock index futures contracts. (g) At Jan. 31, 2009, the cost of securities for federal income tax purposes was approximately $183,140,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $5,828,000 Unrealized depreciation (24,510,000) ------------------------------------------------------------ Net unrealized depreciation $(18,682,000) ------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, industry implementation has just begun and it is likely that there will be a range of practices utilized and it will be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 ---------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in securities $164,458,485 $-- $-- $164,458,485 Other financial instruments* (1,464,795) -- -- (1,464,795) ----------------------------------------------------------------------------------- Total $162,993,690 $-- $-- $162,993,690 -----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument. -------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JAN. 31, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $170,547,512) $151,865,653 Affiliated money market fund (identified cost $3,285,965) 3,285,965 Investments of cash collateral received for securities on loan (identified cost ($9,306,867) 9,306,867 ------------------------------------------------------------------------------- Total investments in securities (identified cost $183,140,344) 164,458,485 Cash 11,207 Capital shares receivable 20,138,142 Dividends and accrued interest receivable 73,146 ------------------------------------------------------------------------------- Total assets 184,680,980 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 427,031 Payable for investment securities purchased 7,977 Payable upon return of securities loaned 9,306,867 Variation margin payable on futures contracts 628,500 Accrued investment management services fees 3,429 Accrued distribution fees 1,041 Accrued transfer agency fees 852 Accrued administrative services fees 294 Other accrued expenses 28,912 ------------------------------------------------------------------------------- Total liabilities 10,404,903 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $174,276,077 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 340,349 Additional paid-in capital 222,547,009 Excess of distributions over net investment income (313,576) Accumulated net realized gain (loss) (28,151,051) Unrealized appreciation (depreciation) on investments (20,146,654) ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $174,276,077 ------------------------------------------------------------------------------- *Including securities on loan, at value $ 8,732,933 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 8,596,846 1,671,716 $5.14(1) Class B $ 838,032 165,984 $5.05 Class C $ 253,418 50,174 $5.05 Class I $ 29,481,598 5,727,037 $5.15 Class R4 $ 6,199 1,205 $5.14 Class W $135,099,984 26,418,768 $5.11 -----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $5.45. The offering price is calculated by dividing the net asset value by 1.0 minus the maximum sales charge of 5.75%. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED JAN. 31, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 681,927 Income distributions from affiliated money market fund 14,085 Fee income from securities lending 17,100 Less foreign taxes withheld (290) ------------------------------------------------------------------------------- Total income 712,822 ------------------------------------------------------------------------------- Expenses: Investment management services fees 296,751 Distribution fees Class A 15,180 Class B 4,356 Class C 766 Class W 69,607 Transfer agency fees Class A 13,367 Class B 1,126 Class C 198 Class R4 2 Class W 55,685 Administrative services fees 26,268 Plan administration services fees -- Class R4 10 Compensation of board members 1,912 Custodian fees 7,110 Printing and postage 14,640 Registration fees 10,125 Professional fees 12,370 Other 3,618 ------------------------------------------------------------------------------- Total expenses 533,091 Expenses waived/reimbursed by the Investment Manager and its affiliates (7,094) Earnings and bank fee credits on cash balances (3) ------------------------------------------------------------------------------- Total net expenses 525,994 ------------------------------------------------------------------------------- Investment income (loss) -- net 186,828 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (12,600,012) Futures contracts 1,802,701 ------------------------------------------------------------------------------- Net realized gain (loss) on investments (10,797,311) Net change in unrealized appreciation (depreciation) on investments (16,819,733) ------------------------------------------------------------------------------- Net gain (loss) on investments (27,617,044) ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(27,430,216) -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 186,828 $ 129,791 Net realized gain (loss) on investments (10,797,311) (17,284,417) Net change in unrealized appreciation (depreciation) on investments (16,819,733) 4,376,682 -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (27,430,216) (12,777,944) -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A -- (34,283) Class I (91,008) (113,611) Class R4 (32) (45) Class W (408,881) (63,669) Tax return of capital Class A -- (10,260) Class I -- (34,002) Class R4 -- (13) Class W -- (19,056) -------------------------------------------------------------------------------------------------- Total distributions (499,921) (274,939) -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares 5,125,549 5,314,007 Class B shares 450,589 524,710 Class C shares 180,843 84,450 Class I shares 23,935,019 5,433,998 Class W shares 149,656,240 36,417,280 Reinvestment of distributions at net asset value Class A shares -- 23,307 Class I shares 90,986 147,564 Class R4 shares 5 14 Class W shares 408,872 82,712 Payments for redemptions Class A shares (6,396,372) (4,596,964) Class B shares (188,794) (699,446) Class C shares (16,705) (81,500) Class I shares (1,189,358) (24,982,300) Class R4 shares -- (3,611) Class W shares (9,878,625) (80,368,252) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 162,178,249 (62,704,031) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 134,248,112 (75,756,914) Net assets at beginning of period 40,027,965 115,784,879 -------------------------------------------------------------------------------------------------- Net assets at end of period $174,276,077 $ 40,027,965 -------------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (313,576) $ (483) --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ---------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(l) 2008 2007 2006(b) Net asset value, beginning of period $8.39 $9.55 $8.95 $9.48 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01(c) .00(c),(d) .05(c) -- Net gains (losses) (both realized and unrealized) (3.26) (1.14) .59 (.53) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.25) (1.14) .64 (.53) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.02) (.04) -- Tax return of capital -- (.00)(d) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (.02) (.04) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.14 $8.39 $9.55 $8.95 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $17 $18 $9 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 1.38%(g) 1.32% 1.67% 5.83%(g) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.28%(g) 1.20% 1.29% 1.26%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .21%(g) .05% .52% .01%(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% 14% -------------------------------------------------------------------------------------------------------------- Total return(j) (38.74%)(k) (11.94%) 7.12% (5.59%)(k) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (i) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. (l) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $8.27 $9.47 $8.93 $9.48 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02)(c) (.06)(c) (.04)(c) (.01) Net gains (losses) (both realized and unrealized) (3.20) (1.14) .62 (.54) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.22) (1.20) .58 (.55) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- (.04) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.05 $8.27 $9.47 $8.93 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $1 $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.15%(f) 2.09% 2.12% 6.64%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.06%(f) 1.97% 2.06% 2.07%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.56%)(f) (.71%) (.41%) (.37%)(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% 14% -------------------------------------------------------------------------------------------------------------- Total return(i) (38.94%)(j) (12.67%) 6.43% (5.80%)(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $8.27 $9.47 $8.93 $9.48 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02)(c) (.06)(c) (.04)(c) (.01) Net gains (losses) (both realized and unrealized) (3.20) (1.14) .61 (.54) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.22) (1.20) .57 (.55) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- (.03) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.05 $8.27 $9.47 $8.93 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.14%(f) 2.08% 2.16% 6.61%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.06%(f) 1.96% 2.06% 2.04%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.52%)(f) (.72%) (.40%) (.78%)(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% 14% -------------------------------------------------------------------------------------------------------------- Total return(i) (38.94%)(j) (12.67%) 6.37% (5.80%)(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $8.41 $9.57 $8.95 $9.48 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(c) .05(c) .08(c) -- Net gains (losses) (both realized and unrealized) (3.26) (1.16) .59 (.53) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.24) (1.11) .67 (.53) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.04) (.05) -- Tax return of capital -- (.01) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions (.02) (.05) (.05) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.15 $8.41 $9.57 $8.95 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $15 $39 $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) .88%(f) .91% .95% 5.58%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .88%(f) .84% .95% 1.01%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .66%(f) .50% .80% .19%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% 14% -------------------------------------------------------------------------------------------------------------- Total return (38.52%)(i) (11.63%) 7.48% (5.59%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $8.42 $9.56 $8.95 $9.48 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(c) .04(c) .07(c) -- Net gains (losses) (both realized and unrealized) (3.27) (1.14) .58 (.53) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.25) (1.10) .65 (.53) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.03) (.04) -- Tax return of capital -- (.01) -- -- -------------------------------------------------------------------------------------------------------------- Total distributions (.03) (.04) (.04) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.14 $8.42 $9.56 $8.95 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.20%(f) 1.23% 1.68% 5.69%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) .90%(f) .84% 1.15% 1.12%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .61%(f) .42% .71% .21%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% 14% -------------------------------------------------------------------------------------------------------------- Total return (38.66%)(i) (11.48%) 7.30% (5.59%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 18, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS W
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $8.36 $9.54 $9.79 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .01 .01 -- Net gains (losses) (both realized and unrealized) (3.24) (1.17) (.20) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.23) (1.16) (.20) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.01) (.05) Tax return of capital -- (.01) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.02) (.02) (.05) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.11 $8.36 $9.54 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $135 $7 $57 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.28%(f) 1.34% 1.60%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.28%(f) 1.31% 1.32%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .41%(f) .08% .03%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 34% 56% 84% -------------------------------------------------------------------------------------------------------------- Total return (38.67%)(i) (12.13%) (2.06%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the six months ended Jan. 31, 2009 and for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS TO JAN. 31, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) is a series of RiverSource Dimensions Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Dimensions Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in equity securities of companies with 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 sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I and Class R4 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. - Class W shares are sold without a front-end sales charge or CDSC and are offered through qualifying discretionary accounts. At Jan. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of Class I shares. All classes of shares have identical voting, dividend and liquidation rights. Class specific expenses (e.g., distribution and service fees, transfer agency fees, plan administration services fees) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- VALUATION OF SECURITIES Effective Aug. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost, which approximates fair value. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the New York Stock Exchange. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At Jan. 31, 2009, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the counterparty will not complete its contract obligations. At Jan. 31, 2009, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures contracts, re- characterization of REIT distributions, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45." The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At Jan. 31, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of Jan. 31, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.70% to 0.475% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper Mid-Cap Core Funds Index. In certain circumstances, the Board may approve a change in the Index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the management fee by $9,709 for the six months ended Jan. 31, 2009. The management fee for the six months ended Jan. 31, 2009 was 0.68% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. The fee for the six months ended Jan. 31, 2009 was 0.06% 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 six months ended Jan. 31, 2009, there were no expenses incurred for these particular items. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class 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 charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class 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, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $55,000 and $3,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2009, and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $13,774 for Class A, $232 for Class B and $13 for Class C for the six months ended Jan. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended Jan. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class A............................................. 1.28% Class B............................................. 2.06 Class C............................................. 2.06 Class I............................................. 0.88 Class R4............................................ 0.90
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class A........................................... $1,766 Class B........................................... 199 Class C........................................... 43
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R4............................................ $10
The management fees waived/reimbursed at the Fund level were $5,076. The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.36% Class B............................................. 2.13 Class C............................................. 2.12 Class I............................................. 0.92 Class R4............................................ 1.22 Class W............................................. 1.37
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. EARNINGS AND BANK FEE CREDITS During the six months ended Jan. 31, 2009, the Fund's transfer agency fees were reduced by $3 as a result of bank fee credits from overnight cash balances. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JPMorgan Chase Bank, N.A. Prior to Dec. 15, 2008, the Fund paid custodian fees amounting to $22,891 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $167,322,998 and $27,017,702, respectively, for the six months ended Jan. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED JAN. 31, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 892,382 -- (1,216,437) (324,055) Class B 76,820 -- (31,957) 44,863 Class C 33,453 -- (2,964) 30,489 Class I 4,103,225 16,573 (209,096) 3,910,702 Class R4 -- 1 -- 1 Class W 27,348,599 74,885 (1,822,149) 25,601,335 ----------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) ---------------------------------------------------------------------------------- Class A 598,899 2,670 (530,197) 71,372 Class B 60,646 -- (83,716) (23,070) Class C 9,742 -- (9,464) 278 Class I 619,508 16,884 (2,871,475) (2,235,083) Class R4 -- 2 (384) (382) Class W 3,946,189 9,475 (9,117,650) (5,161,986) ----------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers on behalf of the Fund. Pursuant to the Agreement, all loaned securities are initially collateralized in an amount equivalent to 102% (for securities denominated in U.S. dollars) or 105% (for all other securities) of the value of the loaned securities, including accrued interest in the case of fixed income securities. Collateral is maintained over the life of the loan thereafter in an amount not less than 100% of the market value of loaned securities, as determined at the close of each business day, except to the extent that a collateral shortfall is due to a diminution in the market value of authorized investments in which cash collateral is invested. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Collateral is either in the form of cash or U.S. government securities. Cash collateral received is invested by the -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed on the Portfolio of Investments and the value of cash collateral received at period end is disclosed on the Statement of Assets and Liabilities along with the related obligation to return the collateral upon return of the securities loaned. At Jan. 31, 2009, securities valued at $8,732,933 were on loan secured by cash collateral of $9,306,867 invested in short-term securities or cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $17,100 earned from securities lending from Dec. 1, 2008 through Jan. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, RiverSource Investments, LLC served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Aug. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $28,707,036 and $26,137,868, respectively, for the six months ended Jan. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at Jan. 31, 2009, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 16, 2008, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended Jan. 31, 2009. Under the prior credit facility which was effective until Oct. 15, 2008, the Fund had entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permitted collective borrowings up to $500 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matured no later than 60 days after the date of borrowing. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. 8. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, the Fund had a capital loss carry-over of $2,301,857 at July 31, 2008, that if not offset by capital gains will expire as follows:
2014 2015 2016 $93,125 $21,904 $2,186,828
-------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post-October loss of $14,991,239 that is treated for income tax purposes as occurring on Aug. 1, 2008. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT 43 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2009 SEMIANNUAL REPORT RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6516 D (4/09)
Semiannual Report (RIVERSOURCE INVESTMENTS LOGO) RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND SEMIANNUAL REPORT FOR THE PERIOD ENDED JANUARY 31, 2009 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. (SINGLE STRATEGY ICON) TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 2 Fund Expenses Example.............. 6 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 18 Statement of Operations............ 20 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 24 Notes to Financial Statements...... 32 Proxy Voting....................... 47
(DALBAR LOGO) The RiverSource mutual fund shareholder reports have been awarded the Communications Seal from Dalbar Inc., an independent financial services research firm. The Seal recognizes communications demonstrating a level of excellence in the industry. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 1 YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > RiverSource Disciplined Small Cap Value Fund (the Fund) Class A shares declined 37.95% (excluding sales charge) for the six-month period ended Jan. 31, 2009. > The Fund underperformed its benchmark, the unmanaged Russell 2000(R) Value Index, which fell 35.72% for the same period. > The Fund also underperformed the Lipper Small-Cap Value Funds Index, representing the Fund's peer group, which declined 35.79%, for the same period. ANNUALIZED TOTAL RETURNS (for period ended Jan. 31, 2009) --------------------------------------------------------------------------------
Since inception 6 months* 1 year 2/16/06 ------------------------------------------------------------------- RiverSource Disciplined Small Cap Value Fund Class A (excluding sales charge) -37.95% -37.23% -17.87% ------------------------------------------------------------------- Russell 2000 Value Index (unmanaged)(1) -35.72% -36.47% -14.66% ------------------------------------------------------------------- Lipper Small-Cap Value Funds Index(2) -35.79% -37.37% -14.76% -------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution or visiting riversource.com/funds. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the table above. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. See the Average Annual Total Returns table for performance of other share classes of the Fund. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. It is not possible to invest directly in an index (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. -------------------------------------------------------------------------------- 2 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------
AT JAN. 31, 2009 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 2/16/06) -37.95% -37.23% -17.87% -------------------------------------------------------------------- Class B (inception 2/16/06) -38.15% -37.72% -18.53% -------------------------------------------------------------------- Class C (inception 2/16/06) -38.15% -37.72% -18.52% -------------------------------------------------------------------- Class I (inception 2/16/06) -37.85% -37.06% -17.62% -------------------------------------------------------------------- Class R2 (inception 12/11/06) -37.92% -37.27% -26.44% -------------------------------------------------------------------- Class R3 (inception 12/11/06) -37.89% -37.17% -26.29% -------------------------------------------------------------------- Class R4 (inception 2/16/06) -37.83% -36.97% -17.67% -------------------------------------------------------------------- Class R5 (inception 12/11/06) -37.82% -37.03% -26.08% -------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -41.49% -40.85% -19.49% -------------------------------------------------------------------- Class B (inception 2/16/06) -41.24% -40.83% -19.60% -------------------------------------------------------------------- Class C (inception 2/16/06) -38.77% -38.34% -18.52% --------------------------------------------------------------------
AT DEC. 31, 2008 SINCE Without sales charge 6 MONTHS* 1 YEAR INCEPTION Class A (inception 2/16/06) -26.01% -30.56% -14.48% -------------------------------------------------------------------- Class B (inception 2/16/06) -26.39% -31.19% -15.18% -------------------------------------------------------------------- Class C (inception 2/16/06) -26.39% -31.19% -15.18% -------------------------------------------------------------------- Class I (inception 2/16/06) -26.01% -30.48% -14.26% -------------------------------------------------------------------- Class R2 (inception 12/11/06) -26.07% -30.70% -22.52% -------------------------------------------------------------------- Class R3 (inception 12/11/06) -26.03% -30.50% -22.35% -------------------------------------------------------------------- Class R4 (inception 2/16/06) -25.88% -30.35% -14.26% -------------------------------------------------------------------- Class R5 (inception 12/11/06) -25.98% -30.45% -22.19% -------------------------------------------------------------------- With sales charge Class A (inception 2/16/06) -30.25% -34.58% -16.22% -------------------------------------------------------------------- Class B (inception 2/16/06) -30.07% -34.63% -16.33% -------------------------------------------------------------------- Class C (inception 2/16/06) -27.12% -31.88% -15.18% --------------------------------------------------------------------
Class A share performance reflects the maximum sales charge of 5.75%. Class B share performance reflects a contingent deferred sales charge (CDSC) applied as follows: first year 5%; second and third years 4%; fourth year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to a 1% CDSC if shares are sold within one year after purchase. Sales charges do not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I, Class R2, Class R3, Class R4 and Class R5 are available to institutional investors only. *Not annualized. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE MEDIUM SIZE X SMALL
Shading within the style matrix indicates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. ANNUAL OPERATING EXPENSE RATIO (as of the current prospectus) --------------------------------------------------------------------------------
Net fund and Total acquired fund fund Net fund (underlying expenses expenses(a) fund) expenses(b) ------------------------------------------------------- Class A 1.54% 1.24% 1.29% ------------------------------------------------------- Class B 2.29% 2.00% 2.05% ------------------------------------------------------- Class C 2.29% 2.00% 2.05% ------------------------------------------------------- Class I 1.22% 0.92% 0.97% ------------------------------------------------------- Class R2 2.03% 1.72% 1.77% ------------------------------------------------------- Class R3 1.79% 1.47% 1.52% ------------------------------------------------------- Class R4 1.52% 1.22% 1.27% ------------------------------------------------------- Class R5 1.28% 0.97% 1.02% -------------------------------------------------------
(a) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until July 31, 2009, unless sooner terminated at the discretion of the Fund's Board. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment (that decreased the management fee by 0.10% for the year ended July 31, 2008), will not exceed 1.43% for Class A, 2.19% for Class B, 2.19% for Class C, 1.04% for Class I, 1.84% for Class R2, 1.59% for Class R3, 1.34% for Class R4 and 1.09% for Class R5. (b) In addition to the Fund's total annual operating expenses that the Fund bears directly, the Fund's shareholders indirectly bear the expenses of acquired funds (affiliated and unaffiliated funds) in which the Fund invests. The Fund's "Acquired fund fees and expenses," based on its investment in the acquired funds, was 0.05% for the year ended July 31, 2008. Investments in small-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- 4 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION(1) (at Jan. 31, 2009; % of portfolio assets) --------------------------------------------------------------------- Consumer Discretionary 10.8% ------------------------------------------------ Consumer Staples 6.4% ------------------------------------------------ Energy 5.1% ------------------------------------------------ Financials 25.4% ------------------------------------------------ Health Care 7.5% ------------------------------------------------ Industrials 17.4% ------------------------------------------------ Information Technology 6.9% ------------------------------------------------ Materials 5.2% ------------------------------------------------ Telecommunication Services 0.9% ------------------------------------------------ Utilities 2.6% ------------------------------------------------ Other(2) 11.8% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. (2) Cash & Cash Equivalents. Of the 11.8%, 10.9% is due to security lending activity and 0.9% is the Fund's cash equivalent position. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. TOP TEN HOLDINGS (at Jan. 31, 2009; % of portfolio assets) --------------------------------------------------------------------- Aspen Insurance Holdings 1.9% ------------------------------------------------ Validus Holdings 1.6% ------------------------------------------------ Plantinum Underwriters Holdings 1.6% ------------------------------------------------ Odyssey Re Holdings 1.5% ------------------------------------------------ Magellan Health Services 1.4% ------------------------------------------------ IPC Holdings 1.3% ------------------------------------------------ UMB Financial 1.3% ------------------------------------------------ Ralcorp Holdings 1.2% ------------------------------------------------ Granite Construction 1.1% ------------------------------------------------ Zenith Natl Insurance 1.1% ------------------------------------------------
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 CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 5 FUND EXPENSES EXAMPLE --------------------------------------------------------- (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include management fees; distribution and service (12b-1) fees; and other Fund fees and expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Jan. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- 6 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING AUG. 1, 2008 JAN. 31, 2009 THE PERIOD(A) THE PERIOD(B) ------------------------------------------------------------------------------------------ Class A ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 620.50 $ 5.93 $ 5.97 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.75 $ 7.38 $ 7.44 ------------------------------------------------------------------------------------------ Class B ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 618.50 $ 9.01 $ 9.05 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.94 $11.21 $11.26 ------------------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 618.50 $ 8.97 $ 9.01 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.99 $11.16 $11.21 ------------------------------------------------------------------------------------------ Class I ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 621.50 $ 4.47 $ 4.51 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.55 $ 5.57 $ 5.62 ------------------------------------------------------------------------------------------ Class R2 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 620.80 $ 7.80 $ 7.84 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.44 $ 9.70 $ 9.75 ------------------------------------------------------------------------------------------ Class R3 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 621.10 $ 6.79 $ 6.83 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.70 $ 8.44 $ 8.49 ------------------------------------------------------------------------------------------ Class R4 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 621.70 $ 5.77 $ 5.81 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.95 $ 7.18 $ 7.23 ------------------------------------------------------------------------------------------ Class R5 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $ 621.80 $ 4.76 $ 4.80 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.20 $ 5.92 $ 5.97 ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) --------------------------------------------- ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES -------------------------------------------------------------------------- Class A 1.46% .01% 1.47% -------------------------------------------------------------------------- Class B 2.22% .01% 2.23% -------------------------------------------------------------------------- Class C 2.21% .01% 2.22% -------------------------------------------------------------------------- Class I 1.10% .01% 1.11% -------------------------------------------------------------------------- Class R2 1.92% .01% 1.93% -------------------------------------------------------------------------- Class R3 1.67% .01% 1.68% -------------------------------------------------------------------------- Class R4 1.42% .01% 1.43% -------------------------------------------------------------------------- Class R5 1.17% .01% 1.18% --------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund's annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended Jan. 31, 2009: -37.95% for Class A, -38.15% for Class B, -38.15% for Class C, -37.85% for Class I, -37.92% for Class R2, -37.89% for Class R3, -37.83% for Class R4 and -37.82% for Class R5. -------------------------------------------------------------------------------- 8 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------ JAN. 31, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.7%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.3%) Applied Signal Technology 2,016 $35,361 Ceradyne 18,210(b) 415,552 Curtiss-Wright 4,828(e) 155,944 Esterline Technologies 1,523(b) 54,965 --------------- Total 661,822 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.7%) Atlas Air Worldwide Holdings 2,977(b) 43,196 Hub Group Cl A 8,645(b) 196,242 Pacer Intl 15,103 129,886 --------------- Total 369,324 ------------------------------------------------------------------------------------- AIRLINES (2.6%) Alaska Air Group 22,302(b) 587,881 Allegiant Travel 2,162(b,e) 77,313 Hawaiian Holdings 20,171(b) 82,096 SkyWest 30,749 481,222 UAL 9,225(b) 87,084 --------------- Total 1,315,596 ------------------------------------------------------------------------------------- AUTO COMPONENTS (1.0%) ArvinMeritor 26,548 46,459 Cooper Tire & Rubber 39,959(e) 186,609 Dana Holding 107,191(b,e) 78,249 Lear 49,834(b) 45,349 Spartan Motors 13,239 57,457 Superior Inds Intl 7,929(e) 81,431 Tenneco 19,116(b) 35,173 --------------- Total 530,727 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.2%) Emergent BioSolutions 5,063(b,e) 111,032 ------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) Apogee Enterprises 3,003(e) 30,781 Insteel Inds 10,139(e) 78,070 Trex 4,159(b,e) 61,512 --------------- Total 170,363 ------------------------------------------------------------------------------------- CAPITAL MARKETS (4.0%) BGC Partners Cl A 41,705 100,509 Knight Capital Group Cl A 22,872(b) 412,382 MVC Capital 16,733 170,677 Penson Worldwide 34,986(b,e) 209,216 Stifel Financial 15,996(b) 560,500 SWS Group 33,985 497,880 Westwood Holdings Group 2,887 80,143 --------------- Total 2,031,307 ------------------------------------------------------------------------------------- CHEMICALS (1.9%) Ferro 5,300 20,988 Innophos Holdings 6,933 104,896 Koppers Holdings 3,527(e) 57,137 LSB Inds 8,367(b) 61,748 OM Group 14,403(b) 279,131 Rockwood Holdings 7,593(b) 57,023 Sensient Technologies 6,312 135,709 Stepan 1,916 70,298 Westlake Chemical 4,435 60,626 WR Grace & Co 18,876(b) 108,915 --------------- Total 956,471 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (7.1%) Arrow Financial 3,146 74,057 BancFirst 5,391 192,027 Camden Natl 4,738 110,395 Capitol Bancorp 12,800(e) 76,928 Community Trust Bancorp 7,290 203,901 First BanCorp 22,744(c,e) 161,710 First Financial 7,607 252,172 First Financial Bankshares 6,062(e) 269,092 Home BancShares 11,216 230,937 MainSource Financial Group 12,728 124,353 Republic Bancorp Cl A 4,228(e) 76,104 S&T Bancorp 8,605 218,825
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) COMMERCIAL BANKS (CONT.) S.Y. Bancorp 4,644 $105,790 Sandy Spring Bancorp 11,548(e) 163,058 TowneBank 12,031 250,726 Trustmark 13,736 278,842 UMB Financial 18,907 732,458 Yadkin Valley Financial 10,049 92,350 --------------- Total 3,613,725 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (1.9%) ABM Inds 9,537(e) 141,623 ATC Technology 6,630(b) 86,522 Comfort Systems USA 6,557 67,078 Consolidated Graphics 1,316(b,e) 21,201 Cornell Companies 2,910(b) 44,407 GeoEye 4,848(b,e) 83,628 Herman Miller 4,939 54,280 HNI 7,771 102,655 Kimball Intl Cl B 21,629 149,023 United Stationers 3,787(b) 106,074 Viad 5,408 120,220 --------------- Total 976,711 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.1%) 3Com 59,999(b) 139,798 ARRIS Group 17,724(b,e) 126,195 Loral Space & Communications 6,640(b) 87,714 NETGEAR 14,053(b) 156,269 Plantronics 5,513 55,957 --------------- Total 565,933 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.1%) Novatel Wireless 8,770(b,e) 48,586 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (3.2%) Dycom Inds 10,663(b,e) 72,615 EMCOR Group 17,403(b) 358,328 Granite Construction 17,683(e) 622,796 Michael Baker 3,640(b) 127,254 Perini 20,753(b) 432,700 --------------- Total 1,613,693 ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.1%) Advanta Cl B 85,435(e) 66,639 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (1.1%) Rock-Tenn Cl A 12,439 387,724 Silgan Holdings 3,312 151,822 --------------- Total 539,546 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.4%) Regis 9,327 104,929 Universal Technical Institute 6,010(b,e) 105,355 --------------- Total 210,284 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.5%) Life Partners Holdings 5,153 195,814 PICO Holdings 2,126(b) 54,043 --------------- Total 249,857 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.5%) Iowa Telecommunications Services 4,563(e) 58,635 Premiere Global Services 8,401(b) 81,406 Shenandoah Telecommunications 4,860(e) 118,486 --------------- Total 258,527 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.3%) Central Vermont Public Service 2,443 55,212 Portland General Electric 5,931 115,358 --------------- Total 170,570 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.2%) AO Smith 1,036 28,469 AZZ 2,493(b,e) 55,843 Encore Wire 2,755 45,485 GrafTech Intl 23,295(b,e) 186,593 Woodward Governor 13,268(e) 272,923 --------------- Total 589,313 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (3.0%) Anixter Intl 8,604(b) 232,136 Benchmark Electronics 43,937(b) 515,820 Brightpoint 13,983(b,e) 65,440 CTS 6,872 35,322
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (CONT.) Insight Enterprises 22,446(b) $116,270 L-1 Identity Solutions 11,571(b) 83,890 Methode Electronics 15,123 69,868 MTS Systems 3,133(e) 82,053 Sanmina-SCI 76,278(b) 25,172 SMART Modular Technologies WWH 24,157(b) 27,781 SYNNEX 14,265(b,e) 218,968 TTM Technologies 10,467(b) 63,116 --------------- Total 1,535,836 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.6%) Bristow Group 1,226(b,e) 29,657 Bronco Drilling 14,420(b,e) 76,138 Cal Dive Intl 11,558(b,e) 73,278 Complete Production Services 20,267(b) 129,911 GulfMark Offshore 4,134(b) 98,968 Lufkin Inds 3,643 127,323 Newpark Resources 10,540(b) 44,373 Parker Drilling 75,829(b) 160,758 Pioneer Drilling 19,119(b) 95,021 --------------- Total 835,427 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.0%) Andersons 6,339 103,896 Casey's General Stores 12,738 270,683 Great Atlantic & Pacific Tea 7,699(b,e) 54,817 Ingles Markets Cl A 9,059 129,181 Nash Finch 4,156 178,833 Spartan Stores 4,762 88,478 Winn-Dixie Stores 13,110(b,e) 180,131 --------------- Total 1,006,019 ------------------------------------------------------------------------------------- FOOD PRODUCTS (4.5%) Cal-Maine Foods 5,396 146,124 Flowers Foods 25,231(e) 542,214 Fresh Del Monte Produce 12,153(b,c) 292,887 Imperial Sugar 4,899 55,653 J&J Snack Foods 2,267 79,141 Lance 5,634 106,088 Ralcorp Holdings 11,610(b) 687,544 Sanderson Farms 10,626 384,449 --------------- Total 2,294,100 ------------------------------------------------------------------------------------- GAS UTILITIES (2.1%) Laclede Group 5,606 254,456 New Jersey Resources 8,514(e) 341,327 Northwest Natural Gas 1,695(e) 72,783 Piedmont Natural Gas 11,485 297,576 South Jersey Inds 3,049 113,728 --------------- Total 1,079,870 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Conmed 6,204(b,e) 97,093 Greatbatch 5,973(b) 139,171 --------------- Total 236,264 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (5.9%) Alliance Imaging 4,066(b,e) 36,025 AMERIGROUP 12,350(b) 345,430 Emergency Medical Services Cl A 2,763(b) 92,616 Gentiva Health Services 6,533(b) 165,154 Hanger Orthopedic Group 10,048(b,e) 137,155 HealthSpring 25,981(b) 452,589 Kindred Healthcare 23,596(b) 320,198 Landauer 2,904 199,156 Magellan Health Services 22,145(b) 802,093 MedCath 3,318(b) 20,870 Molina Healthcare 11,756(b) 206,200 Triple-S Management Cl B 7,229(b,c) 104,025 Universal American Financial 11,604(b) 114,531 --------------- Total 2,996,042 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.1%) Ruby Tuesday 24,877(b,e) 30,847 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) American Greetings Cl A 10,938(e) 47,471 Blyth 8,111 27,659
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HOUSEHOLD DURABLES (CONT.) M/I Homes 4,227(e) $37,367 Natl Presto Inds 2,426 162,881 --------------- Total 275,378 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.6%) Otter Tail 4,872(e) 98,755 Seaboard 222 223,110 --------------- Total 321,865 ------------------------------------------------------------------------------------- INSURANCE (13.0%) Aspen Insurance Holdings 47,969(c) 1,060,116 Employers Holdings 29,745 402,747 IPC Holdings 28,969(c) 743,345 Max Capital Group 11,443(c,e) 194,645 Montpelier Re Holdings 35,085(c) 496,102 Odyssey Re Holdings 18,343 863,038 Platinum Underwriters Holdings 32,136(c) 893,702 Safety Insurance Group 10,081 353,037 Validus Holdings 40,253(c) 918,573 Zenith Natl Insurance 21,292 597,028 --------------- Total 6,522,333 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.9%) Ariba 9,096(b) 69,493 InfoSpace 7,236(b,e) 57,960 Interwoven 4,944(b) 77,967 ModusLink Global Solutions 36,847(b) 85,854 RealNetworks 19,066(b) 53,766 United Online 14,112 86,366 --------------- Total 431,406 ------------------------------------------------------------------------------------- IT SERVICES (0.9%) Ciber 15,518(b) 67,658 CSG Systems Intl 2,918(b) 42,311 MAXIMUS 1,811 67,297 Perot Systems Cl A 19,914(b) 258,683 --------------- Total 435,949 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (1.0%) Brunswick 33,288 92,541 JAKKS Pacific 21,298(b) 390,605 --------------- Total 483,146 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.1%) Albany Molecular Research 4,944(b,e) 42,370 ------------------------------------------------------------------------------------- MACHINERY (3.2%) Badger Meter 2,872(e) 67,750 CIRCOR Intl 3,056 67,996 EnPro Inds 1,916(b) 35,063 Force Protection 24,574(b) 147,690 FreightCar America 4,993 95,616 Hurco Companies 2,252(b,e) 31,933 LB Foster Cl A 2,151(b) 56,765 Lydall 14,395(b) 53,118 Mueller Inds 22,154 445,738 NACCO Inds Cl A 4,325 138,357 Wabtec 15,796 472,774 --------------- Total 1,612,800 ------------------------------------------------------------------------------------- METALS & MINING (2.5%) AM Castle & Co 9,031 76,402 Brush Engineered Materials 6,300(b) 79,128 Compass Minerals Intl 5,485 330,033 Haynes Intl 2,293(b,e) 41,893 Horsehead Holding 45,876(b) 181,669 Kaiser Aluminum 5,055(e) 125,566 Olympic Steel 5,105 81,016 Royal Gold 1,506 72,408 RTI Intl Metals 13,751(b) 183,027 Worthington Inds 11,485 115,539 --------------- Total 1,286,681 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) Dillard's Cl A 44,360(e) 192,965 Fred's Cl A 13,699 140,552 Retail Ventures 21,327(b) 50,972 --------------- Total 384,489 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.2%) CH Energy Group 1,618 81,838 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 12 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (4.1%) Alon USA Energy 4,105(e) $48,439 Berry Petroleum Cl A 6,255(e) 46,037 Bill Barrett 5,032(b) 111,258 Delek US Holdings 5,966 41,464 EXCO Resources 15,887(b) 161,094 GMX Resources 3,021(b) 68,486 Nordic American Tanker Shipping 7,100(c,e) 203,486 PetroQuest Energy 8,411(b,e) 53,242 Rosetta Resources 35,921(b) 218,040 Stone Energy 17,028(b) 146,100 Swift Energy 20,952(b) 320,984 USEC 53,765(b) 273,664 VAALCO Energy 9,492(b) 71,285 Western Refining 13,394 156,174 World Fuel Services 4,025 135,924 --------------- Total 2,055,677 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Wausau Paper 17,665 167,994 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.6%) Chattem 4,414(b) 298,386 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.7%) Par Pharmaceutical Companies 8,795(b) 108,266 Salix Pharmaceuticals 8,528(b,e) 68,224 Valeant Pharmaceuticals Intl 13,147(b,e) 285,290 ViroPharma 35,478(b) 425,736 --------------- Total 887,516 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (2.0%) CDI 5,579 59,807 Exponent 2,238(b,e) 54,876 Heidrick & Struggles Intl 5,996 91,139 ICF Intl 2,097(b,e) 49,762 Kelly Services Cl A 16,650 150,849 Kforce 10,809(b,e) 67,556 Korn/Ferry Intl 10,983(b) 103,240 MPS Group 4,695(b) 28,405 Spherion 45,258(b) 64,719 TrueBlue 30,778(b) 261,612 Volt Information Sciences 14,593(b,e) 77,781 --------------- Total 1,009,746 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (2.2%) Anworth Mtge Asset 39,904 247,405 Capstead Mtge 30,200 322,233 Getty Realty 11,321(e) 234,798 Investors Real Estate Trust 6,756(e) 67,222 Natl Health Investors 9,610(e) 250,341 --------------- Total 1,121,999 ------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.1%) Avatar Holdings 2,322(b) 60,256 ------------------------------------------------------------------------------------- ROAD & RAIL (1.3%) Arkansas Best 17,604 411,757 Genesee & Wyoming Cl A 5,098(b) 138,513 Saia 10,458(b) 111,796 --------------- Total 662,066 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.6%) Amkor Technology 74,250(b) 172,260 MKS Instruments 14,790(b) 207,800 OmniVision Technologies 32,821(b) 219,572 PMC-Sierra 23,595(b) 114,908 Trident Microsystems 21,634(b) 36,778 Zoran 12,596(b) 74,820 --------------- Total 826,138 ------------------------------------------------------------------------------------- SOFTWARE (0.2%) EPIQ Systems 5,531(b) 98,009 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (7.8%) Aaron Rents 9,811 214,468 Asbury Automotive Group 25,540 91,433 Big 5 Sporting Goods 11,478 60,374 Blockbuster Cl A 137,596(b,e) 175,435 Brown Shoe 30,753 144,232 Build-A-Bear Workshop 9,576(b) 40,219 Cato Cl A 11,774 155,770 Charlotte Russe Holding 14,718(b,e) 75,798 Chico's FAS 49,777(b) 197,117
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SPECIALTY RETAIL (CONT.) Children's Place Retail Stores 5,418(b,e) $101,913 Collective Brands 27,289(b) 291,174 Conn's 8,722(b,e) 106,060 Dress Barn 24,056(b,e) 207,363 Finish Line Cl A 13,350 63,413 Genesco 9,286(b) 143,004 Group 1 Automotive 18,031(e) 179,769 Hot Topic 29,316(b) 250,359 Jo-Ann Stores 9,523(b,e) 121,609 Jos A Bank Clothiers 9,351(b,e) 256,778 Men's Wearhouse 31,639(e) 368,594 Monro Muffler Brake 2,547 61,816 Rent-A-Center 25,657(b) 381,005 Rex Stores 4,779(b,e) 27,718 Shoe Carnival 5,418(b) 42,531 Sonic Automotive Cl A 16,405(e) 33,302 Stage Stores 25,865 184,935 --------------- Total 3,976,189 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) Skechers USA Cl A 12,268(b) 122,189 Steven Madden 4,610(b) 80,122 Weyco Group 1,161 33,414 --------------- Total 235,725 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.5%) Corus Bankshares 50,456(e) 56,006 First Niagara Financial Group 35,033 457,531 Ocwen Financial 29,404(b) 261,696 --------------- Total 775,233 ------------------------------------------------------------------------------------- TOBACCO (0.1%) Star Scientific 10,550(b,e) 34,815 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.1%) Aceto 5,160(e) 46,130 Beacon Roofing Supply 7,296(b) 92,878 H&E Equipment Services 12,649(b) 84,369 Kaman 5,405(e) 103,181 Rush Enterprises Cl A 6,301(b) 57,339 Watsco 5,096 168,424 --------------- Total 552,321 ------------------------------------------------------------------------------------- WATER UTILITIES (0.2%) California Water Service Group 2,012(e) 87,522 Connecticut Water Service 1,347(e) 31,170 --------------- Total 118,692 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.5%) Centennial Communications 10,541(b) 86,225 USA Mobility 14,647(b) 154,819 --------------- Total 241,044 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $60,649,729) $50,064,492 ------------------------------------------------------------------------------------- MONEY MARKET FUND (1.0%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.47% 503,008(d) $503,008 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $503,008) $503,008 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (12.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 6,230,864 $6,230,864 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $6,230,864) $6,230,864 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $67,383,601)(f) $56,798,364 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- INVESTMENTS IN DERIVATIVES At Jan. 31, 2009, $55,000 was held in a margin deposit account as collateral to cover initial margin deposits on open stock index futures contracts. FUTURES CONTRACTS OUTSTANDING AT JAN. 31, 2009
NUMBER OF UNREALIZED CONTRACTS NOTIONAL EXPIRATION APPRECIATION CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION) ------------------------------------------------------------------------------------ Russell 2000 Mini Index 10 $442,600 March 2009 $(69,118)
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2009, the value of foreign securities represented 10.0% of net assets. (d) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at Jan. 31, 2009. (e) At Jan. 31, 2009, security was partially or fully on loan. See Note 5 to the financial statements. (f) At Jan. 31, 2009, the cost of securities for federal income tax purposes was approximately $67,384,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,144,000 Unrealized depreciation (11,730,000) ------------------------------------------------------------ Net unrealized depreciation $(10,586,000) ------------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) seeks to implement more uniform reporting relating to the fair valuation of securities for financial statement purposes. Mutual funds are required to implement the requirements of this standard for fiscal years beginning after Nov. 15, 2007. While uniformity of presentation is the objective of the standard, industry implementation has just begun and it is likely that there will be a range of practices utilized and it will be some period of time before industry practices become more uniform. For this reason care should be exercised in interpreting this information and/or using it for comparison with other mutual funds. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following table is a summary of the inputs used to value the Fund's investments as of Jan. 31, 2009:
FAIR VALUE AT JAN. 31, 2009 --------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in securities $56,798,364 $-- $-- $56,798,364 Other financial instruments* (69,118) -- -- (69,118) ----------------------------------------------------------------------------------- Total $56,729,246 $-- $-- $56,729,246 -----------------------------------------------------------------------------------
* Other financial instruments are derivative instruments, such as futures, which are valued at the unrealized appreciation/depreciation on the instrument. -------------------------------------------------------------------------------- 16 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com/funds. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JAN. 31, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $60,649,729) $ 50,064,492 Affiliated money market fund (identified cost $503,008) 503,008 Investments of cash collateral received for securities on loan (identified cost $6,230,864) 6,230,864 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $67,383,601) 56,798,364 Capital shares receivable 59 Dividends and accrued interest receivable 32,451 Receivable for investment securities sold 334,705 Margin deposits on futures contracts 55,000 -------------------------------------------------------------------------------------- Total assets 57,220,579 -------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 118 Capital shares payable 27,413 Payable for investment securities purchased 187,925 Payable upon return of securities loaned 6,230,864 Variation margin payable on futures contracts 12,100 Accrued investment management services fees 1,215 Accrued distribution fees 73 Accrued transfer agency fees 31 Accrued administrative services fees 114 Other accrued expenses 29,710 -------------------------------------------------------------------------------------- Total liabilities 6,489,563 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 50,731,016 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.01 par value $ 93,630 Additional paid-in capital 72,594,483 Undistributed net investment income 127,461 Accumulated net realized gain (loss) (11,430,203) Unrealized appreciation (depreciation) on investments (10,654,355) -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 50,731,016 -------------------------------------------------------------------------------------- *Including securities on loan, at value $ 5,856,861 --------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 18 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- JAN. 31, 2009 (UNAUDITED)
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $ 8,952,751 1,652,165 $5.42(1) Class B $ 305,469 57,096 $5.35 Class C $ 60,986 11,397 $5.35 Class I $41,398,722 7,639,968 $5.42 Class R2 $ 2,469 455 $5.43 Class R3 $ 2,737 505 $5.42 Class R4 $ 5,418 1,000 $5.42 Class R5 $ 2,464 455 $5.42 ----------------------------------------------------------------------------------------
(1) The maximum offering price per share for Class A is $5.75. 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 CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 19 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JAN. 31, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 332,277 Interest 29 Income distributions from affiliated money market fund 5,575 Fee income from securities lending 6,487 Less foreign taxes withheld (396) -------------------------------------------------------------------------- Total income 343,972 -------------------------------------------------------------------------- Expenses: Investment management services fees 161,843 Distribution fees Class A 13,270 Class B 1,698 Class C 320 Class R2 8 Class R3 4 Transfer agency fees Class A 4,762 Class B 181 Class C 31 Class R2 1 Class R3 1 Class R4 2 Class R5 1 Administrative services fees 14,086 Plan administration services fees Class R2 4 Class R3 4 Class R4 9 Compensation of board members 604 Custodian fees 14,270 Printing and postage 8,745 Registration fees 18,596 Professional fees 11,335 Other 1,277 -------------------------------------------------------------------------- Total expenses 251,052 Expenses waived/reimbursed by the Investment Manager and its affiliates (35,037) -------------------------------------------------------------------------- Total net expenses 216,015 -------------------------------------------------------------------------- Investment income (loss) -- net 127,957 --------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SIX MONTHS ENDED JAN. 31, 2009 (UNAUDITED)
REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions $ (7,461,540) Futures contracts (97,430) -------------------------------------------------------------------------- Net realized gain (loss) on investments (7,558,970) Net change in unrealized appreciation (depreciation) on investments (6,920,129) -------------------------------------------------------------------------- Net gain (loss) on investments (14,479,099) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(14,351,142) --------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 127,957 $ 252,553 Net realized gain (loss) on investments (7,558,970) (3,864,235) Net change in unrealized appreciation (depreciation) on investments (6,920,129) (418,356) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (14,351,142) (4,030,038) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (28,406) (83,613) Class C -- (16) Class I (220,730) (249,572) Class R2 (1) (12) Class R3 (10) (23) Class R4 (42) (77) Class R5 (17) (38) Net realized gain Class A -- (316,596) Class B -- (9,723) Class C -- (1,289) Class I -- (625,909) Class R2 -- (99) Class R3 -- (99) Class R4 -- (216) Class R5 -- (99) --------------------------------------------------------------------------------------------- Total distributions (249,206) (1,287,381) ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 22 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JAN. 31, 2009 JULY 31, 2008 (UNAUDITED) CAPITAL SHARE TRANSACTIONS Proceeds from sales Class A shares $ 2,092,624 $ 2,340,112 Class B shares 172,161 151,479 Class C shares 54,779 43,142 Class I shares 35,386,490 4,520,154 Class R3 shares 274 -- Reinvestment of distributions at net asset value Class A shares 11,018 127,449 Class B shares -- 9,506 Class C shares -- 1,086 Class I shares 220,690 875,178 Payments for redemptions Class A shares (786,029) (1,630,280) Class B shares (52,307) (300,352) Class C shares (18,418) (26,754) Class I shares (7,701,890) (4,247,823) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 29,379,392 1,862,897 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 14,779,044 (3,454,522) Net assets at beginning of period 35,951,972 39,406,494 --------------------------------------------------------------------------------------------- Net assets at end of period $ 50,731,016 $35,951,972 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 127,461 $ 248,710 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 23 FINANCIAL HIGHLIGHTS ---------------------------------------------------------- CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $8.76 $10.00 $9.77 $10.22 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02(c) .04(c) .14(c) .02 Net gains (losses) (both realized and unrealized) (3.34) (1.01) .29 (.47) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.32) (.97) .43 (.45) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.05) (.01) -- Distributions from realized gains -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.02) (.27) (.20) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.42 $8.76 $10.00 $9.77 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $9 $13 $14 $11 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.65%(f) 1.54% 1.73% 3.27%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.46%(f) 1.24% 1.35% 1.40%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .56%(f) .44% 1.30% .55%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% 40% -------------------------------------------------------------------------------------------------------------- Total return(i) (37.95%)(j) (9.67%) 4.29% (4.40%)(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(k) 2008 2007 2006(b) Net asset value, beginning of period $8.65 $9.90 $9.73 $10.22 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(c) (.02)(c) .05(c) -- Net gains (losses) (both realized and unrealized) (3.29) (1.01) .31 (.49) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.30) (1.03) .36 (.49) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from realized gains -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.35 $8.65 $9.90 $9.73 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $1 $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 2.42%(f) 2.29% 2.38% 4.05%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 2.23%(f) 2.00% 2.11% 2.18%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.18%)(f) (.27%) .49% (.17%)(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% 40% -------------------------------------------------------------------------------------------------------------- Total return(i) (38.15%)(j) (10.47%) 3.51% (4.79%)(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Total return does not reflect payment of a sales charge. (j) Not annualized. (k) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(l) 2008 2007 2006(b) Net asset value, beginning of period $8.65 $9.90 $9.73 $10.22 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.01)(c) (.03)(c) .05(c) -- Net gains (losses) (both realized and unrealized) (3.29) (1.00) .31 (.49) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.30) (1.03) .36 (.49) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.00)(d) -- -- Distributions from realized gains -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Total distributions -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.35 $8.65 $9.90 $9.73 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 2.41%(g) 2.29% 2.47% 4.05%(g) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 2.21%(g) 2.00% 2.11% 2.18%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.18%)(g) (.29%) .43% (.22%)(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% 40% -------------------------------------------------------------------------------------------------------------- Total return(j) (38.15%)(k) (10.43%) 3.51% (4.79%)(k) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (i) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (j) Total return does not reflect payment of a sales charge. (k) Not annualized. (l) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $8.78 $10.03 $9.78 $10.22 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) .07(c) .15(c) .03 Net gains (losses) (both realized and unrealized) (3.35) (1.02) .32 (.47) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.32) (.95) .47 (.44) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) (.03) -- Distributions from realized gains -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.30) (.22) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.42 $8.78 $10.03 $9.78 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $41 $23 $25 $3 -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.31%(f) 1.22% 1.19% 3.00%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.10%(f) .92% 1.05% 1.13%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .81%(f) .79% 1.43% .91%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% 40% -------------------------------------------------------------------------------------------------------------- Total return (37.85%)(i) (9.46%) 4.69% (4.31%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 27 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS R2
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(k) 2008 2007(b) Net asset value, beginning of period $8.75 $9.97 $10.99 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .01 .02 .06 Net gains (losses) (both realized and unrealized) (3.33) (1.00) (.86) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.32) (.98) (.80) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(d) (.02) (.03) Distributions from realized gains -- (.22) (.19) -------------------------------------------------------------------------------------------------------------- Total distributions -- (.24) (.22) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.43 $8.75 $9.97 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(e),(f) 2.12%(g) 2.03% 1.85%(g) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f),(h),(i) 1.66%(g) 1.46% 1.80%(g) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .35%(g) .23% .77%(g) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% -------------------------------------------------------------------------------------------------------------- Total return (37.92%)(j) (9.82%) (7.40%)(j) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Rounds to zero. (e) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (f) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (g) Adjusted to an annual basis. (h) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (i) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (j) Not annualized. (k) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 28 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R3
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $8.76 $9.99 $10.99 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .02 .04 .07 Net gains (losses) (both realized and unrealized) (3.34) (1.00) (.85) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.32) (.96) (.78) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.05) (.03) Distributions from realized gains -- (.22) (.19) -------------------------------------------------------------------------------------------------------------- Total distributions (.02) (.27) (.22) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.42 $8.76 $9.99 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.88%(f) 1.79% 1.58%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.41%(f) 1.21% 1.55%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .61%(f) .48% 1.02%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% -------------------------------------------------------------------------------------------------------------- Total return (37.89%)(i) (9.65%) (7.21%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 29 FINANCIAL HIGHLIGHTS (continued) ---------------------------------------------- CLASS R4
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007 2006(b) Net asset value, beginning of period $8.78 $10.00 $9.77 $10.22 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03(c) .07(c) .17(c) .02 Net gains (losses) (both realized and unrealized) (3.35) (1.00) .28 (.47) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.32) (.93) .45 (.45) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.07) (.03) -- Distributions from realized gains -- (.22) (.19) -- -------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.29) (.22) -- -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.42 $8.78 $10.00 $9.77 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.62%(f) 1.52% 1.83% 3.12%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.17%(f) .97% 1.26% 1.25%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .84%(f) .73% 1.60% .69%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% 40% -------------------------------------------------------------------------------------------------------------- Total return (37.83%)(i) (9.27%) 4.42% (4.40%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 16, 2006 (when shares became publicly available) to July 31, 2006. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 30 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS R5
PER SHARE INCOME AND CAPITAL CHANGES(a) Fiscal period ended July 31, 2009(j) 2008 2007(b) Net asset value, beginning of period $8.77 $10.02 $10.99 -------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(c) .03 .07 .11 Net gains (losses) (both realized and unrealized) (3.34) (1.02) (.86) -------------------------------------------------------------------------------------------------------------- Total from investment operations (3.31) (.95) (.75) -------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) (.08) (.03) Distributions from realized gains -- (.22) (.19) -------------------------------------------------------------------------------------------------------------- Total distributions (.04) (.30) (.22) -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.42 $8.77 $10.02 -------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- -------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d),(e) 1.36%(f) 1.28% 1.09%(f) -------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(e),(g),(h) 1.17%(f) .97% 1.05%(f) -------------------------------------------------------------------------------------------------------------- Net investment income (loss) .85%(f) .72% 1.53%(f) -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 87% 127% -------------------------------------------------------------------------------------------------------------- Total return (37.82%)(i) (9.50%) (6.93%)(i) --------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007. (c) Per share amounts have been calculated using the average shares outstanding method. (d) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. (h) Includes the impact of a performance incentive adjustment, if any. Expense ratio is before reduction for earnings and bank fee credits on cash balances. Earnings and bank fee credits were less than 0.01% of average net assets for the year ended July 31, 2008. (i) Not annualized. (j) Six months ended Jan. 31, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS TO JAN. 31, 2009) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RiverSource Disciplined Small Cap Value Fund (the Fund) is a series of RiverSource Dimensions Series, Inc. and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource Dimensions Series, Inc. has 10 billion authorized shares of capital stock that can be allocated among the separate series as designated by the Board of Directors (the Board). The Fund invests primarily in 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 sold with a front-end sales charge. - Class B shares may be subject to a contingent deferred sales charge (CDSC) and automatically convert to Class A shares during the ninth year of ownership. - Class C shares may be subject to a CDSC. - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a front-end sales charge or CDSC and are offered to qualifying institutional investors. At Jan. 31, 2009, RiverSource Investments, LLC (RiverSource Investments or the Investment Manager), and the RiverSource affiliated funds-of-funds owned 100% of Class I shares, and the Investment Manager owned 100% of Class R2, Class R4 and Class R5 shares. At Jan. 31, 2009, the Investment Manager and the RiverSource affiliated funds-of-funds owned approximately 82% 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. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, -------------------------------------------------------------------------------- 32 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES Effective Aug. 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an authoritative definition of fair value, sets out a hierarchy for measuring fair value, and requires additional disclosures about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period. There was no impact to the Fund's net assets or results of operations upon adoption. The fair valuation measurements disclosure can be found following the Notes to Portfolio of Investments. All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of the Investment Manager, as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost, which approximates fair value. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. Cash collateral may be collected by the Fund to secure certain over-the-counter options (OTC options) trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty upon closure, exercise or expiration of the contract. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the New York Stock Exchange. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. At Jan. 31, 2009, and for the six months then ended, the Fund had no outstanding option contracts. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of -------------------------------------------------------------------------------- 34 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Futures and options on futures are valued daily based upon the last sale price at the close of the market on the principal exchange on which they are traded. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the counterparty will not complete its contract obligations. At Jan. 31, 2009, the Fund had no outstanding forward foreign currency contracts. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes," clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of futures, re- characterization of 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 (losses) were recorded by the Fund. RECENT ACCOUNTING PRONOUNCEMENTS The Fund has adopted FASB Staff Position No. 133-1 and FIN No. 45-4 (FSP FAS 133-1 and FIN 45-4), "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45". The amendments to FSP FAS 133-1 and FIN 45-4 require enhanced disclosures about a fund's derivatives and guarantees. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows and (d) the current status of the payment/performance risk of the credit derivative. The amendments to FSP FAS 133-1 and FIN 45-4 also require additional disclosures about the current status of the payment/performance risk of a guarantee. At Jan. 31, 2009, the Fund did not own nor was it a party to any credit derivative contracts within the scope of these amendments. -------------------------------------------------------------------------------- 36 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008. As of Jan. 31, 2009, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 2. EXPENSES AND SALES CHARGES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 0.85% to 0.725% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment determined monthly by measuring the percentage difference over a rolling 12-month period between the annualized performance of one Class A share of the Fund and the annualized performance of the Lipper 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 increased the management fee by $12,174 for the six months ended Jan. 31, 2009. The management fee for the six months ended Jan. 31, 2009, was 0.92% of the Fund's average daily net assets, including the adjustment under the terms of the performance incentive arrangement. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. The fee for the six months ended Jan. 31, 2009 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended Jan. 31, 2009, there were no expenses incurred for these particular items. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other RiverSource funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50 for Class B and $20.00 for Class C for this service. The Fund also pays the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's average daily net assets attributable to Class R2, Class R3, Class R4 and Class R5 shares. The Transfer Agent charges an annual fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the Statement of Operations. PLAN ADMINISTRATION SERVICES FEES Under a Plan Administration Services Agreement with the Transfer Agent, the Fund pays an annual fee at a rate of 0.25% of the Fund's average daily net assets attributable to Class R2, Class R3 and Class R4 shares for the provision of various administrative, recordkeeping, communication and educational services. -------------------------------------------------------------------------------- 38 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- DISTRIBUTION FEES The Fund has agreements with RiverSource Distributors, Inc. and RiverSource Fund Distributors, Inc. (collectively, the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class A and Class R3 shares, a fee at an annual rate of up to 0.50% of the Fund's average daily net assets attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of the Fund's average daily net assets attributable to Class B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is reimbursed for distribution expenses. The amount of distribution expenses incurred by the Distributor and not yet reimbursed ("unreimbursed expense") was approximately $17,000 and $1,000 for Class B and Class C shares, respectively. These amounts are based on the most recent information available as of Jan. 31, 2009 and may be recovered from future payments under the distribution plan or CDSC. To the extent the unreimbursed expense has been fully recovered, the distribution fee is reduced. SALES CHARGES Sales charges received by the Distributor for distributing Fund shares were $5,758 for Class A and $36 for Class B for the six months ended Jan. 31, 2009. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended Jan. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), including the adjustment under the terms of a performance incentive arrangement, were as follows: Class A............................................. 1.46% Class B............................................. 2.22 Class C............................................. 2.21 Class I............................................. 1.10 Class R2............................................ 1.66 Class R3............................................ 1.41 Class R4............................................ 1.17 Class R5............................................ 1.17
The waived/reimbursed fees and expenses for the plan administration services fees at the class level were as follows: Class R2............................................. $4 Class R3............................................. 4 Class R4............................................. 9
The management fees waived/reimbursed at the Fund level were $35,020. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- The Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until July 31, 2009, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), before giving effect to any performance incentive adjustment, will not exceed the following percentage of the Fund's average daily net assets: Class A............................................. 1.43% Class B............................................. 2.19 Class C............................................. 2.19 Class I............................................. 1.04 Class R2............................................ 1.84 Class R3............................................ 1.59 Class R4............................................ 1.34 Class R5............................................ 1.09
* 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. CUSTODIAN FEES Effective Dec. 15, 2008, the Fund pays custodian fees to JP Morgan Chase Bank, N.A. Prior to Dec. 15, 2008, the Fund paid custodian fees amounting to $15,679 to Ameriprise Trust Company, a subsidiary of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $46,603,856 and $17,395,587, respectively, for the six months ended Jan. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 40 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED JAN. 31, 2009 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) -------------------------------------------------------------------------------- Class A 327,899 1,852 (128,308) 201,443 Class B 24,929 -- (7,998) 16,931 Class C 7,156 -- (2,110) 5,046 Class I 6,177,001 37,091 (1,174,196) 5,039,896 Class R3 50 -- -- 50 -------------------------------------------------------------------------------- YEAR ENDED JULY 31, 2008 ISSUED FOR REINVESTED NET SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE) -------------------------------------------------------------------------------- Class A 257,256 14,450 (182,613) 89,093 Class B 16,842 1,085 (33,441) (15,514) Class C 4,661 124 (3,091) 1,694 Class I 474,035 99,227 (482,981) 90,281 --------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES Effective Dec. 1, 2008, the Fund has entered into a Master Securities Lending Agreement ("the Agreement") with JPMorgan Chase Bank, National Association ("JPMorgan"). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers on behalf of the Fund. Pursuant to the Agreement, all loaned securities are initially collateralized in an amount equivalent to 102% (for securities denominated in U.S. dollars) or 105% (for all other securities) of the value of the loaned securities, including accrued interest in the case of fixed income securities. Collateral is maintained over the life of the loan thereafter in an amount not less than 100% of the market value of loaned securities, as determined at the close of each business day, except to the extent that a collateral shortfall is due to a diminution in the market value of authorized investments in which cash collateral is invested. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Collateral is either in the form of cash or U.S. government securities. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed on the Portfolio of Investments and the value of cash collateral received at period end is disclosed on the Statement of Assets and Liabilities along with the related -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 41 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- obligation to return the collateral upon return of the securities loaned. At Jan. 31, 2009, securities valued at $5,856,861 were on loan secured by cash collateral of $6,230,684 invested in short term securities or cash equivalents. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Income of $6,487 earned from securities lending from Dec. 1, 2008 through Jan. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Prior to Dec. 1, 2008, RiverSource Investments, LLC served as securities lending agent for the Fund under the Securities Lending Agency Agreement. For the period from Aug. 1, 2008 through Nov. 30, 2008, the Fund had no securities on loan. 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term Cash Fund aggregated $37,789,482 and $37,286,475, respectively, for the six months ended Jan. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found on the Statement of Operations and the Fund's invested balance in RiverSource Short- Term Cash Fund at Jan. 31, 2009, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- 42 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 16, 2008, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum, in addition to an upfront fee equal to its pro rata share of 0.02% of the amount of the credit facility. The Fund had no borrowings during the six months ended Jan. 31, 2009. Under the prior credit facility which was effective until Oct. 15, 2008, the Fund had entered into a revolving credit facility with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby the Fund was permitted to borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which was a collective agreement between the Fund and certain other RiverSource funds, severally and not jointly, permitted collective borrowings up to $500 million. Interest was charged to each Fund based on its borrowings at a rate equal to the federal funds rate plus 0.30%. Each borrowing under the credit facility matured no later than 60 days after the date of borrowing. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. 8. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS For federal income tax purposes, the Fund had a capital loss carry-over of $554,680 at Jan. 31, 2008, that if not offset by capital gains will expire in 2016. Because of the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 43 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2007 and its fiscal year end ("post- October loss") as occurring on the first day of the following tax year. At July 31, 2008, the Fund had a post-October loss of $3,277,154 that is treated for income tax purposes as occurring on Aug. 1, 2008. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. 9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal -------------------------------------------------------------------------------- 44 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co., Inc. (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and the distributor of the Seligman Funds, Seligman Advisors, Inc. (which is now known as RiverSource Fund Distributors, Inc.), relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman will pay $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 45 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 46 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2009 SEMIANNUAL REPORT 47 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS This report must be accompanied or preceded by the Fund's current prospectus. RiverSource(R) mutual funds are distributed by RiverSource Distributors, Inc., and RiverSource Fund Distributors, Inc., Members FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. (RIVERSOURCE INVESTMENTS LOGO) (C) 2009 RiverSource Investments, LLC. S-6509 D (4/09)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Dimensions Series, Inc. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date April 1, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date April 1, 2009 By /s/ Jeffrey P. Fox ----------------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date April 1, 2009