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 811-2111
------------
AXP GROWTH SERIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
-----------------
Date of fiscal year end: 7/31
--------------
Date of reporting period: 1/31
--------------
Semiannual Report
[RiverSource(SM) Investments Logo]
RiverSource(SM)
DISCIPLINED EQUITY FUND
SEMIANNUAL REPORT FOR THE
PERIOD ENDED JAN. 31, 2006
> RIVERSOURCE DISCIPLINED EQUITY FUND (FORMERLY AXP(R) QUANTITATIVE
LARGE CAP EQUITY FUND) SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM
CAPITAL GROWTH.
TABLE OF CONTENTS
Fund Snapshot............................................3
Performance Summary......................................4
Questions & Answers with Portfolio Management............6
Investments in Securities...............................10
Financial Statements....................................14
Notes to Financial Statements...........................17
Fund Expenses Example...................................29
Approval of Investment Management Services Agreement....31
Proxy Voting............................................35
Results of Meeting of Shareholders......................36
- ------------------------------------------------------------------------------
2 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
FUND SNAPSHOT AT JAN. 31, 2006
- ------------------------------------------------------------------------------
PORTFOLIO MANAGERS <
- ------------------------------------------------------------------------------
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY
Dimitris J. Bertsimas 4/03 12
Gina K. Mourtzinou 4/03 8
- ------------------------------------------------------------------------------
FUND OBJECTIVE <
- ------------------------------------------------------------------------------
This Fund seeks to provide shareholders with long-term capital growth.
Inception dates by class
A: 4/24/03 B: 4/24/03 C: 4/24/03 I: 7/15/04 Y: 4/24/03
Ticker symbols by class
A: AQEAX B: AQEBX C: -- I: ALEIX Y: --
Total net assets $198.4 million
Number of holdings 182
- ------------------------------------------------------------------------------
STYLE MATRIX <
- ------------------------------------------------------------------------------
[photo] Shading within the style matrix
indicates areas in which the Fund
generally invests.
- ------------------------------------------------------------------------------
SECTOR COMPOSITION* <
- ------------------------------------------------------------------------------
Percentage of portfolio assets
[PIE CHART]
Financials 20.8%
Health Care 17.1%
Energy 15.6%
Information Technology 13.9%
Consumer Staples 8.4%
Consumer Discretionary 8.0%
Telecommunication Services 6.2%
Industrials 4.8%
Utilities 3.1%
Materials 1.3%
Short-Term Securities 0.8%
* Sectors can be comprised of several industries. Please refer to the
section entitled "Investments in Securities" for a complete listing.
No single industry exceeds 25% of portfolio assets.
- ------------------------------------------------------------------------------
TOP TEN HOLDINGS <
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Exxon Mobil (Oil & Gas) 5.0%
iShares MSCI EAFE Index Fund
(Diversified Financial Services) 3.5
Johnson & Johnson (Pharmaceuticals) 3.2
Citigroup (Diversified Financial Services) 3.1
ConocoPhillips (Oil & Gas) 3.1
Hewlett-Packard (Computers & Peripherals) 3.0
AT&T (Diversified Telecommunication Services) 3.0
Merck & Co (Pharmaceuticals) 2.5
Verizon Communications (Diversified Telecommunication Services) 2.0
Fannie Mae (Thrifts & Mortgage Finance) 2.0
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by
and is the exclusive property of Morgan Stanley Capital International
Inc. and Standard & Poor's, a division of The McGraw-Hill Companies,
Inc.
Fund holdings are subject to change.
- ------------------------------------------------------------------------------
3 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2006
[Bar Chart]
RiverSource Disciplined Equity Fund Class A (excluding sales charge) +7.05%
S&P 500 Index(1) (unmanaged) +4.68%
Lipper Large-Cap Core Funds Index(2) +6.01%
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 calling
(800) 862-7919 or visiting www.riversource.com/funds.
(1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other
fees.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance
incentive adjustment. See "Fund Management and Compensation" for more
information.
The 5.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses. The indices do not reflect the effects of sales
charges, expenses (excluding Lipper) and taxes.
- ------------------------------------------------------------------------------
4 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS <
- ------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (4/24/03) (4/24/03) (4/24/03) (7/15/04) (4/24/03)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
AT JAN. 31, 2006
6 months* +7.05% +0.89% +6.71% +1.71% +6.79% +5.79% +7.28% +7.24%
1 year +13.85% +7.31% +12.84% +7.84% +12.93% +11.93% +14.24% +14.04%
Since inception +16.09% +13.64% +15.16% +14.02% +15.19% +15.19% +14.99% +16.31%
AT DEC. 31, 2005
6 months* +6.36% +0.24% +5.85% +0.85% +5.93% +4.93% +6.59% +6.39%
1 year +6.20% +0.08% +5.36% +0.36% +5.44% +4.44% +6.76% +6.39%
Since inception +14.66% +12.16% +13.75% +12.54% +13.79% +13.79% +12.46% +14.88%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC
applies as follows: first year 5%; second and third year 4%; fourth
year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to affiliated
funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- ------------------------------------------------------------------------------
5 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Managers Dimitris Bertsimas and Gina Mourtzinou discuss the
RiverSource Disciplined Equity Fund's positioning and results for the six
months ended Jan. 31, 2006.
At Jan. 31, 2006, approximately 71% of the Fund's shares were owned in
aggregate by RiverSource Portfolio Builder Funds, a group of six asset
allocation funds managed by RiverSource Investments, LLC (RiverSource). As a
result of asset allocation decisions by RiverSource, it is possible
RiverSource Disciplined Equity Fund may experience relatively large
purchases or redemptions from RiverSource Portfolio Builder Funds (see page
22, Class I capital share transactions for related activity during the most
recent fiscal period). RiverSource seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time.
RiverSource Disciplined Equity Fund may experience increased expenses as it
buys and sells securities to manage transactions for RiverSource Portfolio
Builder Funds. For more information on the Fund's expenses, see the
discussions beginning on pages 20 and 29.
Q: How did the Fund perform for the period?
A: RiverSource Disciplined Equity Fund's Class A shares (excluding sales
charge) gained 7.05%, for the six months ended Jan. 31, 2006. The
Standard & Poor's 500 Index (S&P 500 Index), gained 4.68%. The Fund
outperformed the Lipper Large-Cap Core Funds Index, representing the
Fund's peer group, which returned 6.01%, as well, for the same period.
Q: Which factors significantly affected the Fund's performance?
A: The Fund's outperformance resulted from the performance of the three
quantitative investment models -- momentum, value and quality -- we
employ in selecting stocks for the Fund's portfolio. Under the Fund's
investment process, the three models choose the stocks for the
portfolio. We then weight the models and determine the exposure to
sectors and industries. Over the six-month period, the momentum model
was the strongest performer. The value model was also positive, while
the quality model underperformed the S&P 500 Index. We believe that the
style diversification provided by the three quantitative models
continued to be a significant investment advantage during the period.
Our risk modeling also contributed to the Fund's strong performance
relative to the S&P 500 Index and Lipper peer group. Our risk models
limit the size of individual holdings, as well as sector and industry
allocations, relative to the S&P 500 Index. For example, the
portfolio's weightings by sector and industry can never be more than 6%
overweighted or underweighted relative to the S&P 500 Index. We also
apply additional risk controls that impose constraints on market
capitalization, price, quality, turnover, transaction costs, and other
variables.
- ------------------------------------------------------------------------------
6 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
> BECAUSE OF OUR INVESTMENT PROCESS, MOST OF THE FUND'S EXCESS RETURN
RESULTED FROM STOCK SELECTION.
During the period, the Fund had greater-than-S&P 500 Index positions in
energy, health care and telecommunication services. Energy was the biggest
contributor to return, while telecommunication services detracted from
performance. The Fund's smaller position in financials also hurt
performance.
Because of our investment process, most of the Fund's excess return resulted
from stock selection. Among individual holdings, the Fund's investment in
iShares MSCI EAFE Index Fund, an exchange-traded fund based on the MSCI EAFE
Index of stocks from developed international markets, contributed most to
the Fund's return. The Fund's position in the iShares was established based
on a separate asset allocation model.
The next largest contributor was Altria Group, a food and tobacco stock,
followed by computer maker Hewlett-Packard; drug manufacturer Merck;
integrated oil giant Exxon Mobil; and UnitedHealth Group, which provides
managed health care services. We increased the Fund's holding of
Hewlett-Packard during the period but decreased the position in Altria
Group. Stocks that detracted from the Fund's return included Johnson &
Johnson, a diversified health care company; automaker General Motors;
Sprint/Nextel, a cellular phone services company; and semiconductor maker
Intel.
Based on average weightings in the portfolio over the six months, the Fund's
largest holdings were Exxon Mobil, Altria Group, iShares MSCI EAFE Index
Fund, Johnson & Johnson, and Chevron, a major integrated energy company.
- ------------------------------------------------------------------------------
7 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
Q: What changes did you make to the portfolio during the period?
A: The principal change was the Fund's exposure to international equities
through its holding of iShares MSCI EAFE Index Fund. As our models
became less positive toward developed and emerging market foreign
securities, we stopped purchasing additional iShares in order to
decrease the portfolio's international allocation from a peak of
approximately 5% of total assets to approximately 3.5% at the end of
January.
The Fund received significant inflows of cash during the period, in
part because of an increased allocation to the Fund by RiverSource
Portfolio Builder Funds, a series of asset allocation funds. We managed
the cash inflows by purchasing S&P 500 Index futures on a daily basis
and rebalancing the portfolio at the end of each month. Our goal has
been to manage cash flow and trading in order to limit transaction
costs and turnover. Overall portfolio turnover was 28% for the six
months.
As a result of stock selection during the period, the portfolio's
sector allocations changed slightly, most notably in the information
technology and financials sectors. While both of these sectors remained
underweighted relative to the S&P 500 Index, their weightings moved
closer to the S&P 500 Index's weightings.
At the end of the period, the Fund had significant exposures to the
energy, health care, and telecommunication services sectors and more
modest exposures to the industrial, information technology and
financial sectors.
Q: How are you positioning the Fund going forward?
A: We continue to hold a positive view of the U.S. equity market. We think
conditions may be especially favorable for large-cap stocks, which
carry lower valuations on average than stocks of smaller companies. In
addition, large-caps tend to appeal to investors seeking lower risk
investments during
- ------------------------------------------------------------------------------
8 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
what may be the last stage of the current economic recovery and a
period when the risks of a hard landing for the economy have become
more elevated.
For our part, we intend to continue seeking optimal returns for the
Fund through the style diversification offered by our three
quantitative investment models. We are equally convinced of the merit
of our multifaceted, disciplined approach to controlling risk in the
portfolio. We believe this combination of style diversification and
rigorous risk control will allow us to maintain the high quality of the
Fund's portfolio in whatever market conditions lie ahead.
- ------------------------------------------------------------------------------
9 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource Disciplined Equity Fund
JAN. 31, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
- ------------------------------------------------------------------------------
COMMON STOCKS (99.0%)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (2.4%)
Boeing 38,260 $2,613,541
Goodrich 6,573 258,779
United Technologies 32,630 1,904,613
---------------
Total 4,776,933
- ------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.4%)
FedEx 8,070 816,281
- ------------------------------------------------------------------------------
AUTO COMPONENTS (0.3%)
Johnson Controls 7,699 533,079
- ------------------------------------------------------------------------------
AUTOMOBILES (1.1%)
Ford Motor 98,266 843,122
General Motors 28,470 684,988
Harley-Davidson 11,018 589,794
---------------
Total 2,117,904
- ------------------------------------------------------------------------------
BEVERAGES (2.0%)
Brown-Forman Cl B 2,988 211,909
Coca-Cola 85,894 3,554,293
PepsiCo 5,225 298,766
---------------
Total 4,064,968
- ------------------------------------------------------------------------------
BIOTECHNOLOGY (1.0%)
Gilead Sciences 25,921(b) 1,577,811
MedImmune 10,963(b) 374,058
---------------
Total 1,951,869
- ------------------------------------------------------------------------------
CAPITAL MARKETS (1.8%)
Charles Schwab 22,493 332,671
E*TRADE Financial 9,303(b) 221,318
Franklin Resources 11,019 1,085,372
Goldman Sachs Group 1,439 203,259
Janus Capital Group 9,162 191,394
Lehman Brothers Holdings 3,121 438,344
Morgan Stanley 17,106 1,051,164
---------------
Total 3,523,522
- ------------------------------------------------------------------------------
CHEMICALS (0.2%)
Dow Chemical 4,380 185,274
Monsanto 3,058 258,737
---------------
Total 444,011
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
COMMERCIAL BANKS (1.3%)
Comerica 6,969 $386,570
First Horizon Natl 4,440 168,143
KeyCorp 5,983 211,738
Natl City 27,108 926,552
PNC Financial Services Group 12,871 834,813
---------------
Total 2,527,816
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (3.7%)
ADC Telecommunications 7,647(b) 193,928
Corning 86,279(b) 2,100,894
Motorola 112,224 2,548,607
QUALCOMM 37,596 1,803,104
Scientific-Atlanta 7,828 334,725
Tellabs 27,521(b) 351,994
---------------
Total 7,333,252
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (3.4%)
Apple Computer 9,819(b) 741,433
Hewlett-Packard 191,956 5,985,188
Lexmark Intl Cl A 1,816(b) 88,203
---------------
Total 6,814,824
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.2%)
Vulcan Materials 5,317 382,186
- ------------------------------------------------------------------------------
DISTRIBUTORS (0.2%)
Genuine Parts 9,185 390,638
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (7.0%)
CIT Group 7,305 389,649
Citigroup 133,727 6,229,004
iShares MSCI EAFE Index Fund 110,400 6,936,431
Moody's 5,731 362,887
---------------
Total 13,917,971
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (6.2%)
AT&T 226,587 5,879,932
BellSouth 84,339 2,426,433
Verizon Communications 127,795 4,045,990
---------------
Total 12,352,355
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
10 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
ELECTRIC UTILITIES (2.4%)
American Electric Power 8,425 $314,421
CenterPoint Energy 32,966 421,305
Edison Intl 14,893 652,611
Exelon 13,911 798,770
FirstEnergy 9,454 473,645
PG&E 19,341 721,613
PPL 5,805 174,905
TECO Energy 9,536 162,875
TXU 17,292 875,667
Xcel Energy 9,660 187,597
---------------
Total 4,783,409
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%)
Agilent Technologies 5,977(b) 202,680
Jabil Circuit 8,306(b) 335,562
---------------
Total 538,242
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (2.1%)
Baker Hughes 15,402 1,192,731
Halliburton 19,439 1,546,373
Natl Oilwell Varco 9,499(b) 722,589
Transocean 7,689(b) 623,962
---------------
Total 4,085,655
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (3.8%)
Albertson's 22,143 556,896
CVS 37,032 1,028,008
Kroger 42,969(b) 790,630
Safeway 38,729 907,808
Wal-Mart Stores 82,290 3,794,392
Whole Foods Market 6,182 456,664
---------------
Total 7,534,398
- ------------------------------------------------------------------------------
FOOD PRODUCTS (0.7%)
Archer-Daniels-Midland 28,840 908,460
Sara Lee 22,535 411,940
---------------
Total 1,320,400
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.8%)
Bausch & Lomb 1,943 131,250
Becton Dickinson & Co 3,982 258,034
Biomet 7,676 290,230
Medtronic 10,087 569,612
Millipore 5,675(b) 390,326
---------------
Total 1,639,452
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (6.2%)
Aetna 12,936 1,252,205
AmerisourceBergen 16,144 704,524
Cardinal Health 8,218 592,025
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HEALTH CARE PROVIDERS & SERVICES (CONT.)
Caremark Rx 14,262(b) $703,117
CIGNA 13,220 1,607,552
Coventry Health Care 6,325(b) 376,780
Express Scripts 10,080(b) 920,203
HCA 14,538 713,525
McKesson 16,650 882,450
Medco Health Solutions 11,037(b) 597,102
UnitedHealth Group 38,015 2,258,850
WellPoint 22,472(b) 1,725,850
---------------
Total 12,334,183
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.4%)
Darden Restaurants 4,418 179,636
Harrah's Entertainment 2,087 153,603
Wendy's Intl 7,874 464,172
---------------
Total 797,411
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (1.9%)
Centex 9,592 684,773
DR Horton 27,008 1,007,939
KB HOME 5,316 405,079
Lennar Cl A 5,304 331,818
Pulte Homes 22,630 902,937
Whirlpool 4,854 391,621
---------------
Total 3,724,167
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.4%)
Kimberly-Clark 14,493 827,840
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.9%)
3M 25,593 1,861,891
- ------------------------------------------------------------------------------
INSURANCE (6.0%)
AFLAC 8,226 386,211
Allstate 19,119 995,144
Ambac Financial Group 9,802 752,892
Aon 17,528 599,808
Chubb 1,748 164,924
Hartford Financial Services Group 4,277 351,698
Jefferson-Pilot 5,027 293,225
Lincoln Natl 12,317 671,646
Loews 13,758 1,357,777
Marsh & McLennan Companies 19,712 599,048
MBIA 8,146 501,468
MetLife 16,512 828,242
Prudential Financial 25,288 1,905,197
St Paul Travelers Companies 34,245 1,554,037
Torchmark 6,667 374,019
UnumProvident 24,876 505,729
---------------
Total 11,841,065
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
11 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
IT SERVICES (0.5%)
Convergys 11,645(b) $200,294
Electronic Data Systems 19,674 495,588
Paychex 4,960 180,296
Sabre Holdings Cl A 6,183 151,484
---------------
Total 1,027,662
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.4%)
Eastman Kodak 23,093 579,634
Mattel 8,419 138,914
---------------
Total 718,548
- ------------------------------------------------------------------------------
MACHINERY (0.6%)
Cummins 1,973 191,973
Ingersoll-Rand Cl A 4,337(c) 170,314
ITT Inds 5,164 529,310
PACCAR 4,329 301,298
---------------
Total 1,192,895
- ------------------------------------------------------------------------------
METALS & MINING (0.9%)
Freeport-McMoRan Copper & Gold Cl B 4,207 270,300
Nucor 4,197 353,513
Phelps Dodge 5,567 893,504
United States Steel 3,343 199,744
---------------
Total 1,717,061
- ------------------------------------------------------------------------------
MULTILINE RETAIL (0.8%)
Dollar General 16,148 272,901
Federated Dept Stores 3,967 264,321
JC Penney 9,599(d) 535,624
Nordstrom 12,934 539,607
---------------
Total 1,612,453
- ------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER (0.6%)
CMS Energy 22,482(b) 325,315
Public Service Enterprise Group 7,066 491,934
Sempra Energy 9,658 464,067
---------------
Total 1,281,316
- ------------------------------------------------------------------------------
OIL & GAS (13.4%)
Burlington Resources 15,435 1,408,598
Chevron 65,004 3,859,938
ConocoPhillips 94,542 6,116,867
Devon Energy 13,324 908,830
EOG Resources 16,342 1,381,553
Exxon Mobil 157,947 9,911,175
Marathon Oil 18,721 1,439,083
Occidental Petroleum 8,384 819,201
Sunoco 9,037 860,322
---------------
Total 26,705,567
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
PHARMACEUTICALS (9.0%)
Abbott Laboratories 14,096 $608,242
Allergan 7,600 884,640
Bristol-Myers Squibb 100,463 2,289,552
Johnson & Johnson 110,234 6,342,865
King Pharmaceuticals 22,651(b) 424,706
Merck & Co 141,143 4,869,434
Pfizer 98,330 2,525,114
---------------
Total 17,944,553
- ------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (0.6%)
Equity Office Properties Trust 12,584 400,424
Equity Residential 6,283 266,462
Public Storage 2,520 182,876
Simon Property Group 4,180 346,271
---------------
Total 1,196,033
- ------------------------------------------------------------------------------
ROAD & RAIL (0.5%)
Burlington Northern Santa Fe 11,727 939,567
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.8%)
Advanced Micro Devices 10,646(b) 445,642
Broadcom Cl A 18,274(b) 1,246,287
Intel 72,162 1,534,886
LSI Logic 33,041(b) 302,325
Micron Technology 14,209(b) 208,588
Natl Semiconductor 25,729 725,815
Texas Instruments 36,797 1,075,576
---------------
Total 5,539,119
- ------------------------------------------------------------------------------
SOFTWARE (3.2%)
Autodesk 9,357 379,801
BMC Software 8,420(b) 186,082
Compuware 28,997(b) 238,935
Microsoft 123,936 3,488,798
Oracle 156,495(b) 1,967,142
---------------
Total 6,260,758
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (2.2%)
Best Buy 10,244(d) 518,961
Home Depot 72,125 2,924,669
Office Depot 15,688(b,d) 520,057
Tiffany & Co 9,568 360,714
---------------
Total 4,324,401
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.9%)
Coach 11,279(b) 405,480
Jones Apparel Group 5,556 173,792
Liz Claiborne 4,765 165,441
Nike Cl B 8,026 649,704
VF 5,646 313,240
---------------
Total 1,707,657
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
12 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
THRIFTS & MORTGAGE FINANCE (4.1%)
Fannie Mae 67,564 $3,914,659
Freddie Mac 28,865 1,958,779
MGIC Investment 7,845 517,848
Washington Mutual 42,948 1,817,559
---------------
Total 8,208,845
- ------------------------------------------------------------------------------
TOBACCO (1.4%)
Altria Group 39,242 2,838,766
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $183,442,380) $196,450,923
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SHORT-TERM SECURITIES (0.8%)
- ------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Kitty Hawk Funding
02-02-06 4.32% $1,500,000(e) $1,499,640
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $1,499,820) $1,499,640
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $184,942,200)(f) $197,950,563
==============================================================================
- ------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- ------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Jan. 31,
2006, the value of foreign securities represented 0.1% of net
assets.
(d) Partially pledged as initial margin deposit on the following
open stock index futures contracts (see Note 5 to the financial
statements):
TYPE OF SECURITY CONTRACTS
------------------------------------------------------------------
PURCHASE CONTRACTS
S&P 500 Index, March 2006 5
(e) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to
dealers in that program or other "accredited investors." This
security has been determined to be liquid under guidelines
established by the Fund's Board of Directors. These securities
may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At Jan. 31, 2006, the value
of these securities amounted to $1,499,640 or 0.8% of net
assets.
(f) At Jan. 31, 2006, the cost of securities for federal income tax
purposes was approximately $184,942,000 and the approximate
aggregate gross unrealized appreciation and depreciation based
on that cost was:
Unrealized appreciation $15,789,000
Unrealized depreciation (2,780,000)
------------------------------------------------------------------
Net unrealized appreciation $13,009,000
------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by
and is the exclusive property of Morgan Stanley Capital International
Inc. and Standard & Poor's, a division of The McGraw-Hill Companies,
Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with
the Securities and Exchange Commission (Commission) for the
first and third quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC
(information on the operations of the Public Reference Room may
be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed
in its annual and semiannual shareholder reports and in its
filings on Form N-Q, can be found at www.riversource.com/funds.
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
13 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource Disciplined Equity Fund
JAN. 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 1)
(identified cost $184,942,200) $197,950,563
Cash in bank on demand deposit 201,185
Capital shares receivable 32,184
Dividends and accrued interest receivable 252,361
- -------------------------------------------------------------------------------------------------------
Total assets 198,436,293
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Capital shares payable 5,787
Payable for investment securities purchased 5,629
Accrued investment management services fee 3,269
Accrued distribution fee 654
Accrued transfer agency fee 209
Accrued administrative services fee 327
Other accrued expenses 17,372
- -------------------------------------------------------------------------------------------------------
Total liabilities 33,247
- -------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $198,403,046
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------------------------------
Capital stock -- $.01 par value (Note 1) $ 287,134
Additional paid-in capital 182,788,743
Undistributed net investment income 233,476
Accumulated net realized gain (loss) 2,082,750
Unrealized appreciation (depreciation) on investments (Note 5) 13,010,943
- -------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $198,403,046
=======================================================================================================
Net assets applicable to outstanding shares: Class A $ 44,686,720
Class B $ 12,308,502
Class C $ 322,982
Class I $141,021,871
Class Y $ 62,971
Net asset value per share of outstanding capital stock: Class A shares 6,486,299 $ 6.89
Class B shares 1,804,381 $ 6.82
Class C shares 47,382 $ 6.82
Class I shares 20,366,246 $ 6.92
Class Y shares 9,115 $ 6.91
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
14 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS
RiverSource Disciplined Equity Fund
SIX MONTHS ENDED JAN. 31, 2006 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income:
Dividends $ 1,543,108
Interest 108,647
- ------------------------------------------------------------------------------------------------------
Total income 1,651,755
- ------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 464,218
Distribution fee
Class A 44,266
Class B 51,687
Class C 1,221
Transfer agency fee 40,614
Incremental transfer agency fee
Class A 3,187
Class B 1,861
Class C 55
Service fee -- Class Y 20
Administrative services fees and expenses 41,333
Compensation of board members 4,934
Custodian fees 13,950
Printing and postage 17,716
Registration fees 22,686
Audit fees 10,250
Other 6,134
- ------------------------------------------------------------------------------------------------------
Total expenses 724,132
Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (73)
- ------------------------------------------------------------------------------------------------------
724,059
Earnings credits on cash balances (Note 2) (1,847)
- ------------------------------------------------------------------------------------------------------
Total net expenses 722,212
Investment income (loss) -- net 929,543
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions (Note 3) 4,185,467
Futures contracts (329,668)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 3,855,799
Net change in unrealized appreciation (depreciation) on investments 6,867,270
- ------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 10,723,069
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $11,652,612
======================================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
15 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource Disciplined Equity Fund
JAN. 31, 2006 JULY 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------
OPERATIONS AND DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------
Investment income (loss) -- net $ 929,543 $ 658,382
Net realized gain (loss) on investments 3,855,799 3,796,315
Net change in unrealized appreciation (depreciation) on investments 6,867,270 5,439,579
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 11,652,612 9,894,276
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (264,091) (62,837)
Class B (13,902) --
Class C (589) --
Class I (921,057) (142,494)
Class Y (248) (172)
Net realized gain
Class A (1,335,345) (327,285)
Class B (383,292) (102,880)
Class C (9,963) (3,213)
Class I (3,370,162) (723,932)
Class Y (1,166) (727)
- ------------------------------------------------------------------------------------------------------
Total distributions (6,299,815) (1,363,540)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
- ------------------------------------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 17,444,697 21,609,484
Class B shares 4,078,360 6,978,820
Class C shares 154,121 77,713
Class I shares 51,823,195 66,292,986
Class Y shares 26,000 7,000
Reinvestment of distributions at net asset value
Class A shares 1,586,675 346,177
Class B shares 393,227 100,334
Class C shares 9,719 2,894
Class I shares 4,290,735 866,109
Class Y shares 861 505
Payments for redemptions
Class A shares (3,517,615) (9,642,178)
Class B shares (Note 2) (1,777,876) (1,046,545)
Class C shares (Note 2) (37,732) (48,696)
Class I shares (799,233) (150,008)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 73,675,134 85,394,595
- ------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 79,027,931 93,925,331
Net assets at beginning of period 119,375,115 25,449,784
- ------------------------------------------------------------------------------------------------------
Net assets at end of period $198,403,046 $119,375,115
======================================================================================================
Undistributed net investment income $ 233,476 $ 503,820
- ------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
16 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
RiverSource Disciplined Equity Fund (formerly AXP Quantitative Large
Cap Equity Fund)
(Unaudited as to Jan. 31, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board. The Fund invests primarily in equity
securities of companies listed on U.S. exchanges with market capitalizations
greater than $5 billion at the time of purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o 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.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares have no sales charge and are
made available through a separate prospectus supplement provided to
investors eligible to purchase the shares. At Jan. 31, 2006, Ameriprise
Financial, Inc. (Ameriprise Financial) and the RiverSource Portfolio Builder
Funds owned 100% of Class I shares, which represents 71.08% of the Fund's
net assets.
At Jan. 31, 2006, Ameriprise Financial and the RiverSource Portfolio Builder
Funds owned approximately 71% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee, transfer agency fees and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Pursuant to procedures adopted by the Board of
Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing
(FVP). FVP determinations are made in good
- ------------------------------------------------------------------------------
17 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
faith in accordance with these procedures. If a development or event is so
significant that there is a reasonably high degree of certainty that the
effect of the development or event has actually caused the closing price to
no longer reflect the actual value, the closing prices, as determined at the
close of the applicable foreign market, may be adjusted to reflect the fair
value of the affected foreign securities as of the close of the New York
Stock Exchange. Significant events include material movements in the U.S.
securities markets prior to the opening of foreign markets on the following
trading day. FVP results in an estimated price that reasonably reflects the
current market conditions in order to value the portfolio holdings such that
shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued
at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market
where completing the obligation depends upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured
put options. The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases. The
risk in writing a put option is that the Fund may incur a loss if the market
price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
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.
- ------------------------------------------------------------------------------
18 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
FOREIGN CURRENCY TRANSLATIONS AND 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 exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such
claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue
Code that applies to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. No provision for
income or excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due
to "wash sale" transactions. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end
of the calendar year, when available, is reinvested in additional shares of
the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
- ------------------------------------------------------------------------------
19 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
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
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.48% annually
as the Fund's assets increase. On Feb. 15, 2006, shareholders approved a
change to the Investment Management Services Agreement. Effective March 1,
2006, the management fee percentage of the Fund's average daily net assets
will decline from 0.60% to 0.375% annually as the Fund's assets increase.
The fee may be adjusted upward or downward by a performance incentive
adjustment based on a comparison of the performance of Class A shares of the
Fund to the Lipper Large-Cap 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 increased the fee by $24,710 for the six months
ended Jan. 31, 2006.
Under the current Administrative Services Agreement, the Fund pays
Ameriprise Financial a fee for administration and accounting services at a
percentage of the Fund's average daily net assets that declines from 0.06%
to 0.03% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the
fee percentage of the Fund's average daily net assets declined from 0.05% to
0.02% annually as the Fund's assets increased. A minor portion of additional
administrative service expenses paid by the Fund are consultants' fees and
fund office expenses. Under this agreement, the Fund also pays taxes, audit
and certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the Board.
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.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund
pays the Transfer Agent an annual fee per shareholder account for this
service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
- ------------------------------------------------------------------------------
20 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement
of operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (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 up to 0.25% of the Fund's average daily net assets attributable
to Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee
for service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$71,958 for Class A, $3,385 for Class B and $20 for Class C for the six
months ended Jan. 31, 2006.
For the six months ended Jan. 31, 2006, the Investment Manager and its
affiliates waived certain fees and expenses to 1.24% for Class A. Of these
waived fees and expenses, the transfer agency fees waived for Class A were
$73. Beginning Oct. 1, 2005, an agreement to waive certain fees and expenses
was effective until March 10, 2006, such that net expenses, before giving
effect to any performance incentive adjustment, will not exceed 1.25% for
Class A, 2.04% for Class B, 2.06% for Class C, 0.93% for Class I and 1.06%
for Class Y of the Fund's average daily net assets. Effective as of March
11, 2006, a new agreement to waive certain fees and expenses is effective
until July 31, 2006, such that net expenses before giving effect to any
performance incentive adjustment, will not exceed 1.00% for Class A, 1.78%
for Class B, 1.77% for Class C, 0.64% for Class I and 0.84% for Class Y of
the Fund's average daily net assets.
During the six months Jan. 31, 2006, the Fund's custodian and transfer
agency fees were reduced by $1,847 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise
Trust Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $106,542,457 and $40,299,802,
respectively, for the six months ended Jan. 31, 2006. Realized gains and
losses are determined on an identified cost basis.
- ------------------------------------------------------------------------------
21 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
SIX MONTHS ENDED JAN. 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------------------
Sold 2,581,716 611,910 23,119 7,691,347 3,868
Issued for reinvested distributions 238,239 59,580 1,473 641,365 129
Redeemed (522,993) (269,166) (5,729) (118,550) --
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) 2,296,962 402,324 18,863 8,214,162 3,997
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------------------
Sold 3,401,658 1,109,408 12,216 10,493,500 1,160
Issued for reinvested distributions 54,345 15,850 457 135,541 79
Redeemed (1,531,238) (165,421) (7,726) (24,014) --
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,924,765 959,837 4,947 10,605,027 1,239
- -------------------------------------------------------------------------------------------------------------
5. STOCK INDEX FUTURES CONTRACTS
At Jan. 31, 2006, investments in securities included securities valued at
$250,025 that were pledged as collateral to cover initial margin deposits on
5 open purchase contracts. The notional market value of the open purchase
contracts at Jan. 31, 2006 was $1,604,500 with a net unrealized gain of
$2,580. See "Summary of significant accounting policies" and "Notes to
investments in securities."
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed
by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the
Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial
Lending Rate. Borrowings are payable within 60 days after such loan is
executed. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.07% per annum. Prior to
this agreement, the Fund had a revolving credit agreement that permitted
borrowings up to $500 million with The Bank of New York. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2006.
7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement
agreements with the Securities and Exchange Commission (SEC) and Minnesota
Department of Commerce (MDOC) related to market timing activities. In
connection with these matters, the SEC and MDOC issued orders (the Orders)
alleging that AEFC violated certain provisions of the federal and Minnesota
securities laws by failing to
- ------------------------------------------------------------------------------
22 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
adequately disclose market timing activities by allowing certain identified
market timers to continue to market time contrary to disclosures in mutual
fund and variable annuity product prospectuses. The Orders also alleged that
AEFC failed to implement procedures to detect and prevent market timing in
401(k) plans for employees of AEFC and related companies and failed to
adequately disclose that there were no such procedures. Pursuant to the MDOC
Order, the MDOC also alleged that AEFC allowed inappropriate market timing
to occur by failing to have written policies and procedures and failing to
properly supervise its employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million.
AEFC also agreed to make presentations at least annually to its board of
directors and the relevant mutual funds' board that include an overview of
policies and procedures to prevent market timing, material changes to these
policies and procedures and whether disclosures related to market timing are
consistent with the SEC order and federal securities laws. AEFC also agreed
to retain an independent distribution consultant to assist in developing a
plan for distribution of all disgorgement and civil penalties ordered by the
SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a
summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration 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 or arbitration 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.
- ------------------------------------------------------------------------------
23 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
8. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003(b)
Net asset value, beginning of period $6.70 $5.95 $5.44 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03 .04 .02 .01
Net gains (losses) (both realized and unrealized) .43 .90 .63 .43
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .46 .94 .65 .44
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.03) (.02) --
Distributions from realized gains (.23) (.16) (.12) --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.19) (.14) --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.89 $6.70 $5.95 $5.44
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $45 $28 $13 $8
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.24%(d) 1.25%(e) 1.13%(e) 1.22%(d),(e)
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.04%(d) .84% .65% .81%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 64% 64% 17%
- -----------------------------------------------------------------------------------------------------------------------------
Total return(f) 7.05%(g) 15.95% 11.99% 8.80%(g)
- -----------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class A would have been 1.35%, 1.91% and 7.39% for the
periods ended July 31, 2005, 2004 and 2003, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
24 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003(b)
Net asset value, beginning of period $6.62 $5.90 $5.43 $5.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .01 .02 (.02) --
Net gains (losses) (both realized and unrealized) .43 .86 .61 .43
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .44 .88 .59 .43
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) -- -- --
Distributions from realized gains (.23) (.16) (.12) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.16) (.12) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.82 $6.62 $5.90 $5.43
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $12 $9 $3 $1
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 2.01%(d) 2.04%(e) 1.95%(e) 2.01%(d),(e)
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .27%(d) .06% (.16%) (.08%)(d)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 64% 64% 17%
- -------------------------------------------------------------------------------------------------------------------------------
Total return(f) 6.71%(g) 15.03% 10.95% 8.60%(g)
- -------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class B would have been 2.13%, 2.73% and 8.18% for the
periods ended July 31, 2005, 2004 and 2003, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
25 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003(b)
Net asset value, beginning of period $6.62 $5.90 $5.43 $5.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .01 (.02) --
Net gains (losses) (both realized and unrealized) .42 .87 .61 .43
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .44 .88 .59 .43
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) -- -- --
Distributions from realized gains (.23) (.16) (.12) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.16) (.12) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.82 $6.62 $5.90 $5.43
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 2.02%(d) 2.06%(e) 1.95%(e) 2.01%(d),(e)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .27%(d) .02% (.17%) (.05%)(d)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 64% 64% 17%
- ------------------------------------------------------------------------------------------------------------------------------
Total return(f) 6.79%(g) 15.03% 10.96% 8.60%(g)
- ------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class C would have been 2.13%, 2.73% and 8.20% for the
periods ended July 31, 2005, 2004 and 2003, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
26 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
CLASS I
- ------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004(b)
Net asset value, beginning of period $6.73 $5.96 $5.99
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .04 .02
Net gains (losses) (both realized and unrealized) .44 .92 (.05)
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .48 .96 (.03)
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.03) --
Distributions from realized gains (.23) (.16) --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.29) (.19) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.92 $6.73 $5.96
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $141 $82 $9
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .79%(d) .91% .93%(d),(e)
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.46%(d) 1.19% 5.35%(d)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 64% 64%
- ------------------------------------------------------------------------------------------------------------------
Total return(f) 7.28%(g) 16.29% (.50%)(g)
- ------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Inception date is July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratio of
expenses for Class I would have been 1.27% for the period ended July
31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
27 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003(b)
Net asset value, beginning of period $6.71 $5.95 $5.45 $5.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03 .05 .03 .01
Net gains (losses) (both realized and unrealized) .45 .91 .61 .44
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .48 .96 .64 .45
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.04) (.02) --
Distributions from realized gains (.23) (.16) (.12) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.28) (.20) (.14) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.91 $6.71 $5.95 $5.45
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $-- $-- $-- $--
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.05%(d) 1.06%(e) .98%(e) 1.01%(d),(e)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.19%(d) 1.03% .78% .90%(d)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 28% 64% 64% 17%
- ------------------------------------------------------------------------------------------------------------------------------
Total return(f) 7.24%(g) 16.25% 11.87% 9.00%(g)
- ------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class Y would have been 1.18%, 1.76% and 7.20% for the
periods ended July 31, 2005, 2004 and 2003, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
28 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 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, including management fees;
distribution and service (12b-1) fees; and other Fund 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. 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, 2006.
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.
- ------------------------------------------------------------------------------
29 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
AUG. 1, 2005 JAN. 31, 2006 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,070.50 $6.54(c) 1.24%
Hypothetical (5% return before expenses) $1,000 $1,019.16 $6.38(c) 1.24%
Class B
Actual(b) $1,000 $1,067.10 $10.59(c) 2.01%
Hypothetical (5% return before expenses) $1,000 $1,015.24 $10.32(c) 2.01%
Class C
Actual(b) $1,000 $1,067.90 $10.64(c) 2.02%
Hypothetical (5% return before expenses) $1,000 $1,015.19 $10.37(c) 2.02%
Class I
Actual(b) $1,000 $1,072.80 $4.17(c) .79%
Hypothetical (5% return before expenses) $1,000 $1,021.45 $4.07(c) .79%
Class Y
Actual(b) $1,000 $1,072.40 $5.54(c) 1.05%
Hypothetical (5% return before expenses) $1,000 $1,020.13 $5.40(c) 1.05%
(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 186/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2006:
+7.05% for Class A, +6.71% for Class B, +6.79% for Class C, +7.28% for
Class I and +7.24% for Class Y.
(c) Effective as of March 11, 2006, the Investment Manager and its
affiliates have agreed to waive certain fees and expenses until July
31, 2006, unless sooner terminated at the discretion of the Board, such
that net expenses will not exceed 1.00% for Class A; 1.78% for Class B,
1.77% for Class C; 0.64% for Class I and 0.84% for Class Y of the
Fund's average daily net assets. If the revised fee schedule under the
cap/fee waiver agreement had been in place for the entire six-month
period ended Jan. 31, 2006, the actual expenses paid would have been
$5.28 for Class A, $9.38 for Class B, $9.33 for Class C, $3.38 for
Class I and $4.44 for Class Y; the hypothetical expenses paid would
have been $5.15 for Class A, $9.15 for Class B, $9.09 for Class C,
$3.30 for Class I and $4.33 for Class Y.
- ------------------------------------------------------------------------------
30 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of
Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express
Financial Corporation), serves as the investment manager to the Fund. Under
an investment management services agreement (the IMS Agreement), the
investment manager provides investment advice and other services to the
Fund. Throughout the year, the Fund's Board of Directors (the Board) and the
Board's Investment Review and Contracts Committees monitor these services.
Ameriprise Financial had served as investment manager to the Fund until
Sept. 29, 2005. On that date, and pursuant to the consent of the Board,
Ameriprise Financial transferred its rights, title, and interest and its
burdens and obligations under the IMS Agreement to RiverSource, its
wholly-owned subsidiary.
Each year, the Board determines whether to continue the IMS Agreement by
evaluating the quality and level of services received and the costs
associated with those services. To assist the Board in making this
determination, the investment manager prepares detailed reports for the
Board and its Contracts Committee in March and April and provides data
prepared by independent organizations. The Board gives considerable weight
to the work, deliberations and conclusions of the Contracts and Investment
Review Committees in determining whether to continue the IMS Agreement.
BACKGROUND
This past year, prior to the Board's annual review process, on Feb. 1, 2005,
American Express Company, the former parent of Ameriprise Financial,
announced its intention to pursue a spin-off of Ameriprise Financial by
distributing shares of the common stock of Ameriprise Financial to
shareholders of American Express Company. Following this announcement, the
Board determined to proceed with its annual review process and, after
thorough review of the reports and data provided, at a meeting held in
person on April 14, 2005, the Board, including all of its independent
members, determined that the quality and level of advisory services provided
pursuant to the IMS Agreement were satisfactory and that fees were fair and
reasonable. However, in light of the announced plans of the spin-off, the
Board approved continuation of the IMS Agreement with Ameriprise Financial
for only an interim period ending on the later of (i) the effective date of
the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise
Financial (or its subsidiary) by the shareholders of the Fund, but in no
event for a period longer than one year.
During the course of the six-month period following the April 2005 meeting,
the Board evaluated whether to approve new investment management services
agreements for each of the funds within the Ameriprise Financial fund
complex (together, the Funds) with post-spin Ameriprise Financial (or
RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte),
assisted the Boards in fulfilling their statutory and other responsibilities
associated with the spin-off and the resulting consideration of new
contracts, including the new IMS Agreement. The Board and its committees
were provided with a wealth of written and oral information in this regard.
Furthermore, in connection with the Board's considerations as to whether
post-spin Ameriprise Financial, as an entity independent from American
Express Company, would be capable of continuing to provide a high quality of
services to the Funds,
- ------------------------------------------------------------------------------
31 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
the Board's independent members retained their own financial adviser, Credit
Suisse First Boston LLC (CSFB), to assist them in analyzing the capital
adequacy of post-spin Ameriprise Financial. (The costs of independent
counsel and CSFB and of additional meetings of the Boards were borne by
Ameriprise Financial as part of the commitment of the American Express
Company to ensure a complete and thorough review of the proposed spin-off
and its effect on the services provided by Ameriprise Financial and its
subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board,
including all of its independent members, approved, and recommended that
shareholders approve, a proposed new IMS Agreement with RiverSource (the New
IMS Agreement). At a meeting of the Fund's shareholders held on Feb. 15,
2006, shareholders approved the New IMS Agreement. The following section,
"Board Considerations Related to the New IMS Agreement," provides a detailed
discussion of the Board's considerations and determinations respecting the
New IMS Agreement.
BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT
In carrying out its legal responsibilities associated with the consideration
of the New IMS Agreement, the Board evaluated the following factors:
Nature, Extent and Quality of Services to be Provided by Post-Spin
Ameriprise Financial (and Its Subsidiaries)
The Board recognized that only a few months had passed since its April 2005
conclusion that the nature, extent and quality of services provided by
Ameriprise Financial were satisfactory and consistent with those that would
be expected for a fund family of the size of the Funds and its determination
to renew the IMS Agreement for the interim period. However, the Board also
recognized the need to supplement this assessment with an evaluation of
whether the spin-off or other factors would result in changes to the
advisory services being provided under the current IMS Agreement.
The Board focused its evaluation on the following factors potentially
impacting the nature, extent and quality of advisory services to be provided
by Ameriprise Financial: (i) Ameriprise Financial's projected capital
structure and capital adequacy as a stand-alone entity; (ii) its legal and
regulatory risks; (iii) its ability to retain and attract personnel; and
(iv) its ability to successfully re-brand its products and services. Based
on extensive presentations and reports by Ameriprise Financial, CSFB and
Schulte, the Board concluded that the proposed capital structure (which
includes certain indemnification commitments made by American Express
Company) should enable RiverSource to continue to provide a high quality and
level of advisory services to the Fund. In making this determination, the
Board took into account representations by management of Ameriprise
Financial that projected capital levels would allow Ameriprise Financial and
RiverSource to meet legal and compliance responsibilities, build their
distribution network, pursue technological upgrades, make capital
commitments necessary to retain and attract key personnel devoted to legal
and compliance responsibilities, portfolio management and distribution, and
pursue smaller asset management acquisitions to help grow the asset
management business. The Board accorded significant weight to CSFB's
confirmation as to the reasonableness of the proposed capital structure. The
Board also considered the fact that there were no expected departures of key
personnel involved in the portfolio management, operations and marketing of
the Funds as a result of the announcement of the spin-off.
- ------------------------------------------------------------------------------
32 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
The Board concluded that, based on all of the materials and information
provided, post-spin Ameriprise Financial (including RiverSource) would be in
a position to continue to provide a high quality and level of advisory
services to the Fund.
INVESTMENT PERFORMANCE
The Board next focused on investment performance. The Board reviewed reports
documenting the Fund's performance over one-, three- and/or five-year
periods, as well as the entire period during which its current portfolio
manager has managed the Fund, and compared to relevant Lipper and market
indices. The Board took into account its determination in April 2005 that
investment performance in 2004 exceeded the median.
The Board also considered that it had been receiving monthly performance
reports for the Fund and that there had been no significant deviations from
April's overall performance data.
COST OF SERVICES PROVIDED
The Board evaluated comparative fees and the costs of services under the
current IMS Agreement and the New IMS Agreement, including fees charged by
Ameriprise Financial (including RiverSource and other subsidiaries) to
institutional clients. The Board studied RiverSource's effort (i.e., its
"pricing philosophy") to set substantially all Funds' total expense ratios
at or below the median expense ratio of comparable mutual funds (as compiled
by Lipper). The Board observed that the proposed advisory fee changes are
designed to work in tandem with proposed changes to administrative services
fees. It also noted that RiverSource has agreed to voluntarily impose
expense caps or waivers to achieve this pricing objective whenever the
expense ratio exceeded the median expense ratio by more than three basis
points (unless the higher ratio was due to the impact of the performance fee
adjustment). The Board considered that advisory fees under the New IMS
Agreement would stay the same. The Board also took into account the effect
of the proposed performance incentive adjustment on the advisory fee. In
this regard, the Board recalled its past determinations regarding the
appropriateness of (i) the use of the relevant index for the performance
comparison; (ii) the methodology for determining when the Board may change
an index used to calculate the performance incentive adjustment; (iii) the
periods used for averaging the Fund's assets and computing investment
performance; and (iv) the length of the period over which performance is
computed.
The Board next considered the expected profitability to Ameriprise Financial
and RiverSource derived from their relationship with the Fund, recalling the
April 2005 determination that the profitability level was appropriate. The
Board noted that projected profitability of Ameriprise Financial would allow
it to operate effectively and, at the same time, reinvest in RiverSource and
its other asset management businesses. The Board also considered that the
proposed changes in advisory fees and the mergers of certain other Funds
would result in revenue gains to Ameriprise Financial, but that these
increases would not materially alter profit margins due to expected
increases in costs associated with the spin-off, particularly re-branding
and separation. CSFB also reported that Ameriprise Financial's projected
level of return on equity was generally reasonable in light of the returns
on equity of its industry competitors. In evaluating profitability, the
Board also considered the benefits Ameriprise Financial obtains through the
use of commission dollars paid on portfolio transactions for the Fund and
from other business relationships that result from managing the Fund. The
Board also considered
- ------------------------------------------------------------------------------
33 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
the fees charged by Ameriprise Financial (and its subsidiaries) to
institutional clients as well as the fees paid to, and charged by,
subadvisers, noting the differences in services provided in each case. In
light of these considerations, the Board concluded that projected
profitability levels were appropriate.
ECONOMIES OF SCALE
The Board also considered the "breakpoints" in fees that would be triggered
as Fund net asset levels grew and the extent to which shareholders would
benefit from such growth. The Board observed that the revised fee schedules
under the proposed New IMS Agreement would continue to provide breakpoints
similar to those in place pursuant to the current IMS Agreement.
Accordingly, the Board concluded that the proposed New IMS Agreement
provides adequate opportunity for shareholders to realize benefits as Fund
assets grow.
OTHER CONSIDERATIONS
In addition, the Board accorded weight to the fact that, under the New IMS
Agreement, RiverSource Investments is held to a higher standard of care than
under the current IMS Agreement. The Board also noted Ameriprise Financial's
commitment to a culture that adheres to ethical business practice, assigns
accountability to senior management and seeks to identify conflicts and
propose appropriate action to minimize the risks posed by the conflicts.
Furthermore, the Board recognized that it was not limited to considering
management's proposed New IMS Agreement. In this regard, the Board evaluated
the circumstances under which it would consider the retention of an
investment adviser different from RiverSource Investments. The Board
concluded, based on its consultation with independent counsel, that pursuing
the retention of a different adviser was not necessary, primarily because,
in its best judgment, Ameriprise Financial continues to be basically the
same organization (from a functional and managerial standpoint), as it was
prior to the spin-off. The Board reasoned that shareholders purchased shares
of the Fund with an expectation that the current investment advisory
organization would be servicing the Fund.
- ------------------------------------------------------------------------------
34 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in
which the Fund holds investments. The procedures are stated in the
Statement of Additional Information (SAI). You may obtain a copy of
the SAI without charge by calling (800) 862-7919; by looking at the
website www.riversource.com/funds; or by 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 during the most recent 12-month period ended
June 30 is available without charge by calling the Fund's
administrator, Board Services Corporation, collect at (612) 330-9283;
by looking at the website www.riversource.com/funds; or by searching
the website of the SEC at www.sec.gov.
- ------------------------------------------------------------------------------
35 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE DISCIPLINED EQUITY FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and
the votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes as to each proposal is set forth
below. A vote is based on total dollar interest in a fund.
1. ELECTION OF BOARD MEMBERS
KATHLEEN BLATZ
Affirmative 137,687,051.18
Withhold 3,777,037.12
Abstain 0.00
TOTAL 141,464,088.30
ARNE H. CARLSON
Affirmative 137,080,136.14
Withhold 4,383,952.16
Abstain 0.00
TOTAL 141,464,088.30
PATRICIA M. FLYNN
Affirmative 137,754,717.40
Withhold 3,709,370.90
Abstain 0.00
TOTAL 141,464,088.30
ANNE P. JONES
Affirmative 137,495,442.17
Withhold 3,968,646.13
Abstain 0.00
TOTAL 141,464,088.30
JEFFREY LAIKIND
Affirmative 137,487,753.60
Withhold 3,976,334.70
Abstain 0.00
TOTAL 141,464,088.30
- ------------------------------------------------------------------------------
36 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
STEPHEN R. LEWIS, JR.
Affirmative 137,741,665.65
Withhold 3,722,422.65
Abstain 0.00
TOTAL 141,464,088.30
CATHERINE JAMES PAGLIA
Affirmative 137,692,414.22
Withhold 3,771,674.08
Abstain 0.00
TOTAL 141,464,088.30
VIKKI L. PRYOR
Affirmative 137,692,414.22
Withhold 3,771,674.08
Abstain 0.00
TOTAL 141,464,088.30
ALAN K. SIMPSON
Affirmative 137,240,274.05
Withhold 4,223,814.25
Abstain 0.00
TOTAL 141,464,088.30
ALISON TAUNTON-RIGBY
Affirmative 137,754,717.40
Withhold 3,709,370.90
Abstain 0.00
TOTAL 141,464,088.30
WILLIAM F. TRUSCOTT
Affirmative 137,636,780.35
Withhold 3,827,307.95
Abstain 0.00
TOTAL 141,464,088.30
- ------------------------------------------------------------------------------
37 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
2. AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH
THE MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
Affirmative 136,497,402.85
Against 2,176,718.11
Abstain 2,789,967.34
Broker Non-votes 0.00
TOTAL 141,464,088.30
3. APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH
RIVERSOURCE INVESTMENTS, LLC
Affirmative 137,258,733.84
Against 1,860,526.22
Abstain 2,344,828.24
Broker Non-votes 0.00
TOTAL 141,464,088.30
4. APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
A. DIVERSIFICATION
Affirmative 137,669,982.82
Against 1,266,516.25
Abstain 2,527,589.23
Broker Non-votes 0.00
TOTAL 141,464,088.30
B. LENDING
Affirmative 136,003,311.77
Against 2,081,141.59
Abstain 3,379,634.94
Broker Non-votes 0.00
TOTAL 141,464,088.30
C. BORROWING
Affirmative 136,626,424.17
Against 1,964,692.59
Abstain 2,872,971.54
Broker Non-votes 0.00
TOTAL 141,464,088.30
- ------------------------------------------------------------------------------
38 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
- ------------------------------------------------------------------------------
39 -- RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 SEMIANNUAL REPORT
[RIVERSOURCE INVESTMENTS LOGO]
RIVERSOURCE INVESTMENTS
200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC
and distributed by Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
Semiannual Report
[RIVERSOURCE INVESTMENTS LOGO]
RIVERSOURCE(SM)
GROWTH FUND
SEMIANNUAL REPORT FOR THE
PERIOD ENDED JAN. 31, 2006
> RIVERSOURCE GROWTH FUND
(FORMERLY AXP(R) GROWTH FUND)
SEEKS TO PROVIDE SHAREHOLDERS
WITH LONG-TERM CAPITAL GROWTH.
TABLE OF CONTENTS
Fund Snapshot..............................3
Performance Summary........................4
Questions & Answers
with Portfolio Management..............6
Investments in Securities..................9
Financial Statements......................13
Notes to Financial Statements.............16
Fund Expenses Example.....................29
Approval of Investment Management
Services Agreement....................31
Proxy Voting..............................34
Results of Meeting of Shareholders........35
[DALBAR LOGO]
American Express(R) Funds'* reports to shareholders 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.
* As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as
the name of the American Express Funds.
- ------------------------------------------------------------------------------
2 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
FUND SNAPSHOT AT JAN. 31, 2006 <
- ------------------------------------------------------------------------------
PORTFOLIO MANAGER
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY
Nick Thakore 4/02 12
- ------------------------------------------------------------------------------
FUND OBJECTIVE <
- ------------------------------------------------------------------------------
For investors seeking long-term capital growth.
Inception dates by class
A: 3/1/72 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95
Ticker symbols by class
A: INIDX B: IGRBX C: AXGCX I: AGWIX Y: IGRYX
Total net assets $3.533 billion
Number of holdings 139
- ------------------------------------------------------------------------------
STYLE MATRIX <
- ------------------------------------------------------------------------------
[photo] Shading within the style matrix
indicates areas in which the Fund
generally invests.
- ------------------------------------------------------------------------------
SECTOR COMPOSITION* <
- ------------------------------------------------------------------------------
Percentage of portfolio assets
[PIE CHART]
Health Care 20.9%
Information Technology 18.1%
Telecommunication Services 17.2%
Consumer Discretionary 14.2%
Consumer Staples 9.2%
Energy 6.2%
Short-Term Securities** 4.6%
Financials 4.2%
Industrials 4.1%
Materials 1.3%
* Sectors can be comprised of several industries. Please refer to the
section entitled "Investments in Securities" for a complete listing.
No single industry exceeds 25% of portfolio assets.
** Of the 4.6%, 1.3% is due to security lending activity and 3.3% is the
Portfolio's cash equivalent position.
- ------------------------------------------------------------------------------
TOP TEN HOLDINGS <
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Sprint Nextel (Diversified Telecommunication Services) 8.8%
NTL (Media) 5.5
Cisco Systems (Communications Equipment) 4.0
Pfizer (Pharmaceuticals) 3.9
Google Cl A (Internet Software and Services) 2.9
Vodafone Group (Wireless
Telecommunication Services) 2.7
Procter & Gamble (Household Products) 2.2
Exxon Mobil (Oil & Gas) 2.2
Nokia ADR (Communications Equipment) 1.8
Orascom Telecom Holding GDR (Wireless Telecommunication
Services) 1.8
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
Investment products, including shares of mutual funds, involve investment
risks including possible loss of principal and fluctuation in value.
Fund holdings are subject to change.
- ------------------------------------------------------------------------------
3 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2006
[BAR CHART]
RiverSource Growth Fund Class A (excluding sales charge) +3.70%
Russell 1000 Growth Index(1) (unmanaged) +3.91%
Lipper Large-Cap Growth Funds Index(2) +6.58%
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 calling
(800) 862-7919 or visiting www.riversource.com/funds.
(1) The Russell 1000 Growth Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with higher
price-to-book ratios and higher forecasted growth values. The index
reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees.
(2) The Lipper Large-Cap Growth Funds Index includes the 30 largest
large-cap growth funds tracked by Lipper Inc. The index's returns
include net reinvested dividends. The Fund's performance is currently
measured against this index for purposes of determining the
performance incentive adjustment.
The 5.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- ------------------------------------------------------------------------------
4 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS <
- --------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (3/1/72) (3/20/95) (6/26/00) (3/4/04) (3/20/95)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
AT JAN. 31, 2006
6 months* +3.70% -2.26% +3.31% -1.69% +3.31% +2.31% +3.94% +3.80%
1 year +12.69% +6.21% +11.87% +6.87% +11.87% +10.87% +13.26% +12.94%
3 years +13.96% +11.73% +13.07% +12.01% +13.07% +13.07% N/A +14.16%
5 years -6.58% -7.68% -7.30% -7.67% -7.31% -7.31% N/A -6.41%
10 years +4.38% +3.76% +3.58% +3.58% N/A N/A N/A +4.54%
Since inception +11.98% +11.98% +6.06% +6.06% -10.34% -10.34% +8.75% +7.03%
AT DEC. 31, 2005
6 months* +4.53% -1.48% +4.11% -0.89% +4.11% +3.11% +4.76% +4.63%
1 year +8.42% +2.19% +7.55% +2.55% +7.55% +6.55% +8.90% +8.62%
3 years +12.41% +10.21% +11.53% +10.45% +11.53% +11.53% N/A +12.61%
5 years -5.83% -6.93% -6.56% -6.94% -6.57% -6.57% N/A -5.66%
10 years +4.42% +3.80% +3.61% +3.61% N/A N/A N/A +4.57%
Since inception +11.95% +11.95% +5.92% +5.92% -10.80% -10.80% +7.98% +6.89%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of
5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC
applies as follows: first year 5%; second and third year 4%; fourth
year 3%; fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to affiliated
funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- ------------------------------------------------------------------------------
5 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nick Thakore discusses the Fund's positioning and
results for the first six months of the 2006 fiscal year.
Q: How did RiverSource Growth Fund perform for the six-month period ended
Jan. 31, 2006?
A: RiverSource Growth Fund's Class A shares rose 3.70%, excluding sales
charge, for the six-month period ended Jan. 31, 2006. The Fund's
benchmark, the Russell 1000(R) Growth Index (Russell Index), advanced
3.91%. The Fund's peer group as represented by the Lipper Large-Cap
Growth Funds Index (Lipper Index) returned 6.58% for the same period.
Q: What factors influenced performance during the period?
A: The stock market advanced strongly during the six-month period and the
Fund participated in the rally. The Fund's slight performance lag
relative to the Russell Index is attributable to modest
underperformance from a number of individual stocks. Overall, the
Fund's positioning in the telecommunications services, consumer
discretionary and consumer staples sectors proved disadvantageous,
while positioning in technology and health care was beneficial.
Although the Fund's performance was close to that of the Russell
Index, performance relative to its peers, as measured by the Lipper
Index, was not as favorable. Our analysis of this underperformance
suggests that the Fund was underweight compared to the Lipper Index in
a number of strong performing stocks where our peers seemed to be
overweight. In our view, these stocks offer very strong growth
opportunities, but we believe these companies' valuations are too high
relative to that growth outlook.
Significant individual detractors relative to the Russell Index
included Sprint Nextel, Spectrum Brands and Dell. Sprint Nextel lagged
the market as investors seemed to have concern about near-term
fundamentals. We still believe Sprint Nextel is an outstanding growth
story with an attractive valuation and thus, the portfolio maintained
a large position. Spectrum Brands, a maker of batteries, fertilizers
and other consumer products, had disappointing earnings, partly due to
higher raw material costs that the company could not pass on to its
customers. We still hold the stock, but have generally not added to it
as its price went down. Computer hardware company Dell had a small
negative effect on return because the market has become increasingly
concerned about the company's growth rate compared to what it had been
in the past. We share some of these concerns and have reduced the
portfolio weighting in Dell.
- ------------------------------------------------------------------------------
6 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
> CHANGES TO THE PORTFOLIO DURING THE PERIOD STEMMED PRIMARILY FROM OUR
BELIEF THAT CONSUMERS FACE GREATER HEADWIND THAN IN RECENT YEARS,
WHILE THE OUTLOOK FOR CORPORATE CAPITAL SPENDING IS MORE FAVORABLE.
On the positive side, Google was the largest contributor to
performance. Google has delivered tremendous earnings growth since its
initial public offering in 2004. We believe it is still a great growth
story with a reasonable valuation, although early in 2006 we
anticipated some weakness in its short-term earnings. We reduced the
portfolio's Google holdings in January before the company announced
its fourth quarter 2005 earnings which fell short of analyst
expectations and precipitated a sharp decline in the stock's price.
Cell phone maker Nokia was also a major contributor, advancing on both
improving margins and its recovery of global market share. We believe
Nokia continues to have strong fundamentals, good earnings growth
potential and an attractive valuation. A third significant
contributor, Orascom Telecom, an emerging markets wireless firm, has
benefited from strong growth rates, solid fundamentals and attractive
valuations. Orascom Telecom fits our telecommunications theme which
focuses on three different groups: established U.S. carriers, rural
carriers and emerging markets carriers.
Q: What changes did you make during the six-month period?
A: Changes to the portfolio during the period stemmed primarily from our
belief that consumers face greater headwind than in recent years,
while the outlook for corporate capital spending is more favorable.
Therefore, we increased emphasis on stocks that will benefit from
capital spending and reduced focus on those that are dependent on
consumers. Thus the portfolio has a smaller-than-benchmark position in
retail, but we increased the portfolio weighting in stocks such as
Cisco Systems, a communications technology company that we believe can
benefit from increased corporate capital spending.
Another theme is our expectation that earnings growth will decelerate
in 2006, so we increased the portfolio's emphasis on
telecommunications services, health care and consumer staples. These
sectors are typically not dependent on cyclical growth so we think the
companies can deliver strong earnings regardless of economic
conditions. Stocks in these sectors have underperformed, but in a
- ------------------------------------------------------------------------------
7 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
> IN GENERAL, WE BELIEVE THE FUND HOLDS STOCKS THAT, AS A GROUP, ARE LIKELY
TO GROW EARNINGS FASTER THAN THE MARKET.
slowing growth environment, we anticipate that investors are willing
to pay more for them.
In terms of individual stocks, we added to Pfizer because the company
received a favorable patent ruling on its cholesterol-lowering drug
Lipitor, which had been a risk for the stock. We consider Pfizer's
valuation attractive and think there is an opportunity for the company
to return to growth. We also increased holdings of Vodafone Group.
This is a more mature telecommunications story, but one with good
long-term growth and, after recent declines, a very attractive
valuation. We added selectively to General Electric on price weakness
of its stock because we see a favorable outlook for 2006 growth. Also,
we added to News Corp. on its recent decline given its solid
fundamentals and promising growth outlook.
We modestly reduced weightings in technology stocks Dell (discussed
above) and Intel and also sold our holdings of Telewest Global.
Telewest Global had been a play on the U.K. cable market, but now that
the company has agreed to merge with NTL, the U.K.'s largest cable
operator and broadband and communications services provider, and given
how much the stock price has already risen, we didn't see as much
future opportunity in Telewest Global.
Q: How have you positioned the Fund for current market conditions?
A: In general, we believe the Fund holds stocks that, as a group, are
likely to grow earnings faster than the market. At the same time, we
don't think we are overpaying for that growth potential. We also
believe that the stocks in the portfolio generally won't have to
depend on macro-economic growth to fuel their earnings growth. We are
confident about the stocks and the positioning of the portfolio, given
our expectations for slow economic growth and decelerating earnings in
2006.
- ------------------------------------------------------------------------------
8 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource Growth Fund
JAN. 31, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
- ------------------------------------------------------------------------------
COMMON STOCKS (95.4%)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (1.7%)
Boeing 204,804 $13,990,161
General Dynamics 91,791 10,680,801
Goodrich 72,802 2,866,215
Honeywell Intl 346,590 13,315,988
Lockheed Martin 273,766 18,520,269
---------------
Total 59,373,434
- ------------------------------------------------------------------------------
BEVERAGES (1.9%)
Coca-Cola 343,046 14,195,243
PepsiCo 920,571 52,638,250
---------------
Total 66,833,493
- ------------------------------------------------------------------------------
BIOTECHNOLOGY (3.3%)
Amgen 829,296(b) 60,447,385
Biogen Idec 465,167(b) 20,816,223
Genentech 318,228(b,d) 27,342,150
Gilead Sciences 144,464(b) 8,793,524
---------------
Total 117,399,282
- ------------------------------------------------------------------------------
CHEMICALS (0.3%)
Bayer 241,920(c) 10,103,296
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (0.1%)
ICICI Bank ADR 104,796(c) 3,292,690
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.4%)
Cendant 858,738 14,375,274
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (5.8%)
Cisco Systems 7,568,095(b) 140,539,524
Nokia ADR 3,469,335(c) 63,766,377
---------------
Total 204,305,901
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.2%)
Dell 1,649,469(b) 48,345,937
EMC 1,104,811(b) 14,804,467
Hewlett-Packard 478,283 14,912,864
---------------
Total 78,063,268
- ------------------------------------------------------------------------------
CONSUMER FINANCE (0.4%)
American Express 69,141 3,626,445
Capital One Financial 49,677 4,138,094
SLM 123,466 6,909,158
---------------
Total 14,673,697
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DIVERSIFIED TELECOMMUNICATION SERVICES (9.9%)
ALLTEL 152,005 $9,124,860
Philippine Long Distance Telephone ADR 202,647(c) 7,252,736
Qwest Communications Intl 907,300(b) 5,461,946
Sprint Nextel 13,708,698 313,792,097
Verizon Communications 346,736 10,977,662
---------------
Total 346,609,301
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.4%)
Halliburton 439,873 34,991,898
Schlumberger 75,432 9,613,808
Transocean 63,036(b) 5,115,371
---------------
Total 49,721,077
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.6%)
Safeway 1,517,552 35,571,419
Wal-Mart Stores 474,065 21,859,137
---------------
Total 57,430,556
- ------------------------------------------------------------------------------
FOOD PRODUCTS (1.0%)
Cadbury Schweppes 923,360(c) 9,066,446
General Mills 133,640 6,496,240
Kellogg 501,190 21,501,051
---------------
Total 37,063,737
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (3.6%)
Alcon 54,916(c) 7,024,855
Baxter Intl 1,389,215 51,192,573
Boston Scientific 409,711(b) 8,960,380
Guidant 724,125 53,295,599
PerkinElmer 310,707 7,065,477
---------------
Total 127,538,884
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (4.9%)
Cardinal Health 753,672 54,294,532
HCA 745,406 36,584,526
HealthSouth 1,479,993(b) 7,111,366
McKesson 122,988 6,518,364
Medco Health Solutions 329,353(b) 17,817,997
UnitedHealth Group 883,507 52,497,986
---------------
Total 174,824,771
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
9 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HOTELS, RESTAURANTS & LEISURE (0.5%)
Kerzner Intl 149,103(b,c) $9,727,480
McDonald's 183,091 6,410,016
---------------
Total 16,137,496
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.7%)
Harman Intl Inds 70,977(d) 7,807,470
Sony 376,300(c) 18,285,678
---------------
Total 26,093,148
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (3.1%)
Procter & Gamble 1,313,531 77,800,441
Spectrum Brands 1,675,161(b) 31,677,295
---------------
Total 109,477,736
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (1.7%)
General Electric 1,049,686 34,377,217
Tyco Intl 975,507(c) 25,411,957
---------------
Total 59,789,174
- ------------------------------------------------------------------------------
INSURANCE (2.8%)
ACE 388,636(c) 21,277,821
American Intl Group 758,143 49,628,041
Arch Capital Group 162,803(b,c) 8,846,715
Aspen Insurance Holdings 572,510(c) 13,270,782
Chubb 35,323 3,332,725
Hartford Financial Services Group 39,980 3,287,555
---------------
Total 99,643,639
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.2%)
eBay 159,739(b) 6,884,751
- ------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (2.9%)
Google Cl A 234,737(b,g) 101,699,805
- ------------------------------------------------------------------------------
IT SERVICES (0.5%)
First Data 395,981 17,858,743
- ------------------------------------------------------------------------------
MACHINERY (0.3%)
Caterpillar 175,608 11,923,783
- ------------------------------------------------------------------------------
MEDIA (11.6%)
Comcast Cl A 2,020,827(b) 56,219,407
Comcast Special Cl A 303,106(b) 8,402,098
Liberty Global Cl A 1,938,288(b) 41,479,363
Liberty Global Series C 847,954(b) 17,145,630
News Corp Cl A 1,512,712 23,840,341
NTL 3,060,574(b,d) 193,581,307
Time Warner 657,567 11,527,150
Viacom Cl B 92,496(b) 3,836,734
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MEDIA (CONT.)
Vivendi Universal ADR 1,526,466(c) $47,793,650
WorldSpace Cl A 314,100(b,d) 3,989,070
---------------
Total 407,814,750
- ------------------------------------------------------------------------------
METALS & MINING (1.0%)
Coeur d'Alene Mines 2,941,986(b,d) 15,239,487
Newmont Mining 353,501 21,846,362
---------------
Total 37,085,849
- ------------------------------------------------------------------------------
MULTILINE RETAIL (0.5%)
Federated Dept Stores 93,317 6,217,712
JC Penney 216,884 12,102,127
---------------
Total 18,319,839
- ------------------------------------------------------------------------------
OIL & GAS (4.8%)
Anadarko Petroleum 140,211 15,117,550
Chevron 143,733 8,534,866
ConocoPhillips 138,038 8,931,059
Devon Energy 195,062 13,305,179
Exxon Mobil 1,233,540 77,404,634
Kinder Morgan Management LLC --(b) 15
Marathon Oil 192,200 14,774,414
Ultra Petroleum 199,616(b) 13,731,585
Valero Energy 288,450 18,007,933
---------------
Total 169,807,235
- ------------------------------------------------------------------------------
PHARMACEUTICALS (9.2%)
AstraZeneca 435,254(c) 21,074,526
Bristol-Myers Squibb 389,900 8,885,821
GlaxoSmithKline ADR 137,394(c) 7,040,069
Johnson & Johnson 610,751 35,142,612
Merck & Co 205,227 7,080,332
Novartis ADR 452,348(c) 24,951,516
Pfizer 5,342,714 137,200,895
Roche Holding 139,866(c) 22,103,686
Schering-Plough 736,490 14,103,784
Teva Pharmaceutical Inds ADR 610,280(c) 26,016,236
Wyeth 361,791 16,732,834
---------------
Total 320,332,311
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.2%)
Analog Devices 376,957 14,991,580
Freescale Semiconductor Cl A 824,276(b) 20,738,784
Freescale Semiconductor Cl B 302,062(b) 7,627,066
Integrated Device Technology 720,467(b) 10,007,287
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
10 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.)
Intel 1,577,274 $33,548,618
Linear Technology 94,221 3,505,963
MEMC Electronic Materials 156,531(b) 4,473,656
PMC-Sierra 361,209(b) 3,417,037
Texas Instruments 482,466(d) 14,102,481
---------------
Total 112,412,472
- ------------------------------------------------------------------------------
SOFTWARE (3.5%)
Adobe Systems 335,985 13,345,324
Compuware 833,799(b) 6,870,504
Mercury Interactive 316,451(b) 10,996,672
Microsoft 2,199,328 61,911,083
Oracle 1,813,106(b) 22,790,742
Symantec 489,354(b) 8,994,327
---------------
Total 124,908,652
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.1%)
Best Buy 80,110 4,058,373
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.7%)
Nike Cl B 317,810 25,726,720
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.9%)
Countrywide Financial 330,677 11,057,839
Fannie Mae 256,835 14,881,020
Freddie Mac 63,554 4,312,774
---------------
Total 30,251,633
- ------------------------------------------------------------------------------
TOBACCO (1.6%)
Altria Group 766,745 55,466,333
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (7.2%)
Centennial Communications 227,996 2,150,002
Hutchison Telecommunications Intl ADR 893,529(b,c) 22,382,901
Motient 358,775(b,d) 7,480,459
NeuStar Cl A 1,094,709(b) 31,757,508
O2 5,270,162(c) 18,749,120
Orascom Telecom Holding GDR 946,342(c,d) 62,647,840
Partner Communications ADR 101,263(c) 807,066
Vodafone Group 46,075,542(c) 96,711,783
Vodafone Group ADR 555,154(c) 11,719,301
---------------
Total 254,405,980
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $3,168,898,445) $3,371,707,083
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OPTIONS PURCHASED (0.3%)
- ------------------------------------------------------------------------------
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
CALLS
Sprint Nextel 45,575 $22.50 Aug. 2006 $10,026,500
- ------------------------------------------------------------------------------
PUTS
Google Cl A 406 430.00 Feb. 2006 945,980
- ------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost: $13,502,671) $10,972,480
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SHORT-TERM SECURITIES (4.6%)(e)
- ------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Alpine Securitization
02-01-06 4.48% $4,100,000(f) $4,099,490
Chariot Funding LLC
02-13-06 4.36 25,000,000(f) 24,960,729
02-22-06 4.46 30,000,000(f) 29,918,416
CIESCO LLC
03-07-06 4.49 30,000,000(f) 29,869,626
Falcon Asset Securitization
02-21-06 4.43 13,800,000(f) 13,764,419
Goldman Sachs Group
02-06-06 4.48 15,000,000 14,988,800
Kitty Hawk Funding
02-03-06 4.30 10,000,000(f) 9,996,417
Nieuw Amsterdam
03-01-06 4.50 16,000,000(f) 15,942,258
Park Granada LLC
02-21-06 4.40 19,700,000(f) 19,649,551
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $163,209,819) $163,189,706
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $3,345,610,935)(h) $3,545,869,269
==============================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
11 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- ------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2006,
the value of foreign securities represented 15.8% of net assets.
(d) At Jan. 31, 2006, security was partially or fully on loan. See Note 6
to the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 1.3% of net assets. See Note 6 to
the financial statements. 3.3% of net assets is the Fund's cash
equivalent position.
(f) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At Jan. 31,
2006, the value of these securities amounted to $148,200,906 or 4.2%
of net assets.
(g) At Jan. 31, 2006, securities valued at $100,167,400 were held to cover
open call options written as follows (see Note 7 to the financial
statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
----------------------------------------------------------------------
Google Cl A 2,312 $460 Feb. 2006 $3,676,080
(h) At Jan. 31, 2006, the cost of securities for federal income tax purposes
was approximately $3,345,611,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $283,866,000
Unrealized depreciation (83,608,000)
----------------------------------------------------------------------
Net unrealized appreciation $200,258,000
----------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and
third quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling
1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in
its annual and semiannual shareholder reports and in its filings on
Form N-Q, can be found at www.riversource.com/funds.
- ------------------------------------------------------------------------------
12 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource Growth Fund
JAN. 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 1)*
(identified cost $3,345,610,935) $3,545,869,269
Cash in bank on demand deposit 9,993,584
Foreign currency holdings (identified cost $18,385) (Note 1) 18,418
Capital shares receivable 710,373
Dividends and accrued interest receivable 1,428,608
Receivable for investment securities sold 126,813,175
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 19,802
- -------------------------------------------------------------------------------------------------------------
Total assets 3,684,853,229
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Capital shares payable 229,102
Payable for investment securities purchased 103,018,344
Payable upon return of securities loaned (Note 6) 44,574,000
Accrued investment management services fee 55,204
Accrued distribution fee 33,468
Accrued service fee 796
Accrued transfer agency fee 7,881
Accrued administrative services fee 4,920
Other accrued expenses 242,289
Options contracts written, at value (premiums received $7,215,049) (Note 7) 3,676,080
- -------------------------------------------------------------------------------------------------------------
Total liabilities 151,842,084
- -------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $3,533,011,145
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------------------------------------
Capital stock -- $.01 par value (Note 1) $ 1,218,546
Additional paid-in capital 4,020,980,838
Undistributed net investment income 1,532,992
Accumulated net realized gain (loss) (Note 9) (694,515,464)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 203,794,233
- -------------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $3,533,011,145
=============================================================================================================
Net assets applicable to outstanding shares: Class A $2,443,136,052
Class B $ 585,137,281
Class C $ 18,993,994
Class I $ 196,329,600
Class Y $ 289,414,218
Net asset value per share of outstanding capital stock: Class A shares 83,149,104 $ 29.38
Class B shares 21,777,433 $ 26.87
Class C shares 706,836 $ 26.87
Class I shares 6,537,580 $ 30.03
Class Y shares 9,683,669 $ 29.89
- -------------------------------------------------------------------------------------------------------------
* Including securities on loan, at value (Note 6) $ 42,845,574
- -------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
13 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS
RiverSource Growth Fund
PERIOD FROM
AUG. 1, 2005 TO PERIOD FROM TOTAL
DEC. 5, 2005 DEC. 6, 2005 TO AUG. 1, 2005 TO
(UNAUDITED) JAN. 31, 2006 JAN. 31, 2006
(NOTE 1) (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------------------------------------
Income:
Dividends $ 14,193,685 $ 5,796,273 $ 19,989,958
Interest 1,247,678 1,094,920 2,342,598
Fee income from securities lending (Note 6) 63,368 20,930 84,298
Less foreign taxes withheld (197,993) (38,528) (236,521)
- --------------------------------------------------------------------------------------------------------------------------------
Total income 15,306,738 6,873,595 22,180,333
- --------------------------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 6,845,457 3,148,269 9,993,726
Distribution fee
Class A 1,921,807 942,004 2,863,811
Class B 1,879,387 900,519 2,779,906
Class C 56,959 28,899 85,858
Transfer agency fee 2,065,763 935,814 3,001,577
Incremental transfer agency fee
Class A 149,860 69,037 218,897
Class B 88,975 39,958 128,933
Class C 2,333 1,126 3,459
Service fee -- Class Y 101,751 45,579 147,330
Administrative services fees and expenses 553,402 290,715 844,117
Compensation of board members 14,850 2,433 17,283
Custodian fees 103,625 40,100 143,725
Printing and postage 215,775 87,900 303,675
Registration fees 50,115 37,800 87,915
Audit fees 16,600 5,400 22,000
Other 61,063 16,267 77,330
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses 14,127,722 6,591,820 20,719,542
Earnings credits on cash balances (Note 2) (44,884) (27,252) (72,136)
- --------------------------------------------------------------------------------------------------------------------------------
Total net expenses 14,082,838 6,564,568 20,647,406
- --------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 1,223,900 309,027 1,532,927
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions (Note 3) 124,446,635 119,102,118 243,548,753
Foreign currency transactions (24,009) (47,460) (71,469)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 124,422,626 119,054,658 243,477,284
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (71,020,375) (51,220,324) (122,240,699)
- --------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 53,402,251 67,834,334 121,236,585
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 54,626,151 $ 68,143,361 $ 122,769,512
================================================================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
14 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource Growth Fund
JAN. 31, 2006 JULY 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS AND DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net $ 1,532,927 $ 1,207,349
Net realized gain (loss) on investments 243,477,284 289,309,123
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (122,240,699) 243,570,687
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 122,769,512 534,087,159
- ----------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (766,401) --
Class I (240,149) --
Class Y (164,444) --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (1,170,994) --
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
- ----------------------------------------------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 487,013,376 245,400,269
Class B shares 112,365,079 84,469,961
Class C shares 5,591,366 4,411,692
Class I shares 43,711,622 115,544,634
Class Y shares 24,808,702 47,375,409
Reinvestment of distributions at net asset value
Class A shares 748,306 --
Class I shares 240,141 --
Class Y shares 164,444 --
Payments for redemptions
Class A shares (231,851,700) (623,373,452)
Class B shares (Note 2) (122,421,990) (200,303,603)
Class C shares (Note 2) (2,209,582) (4,584,216)
Class I shares (1,405,819) (1,248,614)
Class Y shares (50,401,574) (152,214,350)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 266,352,371 (484,522,270)
- ----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 387,950,889 49,564,889
Net assets at beginning of period 3,145,060,256 3,095,495,367
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period $3,533,011,145 $3,145,060,256
================================================================================================================
Undistributed net investment income $ 1,532,992 $ 1,171,059
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
15 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
RiverSource Growth Fund (formerly AXP Growth Fund)
(Unaudited as to Jan. 31, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board. The Fund invests primarily in common
stocks of U.S. and foreign companies that appear to offer growth
opportunities.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o 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.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares have no sales charge and are
made available through a separate prospectus supplement provided to
investors eligible to purchase the shares. At Jan. 31, 2006, Ameriprise
Financial, Inc. (Ameriprise Financial) and the RiverSource Portfolio Builder
Funds owned 100% of Class I shares, which represents 5.56% of the Fund's net
assets.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee, transfer agency fees and service fee (class
specific expenses) 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.
Prior to Dec. 6, 2005, the Fund invested all of its assets in Growth
Portfolio (the Portfolio). The Fund recorded its daily share of the
Portfolio's income, expenses and realized and unrealized gains and losses.
- ------------------------------------------------------------------------------
16 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
Effective at the close of business on Dec. 5, 2005, the Portfolio was
liquidated and the Fund exchanged its interest in the Portfolio for its
proportionate share (99.99%) of the Portfolio's assets and liabilities.
Within the statement of operations for the period from Aug. 1, 2005 to Dec.
5, 2005, income and expense amounts include allocations from the Portfolio
in the following amounts:
Dividends $14,193,685
Interest Income $1,247,678
Fee income from securities lending $63,368
Foreign taxes withheld $(197,993)
Investment management services fee $6,845,457
Compensation of board members $9,983
Custodian fees $103,173
Audit fees $12,025
Other $36,351
Earnings credits on cash balances $(714)
All realized and unrealized gains (losses) presented for the period from
Aug. 1, 2005 to Dec. 5, 2005 were as a result of allocations from the
Portfolio.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Pursuant to procedures adopted by the Board of
Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing
(FVP). FVP determinations are made in good faith in accordance with these
procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or
event has actually caused the closing price to no longer reflect the actual
value, the closing prices, as determined at the close of the applicable
foreign market, may be adjusted to reflect the fair value of the affected
foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. 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.
- ------------------------------------------------------------------------------
17 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
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. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured
put options. The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases. The
risk in writing a put option is that the Fund may incur a loss if the market
price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
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 FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars. Foreign currency amounts
related to the purchase or sale of securities and income and expenses are
translated at the exchange rate on the transaction date. The effect of
changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from foreign currency
transactions, if any, may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the trade date
and settlement date on securities transactions, and other translation gains
or losses on dividends, interest income and foreign withholding taxes. At
Jan. 31, 2006, foreign currency holdings were entirely comprised of European
monetary units.
- ------------------------------------------------------------------------------
18 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such
claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue
Code that applies to regulated investment companies and to distribute
substantially all of its taxable income to the shareholders. No provision
for income or excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts and losses deferred due to "wash sale"
transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were
recorded by the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end
of the calendar year, when available, is reinvested in additional shares of
the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased
or sold. Interest income, including amortization of premium, market discount
and original issue discount using the effective interest method, is accrued
daily.
- ------------------------------------------------------------------------------
19 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Effective Dec. 6, 2005, the Fund entered into an Investment Management
Services Agreement with RiverSource Investments, LLC (the Investment
Manager) to determine which securities will be purchased, held or sold.
Prior to the withdrawal of the Fund's assets from the Portfolio, Growth
Trust (the Trust), on behalf of the Portfolio, had an Investment Management
Services Agreement with Ameriprise Financial. Prior to Dec. 6, 2005, the
investment management fee was assessed at the Portfolio level. The
management fee is a percentage of the Fund's average daily net assets that
declines from 0.60% to 0.48% annually as the Fund's assets increase. On Feb.
15, 2006, shareholders approved a change to the Investment Management
Services Agreement. Effective March 1, 2006, the management fee percentage
of the Fund's average daily net assets will decline from 0.60% to 0.375%
annually as the Fund's assets increase. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Growth
Funds Index. In certain circumstances, the Board may approve a change in the
index. The maximum adjustment is 0.12% per year. If the performance
difference is less than 0.50%, the adjustment will be zero. For the period
from Aug. 1, 2005 to Dec. 5, 2005, the adjustment increased the fee by
$432,349 and for the period from Dec. 6, 2005 to Jan. 31, 2006, the
adjustment increased the fee by $53,915.
Under the current Administrative Services Agreement, the Fund pays
Ameriprise Financial a fee for administration and accounting services at a
percentage of the Fund's average daily net assets that declines from 0.06%
to 0.03% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the
fee percentage of the Fund's average daily net assets declined from 0.05% to
0.02% annually as the Fund's assets increased. A minor portion of additional
administrative service expenses paid by the Fund are consultants' fees and
fund office expenses. Under this agreement, the Fund also pays taxes, audit
and certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the Board.
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.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund
pays the Transfer Agent an annual fee per shareholder account for this
service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
- ------------------------------------------------------------------------------
20 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement
of operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (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 up to 0.25% of the Fund's average daily net assets attributable
to Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee
for service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$1,989,873 for Class A, $296,940 for Class B and $1,523 for Class C for the
six months ended Jan. 31, 2006.
During the period from Aug. 1, 2005 to Dec. 5, 2005, the Portfolio's
custodian fees were reduced by $44,884 as a result of earnings credits from
overnight cash balances. During the period from Dec. 6, 2005 to Jan. 31,
2006, the Fund's custodian and transfer agency fees were reduced by $27,252
as a result of earnings credits from overnight cash balances.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,543,392,466 and $1,352,146,154,
respectively, for the period from Aug. 1, 2005 to Dec. 5, 2005 and
$1,024,278,115 and $910,743,384, respectively, for the period from Dec. 6,
2005 to Jan. 31, 2006. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
SIX MONTHS ENDED JAN. 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ---------------------------------------------------------------------------------------------------------
Sold 17,143,440 4,309,383 215,332 1,504,626 854,786
Issued for reinvested distributions 25,726 -- -- 8,083 5,559
Redeemed (8,151,530) (4,754,594) (84,942) (47,636) (1,734,377)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) 9,017,636 (445,211) 130,390 1,465,073 (874,032)
- ---------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ---------------------------------------------------------------------------------------------------------
Sold 9,267,227 3,475,136 181,331 4,366,146 1,841,710
Issued for reinvested distributions -- -- -- -- --
Redeemed (24,353,716) (8,484,021) (194,446) (44,571) (5,823,100)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) (15,086,489) (5,008,885) (13,115) 4,321,575 (3,981,390)
- ---------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
21 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Jan. 31, 2006, the Fund has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is included
in the accompanying financial statements. See "Summary of significant
accounting policies." The terms of the open contracts are as follows:
EXCHANGE DATE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- -------------------------------------------------------------------------------------------------
Feb. 1, 2006 1,767,112 999,272 $10,392 $--
U.S. Dollar British Pound
Feb. 2, 2006 1,771,517 1,001,196 9,410 --
U.S. Dollar British Pound
- -------------------------------------------------------------------------------------------------
Total $19,802 $--
- -------------------------------------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES
At Jan. 31, 2006, securities valued at $42,845,574 were on loan to brokers.
For collateral, the Fund received $44,574,000 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from
securities lending amounted to $84,298 for six months ended Jan. 31, 2006.
The risks to the Fund of securities lending are that the borrower may not
provide additional collateral when required or return the securities when
due.
7. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as
follows:
- -------------------------------------------------------------------------------------------
SIX MONTHS ENDED JAN. 31, 2006
CALLS
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------------------
Balance July 31, 2005 -- $ --
Opened 2,312 7,215,049
Closed -- --
- -------------------------------------------------------------------------------------------
Balance Jan. 31, 2006 2,312 $7,215,049
- -------------------------------------------------------------------------------------------
See "Summary of significant accounting policies."
8. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed
by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the
Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial
Lending Rate. Borrowings are payable within 60 days after such loan is
executed. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.07% per annum. Prior to
this agreement, the Fund had a revolving credit agreement that permitted
borrowings up to $500 million with The Bank of New York. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2006.
- ------------------------------------------------------------------------------
22 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
9. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$913,031,953 at July 31, 2005, that if not offset by capital gains will
expire as follows:
2010 2011
$544,257,626 $368,774,327
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.
10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement
agreements with the Securities and Exchange Commission (SEC) and Minnesota
Department of Commerce (MDOC) related to market timing activities. In
connection with these matters, the SEC and MDOC issued orders (the Orders)
alleging that AEFC violated certain provisions of the federal and Minnesota
securities laws by failing to adequately disclose market timing activities
by allowing certain identified market timers to continue to market time
contrary to disclosures in mutual fund and variable annuity product
prospectuses. The Orders also alleged that AEFC failed to implement
procedures to detect and prevent market timing in 401(k) plans for employees
of AEFC and related companies and failed to adequately disclose that there
were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its
employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million.
AEFC also agreed to make presentations at least annually to its board of
directors and the relevant mutual funds' board that include an overview of
policies and procedures to prevent market timing, material changes to these
policies and procedures and whether disclosures related to market timing are
consistent with the SEC order and federal securities laws. AEFC also agreed
to retain an independent distribution consultant to assist in developing a
plan for distribution of all disgorgement and civil penalties ordered by the
SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a
summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
- ------------------------------------------------------------------------------
23 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration 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 or arbitration 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.
11. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $28.34 $23.73 $22.80 $20.88 $29.68
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03 .04 .02 -- (.04)
Net gains (losses) (both realized and unrealized) 1.02 4.57 .91 1.92 (8.74)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.05 4.61 .93 1.92 (8.78)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) -- -- -- --
Distributions from realized gains -- -- -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.01) -- -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.38 $28.34 $23.73 $22.80 $20.88
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $2,443 $2,101 $2,117 $2,263 $2,213
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.15%(c) 1.19% 1.03% 1.21% .99%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .19%(c) .16% .07% --% (.15%)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 72% 136% 171% 205% 225%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.70%(e) 19.43% 4.08% 9.20% (29.59%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
24 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $26.01 $21.95 $21.25 $19.61 $28.11
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.08) (.16) (.16) (.17) (.25)
Net gains (losses) (both realized and unrealized) .94 4.22 .86 1.81 (8.23)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .86 4.06 .70 1.64 (8.48)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- -- -- -- (.02)
Net asset value, end of period $26.87 $26.01 $21.95 $21.25 $19.61
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $585 $578 $598 $775 $845
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.93%(c) 1.97% 1.81% 1.99% 1.77%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.59%)(c) (.62%) (.71%) (.77%) (.93%)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 72% 136% 171% 205% 225%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.31%(e) 18.50% 3.29% 8.36% (30.18%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
25 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(d) 2005 2004 2003 2002
Net asset value, beginning of period $26.01 $21.95 $21.25 $19.62 $28.12
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.08) (.16) (.16) (.17) (.21)
Net gains (losses) (both realized and unrealized) .94 4.22 .86 1.80 (8.27)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .86 4.06 .70 1.63 (8.48)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- -- -- -- (.02)
Net asset value, end of period $26.87 $26.01 $21.95 $21.25 $19.62
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $19 $15 $13 $12 $7
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.92%(c) 1.97% 1.81% 2.01% 1.80%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.58%)(c) (.62%) (.71%) (.81%) (.96%)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 72% 136% 171% 205% 225%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.31%(e) 18.50% 3.29% 8.31% (30.17%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
26 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
CLASS I
- ---------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(g) 2005 2004(b)
Net asset value, beginning of period $28.93 $24.10 $25.61
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .12 .09
Net gains (losses) (both realized and unrealized) 1.04 4.71 (1.60)
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.14 4.83 (1.51)
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) -- --
Net asset value, end of period $30.03 $28.93 $24.10
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $196 $147 $18
- ---------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .69%(d) .75% .57%(d)
- ---------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .65%(d) .55% .43%(d)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 72% 136% 171%
- ---------------------------------------------------------------------------------------------------------------
Total return(e) 3.94%(f) 20.04% (5.90%)(f)
- ---------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
27 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $28.81 $24.07 $23.09 $21.11 $29.96
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .09 .07 .04 --
Net gains (losses) (both realized and unrealized) 1.04 4.65 .91 1.94 (8.83)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.10 4.74 .98 1.98 (8.83)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- -- -- --
Distributions from realized gains -- -- -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.02) -- -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.89 $28.81 $24.07 $23.09 $21.11
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $289 $304 $350 $398 $481
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) .97%(c) 1.02% .86% 1.03% .82%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .37%(c) .34% .25% .18% .02%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 72% 136% 171% 205% 225%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(d) 3.80%(e) 19.69% 4.24% 9.38% (29.48%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
28 -- RIVERSOURCE GROWTH FUND -- 2006 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, including management fees; distribution and service (12b-1) fees; and
other Fund 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.
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, 2006.
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.
- ------------------------------------------------------------------------------
29 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
AUG. 1, 2005 JAN. 31, 2006 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,037.00 $5.97 1.15%
Hypothetical (5% return before expenses) $1,000 $1,019.62 $5.92 1.15%
Class B
Actual(b) $1,000 $1,033.10 $10.00 1.93%
Hypothetical (5% return before expenses) $1,000 $1,015.64 $9.91 1.93%
Class C
Actual(b) $1,000 $1,033.10 $9.95 1.92%
Hypothetical (5% return before expenses) $1,000 $1,015.70 $9.86 1.92%
Class I
Actual(b) $1,000 $1,039.40 $3.59 .69%
Hypothetical (5% return before expenses) $1,000 $1,021.96 $3.55 .69%
Class Y
Actual(b) $1,000 $1,038.00 $5.04 .97%
Hypothetical (5% return before expenses) $1,000 $1,020.54 $4.99 .97%
(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 186/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2006:
+3.70% for Class A, +3.31% for Class B, +3.31% for Class C, +3.94% for
Class I and +3.80% for Class Y.
- ------------------------------------------------------------------------------
30 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of
Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express
Financial Corporation), serves as the investment manager to the Fund. Under
an investment management services agreement (the IMS Agreement), the
investment manager provides investment advice and other services to the
Fund. Throughout the year, the Fund's Board of Directors (the Board) and the
Board's Investment Review and Contracts Committees monitor these services.
Ameriprise Financial had served as investment manager to the Fund until
Sept. 29, 2005. On that date, and pursuant to the consent of the Board,
Ameriprise Financial transferred its rights, title, and interest and its
burdens and obligations under the IMS Agreement to RiverSource, its
wholly-owned subsidiary.
Each year, the Board determines whether to continue the IMS Agreement by
evaluating the quality and level of services received and the costs
associated with those services. To assist the Board in making this
determination, the investment manager prepares detailed reports for the
Board and its Contracts Committee in March and April and provides data
prepared by independent organizations. The Board gives considerable weight
to the work, deliberations and conclusions of the Contracts and Investment
Review Committees in determining whether to continue the IMS Agreement.
BACKGROUND
This past year, prior to the Board's annual review process, on Feb. 1, 2005,
American Express Company, the former parent of Ameriprise Financial,
announced its intention to pursue a spin-off of Ameriprise Financial by
distributing shares of the common stock of Ameriprise Financial to
shareholders of American Express Company. Following this announcement, the
Board determined to proceed with its annual review process and, after
thorough review of the reports and data provided, at a meeting held in
person on April 14, 2005, the Board, including all of its independent
members, determined that the quality and level of advisory services provided
pursuant to the IMS Agreement were satisfactory and that fees were fair and
reasonable. However, in light of the announced plans of the spin-off, the
Board approved continuation of the IMS Agreement with Ameriprise Financial
for only an interim period ending on the later of (i) the effective date of
the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise
Financial (or its subsidiary) by the shareholders of the Fund, but in no
event for a period longer than one year.
During the course of the six-month period following the April 2005 meeting,
the Board evaluated whether to approve new investment management services
agreements for each of the funds within the Ameriprise Financial fund
complex (together, the Funds) with post-spin Ameriprise Financial (or
RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte),
assisted the Boards in fulfilling their statutory and other responsibilities
associated with the spin-off and the resulting consideration of new
contracts, including the new IMS Agreement. The Board and its committees
were provided with a wealth of written and oral information in this regard.
Furthermore, in connection with the Board's considerations as to whether
post-spin Ameriprise Financial, as an entity independent from American
Express Company, would be capable of continuing to provide a high quality of
services to the Funds,
- ------------------------------------------------------------------------------
31 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
the Board's independent members retained their own financial adviser, Credit
Suisse First Boston LLC (CSFB), to assist them in analyzing the capital
adequacy of post-spin Ameriprise Financial. (The costs of independent
counsel and CSFB and of additional meetings of the Boards were borne by
Ameriprise Financial as part of the commitment of the American Express
Company to ensure a complete and thorough review of the proposed spin-off
and its effect on the services provided by Ameriprise Financial and its
subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board,
including all of its independent members, approved, and recommended that
shareholders approve, a proposed new IMS Agreement with RiverSource (the New
IMS Agreement). At a meeting of the Fund's shareholders held on Feb. 15,
2006, shareholders approved the New IMS Agreement. The following section,
"Board Considerations Related to the New IMS Agreement," provides a detailed
discussion of the Board's considerations and determinations respecting the
New IMS Agreement.
BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT
In carrying out its legal responsibilities associated with the consideration
of the New IMS Agreement, the Board evaluated the following factors:
Nature, Extent and Quality of Services to be Provided by Post-Spin
Ameriprise Financial (and Its Subsidiaries)
The Board recognized that only a few months had passed since its April 2005
conclusion that the nature, extent and quality of services provided by
Ameriprise Financial were satisfactory and consistent with those that would
be expected for a fund family of the size of the Funds and its determination
to renew the IMS Agreement for the interim period. However, the Board also
recognized the need to supplement this assessment with an evaluation of
whether the spin-off or other factors would result in changes to the
advisory services being provided under the current IMS Agreement.
The Board focused its evaluation on the following factors potentially
impacting the nature, extent and quality of advisory services to be provided
by Ameriprise Financial: (i) Ameriprise Financial's projected capital
structure and capital adequacy as a stand-alone entity; (ii) its legal and
regulatory risks; (iii) its ability to retain and attract personnel; and
(iv) its ability to successfully re-brand its products and services. Based
on extensive presentations and reports by Ameriprise Financial, CSFB and
Schulte, the Board concluded that the proposed capital structure (which
includes certain indemnification commitments made by American Express
Company) should enable RiverSource to continue to provide a high quality and
level of advisory services to the Fund. In making this determination, the
Board took into account representations by management of Ameriprise
Financial that projected capital levels would allow Ameriprise Financial and
RiverSource to meet legal and compliance responsibilities, build their
distribution network, pursue technological upgrades, make capital
commitments necessary to retain and attract key personnel devoted to legal
and compliance responsibilities, portfolio management and distribution, and
pursue smaller asset management acquisitions to help grow the asset
management business. The Board accorded significant weight to CSFB's
confirmation as to the reasonableness of the proposed capital structure. The
Board also considered the fact that there were no expected departures of key
personnel involved in the portfolio management, operations and marketing of
the Funds as a result of the announcement of the spin-off.
- ------------------------------------------------------------------------------
32 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
The Board concluded that, based on all of the materials and information
provided, post-spin Ameriprise Financial (including RiverSource) would be in
a position to continue to provide a high quality and level of advisory
services to the Fund.
Investment Performance
The Board next focused on investment performance. The Board reviewed reports
documenting the Fund's performance over one-, three- and/or five-year
periods, as well as the entire period during which its current portfolio
manager has managed the Fund, and compared to relevant Lipper and market
indices. The Board took into account its determination in April 2005 that
investment performance in 2004 exceeded the median.
The Board also considered that it had been receiving monthly performance
reports for the Fund and that there had been no significant deviations from
April's overall performance data.
Cost of Services Provided
The Board evaluated comparative fees and the costs of services under the
current IMS Agreement and the New IMS Agreement, including fees charged by
Ameriprise Financial (including RiverSource and other subsidiaries) to
institutional clients. The Board studied RiverSource's effort (i.e., its
"pricing philosophy") to set substantially all Funds' total expense ratios
at or below the median expense ratio of comparable mutual funds (as compiled
by Lipper). The Board observed that the proposed advisory fee changes are
designed to work in tandem with proposed changes to administrative services
fees. It also noted that RiverSource has agreed to voluntarily impose
expense caps or waivers to achieve this pricing objective whenever the
expense ratio exceeded the median expense ratio by more than three basis
points (unless the higher ratio was due to the impact of the performance fee
adjustment). The Board considered that advisory fees under the New IMS
Agreement would stay the same. The Board also took into account the effect
of the proposed performance incentive adjustment on the advisory fee. In
this regard, the Board recalled its past determinations regarding the
appropriateness of (i) the use of the relevant index for the performance
comparison; (ii) the methodology for determining when the Board may change
an index used to calculate the performance incentive adjustment; (iii) the
periods used for averaging the Fund's assets and computing investment
performance; and (iv) the length of the period over which performance is
computed.
The Board next considered the expected profitability to Ameriprise Financial
and RiverSource derived from their relationship with the Fund, recalling the
April 2005 determination that the profitability level was appropriate. The
Board noted that projected profitability of Ameriprise Financial would allow
it to operate effectively and, at the same time, reinvest in RiverSource and
its other asset management businesses. The Board also considered that the
proposed changes in advisory fees and the mergers of certain other Funds
would result in revenue gains to Ameriprise Financial, but that these
increases would not materially alter profit margins due to expected
increases in costs associated with the spin-off, particularly re-branding
and separation. CSFB also reported that Ameriprise Financial's projected
level of return on equity was generally reasonable in light of the returns
on equity of its industry competitors. In evaluating profitability, the
Board also considered the benefits Ameriprise Financial obtains through the
use of commission dollars paid on portfolio transactions for the Fund and
from other business relationships that result from managing the Fund. The
Board also considered
- ------------------------------------------------------------------------------
33 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
the fees charged by Ameriprise Financial (and its subsidiaries) to
institutional clients as well as the fees paid to, and charged by,
subadvisers, noting the differences in services provided in each case. In
light of these considerations, the Board concluded that projected
profitability levels were appropriate.
Economies of Scale
The Board also considered the "breakpoints" in fees that would be triggered
as Fund net asset levels grew and the extent to which shareholders would
benefit from such growth. The Board observed that the revised fee schedules
under the proposed New IMS Agreement would continue to provide breakpoints
similar to those in place pursuant to the current IMS Agreement.
Accordingly, the Board concluded that the proposed New IMS Agreement
provides adequate opportunity for shareholders to realize benefits as Fund
assets grow.
Other Considerations
In addition, the Board accorded weight to the fact that, under the New IMS
Agreement, RiverSource Investments is held to a higher standard of care than
under the current IMS Agreement. The Board also noted Ameriprise Financial's
commitment to a culture that adheres to ethical business practice, assigns
accountability to senior management and seeks to identify conflicts and
propose appropriate action to minimize the risks posed by the conflicts.
Furthermore, the Board recognized that it was not limited to considering
management's proposed New IMS Agreement. In this regard, the Board evaluated
the circumstances under which it would consider the retention of an
investment adviser different from RiverSource Investments. The Board
concluded, based on its consultation with independent counsel, that pursuing
the retention of a different adviser was not necessary, primarily because,
in its best judgment, Ameriprise Financial continues to be basically the
same organization (from a functional and managerial standpoint), as it was
prior to the spin-off. The Board reasoned that shareholders purchased shares
of the Fund with an expectation that the current investment advisory
organization would be servicing the Fund.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling (800) 862-7919; by looking at the website
www.riversource.com/funds; or by 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 during the most
recent 12-month period ended June 30 is available without charge by calling
the Fund's administrator, Board Services Corporation, collect at (612)
330-9283; by looking at the website www.riversource.com/funds; or by
searching the website of the SEC at www.sec.gov.
- ------------------------------------------------------------------------------
34 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE GROWTH FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and the votes
cast for, against or withheld, as well as the number of abstentions and
broker non-votes as to each proposal is set forth below. A vote is based on
total dollar interest in a fund.
1. ELECTION OF BOARD MEMBERS
KATHLEEN BLATZ
Affirmative 2,143,098,460.70
Withhold 76,188,225.76
Abstain 0.00
TOTAL 2,219,286,686.46
ARNE H. CARLSON
Affirmative 2,138,590,820.76
Withhold 80,695,865.70
Abstain 0.00
TOTAL 2,219,286,686.46
PATRICIA M. FLYNN
Affirmative 2,146,080,363.69
Withhold 73,206,322.77
Abstain 0.00
TOTAL 2,219,286,686.46
ANNE P. JONES
Affirmative 2,139,389,255.96
Withhold 79,897,430.50
Abstain 0.00
TOTAL 2,219,286,686.46
JEFFREY LAIKIND
Affirmative 2,141,953,366.29
Withhold 77,333,320.17
Abstain 0.00
TOTAL 2,219,286,686.46
- ------------------------------------------------------------------------------
35 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
STEPHEN R. LEWIS, JR.
Affirmative 2,145,348,318.47
Withhold 73,938,367.99
Abstain 0.00
TOTAL 2,219,286,686.46
CATHERINE JAMES PAGLIA
Affirmative 2,145,316,875.36
Withhold 73,969,811.10
Abstain 0.00
TOTAL 2,219,286,686.46
VIKKI L. PRYOR
Affirmative 2,145,476,244.84
Withhold 73,810,441.62
Abstain 0.00
TOTAL 2,219,286,686.46
ALAN K. SIMPSON
Affirmative 2,133,391,453.70
Withhold 85,895,232.76
Abstain 0.00
TOTAL 2,219,286,686.46
ALISON TAUNTON-RIGBY
Affirmative 2,145,341,649.29
Withhold 73,945,037.17
Abstain 0.00
TOTAL 2,219,286,686.46
WILLIAM F. TRUSCOTT
Affirmative 2,145,374,858.54
Withhold 73,911,827.92
Abstain 0.00
TOTAL 2,219,286,686.46
- ------------------------------------------------------------------------------
36 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
2. AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE
MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
Affirmative 2,087,545,601.35
Against 86,691,378.94
Abstain 44,696,610.03
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
3. APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE
INVESTMENTS, LLC
Affirmative 2,104,849,719.56
Against 66,958,482.92
Abstain 47,125,387.84
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
4. APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
A. DIVERSIFICATION
Affirmative 2,104,109,336.41
Against 69,517,405.91
Abstain 45,306,848.00
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
B. TEN PERCENT LIMITATION IN SINGLE ISSUER
Affirmative 2,097,032,700.39
Against 74,003,226.36
Abstain 47,897,663.57
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
C. LENDING
Affirmative 2,083,343,069.88
Against 88,786,913.24
Abstain 46,803,607.20
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
- ------------------------------------------------------------------------------
37 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
D. BORROWING
Affirmative 2,088,616,198.84
Against 85,633,074.22
Abstain 44,684,317.26
Broker Non-votes 353,096.14
TOTAL 2,219,286,686.46
- ------------------------------------------------------------------------------
38 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
- ------------------------------------------------------------------------------
39 -- RIVERSOURCE GROWTH FUND -- 2006 SEMIANNUAL REPORT
[RIVERSOURCE INVESTMENTS LOGO]
RIVERSOURCE INVESTMENTS
200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC
and distributed by Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
Semiannual Report
[RIVERSOURCE(SM) INVESTMENTS LOGO]
RIVERSOURCE(SM)
LARGE CAP EQUITY FUND
SEMIANNUAL REPORT FOR THE
PERIOD ENDED JAN. 31, 2006
> RIVERSOURCE LARGE CAP EQUITY FUND (FORMERLY AXP(R) LARGE CAP EQUITY FUND)
SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL.
TABLE OF CONTENTS
Fund Snapshot..............................3
Performance Summary........................4
Questions & Answers
with Portfolio Management................6
Investments in Securities..................9
Financial Statements......................16
Notes to Financial Statements.............19
Fund Expenses Example.....................32
Approval of Investment Management
Services Agreement......................34
Proxy Voting..............................37
Results of Meeting of Shareholders........38
[Dalbar Logo]
American Express(R) Funds'* reports to shareholders 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.
<FN>
* As of Oct. 1, 2005, the RiverSource brand replaced "American Express" as
the name of the American Express Funds.
- ------------------------------------------------------------------------------
2 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
FUND SNAPSHOT
AT JAN. 31, 2006
- ------------------------------------------------------------------
PORTFOLIO MANAGERS <
- ------------------------------------------------------------------
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY
Robert Ewing, CFA 1/05 16
Nick Thakore 1/05 11
- ------------------------------------------------------------------
FUND OBJECTIVE <
- ------------------------------------------------------------------
The Fund seeks to provide shareholders with long-term growth of
capital.
Inception dates by class
A: 3/28/02 B: 3/28/02 C: 3/28/02 I: 3/4/04 Y: 3/28/02
Ticker symbols by class
A: ALEAX B: ALEBX C: ARQCX I: ALRIX Y: ALEYX
Total net assets $1.415 billion
Number of holdings 371
- ------------------------------------------------------------------
STYLE MATRIX <
- ------------------------------------------------------------------
[photo] Shading within the style
matrix indicates areas in
which the Fund generally
invests.
- ------------------------------------------------------------------
SECTOR COMPOSITION* <
- ------------------------------------------------------------------
Percentage of portfolio assets
[Pie Graph]
Financials 18.1%
Information Technology 14.3%
Health Care 13.8%
Consumer Discretionary 11.5%
Energy 10.2%
Telecommunication Services 9.1%
Consumer Staples 8.3%
Industrials 8.0%
Materials 2.5%
Utilities 2.3%
Short-Term Securities** 1.9%
<FN>
* Sectors can be comprised of several industries. Please refer to the
section entitled "Investments in Securities" for a complete listing. No
single industry exceeds 25% of portfolio assets.
** Of the 1.9%, 0.3% is due to security lending activity and 1.6% is the
Fund's cash equivalent position.
- ------------------------------------------------------------------
TOP TEN HOLDINGS <
- ------------------------------------------------------------------
Percentage of portfolio assets
Sprint Nextel (Diversified Telecommunication Services) 4.2%
Exxon Mobil (Oil & Gas) 3.4
Pfizer (Pharmaceuticals) 2.9
NTL (Media) 2.4
Bank of America (Commercial Banks) 2.2
American Intl Group (Insurance) 2.2
General Electric (Industrial Conglomerates) 2.1
Cisco Systems (Communications Equipment) 1.9
Altria Group (Tobacco) 1.8
Citigroup (Diversified Financial Services) 1.6
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are subject to change.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 3
- ------------------------------------------------------------------------------
PERFORMANCE SUMMARY
[Bar Graph]
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2006
RiverSource Large Cap Equity Fund Class A (excluding sales charge) +3.44%
Russell 1000(R) Index(1) (unmanaged) +5.04%
S&P 500 Index(2) (unmanaged) +4.68%
Lipper Large-Cap Core Funds Index(3) +6.01%
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 calling
(800) 862-7919 or visiting www.riversource.com/funds.
<FN>
(1) The Russell 1000(R) Index, an unmanaged index, measures the performance
of the 1,000 largest companies in the Russell 3000(R) Index, which
represents approximately 92% of the total market capitalization of the
Russell 3000 Index. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
(2) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other
fees.
(3) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance incentive
adjustment.
The 5.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- ------------------------------------------------------------------------------
4 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS <
- -------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (3/28/02) (3/28/02) (3/28/02) (3/4/04) (3/28/02)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
AT JAN. 31, 2006
6 months* +3.44% -2.51% +3.11% -1.89% +3.10% +2.10% +3.77% +3.66%
1 year +9.47% +3.18% +8.81% +3.81% +8.79% +7.79% +10.20% +9.91%
3 years +13.95% +11.72% +13.05% +11.99% +13.02% +13.02% N/A +14.13%
Since inception +3.61% +2.03% +2.81% +2.08% +2.86% +2.86% +6.23% +3.81%
AT DEC. 31, 2005
6 months* +4.11% -1.87% +3.59% -1.41% +3.58% +2.58% +4.24% +4.14%
1 year +5.76% -0.31% +5.05% +0.05% +5.04% +4.04% +6.30% +6.21%
3 years +12.50% +10.30% +11.59% +10.51% +11.56% +11.56% N/A +12.68%
Since inception +3.13% +1.52% +2.30% +1.55% +2.35% +2.35% +5.24% +3.34%
<FN>
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 5
- ------------------------------------------------------------------------------
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
RiverSource Large Cap Equity Fund's Class A shares advanced 3.44%, excluding
sales charge, for the six months ended Jan. 31, 2006. The Fund
underperformed its benchmarks, the Russell 1000(R) Index (Russell Index) and
the Standard & Poor's 500 Index (S&P 500 Index), which increased 5.04% and
4.68%, respectively. The Fund's peer group, the Lipper Large-Cap Core Funds
Index, gained 6.01% during the same time frame.
Q: What factors most significantly affected performance for the period?
A: Although RiverSource Large Cap Equity Fund advanced during the period,
it did not keep pace with the strong market rally. Underperformance
relative to the S&P 500 Index resulted from a combination of stock
selection and sector allocations. The Fund's positioning in the
telecommunications services, consumer staples and industrials sectors
had the most significant negative impact on performance, while
positioning in the technology, health care and materials sectors was
advantageous.
In the telecommunications sector, stock selection was a modest negative,
but the Fund's overweight position relative to the S&P 500 Index was the
primary challenge as the sector lagged the index.
Significant individual contributors to performance included Google,
Nokia, MEMC Electronic Materials and Guidant. Google has delivered
tremendous earnings growth since its initial public offering in 2004. We
believe it is still a great growth story with a reasonable valuation,
although early in 2006 we anticipated some weakness in short-term
earnings. We reduced the portfolio's Google holdings in January before
the company announced its fourth quarter 2005 earnings which fell short
of analyst expectations and precipitated a sharp decline in the stock's
price. Cell phone maker Nokia was also a major contributor, advancing on
both improving margins and its recovery of global market share. We
believe Nokia continues to have strong fundamentals, good earnings
growth potential and an attractive valuation. MEMC Electronic Materials
supplies wafers to semiconductor device manufacturers. Because of a
tight supply/demand balance for polisilicon, a component of the wafers,
we anticipated that the company's earnings growth would be strong and
was not reflected in the stock price. Medical instruments company
Guidant saw its stock price rise in a bidding war for the company. We
owned the stock going into the six-month period and stuck with it during
periods of uncertainty. Guidant has agreed to be acquired by Boston
Scientific.
Individual detractors during the period included not holding Goldman
Sachs, which delivered superior earnings growth
- ------------------------------------------------------------------------------
6 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
QUESTIONS & ANSWERS
> AT THIS TIME WE SEE VERY LITTLE VALUATION DIFFERENCE BETWEEN TRADITIONAL
VALUE AND GROWTH STOCKS, SO WE DON'T HAVE TO PAY TOO MUCH TO EXPOSE THE
PORTFOLIO TO GROWTH.
during the period. In general, the Fund's positioning among brokerage
stocks was disadvantageous. In addition, the Fund's performance was
hampered by not owning communications technology stock Qualcomm, which
advanced strongly during the period. Although we consider Qualcomm to be
a good growth story, we believe its valuation is too high relative to
that growth outlook. A lower-than-S&P 500 Index weighting in Burlington
Northern, a transportation stock, was also a significant detractor.
Burlington Northern benefited from its ability to raise prices as the
economic expansion increased demand for railway services.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: Overall positioning of the portfolio did not change significantly during
the period. However, we made changes to some individual stocks. For
example, we substantially increased the Fund's holdings of Verizon
Communications. Like other wireline telephone companies, Verizon's stock
price has been beaten down. However, the company's wireless component
has done well and, in our view, has been ignored by the market. We also
increased exposure to software developer Adobe Systems which is involved
in a merger with Macromedia. In our opinion, Adobe offers a favorable
growth outlook based on upcoming product cycles.
We reduced the Fund's holdings of commercial services company Cendant
because we saw some signs that earnings growth was likely to be
disappointing. We also reduced holdings of Spectrum Brands and Telewest
Global. Spectrum Brands, a maker of batteries, fertilizers and other
consumer products, has had disappointing earnings, partly due to higher
raw material costs that the company could not pass on to its customers.
Telewest Global had been a play on the U.K. cable market, but now that
the company has agreed to merge with NTL, the U.K.'s largest broadband
and communication services provider, and given how much the stock price
has already risen, we don't see as much future opportunity in Telewest
Global.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 7
- ------------------------------------------------------------------------------
QUESTIONS & ANSWERS
> WE BELIEVE 2006 IS LIKELY TO BE A TRANSITION YEAR, MOVING FROM A PERIOD OF
THE FEDERAL RESERVE RAISING SHORT-TERM INTEREST RATES TO EITHER A PERIOD OF
STABILITY OR THE FED POSSIBLY CUTTING SHORT-TERM RATES.
We reduced the Fund's position in pharmaceutical firm Johnson & Johnson
because its bid for Guidant was unsuccessful and we think without that
company, Johnson & Johnson's future growth will be challenged. We also
saw better opportunities in Pfizer. Pfizer received a favorable patent
ruling on its cholesterol-lowering drug Lipitor. The patent issues had
been a risk for the stock. We consider Pfizer's valuation attractive and
think there is an opportunity for the company to return to growth.
Q: How do you plan to manage the Fund in coming months?
A: We have focused on a number of key themes within the portfolio. First we
are looking for companies that are less dependent on the economy. With
the U.S. fairly far along in the economic cycle, it appears likely that
economic and earnings growth could decelerate in 2006. In such an
environment, we think it makes sense to be more cautious and to focus on
stocks that control their own destiny no matter the state of the
economy. Secondly, it seems to us that there are more opportunities in
large-cap stocks than there have been in a long time. Compared to small-
and mid-cap stocks, large stocks appear inexpensive in terms of the
normal relationships between these groups. At this time we see very
little valuation difference between traditional value and growth stocks,
so we don't have to pay too much to expose the portfolio to growth. For
that reason, the portfolio has a bit more emphasis on growth than it
typically would but remains solidly in the core space.
We believe 2006 is likely to be a transition year, moving from a period
of the Federal Reserve raising short-term interest rates to either a
period of stability or the Fed possibly cutting short-term rates. If
that's the case, 2006 would be a year for even greater attentiveness and
caution.
- ------------------------------------------------------------------------------
8 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
RiverSource Large Cap Equity Fund
JAN. 31, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
- ------------------------------------------------------------------------------
COMMON STOCKS (97.9%)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (3.1%)
Boeing 114,873 $7,846,975
Empresa Brasileira de Aeronautica ADR 30,560(c) 1,242,264
General Dynamics 25,020 2,911,327
Goodrich 105,819 4,166,094
Honeywell Intl 235,514 9,048,448
Lockheed Martin 123,883 8,380,685
Northrop Grumman 72,373 4,496,534
United Technologies 105,663 6,167,549
-------------
Total 44,259,876
- ------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.1%)
United Parcel Service Cl B 19,414 1,454,303
- ------------------------------------------------------------------------------
AUTO COMPONENTS (0.1%)
Cooper Tire & Rubber 2,936 44,011
Dana 6,520 31,752
Delphi 22,461 7,244
Goodyear Tire & Rubber 7,257(b) 113,499
Johnson Controls 7,925 548,727
Visteon 5,370(b) 28,193
-------------
Total 773,426
- ------------------------------------------------------------------------------
AUTOMOBILES (0.2%)
Ford Motor 76,744 658,464
General Motors 51,577(d) 1,240,942
Harley-Davidson 11,851 634,384
-------------
Total 2,533,790
- ------------------------------------------------------------------------------
BEVERAGES (1.4%)
Coca-Cola 106,918 4,424,267
PepsiCo 276,868 15,831,312
-------------
Total 20,255,579
- ------------------------------------------------------------------------------
BIOTECHNOLOGY (1.7%)
Amgen 168,440(b) 12,277,591
Biogen Idec 118,967(b) 5,323,773
Genentech 50,531(b) 4,341,624
Gilead Sciences 35,433(b) 2,156,807
-------------
Total 24,099,795
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
BUILDING PRODUCTS (0.2%)
American Standard Companies 24,767 $891,612
Masco 64,716 1,918,829
-------------
Total 2,810,441
- ------------------------------------------------------------------------------
CAPITAL MARKETS (2.4%)
Bank of New York 157,241 5,001,836
Charles Schwab 68,541 1,013,721
Franklin Resources 34,868 3,434,498
Investors Financial Services 23,421 1,099,382
Legg Mason 2,402 311,539
Lehman Brothers Holdings 54,695 7,681,913
Merrill Lynch & Co 50,445 3,786,906
Morgan Stanley 157,816 9,697,793
State Street 41,784 2,526,261
-------------
Total 34,553,849
- ------------------------------------------------------------------------------
CHEMICALS (1.1%)
Air Products & Chemicals 9,266 571,620
Bayer 32,329(c) 1,350,155
Dow Chemical 137,141 5,801,064
Eastman Chemical 21,900 1,055,799
Ecolab 9,188 329,022
EI du Pont de Nemours & Co 39,913 1,562,594
Engelhard 4,998 201,419
Hercules 4,787(b) 56,056
Intl Flavors & Fragrances 3,827 126,138
Lyondell Chemical 46,670 1,120,547
Monsanto 10,846 917,680
PPG Inds 7,044 419,118
Praxair 12,640 665,875
Rohm & Haas 7,914 402,823
RPM Intl 27,513 519,996
Sigma-Aldrich 2,923 189,644
-------------
Total 15,289,550
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (4.8%)
Bank of America 705,932 31,223,373
Commerce Bancorp 67,035(d) 2,241,650
ICICI Bank ADR 21,640(c) 679,929
PNC Financial Services Group 92,624 6,007,593
US Bancorp 143,773 4,300,250
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 9
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
COMMERCIAL BANKS (CONT.)
Wachovia 148,803 $8,158,868
Wells Fargo & Co 240,560 15,001,322
-------------
Total 67,612,985
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.6%)
Allied Waste Inds 11,005(b) 100,035
Apollo Group Cl A 6,698(b) 372,878
Avery Dennison 16,621 992,939
Cendant 293,107 4,906,612
Cintas 6,179 263,225
Monster Worldwide 4,750(b) 202,635
Pitney Bowes 9,811 419,322
Robert Half Intl 6,711 245,153
RR Donnelley & Sons 8,909 290,433
Waste Management 24,511 774,057
-------------
Total 8,567,289
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (3.1%)
CBS Cl B 76,113 1,988,833
Cisco Systems 1,462,211(b) 27,153,258
Corning 67,453(b) 1,642,481
Nokia ADR 615,246(c) 11,308,221
Scientific-Atlanta 44,201 1,890,035
-------------
Total 43,982,828
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.9%)
Dell 421,479(b) 12,353,549
EMC 431,278(b) 5,779,125
Hewlett-Packard 372,244 11,606,568
Intl Business Machines 139,562 11,346,391
-------------
Total 41,085,633
- ------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (--%)
Fluor 3,479 305,978
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (--%)
Vulcan Materials 4,116 295,858
- ------------------------------------------------------------------------------
CONSUMER FINANCE (1.2%)
American Express 137,909 7,233,327
Capital One Financial 91,374 7,611,454
SLM 48,479 2,712,885
-------------
Total 17,557,666
- ------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.3%)
Ball 4,593 186,017
Bemis 4,606 140,575
Pactiv 6,209(b) 138,088
Sealed Air 3,373(b) 186,426
Temple-Inland 62,712 2,941,192
-------------
Total 3,592,298
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DISTRIBUTORS (--%)
Genuine Parts 7,183 $305,493
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (2.6%)
Citigroup 497,549 23,175,832
Consumer Discretionary Select Sector SPDR Fund 7,605 252,714
Industrial Select Sector SPDR Fund 23,072 727,922
iShares Dow Jones US Healthcare Sector Index Fund 1 64
JPMorgan Chase & Co 306,926 12,200,309
Materials Select Sector SPDR Trust 22,939 728,084
-------------
Total 37,084,925
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (6.5%)
ALLTEL 45,816 2,750,334
AT&T 263,129 6,828,198
BellSouth 198,621 5,714,326
Chunghwa Telecom ADR 71,264(c) 1,326,936
Citizens Communications 39,408 483,536
Philippine Long Distance Telephone ADR 27,081(c) 969,229
Qwest Communications Intl 271,993(b) 1,637,398
Sprint Nextel 2,603,562 59,595,534
Telewest Global 33,653(b,c) 784,115
Verizon Communications 380,604 12,049,923
-------------
Total 92,139,529
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (1.6%)
Allegheny Energy 6,495(b) 225,961
Ameren 8,427 427,755
American Electric Power 16,335 609,622
CenterPoint Energy 12,135 155,085
Cinergy 8,671 376,755
Consolidated Edison 10,162 477,716
DTE Energy 7,560 319,032
Edison Intl 13,514 592,183
Entergy 44,895 3,120,651
Exelon 101,256 5,814,119
FirstEnergy 14,062 704,506
FPL Group 30,369 1,269,121
PG&E 15,282 570,171
Pinnacle West Capital 4,195 178,749
PPL 61,397 1,849,892
Progress Energy 10,425 454,739
Southern 107,317 3,734,632
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
10 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
ELECTRIC UTILITIES (CONT.)
TECO Energy 8,916 $152,285
TXU 18,922 958,210
Xcel Energy 66,455 1,290,556
-------------
Total 23,281,740
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.2%)
American Power Conversion 7,583 179,717
Cooper Inds Cl A 4,080 333,132
Emerson Electric 17,319 1,341,357
Rockwell Automation 7,643 504,973
-------------
Total 2,359,179
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
Flextronics Intl 129,141(b,c) 1,350,815
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.9%)
Baker Hughes 13,915 1,077,578
BJ Services 13,691 554,349
Cooper Cameron 32,284(b) 1,562,223
Halliburton 124,780 9,926,248
Nabors Inds 6,191(b,c) 503,019
Natl Oilwell Varco 6,729(b) 511,875
Noble 5,448 438,237
Rowan Companies 4,334 194,293
Schlumberger 42,820 5,457,409
TODCO Cl A 5,745 256,227
Transocean 53,396(b) 4,333,085
Weatherford Intl 61,293(b) 2,744,701
-------------
Total 27,559,244
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.4%)
CVS 55,298 1,535,072
Safeway 348,991 8,180,349
Wal-Mart Stores 230,151 10,612,263
-------------
Total 20,327,684
- ------------------------------------------------------------------------------
FOOD PRODUCTS (1.3%)
Cadbury Schweppes 296,568(c) 2,911,993
Campbell Soup 65,997 1,975,290
General Mills 52,625 2,558,101
Kellogg 240,939 10,336,283
-------------
Total 17,781,667
- ------------------------------------------------------------------------------
GAS UTILITIES (0.1%)
KeySpan 7,330 263,294
Nicor 1,843 75,379
NiSource 11,703 240,263
ONEOK 49,021 1,385,332
Peoples Energy 1,717 63,907
-------------
Total 2,028,175
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HEALTH CARE EQUIPMENT & SUPPLIES (2.0%)
Alcon 7,339(c) $938,805
Baxter Intl 330,294 12,171,334
Boston Scientific 138,610(b) 3,031,401
Guidant 124,172 9,139,059
Hospira 17,131(b) 766,612
PerkinElmer 94,987 2,160,004
-------------
Total 28,207,215
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (3.0%)
Cardinal Health 166,448 11,990,914
Caremark Rx 7,961(b) 392,477
HCA 153,512 7,534,369
HealthSouth 332,755(b) 1,598,888
IMS Health 11,332 278,767
Magellan Health Services 38,468(b) 1,403,313
McKesson 16,436 871,108
Medco Health Solutions 86,812(b) 4,696,529
UnitedHealth Group 191,004 11,349,458
Universal Health Services Cl B 12,957 615,587
WellPoint 27,893(b) 2,142,182
-------------
Total 42,873,592
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.6%)
Carnival Unit 22,239 1,151,091
Harrah's Entertainment 10,413 766,397
Kerzner Intl 19,926(b,c) 1,299,972
Marriott Intl Cl A 19,193 1,279,022
McDonald's 105,215 3,683,577
Orient-Express Hotels Cl A 7,780(c) 251,138
-------------
Total 8,431,197
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.4%)
Centex 5,374 383,650
DR Horton 10,964 409,176
Fortune Brands 6,360 476,746
Harman Intl Inds 9,497 1,044,670
KB HOME 3,490 265,938
Leggett & Platt 7,902 194,547
Maytag 3,315 57,084
Pulte Homes 9,627 384,117
Snap-On 2,297 92,179
Sony 51,299(c) 2,492,791
Stanley Works 3,145 154,231
Whirlpool 2,803 226,146
-------------
Total 6,181,275
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 11
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HOUSEHOLD PRODUCTS (2.4%)
Colgate-Palmolive 74,139 $4,069,490
Procter & Gamble 378,813 22,437,094
Spectrum Brands 389,873(b) 7,372,498
-------------
Total 33,879,082
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.7%)
General Electric 884,438 28,965,344
Tyco Intl 349,159(c) 9,095,592
-------------
Total 38,060,936
- ------------------------------------------------------------------------------
INSURANCE (4.3%)
ACE 163,659(c) 8,960,330
American Intl Group 466,201 30,517,517
Aon 101,136 3,460,874
Arch Capital Group 39,498(b,c) 2,146,321
Aspen Insurance Holdings 195,366(c) 4,528,584
Chubb 39,613 3,737,487
Endurance Specialty Holdings 22,567(c) 743,131
Hartford Financial Services Group 49,755 4,091,354
Max Re Capital 67,551(c) 1,790,777
Prudential Financial 15,900 1,197,906
-------------
Total 61,174,281
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.2%)
eBay 68,089(b) 2,934,636
- ------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.1%)
Google Cl A 31,332(b,g) 13,574,589
Yahoo! 54,433(b) 1,869,229
-------------
Total 15,443,818
- ------------------------------------------------------------------------------
IT SERVICES (0.9%)
Accenture Cl A 15,280(c) 481,778
Affiliated Computer Services Cl A 59,304(b) 3,712,430
Automatic Data Processing 36,364 1,597,834
Cognizant Technology Solutions Cl A 5,970(b) 312,649
Computer Sciences 16,298(b) 826,309
First Data 110,786 4,996,448
Ness Technologies 16,270(b,c) 188,407
Patni Computer Systems ADR 14,658(b,c) 339,333
Paychex 7,668 278,732
-------------
Total 12,733,920
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (--%)
Mattel 25,751 424,892
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MACHINERY (1.0%)
Caterpillar 83,318 $5,657,291
Cummins 1,801 175,237
Danaher 11,496 651,133
Deere & Co 26,643 1,911,902
Dover 8,805 404,414
Eaton 6,343 419,907
Illinois Tool Works 22,134 1,865,675
Ingersoll-Rand Cl A 37,973(c) 1,491,200
ITT Inds 6,566 673,015
Navistar Intl 2,830(b) 76,976
PACCAR 7,243 504,113
Pall 5,404 155,635
-------------
Total 13,986,498
- ------------------------------------------------------------------------------
MEDIA (7.6%)
Clear Channel Communications 57,198 1,674,185
Clear Channel Outdoor Holdings Cl A 22,763(b) 454,122
Comcast Cl A 387,667(b) 10,784,896
Comcast Special Cl A 161,374(b) 4,473,287
EchoStar Communications Cl A 14,773(b) 407,735
Liberty Global Cl A 294,728(b) 6,307,179
Liberty Global Series C 149,020(b) 3,013,184
Liberty Media Cl A 543,528(b) 4,543,894
News Corp Cl A 670,018 10,559,484
NTL 539,433(b) 34,119,138
Time Warner 507,212 8,891,426
Viacom Cl B 132,628(b) 5,501,409
Vivendi Universal ADR 391,083(c) 12,244,809
Walt Disney 118,735 3,005,183
WorldSpace Cl A 42,090(b) 534,543
-------------
Total 106,514,474
- ------------------------------------------------------------------------------
METALS & MINING (0.8%)
Alcan 37,441(c) 1,826,746
Alcoa 54,004 1,701,126
Allegheny Technologies 3,525 182,771
Coeur d'Alene Mines 392,816(b) 2,034,787
Freeport-McMoRan Copper & Gold Cl B 7,135 458,424
Newmont Mining 65,305 4,035,849
Nucor 5,999 505,296
-------------
Total 10,744,999
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
12 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MULTILINE RETAIL (1.1%)
Dollar General 15,020 $253,838
Federated Dept Stores 44,481 2,963,769
JC Penney 91,293 5,094,149
Kohl's 56,084(b) 2,489,569
Target 95,509 5,229,118
-------------
Total 16,030,443
- ------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER (0.5%)
AES 26,912(b) 458,580
Calpine 19,940(b) 4,427
CMS Energy 9,085(b) 131,460
Constellation Energy Group 7,328 427,003
Dominion Resources 57,831 4,367,975
Duke Energy 38,987 1,105,281
Dynegy Cl A 15,714(b) 86,427
Public Service Enterprise Group 9,719 676,637
Sempra Energy 9,775 469,689
-------------
Total 7,727,479
- ------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox 65,591(b) 938,607
- ------------------------------------------------------------------------------
OIL & GAS (8.3%)
Amerada Hess 11,258 1,742,738
Anadarko Petroleum 73,776 7,954,528
Apache 13,922 1,051,529
Ashland 2,775 182,928
BP ADR 42,958(c) 3,106,293
Burlington Resources 15,812 1,443,003
Chevron 244,907 14,542,578
ConocoPhillips 229,947 14,877,571
Devon Energy 76,277 5,202,854
El Paso 26,657 358,803
EOG Resources 10,222 864,168
Exxon Mobil 774,751 48,615,625
Kerr-McGee 4,737 522,917
Kinder Morgan 4,338 417,533
Marathon Oil 40,535 3,115,925
Newfield Exploration 27,849(b) 1,459,288
Occidental Petroleum 16,787 1,640,258
Royal Dutch Shell ADR Series A 21,936(c) 1,494,061
Sunoco 5,383 512,462
Ultra Petroleum 26,654(b) 1,833,529
Valero Energy 59,733 3,729,131
Williams Companies 23,257 554,447
XTO Energy 14,886 730,605
-------------
Total 115,952,774
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
PAPER & FOREST PRODUCTS (0.4%)
Bowater 29,058 $794,446
Intl Paper 64,631 2,108,910
Louisiana-Pacific 4,628 136,295
MeadWestvaco 7,946 212,079
Weyerhaeuser 34,521 2,408,184
-------------
Total 5,659,914
- ------------------------------------------------------------------------------
PHARMACEUTICALS (7.1%)
Abbott Laboratories 9,700 418,555
AstraZeneca 58,165(c) 2,816,286
Bristol-Myers Squibb 203,132 4,629,378
Eli Lilly & Co 53,275 3,016,431
GlaxoSmithKline ADR 42,576(c) 2,181,594
Johnson & Johnson 141,531 8,143,694
Merck & Co 140,328 4,841,316
Novartis ADR 126,886(c) 6,999,032
Pfizer 1,607,502 41,280,651
Roche Holding 32,211(c) 5,090,457
Schering-Plough 368,508 7,056,928
Teva Pharmaceutical Inds ADR 104,889(c) 4,471,418
Wyeth 189,310 8,755,588
-------------
Total 99,701,328
- ------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (0.3%)
Apartment Investment & Management Cl A 16,792 713,996
Equity Office Properties Trust 44,889 1,428,368
HomeBanc 168,737 1,405,579
-------------
Total 3,547,943
- ------------------------------------------------------------------------------
ROAD & RAIL (0.1%)
Norfolk Southern 22,923 1,142,482
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.6%)
Analog Devices 93,163 3,705,093
Applied Materials 98,355 1,873,663
Atmel 16,608(b) 65,602
Broadcom Cl A 18,153(b) 1,238,035
Credence Systems 32,139(b) 281,216
Cypress Semiconductor 75,969(b) 1,286,155
Freescale Semiconductor Cl A 174,623(b) 4,393,515
Freescale Semiconductor Cl B 87,473(b) 2,208,693
Infineon Technologies ADR 29,900(b,c) 281,957
Integrated Device Technology 114,983(b) 1,597,114
Intel 486,530 10,348,492
Linear Technology 47,717 1,775,550
Maxim Integrated Products 9,251 379,661
MEMC Electronic Materials 83,201(b) 2,377,885
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 13
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.)
PMC-Sierra 48,521(b) $459,009
Texas Instruments 170,578 4,985,994
-------------
Total 37,257,634
- ------------------------------------------------------------------------------
SOFTWARE (3.4%)
Adobe Systems 143,663 5,706,294
Cadence Design Systems 118,855(b) 2,098,979
Computer Associates Intl 62,019 1,693,119
Compuware 226,944(b) 1,870,019
Mercury Interactive 69,905(b) 2,429,199
Microsoft 820,628 23,100,678
Oracle 602,516(b) 7,573,626
Symantec 150,331(b) 2,763,084
TIBCO Software 143,204(b) 1,144,200
-------------
Total 48,379,198
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.9%)
AutoNation 9,188(b) 204,801
AutoZone 2,726(b) 266,467
Best Buy 42,439 2,149,960
Home Depot 134,800 5,466,139
Lowe's Companies 31,680 2,013,264
Office Depot 12,853(b) 426,077
OfficeMax 3,142 89,767
RadioShack 5,675 125,985
Sherwin-Williams 5,151 272,488
Staples 30,458 722,159
Urban Outfitters 27,452(b) 749,714
-------------
Total 12,486,821
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
Jones Apparel Group 5,401 168,943
Liz Claiborne 4,525 157,108
Nike Cl B 51,659 4,181,796
Reebok Intl 2,265 133,612
VF 4,139 229,632
-------------
Total 4,871,091
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (2.5%)
Countrywide Financial 335,027 11,203,303
Fannie Mae 249,799 14,473,355
Freddie Mac 117,769 7,991,804
Washington Mutual 23,776 1,006,200
-------------
Total 34,674,662
- ------------------------------------------------------------------------------
TOBACCO (1.8%)
Altria Group 347,639 25,148,205
- ------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (--%)
WW Grainger 3,569 253,149
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
WIRELESS TELECOMMUNICATION SERVICES (2.6%)
Centennial Communications 35,271 $332,606
Hutchison Telecommunications Intl ADR 136,478(b,c) 3,418,774
Motient 47,945(b,d) 999,653
NeuStar Cl A 150,434(b) 4,364,090
O2 757,644(c) 2,695,393
Orascom Telecom Holding GDR 126,714(c) 8,388,467
Partner Communications ADR 13,686(c) 109,077
Vodafone Group 6,398,230(c) 13,429,777
Vodafone Group ADR 142,647(c) 3,011,278
-------------
Total 36,749,115
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $1,305,110,273) $1,385,361,255
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OPTIONS PURCHASED (--%)
- ------------------------------------------------------------------------------
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
PUTS
Google Cl A 56 $430 Feb. 2006 $130,480
- ------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost: $113,760) $130,480
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SHORT-TERM SECURITIES (1.9%)(e)
- ------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Alpine Securitization
02-01-06 4.48% $6,400,000(f) $6,399,204
Barton Capital
02-01-06 4.48 9,400,000(f) 9,398,830
Dexia Delaware LLC
02-06-06 4.31 10,000,000 9,992,816
Windmill Funding
02-01-06 4.48 1,200,000(f) 1,199,851
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $26,994,013) $26,990,701
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,332,218,046)(h) $1,412,482,436
==============================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
14 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
<FN>
- ------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- ------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2006,
the value of foreign securities represented 9.1% of net assets.
(d) At Jan. 31, 2006, security was partially or fully on loan. See Note 6 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.3% of net assets. See Note 6 to
the financial statements. 1.6% of net assets is the Fund's cash
equivalent position.
(f) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At Jan. 31, 2006, the value
of these securities amounted to $16,997,885 or 1.2% of net assets.
(g) At Jan. 31, 2006, securities valued at $13,560,725 were held to cover
open call options written as follows (see Note 7 to the financial
statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
------------------------------------------------------------------------
Google Cl A 313 $460 Feb. 2006 $497,670
(h) At Jan. 31, 2006, the cost of securities for federal income tax purposes
was approximately $1,332,218,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $111,956,000
Unrealized depreciation (31,692,000)
-------------------------------------------------------------------------
Net unrealized appreciation $ 80,264,000
-------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling 1-800-SEC-0330);
and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.riversource.com/funds.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 15
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource Large Cap Equity Fund
JAN. 31, 2006 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 1)*
(identified cost $1,332,218,046) $1,412,482,436
Cash in bank on demand deposit 1,131,286
Foreign currency holdings (identified cost $4,729) (Note 1) 4,737
Capital shares receivable 97,901
Dividends and accrued interest receivable 875,480
Receivable for investment securities sold 31,919,450
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 2,408
- ----------------------------------------------------------------------------------------------------------------
Total assets 1,446,513,698
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------
Capital shares payable 205,282
Payable for investment securities purchased 26,273,118
Unrealized depreciation on foreign currency contracts held, at value (Note 5) 804
Payable upon return of securities loaned (Note 6) 4,030,000
Accrued investment management services fee 23,114
Accrued distribution fee 17,139
Accrued service fee 1
Accrued transfer agency fee 4,999
Accrued administrative services fee 2,156
Other accrued expenses 292,231
Options contracts written, at value (premiums received $975,964) (Note 7) 497,670
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 31,346,514
- ----------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $1,415,167,184
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
REPRESENTED BY
- ----------------------------------------------------------------------------------------------------------------
Capital stock -- $.01 par value (Note 1) $ 2,622,914
Additional paid-in capital 2,250,080,361
Undistributed net investment income 3,451,655
Accumulated net realized gain (loss) (Note 9) (921,731,077)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 80,743,331
- ----------------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $1,415,167,184
================================================================================================================
Net assets applicable to outstanding shares: Class A $1,019,117,424
Class B $ 358,045,462
Class C $ 8,872,445
Class I $ 28,884,072
Class Y $ 247,781
Net asset value per share of outstanding capital stock: Class A shares 187,879,437 $ 5.42
Class B shares 67,414,823 $ 5.31
Class C shares 1,667,598 $ 5.32
Class I shares 5,284,307 $ 5.47
Class Y shares 45,259 $ 5.47
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Including securities on loan, at value (Note 6) $ 3,953,950
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
16 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
RiverSource Large Cap Equity Fund
SIX MONTHS ENDED JAN. 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------
Income:
Dividends $ 13,640,675
Interest 483,398
Fee income from securities lending (Note 6) 75,020
Less foreign taxes withheld (79,413)
- -------------------------------------------------------------------------------------------
Total income 14,119,680
- -------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 4,653,265
Distribution fee
Class A 1,308,139
Class B 1,927,400
Class C 45,392
Transfer agency fee 1,634,311
Incremental transfer agency fee
Class A 113,166
Class B 78,544
Class C 1,709
Service fee -- Class Y 123
Administrative services fees and expenses 422,844
Compensation of board members 9,017
Custodian fees 150,450
Printing and postage 265,000
Registration fees 64,410
Audit fees 15,000
Other 30,355
- -------------------------------------------------------------------------------------------
Total expenses 10,719,125
Earnings credits on cash balances (Note 2) (44,702)
- -------------------------------------------------------------------------------------------
Total net expenses 10,674,423
- -------------------------------------------------------------------------------------------
Investment income (loss) -- net 3,445,257
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions (Note 3) 60,254,449
Foreign currency transactions (50,196)
Options contracts written (Note 7) 5,894
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 60,210,147
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (17,180,915)
- -------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 43,029,232
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 46,474,489
===========================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 17
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource Large Cap Equity Fund
JAN. 31, 2006 JULY 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
OPERATIONS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net $ 3,445,257 $ 9,555,645
Net realized gain (loss) on investments 60,210,147 81,295,185
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (17,180,915) 128,747,672
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 46,474,489 219,598,502
- -------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (3,948,834) (5,100,612)
Class I (398,217) (205,016)
Class Y (152) (42,646)
Net realized gain
Class A -- (1,579,848)
Class B -- (746,323)
Class C -- (14,219)
Class I -- (38,374)
Class Y -- (10,290)
- -------------------------------------------------------------------------------------------------------------
Total distributions (4,347,203) (7,737,328)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
- -------------------------------------------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 134,401,933 72,128,244
Class B shares 16,210,542 33,166,584
Class C shares 921,120 1,679,423
Class I shares 10,963,896 35,280,636
Class Y shares 47,452 569,613
Reinvestment of distributions at net asset value
Class A shares 3,870,858 6,565,939
Class B shares -- 737,490
Class C shares -- 13,859
Class I shares 398,180 243,352
Class Y shares 145 52,860
Payments for redemptions
Class A shares (180,354,301) (438,987,389)
Class B shares (Note 2) (139,457,817) (197,466,065)
Class C shares (Note 2) (1,600,311) (4,548,807)
Class I shares (26,421,105) (11,054,445)
Class Y shares (17,141) (8,498,540)
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (181,036,549) (510,117,246)
- -------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (138,909,263) (298,256,072)
Net assets at beginning of period 1,554,076,447 1,852,332,519
- -------------------------------------------------------------------------------------------------------------
Net assets at end of period $1,415,167,184 $1,554,076,447
=============================================================================================================
Undistributed net investment income $ 3,451,655 $ 4,353,601
- -------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
18 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
RiverSource Large Cap Equity Fund (formerly AXP Large Cap Equity Fund)
(Unaudited as to Jan. 31, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered
under the Investment Company Act of 1940 (as amended) as a diversified,
open-end management investment company. AXP Growth Series, Inc. has 10
billion authorized shares of capital stock that can be allocated among the
separate series as designated by the Board. The Fund invests primarily in
equity securities of companies with a market capitalization greater than $5
billion at the time of purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o 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.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares have no sales charge and are
made available through a separate prospectus supplement provided to
investors eligible to purchase the shares. At Jan. 31, 2006, Ameriprise
Financial, Inc. (Ameriprise Financial) and the RiverSource Portfolio Builder
Funds owned 100% of Class I shares, which represents 2.04% of the Fund's net
assets.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee, transfer agency fees and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 19
- ------------------------------------------------------------------------------
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Pursuant to procedures adopted by the Board of
Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing
(FVP). FVP determinations are made in good faith in accordance with these
procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or
event has actually caused the closing price to no longer reflect the actual
value, the closing prices, as determined at the close of the applicable
foreign market, may be adjusted to reflect the fair value of the affected
foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing
in more than 60 days from the valuation date are valued at the market price
or approximate market value based on current interest rates; those maturing
in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market
where completing the obligation depends upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured
put options. The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases. The
risk in writing a put option is that the Fund may incur a loss if the market
price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
- ------------------------------------------------------------------------------
20 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
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 FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars. Foreign currency amounts
related to the purchase or sale of securities and income and expenses are
translated at the exchange rate on the transaction date. The effect of
changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from foreign currency
transactions, if any, may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the trade date
and settlement date on securities transactions, and other translation gains
or losses on dividends, interest income and foreign withholding taxes. At
Jan. 31, 2006, foreign currency holdings were entirely comprised of European
monetary unit.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund and the resulting
unrealized appreciation or depreciation are determined using foreign
currency exchange rates from an independent pricing service. The Fund is
subject to the credit risk that the other party will not complete its
contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such
claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue
Code that applies to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. No provision for
income or excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due
to "wash sale" transactions. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 21
- ------------------------------------------------------------------------------
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
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.48% annually
as the Fund's assets increase. On Feb. 15, 2006, shareholders approved a
change to the Investment Management Services Agreement. Effective March 1,
2006, the management fee percentage of the Fund's average daily net assets
will decline from 0.60% to 0.375% annually as the Fund's assets increase.
The fee may be adjusted upward or downward by a performance incentive
adjustment based on a comparison of the performance of Class A shares of the
Fund to the Lipper Large-Cap 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 increased the fee by $250,306 for the six months
ended Jan. 31, 2006.
Under the current Administrative Services Agreement, the Fund pays
Ameriprise Financial a fee for administration and accounting services at a
percentage of the Fund's average daily net assets that declines from 0.06%
to 0.03% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the
fee percentage of the Fund's average daily net assets declined from 0.05% to
0.02% annually as the Fund's assets increased. A minor portion of additional
administrative service expenses paid by the Fund are consultants' fees and
fund office expenses. Under this agreement, the Fund also pays taxes, audit
and certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the Board.
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.
- ------------------------------------------------------------------------------
22 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund
pays the Transfer Agent an annual fee per shareholder account for this
service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement
of operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (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 up to 0.25% of the Fund's average daily net assets attributable
to Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee
for service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$451,900 for Class A, $186,476 for Class B and $605 for Class C for the six
months ended Jan. 31, 2006.
During the six months ended Jan. 31, 2006, the Fund's custodian and transfer
agency fees were reduced by $44,702 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise
Trust Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $764,641,245 and $925,619,352,
respectively, for the six months ended Jan. 31, 2006. Realized gains and
losses are determined on an identified cost basis.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 23
- ------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated
are as follows:
SIX MONTHS ENDED JAN. 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ------------------------------------------------------------------------------------------------------------
Sold 25,655,905 3,137,376 178,029 2,076,561 8,971
Issued for reinvested distributions 722,175 -- -- 73,737 27
Redeemed (34,322,693) (27,339,038) (309,730) (4,892,667) (3,181)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (7,944,613) (24,201,662) (131,701) (2,742,369) 5,817
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ------------------------------------------------------------------------------------------------------------
Sold 14,871,934 6,952,759 351,747 7,088,316 117,456
Issued for reinvested distributions 1,331,830 152,060 2,852 49,063 10,679
Redeemed (89,223,978) (40,853,895) (942,228) (2,204,982) (1,698,241)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (73,020,214) (33,749,076) (587,629) 4,932,397 (1,570,106)
- ------------------------------------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Jan. 31, 2006, the Fund has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is included
in the accompanying financial statements. See "Summary of significant
accounting policies." The terms of the open contracts are as follows:
EXCHANGE DATE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- -------------------------------------------------------------------------------------------------------
Feb. 1, 2006 212,730 120,295 $1,251 $ --
U.S. Dollar British Pound
Feb. 2, 2006 112,439 87,292 -- 675
Swiss Franc U.S. Dollar
Feb. 2, 2006 9,058 15,983 -- 129
British Pound U.S. Dollar
Feb. 2, 2006 217,878 123,137 1,157 --
U.S. Dollar British Pound
- -------------------------------------------------------------------------------------------------------
Total $2,408 $804
- -------------------------------------------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES
At Jan. 31, 2006, securities valued at $3,953,950 were on loan to brokers.
For collateral, the Fund received $4,030,000 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from
securities lending amounted to $75,020 for the six months ended Jan. 31,
2006. The risks to the Fund of securities lending are that the borrower may
not provide additional collateral when required or return the securities
when due.
- ------------------------------------------------------------------------------
24 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
7. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as follows:
SIX MONTHS ENDED JAN. 31, 2006
CALLS
- ------------------------------------------------------------------------------
CONTRACTS PREMIUMS
- ------------------------------------------------------------------------------
Balance July 31, 2005 -- $ --
Opened 316 986,157
Closed (3) (10,193)
Expired -- --
- ------------------------------------------------------------------------------
Balance Jan. 31, 2006 313 $975,964
- ------------------------------------------------------------------------------
See "Summary of significant accounting policies."
8. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed
by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the
Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial
Lending Rate. Borrowings are payable within 60 days after such loan is
executed. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.07% per annum. Prior to
this agreement, the Fund had a revolving credit agreement that permitted
borrowings up to $500 million with The Bank of New York. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2006.
9. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$953,822,923 at July 31, 2005, that if not offset by capital gains will
expire as follows:
2008 2009 2010 2011
$506,643,917 $416,711,846 $20,988,174 $9,478,986
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 25
- ------------------------------------------------------------------------------
10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement
agreements with the Securities and Exchange Commission (SEC) and Minnesota
Department of Commerce (MDOC) related to market timing activities. In
connection with these matters, the SEC and MDOC issued orders (the Orders)
alleging that AEFC violated certain provisions of the federal and Minnesota
securities laws by failing to adequately disclose market timing activities
by allowing certain identified market timers to continue to market time
contrary to disclosures in mutual fund and variable annuity product
prospectuses. The Orders also alleged that AEFC failed to implement
procedures to detect and prevent market timing in 401(k) plans for employees
of AEFC and related companies and failed to adequately disclose that there
were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its
employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million.
AEFC also agreed to make presentations at least annually to its board of
directors and the relevant mutual funds' board that include an overview of
policies and procedures to prevent market timing, material changes to these
policies and procedures and whether disclosures related to market timing are
consistent with the SEC order and federal securities laws. AEFC also agreed
to retain an independent distribution consultant to assist in developing a
plan for distribution of all disgorgement and civil penalties ordered by the
SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a
summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration 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 or arbitration 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.
- ------------------------------------------------------------------------------
26 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
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.
11. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.26 $4.64 $4.53 $4.11 $5.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .04 .01 .01 --
Net gains (losses) (both realized and unrealized) .16 .61 .32 .41 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .18 .65 .33 .42 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.02) -- -- --
Distributions from realized gains -- (.01) (.22) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.02) (.03) (.22) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.42 $5.26 $4.64 $4.53 $4.11
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $1,019 $1,030 $1,248 $83 $11
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.25%(d) 1.11%(e) 1.20%(e) 1.25%(e) 1.25%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .65%(d) .79% .36% .24% (.11%)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 53% 128% 99% 135% 88%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.44%(g) 13.99% 7.19% 10.22% (17.80%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from March 28, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.16%, 1.23%, 1.84% and 5.12% for the
periods ended July 31, 2005, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 27
- ------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.15 $4.56 $4.48 $4.10 $5.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) -- -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .16 .60 .31 .39 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 .60 .30 .38 (.90)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- (.01) (.22) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.31 $5.15 $4.56 $4.48 $4.10
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $358 $472 $572 $36 $5
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 2.02%(d) 1.88%(e) 1.95%(e) 2.01%(e) 2.01%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.12%)(d) .02% (.46%) (.52%) (.86%)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 53% 128% 99% 135% 88%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.11%(g) 13.09% 6.48% 9.27% (18.00%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 1.93%, 1.98%, 2.60% and 5.88% for the periods ended
July 31, 2005, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
28 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.16 $4.57 $4.49 $4.10 $5.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) -- -- (.01) (.01) (.01)
Net gains (losses) (both realized and unrealized) .16 .60 .31 .40 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16 .60 .30 .39 (.90)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- (.01) (.22) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.32 $5.16 $4.57 $4.49 $4.10
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $9 $9 $11 $2 $--
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 2.02%(d) 1.88%(e) 1.98%(e) 2.01%(e) 2.01%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.12%)(d) .02% (.43%) (.53%) (.92%)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 53% 128% 99% 135% 88%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.10%(g) 13.06% 6.46% 9.51% (18.00%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 1.93%, 2.01%, 2.60% and 5.88% for the periods ended
July 31, 2005, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 29
- ------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004(b)
Net asset value, beginning of period $5.31 $4.67 $5.08
- -------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .05 --
Net gains (losses) (both realized and unrealized) .16 .63 (.28)
- -------------------------------------------------------------------------------------------------------
Total from investment operations .20 .68 (.28)
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.03) --
Distributions from realized gains -- (.01) (.13)
- -------------------------------------------------------------------------------------------------------
Total distributions (.04) (.04) (.13)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.47 $5.31 $4.67
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $29 $43 $14
- -------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .75%(d) .65%(e) .71%(d),(e)
- -------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.21%(d) 1.24% .74%(d)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 53% 128% 99%
- -------------------------------------------------------------------------------------------------------
Total return(f) 3.77%(g) 14.64% (5.65%)(g)
- -------------------------------------------------------------------------------------------------------
<FN>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class I would have been 0.70% and 0.72% for the periods ended July 31, 2005
and 2004, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
30 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
CLASS Y
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.28 $4.66 $4.54 $4.11 $5.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .04 .01 .01 --
Net gains (losses) (both realized and unrealized) .15 .61 .34 .42 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .19 .65 .35 .43 (.89)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (.02) (.01) -- --
Distributions from realized gains -- (.01) (.22) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03) (.23) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.47 $5.28 $4.66 $4.54 $4.11
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $-- $-- $8 $-- $--
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.06%(d) .90%(e) 1.00%(e) 1.07%(e) 1.07%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .86%(d) 1.08% .50% .45% .09%(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 53% 128% 99% 135% 88%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.66%(g) 14.06% 7.44% 10.46% (17.80%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from March 28, 2002 (when shares became publicly available)
to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction
of earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class Y would have been 0.95%, 1.03%, 1.66% and 4.94% for the periods ended
July 31, 2005, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 31
- ------------------------------------------------------------------------------
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, including management fees; distribution and service (12b-1) fees; and
other Fund 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.
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, 2006.
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.
- ------------------------------------------------------------------------------
32 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
AUG. 1, 2005 JAN. 31, 2006 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,034.40 $6.48 1.25%
Hypothetical (5% return before expenses) $1,000 $1,019.11 $6.43 1.25%
Class B
Actual(b) $1,000 $1,031.10 $10.45 2.02%
Hypothetical (5% return before expenses) $1,000 $1,015.19 $10.37 2.02%
Class C
Actual(b) $1,000 $1,031.00 $10.45 2.02%
Hypothetical (5% return before expenses) $1,000 $1,015.19 $10.37 2.02%
Class I
Actual(b) $1,000 $1,037.70 $3.89 .75%
Hypothetical (5% return before expenses) $1,000 $1,021.66 $3.86 .75%
Class Y
Actual(b) $1,000 $1,036.60 $5.50 1.06%
Hypothetical (5% return before expenses) $1,000 $1,020.08 $5.46 1.06%
<FN>
(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 186/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Jan. 31, 2006: +3.44%
for Class A, +3.11% for Class B, +3.10% for Class C, +3.77% for Class I
and +3.66% for Class Y.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 33
- ------------------------------------------------------------------------------
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of
Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express
Financial Corporation), serves as the investment manager to the Fund. Under
an investment management services agreement (the IMS Agreement), the
investment manager provides investment advice and other services to the
Fund. Throughout the year, the Fund's Board of Directors (the Board) and the
Board's Investment Review and Contracts Committees monitor these services.
Ameriprise Financial had served as investment manager to the Fund until
Sept. 29, 2005. On that date, and pursuant to the consent of the Board,
Ameriprise Financial transferred its rights, title, and interest and its
burdens and obligations under the IMS Agreement to RiverSource, its
wholly-owned subsidiary.
Each year, the Board determines whether to continue the IMS Agreement by
evaluating the quality and level of services received and the costs
associated with those services. To assist the Board in making this
determination, the investment manager prepares detailed reports for the
Board and its Contracts Committee in March and April and provides data
prepared by independent organizations. The Board gives considerable weight
to the work, deliberations and conclusions of the Contracts and Investment
Review Committees in determining whether to continue the IMS Agreement.
BACKGROUND
This past year, prior to the Board's annual review process, on Feb. 1, 2005,
American Express Company, the former parent of Ameriprise Financial,
announced its intention to pursue a spin-off of Ameriprise Financial by
distributing shares of the common stock of Ameriprise Financial to
shareholders of American Express Company. Following this announcement, the
Board determined to proceed with its annual review process and, after
thorough review of the reports and data provided, at a meeting held in
person on April 14, 2005, the Board, including all of its independent
members, determined that the quality and level of advisory services provided
pursuant to the IMS Agreement were satisfactory and that fees were fair and
reasonable. However, in light of the announced plans of the spin-off, the
Board approved continuation of the IMS Agreement with Ameriprise Financial
for only an interim period ending on the later of (i) the effective date of
the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise
Financial (or its subsidiary) by the shareholders of the Fund, but in no
event for a period longer than one year.
During the course of the six-month period following the April 2005 meeting,
the Board evaluated whether to approve new investment management services
agreements for each of the funds within the Ameriprise Financial fund
complex (together, the Funds) with post-spin Ameriprise Financial (or
RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte),
assisted the Boards in fulfilling their statutory and other responsibilities
associated with the spin-off and the resulting consideration of new
contracts, including the new IMS Agreement. The Board and its committees
were provided with a wealth of written and oral information in this regard.
Furthermore, in connection with the Board's considerations as to whether
post-spin Ameriprise Financial, as an entity independent from American
Express Company, would be capable of continuing to provide a high quality of
services to the Funds,
- ------------------------------------------------------------------------------
34 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
the Board's independent members retained their own financial adviser, Credit
Suisse First Boston LLC (CSFB), to assist them in analyzing the capital
adequacy of post-spin Ameriprise Financial. (The costs of independent
counsel and CSFB and of additional meetings of the Boards were borne by
Ameriprise Financial as part of the commitment of the American Express
Company to ensure a complete and thorough review of the proposed spin-off
and its effect on the services provided by Ameriprise Financial and its
subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board,
including all of its independent members, approved, and recommended that
shareholders approve, a proposed new IMS Agreement with RiverSource (the New
IMS Agreement). At a meeting of the Fund's shareholders held on Feb. 15,
2006, shareholders approved the New IMS Agreement. The following section,
"Board Considerations Related to the New IMS Agreement," provides a detailed
discussion of the Board's considerations and determinations respecting the
New IMS Agreement.
BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT
In carrying out its legal responsibilities associated with the consideration
of the New IMS Agreement, the Board evaluated the following factors:
Nature, Extent and Quality of Services to be Provided by Post-Spin
Ameriprise Financial (and Its Subsidiaries)
The Board recognized that only a few months had passed since its April 2005
conclusion that the nature, extent and quality of services provided by
Ameriprise Financial were satisfactory and consistent with those that would
be expected for a fund family of the size of the Funds and its determination
to renew the IMS Agreement for the interim period. However, the Board also
recognized the need to supplement this assessment with an evaluation of
whether the spin-off or other factors would result in changes to the
advisory services being provided under the current IMS Agreement.
The Board focused its evaluation on the following factors potentially
impacting the nature, extent and quality of advisory services to be provided
by Ameriprise Financial: (i) Ameriprise Financial's projected capital
structure and capital adequacy as a stand-alone entity; (ii) its legal and
regulatory risks; (iii) its ability to retain and attract personnel; and
(iv) its ability to successfully re-brand its products and services. Based
on extensive presentations and reports by Ameriprise Financial, CSFB and
Schulte, the Board concluded that the proposed capital structure (which
includes certain indemnification commitments made by American Express
Company) should enable RiverSource to continue to provide a high quality and
level of advisory services to the Fund. In making this determination, the
Board took into account representations by management of Ameriprise
Financial that projected capital levels would allow Ameriprise Financial and
RiverSource to meet legal and compliance responsibilities, build their
distribution network, pursue technological upgrades, make capital
commitments necessary to retain and attract key personnel devoted to legal
and compliance responsibilities, portfolio management and distribution, and
pursue smaller asset management acquisitions to help grow the asset
management business. The Board accorded significant weight to CSFB's
confirmation as to the reasonableness of the proposed capital structure. The
Board also considered the fact that there were no expected departures of key
personnel involved in the portfolio management, operations and marketing of
the Funds as a result of the announcement of the spin-off.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 35
- ------------------------------------------------------------------------------
The Board concluded that, based on all of the materials and information
provided, post-spin Ameriprise Financial (including RiverSource) would be in
a position to continue to provide a high quality and level of advisory
services to the Fund.
Investment Performance
The Board next focused on investment performance. The Board reviewed reports
documenting the Fund's performance over one-, three- and/or five-year
periods, as well as the entire period during which its current portfolio
manager has managed the Fund, and compared to relevant Lipper and market
indices. The Board took into account its determination in April 2005 that
although investment performance in 2004 was below median, it was consistent
with the management style of the Fund in light of market conditions in 2004.
The Board also considered that it had been receiving monthly performance
reports for the Fund and that there had been no significant deviations from
April's overall performance data.
Cost of Services Provided
The Board evaluated comparative fees and the costs of services under the
current IMS Agreement and the New IMS Agreement, including fees charged by
Ameriprise Financial (including RiverSource and other subsidiaries) to
institutional clients. The Board studied RiverSource's effort (i.e., its
"pricing philosophy") to set substantially all Funds' total expense ratios
at or below the median expense ratio of comparable mutual funds (as compiled
by Lipper). The Board observed that the proposed advisory fee changes are
designed to work in tandem with proposed changes to administrative services
fees. It also noted that RiverSource has agreed to voluntarily impose
expense caps or waivers to achieve this pricing objective whenever the
expense ratio exceeded the median expense ratio by more than three basis
points (unless the higher ratio was due to the impact of the performance fee
adjustment). The Board considered that advisory fees under the New IMS
Agreement would stay the same. The Board also took into account the effect
of the proposed performance incentive adjustment on the advisory fee. In
this regard, the Board recalled its past determinations regarding the
appropriateness of (i) the use of the relevant index for the performance
comparison; (ii) the methodology for determining when the Board may change
an index used to calculate the performance incentive adjustment; (iii) the
periods used for averaging the Fund's assets and computing investment
performance; and (iv) the length of the period over which performance is
computed.
The Board next considered the expected profitability to Ameriprise Financial
and RiverSource derived from their relationship with the Fund, recalling the
April 2005 determination that the profitability level was appropriate. The
Board noted that projected profitability of Ameriprise Financial would allow
it to operate effectively and, at the same time, reinvest in RiverSource and
its other asset management businesses. The Board also considered that the
proposed changes in advisory fees and the mergers of certain other Funds
would result in revenue gains to Ameriprise Financial, but that these
increases would not materially alter profit margins due to expected
increases in costs associated with the spin-off, particularly re-branding
and separation. CSFB also reported that Ameriprise Financial's projected
level of return on equity was generally reasonable in light of the returns
on equity of its industry competitors. In evaluating profitability, the
Board also considered the benefits Ameriprise Financial obtains through the
use of commission dollars paid on portfolio transactions for the Fund and
from other business relationships that result from managing the Fund. The
Board also considered
- ------------------------------------------------------------------------------
36 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
the fees charged by Ameriprise Financial (and its subsidiaries) to
institutional clients as well as the fees paid to, and charged by,
subadvisers, noting the differences in services provided in each case. In
light of these considerations, the Board concluded that projected
profitability levels were appropriate.
Economies of Scale
The Board also considered the "breakpoints" in fees that would be triggered
as Fund net asset levels grew and the extent to which shareholders would
benefit from such growth. The Board observed that the revised fee schedules
under the proposed New IMS Agreement would continue to provide breakpoints
similar to those in place pursuant to the current IMS Agreement.
Accordingly, the Board concluded that the proposed New IMS Agreement
provides adequate opportunity for shareholders to realize benefits as Fund
assets grow.
Other Considerations
In addition, the Board accorded weight to the fact that, under the New IMS
Agreement, RiverSource Investments is held to a higher standard of care than
under the current IMS Agreement. The Board also noted Ameriprise Financial's
commitment to a culture that adheres to ethical business practice, assigns
accountability to senior management and seeks to identify conflicts and
propose appropriate action to minimize the risks posed by the conflicts.
Furthermore, the Board recognized that it was not limited to considering
management's proposed New IMS Agreement. In this regard, the Board evaluated
the circumstances under which it would consider the retention of an
investment adviser different from RiverSource Investments. The Board
concluded, based on its consultation with independent counsel, that pursuing
the retention of a different adviser was not necessary, primarily because,
in its best judgment, Ameriprise Financial continues to be basically the
same organization (from a functional and managerial standpoint), as it was
prior to the spin-off. The Board reasoned that shareholders purchased shares
of the Fund with an expectation that the current investment advisory
organization would be servicing the Fund.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling (800) 862-7919; by looking at the website
www.riversource.com/funds; or by 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 during the most
recent 12-month period ended June 30 is available without charge by calling
the Fund's administrator, Board Services Corporation, collect at (612)
330-9283; by looking at the website www.riversource.com/funds; or by
searching the website of the SEC at www.sec.gov.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 37
- ------------------------------------------------------------------------------
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE LARGE CAP EQUITY FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and the votes
cast for, against or withheld, as well as the number of abstentions and
broker non-votes as to each proposal is set forth below. A vote is based on
total dollar interest in a fund.
1. ELECTION OF BOARD MEMBERS
KATHLEEN BLATZ
Affirmative 1,008,787,765.07
Withhold 35,204,732.20
Abstain 0.00
TOTAL 1,043,992,497.27
ARNE H. CARLSON
Affirmative 1,007,056,546.76
Withhold 36,935,950.51
Abstain 0.00
TOTAL 1,043,992,497.27
PATRICIA M. FLYNN
Affirmative 1,010,259,725.58
Withhold 33,732,771.69
Abstain 0.00
TOTAL 1,043,992,497.27
ANNE P. JONES
Affirmative 1,007,296,357.13
Withhold 36,696,140.14
Abstain 0.00
TOTAL 1,043,992,497.27
JEFFREY LAIKIND
Affirmative 1,008,655,398.36
Withhold 35,337,098.91
Abstain 0.00
TOTAL 1,043,992,497.27
- ------------------------------------------------------------------------------
38 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
STEPHEN R. LEWIS, JR.
Affirmative 1,010,170,764.81
Withhold 33,821,732.46
Abstain 0.00
TOTAL 1,043,992,497.27
CATHERINE JAMES PAGLIA
Affirmative 1,009,913,424.91
Withhold 34,079,072.36
Abstain 0.00
TOTAL 1,043,992,497.27
VIKKI L. PRYOR
Affirmative 1,009,778,830.31
Withhold 34,213,666.96
Abstain 0.00
TOTAL 1,043,992,497.27
ALAN K. SIMPSON
Affirmative 1,005,323,673.61
Withhold 38,668,823.66
Abstain 0.00
TOTAL 1,043,992,497.27
ALISON TAUNTON-RIGBY
Affirmative 1,010,676,382.89
Withhold 33,316,114.38
Abstain 0.00
TOTAL 1,043,992,497.27
WILLIAM F. TRUSCOTT
Affirmative 1,010,410,146.11
Withhold 33,582,351.16
Abstain 0.00
TOTAL 1,043,992,497.27
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 39
- ------------------------------------------------------------------------------
2. AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE
MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
Affirmative 984,956,244.45
Against 37,591,169.16
Abstain 21,388,386.58
Broker Non-votes 56,697.08
TOTAL 1,043,992,497.27
3. APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE
INVESTMENTS, LLC
Affirmative 993,018,182.74
Against 28,976,910.56
Abstain 21,940,706.89
Broker Non-votes 56,697.08
TOTAL 1,043,992,497.27
4. APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
A. DIVERSIFICATION
Affirmative 990,017,490.82
Against 31,876,186.28
Abstain 22,042,123.09
Broker Non-votes 56,697.08
TOTAL 1,043,992,497.27
B. LENDING
Affirmative 985,427,021.24
Against 35,649,476.57
Abstain 22,859,302.38
Broker Non-votes 56,697.08
TOTAL 1,043,992,497.27
C. BORROWING
Affirmative 987,089,316.60
Against 34,838,820.67
Abstain 22,007,662.92
Broker Non-votes 56,697.08
TOTAL 1,043,992,497.27
- ------------------------------------------------------------------------------
40 -- RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT
- ------------------------------------------------------------------------------
THIS PAGE LEFT BLANK INTENTIONALLY
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 SEMIANNUAL REPORT -- 41
- ------------------------------------------------------------------------------
[RIVERSOURCE(SM) INVESTMENTS LOGO]
RIVERSOURCE INVESTMENTS
200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC
and distributed by Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
Semiannual Report
[RIVERSOURCE(SM) INVESTMENTS logo]
RIVERSOURCE(SM)
LARGE CAP VALUE FUND
SEMIANNUAL REPORT FOR THE
PERIOD ENDED JAN. 31, 2006
> RIVERSOURCE LARGE CAP VALUE FUND (FORMERLY AXP(R) LARGE CAP VALUE FUND)
SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL.
TABLE OF CONTENTS
Fund Snapshot..............................3
Performance Summary........................4
Questions & Answers
with Portfolio Management................6
Investments in Securities.................10
Financial Statements......................14
Notes to Financial Statements.............17
Fund Expenses Example.....................29
Approval of Investment Management
Services Agreement......................31
Proxy Voting..............................35
Results of Meeting of Shareholders........36
[Dalbar Logo]
American Express(R) Funds'* reports to shareholders 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.
* As of Oct. 1, 2005, the RiverSource brand replaced "American Express"
as the name of the American Express Funds.
- --------------------------------------------------------------------------------
2 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FUND SNAPSHOT
AT JAN. 31, 2006
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER <
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY
Robert Ewing, CFA 6/02 16
- -------------------------------------------------------------------------------
FUND OBJECTIVE <
- -------------------------------------------------------------------------------
The Fund seeks to provide shareholders with long-term growth of capital.
Inception dates by class
A: 6/27/02 B: 6/27/02 C: 6/27/02 I: 3/4/04 Y: 6/27/02
Ticker symbols by class
A: ALVAX B: ALVBX C: -- I: ALCIX Y: --
Total net assets $132.3 million
Number of holdings 180
- -------------------------------------------------------------------------------
STYLE MATRIX <
- -------------------------------------------------------------------------------
[GRAPH]
Shading within the style matrix indicates areas in which the Fund generally
invests.
- -------------------------------------------------------------------------------
SECTOR COMPOSITION* <
- -------------------------------------------------------------------------------
Percentage of portfolio assets
[Pie Graph]
Financials 29.1%
Energy 13.8%
Information Technology 10.1%
Industrials 8.7%
Consumer Discretionary 8.2%
Consumer Staples 7.1%
Health Care 7.1%
Telecommunication Services 6.7%
Utilities 3.6%
Materials 3.3%
Short-Term Securities 2.3%
* Sectors can be comprised of several industries. Please refer to the
section entitled "Investments in Securities" for a complete listing. No
single industry exceeds 25% of portfolio assets.
- -------------------------------------------------------------------------------
TOP TEN HOLDINGS <
- -------------------------------------------------------------------------------
Percentage of portfolio assets
Exxon Mobil (Oil & Gas) 4.5%
Bank of America (Commercial Banks) 3.9
Citigroup (Diversified Financial Services) 3.3
American Intl Group (Insurance) 2.7
Pfizer (Pharmaceuticals) 2.6
Altria Group (Tobacco) 2.2
ConocoPhillips (Oil & Gas) 2.1
Wells Fargo & Co (Commercial Banks) 1.8
Verizon Communications
(Diversified Telecommunication Services) 1.8
JPMorgan Chase & Co
(Diversified Financial Services) 1.7
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are subject to change.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 3
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended Jan. 31, 2006
[Bar Graph]
+4.28% = RiverSource Large Cap Value Fund Class A (excluding sales charge)
+6.21% = Russell 1000(R) Value Index(1) (unmanaged)
+5.39% = Lipper Large-Cap Value Funds Index(2)
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 calling
(800) 862-7919 or visiting www.riversource.com/funds.
(1) The Russell 1000(R) Value Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. The index reflects
reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
(2) The Lipper Large-Cap Value Funds Index includes the 30 largest large-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.
The 5.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
4 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS <
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (6/27/02) (6/27/02) (6/27/02) (3/4/04) (6/27/02)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(6)
AT JAN. 31, 2006
6 months* +4.28% -1.72% +3.95% -0.97% +4.00% +3.02% +4.57% +4.45%
1 year +9.35% +3.06% +8.46% +3.46% +8.51% +7.51% +9.82% +9.51%
3 years +16.27% +13.99% +15.42% +14.41% +15.50% +15.50% N/A +16.56%
Since inception +9.23% +7.45% +8.44% +7.76% +8.45% +8.45% +7.92% +9.47%
AT DEC. 31, 2005
6 months* +3.67% -2.29% +3.35% -1.54% +3.40% +2.42% +3.96% +3.84%
1 year +4.22% -1.77% +3.53% -1.37% +3.58% +2.60% +4.69% +4.57%
3 years +14.11% +11.88% +13.27% +12.22% +13.26% +13.26% N/A +14.40%
Since inception +8.58% +6.77% +7.77% +7.06% +7.79% +7.79% 6.64% +8.83%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
eligible investors only, currently limited to affiliated funds-of-funds.
(6) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 5
- --------------------------------------------------------------------------------
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
RiverSource Large Cap Value Fund's Class A shares advanced 4.28%, excluding
sales charge, for the six months ended Jan. 31, 2006. The Fund
underperformed its benchmark, the Russell 1000(R) Value Index (Russell
Index), which increased 6.21% during the period. The Fund's peer group, the
Lipper Large-Cap Value Funds Index, gained 5.39% during the same time frame.
Below, Portfolio Manager Robert Ewing discusses the Fund's results and
positioning for the semiannual period ended Jan. 31, 2006.
As of Jan. 31, 2006, approximately 28% of the Fund's shares were owned in
aggregate by RiverSource Portfolio Builder Funds, a group of six asset
allocation funds managed by RiverSource Investments, LLC (RiverSource
Investments). It is possible RiverSource Large Cap Value Fund may experience
relatively large purchases or redemptions from RiverSource Portfolio Builder
Funds (see page 21, Class I capital share transactions for related activity
during the most recent fiscal period). RiverSource Investments seeks to
minimize the impact of these transactions, which may include structuring
them over a reasonable period of time. RiverSource Large Cap Value Fund may
experience increased expenses as it buys and sells securities to satisfy
purchases and redemptions in RiverSource Portfolio Builder Funds. For more
information on the Fund's expenses, see the discussions beginning on pages
20 and 29.
Q: What factors most significantly affected performance for the period?
A: The stock market advanced strongly during the period and the Fund
benefited from the overall upward movement of the market. However,
compared to its benchmark, the Russell Index, results were less
favorable. At the start of the period, we positioned the Fund somewhat
more conservatively than the Russell Index. The economic expansion had
been building for some time, the Federal Reserve's policy of higher
short-term interest rates was continuing and energy prices were rising.
Given such an environment, we determined that a conservative approach
was prudent. That conservative positioning made it difficult for Large
Cap Value Fund to keep up with the Russell Index as the market rose
sharply.
During the six month period, stock selection was primarily responsible
for the Fund's underperformance of the Russell Index. Sector allocations
were slightly favorable.
Stock selection in the financial and energy sectors was strong, but was
offset by unfavorable results in technology and industrials. Within the
financial sector, a number of insurance company holdings performed quite
well. In the energy sector, the portfolio held a larger-than-Russell
Index position in energy services
- --------------------------------------------------------------------------------
6 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
QUESTIONS & ANSWERS
> THE STOCK MARKET ADVANCED STRONGLY DURING THE PERIOD AND THE FUND
BENEFITED FROM THE OVERALL UPWARD MOVEMENT OF THE MARKET.
stocks, which benefited as the energy sector appreciated. Conversely, in
the technology sector we had focused on some of the larger, more mature
technology companies, mainly those related to personal computers. These
companies struggled with the technology environment, which included some
weakness in personal computer sales.
Looking at the overall positive effect of the Fund's sector weightings,
a larger-than-Russell Index allocation to technology was advantageous as
the index sector performed quite well during the period. A below that of
the Russell Index position in utilities was also beneficial as the
utilities sector was flat during the six-month period. As we noted
above, energy stocks outperformed, making the portfolio's slightly below
the Russell Index's energy weighting a negative, despite strong results
from individual energy holdings. A less than Russell Index weighting in
financials was also detrimental. Although the financial sector
outperformed the Russell Index by only a modest amount, financials make
up such a large percentage of that Index that any difference in
weighting can have a meaningful impact on return.
Positive individual contributors to results included insurance company
ACE and energy services stocks Halliburton and Weatherford Intl. ACE
benefited from firmer pricing in the insurance industry that followed
the unusually large flow of natural disasters in 2005. Halliburton and
Weatherford Intl benefited along with other energy services stocks as
rising energy prices have been a catalyst for more aggressive
exploration for oil and natural gas reserves.
Detractors from results during the period included a larger-than-Russell
Index position in Spectrum Brands and smaller-than-Russell Index
positions in financial services company Goldman Sachs and oil refinery
stock Valero. Spectrum Brands makes batteries, fertilizers and other
consumer discretionary products. The company has had revenue and expense
problems, partly stemming from rising raw material costs that the
company could not pass on to its customers. As a result, Spectrum fell
short of quarterly earnings expectations twice in 2005.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 7
- --------------------------------------------------------------------------------
QUESTIONS & ANSWERS
> WE STILL BELIEVE THAT ELEVATED VALUATIONS ON GLOBAL EQUITIES, THE LATE
STAGE OF THE ECONOMIC EXPANSION, THE GEOPOLITICAL ENVIRONMENT AND POTENTIAL
WEAKNESS IN CONSUMER SPENDING SUPPORT MORE CAUTIOUS PORTFOLIO POSITIONING.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: The most significant positioning change during the six-month period was
an increase in the health care weighting. Specifically, we added to
holdings of larger pharmaceutical firms whose stocks became very
inexpensive over the period. We also decreased the portfolio weighting
in consumer staples because we believe there are developing pressures on
revenues and creeping expense issues that are problematic for consumer
staples companies. We added to the Fund's consumer discretionary
holdings, focusing on two areas: discretionary companies whose stock
prices had already weakened a bit in anticipation of slower consumer
spending and media stocks that had become inexpensive in our view.
To summarize current positioning, the Fund has larger-than-Russell Index
weightings in technology and industrials and weightings
less-than-Russell Index positions in financials and utilities. The
technology portion of the Russell Index is relatively small, so it
doesn't take much for the Fund to be overweight relative to the index in
that sector. In addition, there are a fair number of reasonably
reliable, more mature growth companies in the technology sector that
don't appear too expensive to us at this time.
As we have explained in the past, we believe maintaining a position less
than the Russell Index in financials is justified because the Russell
Index position is so large and we cannot identify enough good
opportunities among individual financial stocks to fill so large an
allocation. In addition, this remains a tough environment for financial
stocks. Interest rates are still rising and the yield curve is very
flat, which means there is not a lot of difference between short-term
and long-term interest rates. The spread between short and long-term
rates is a key source of revenue for financial stocks. Similarly, the
utilities weighting is below that of the Russell Index because
valuations are high and dividend yields on utility stocks are
historically low. With interest rates still rising, the environment
appears unfavorable for utilities, which are often considered a bond
substitute.
- --------------------------------------------------------------------------------
8 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
QUESTIONS & ANSWERS
Q: How do you plan to manage the Fund in the coming months?
A: We still believe that elevated valuations on global equities, the late
stage of the economic expansion, the geopolitical environment and
potential weakness in consumer spending support more cautious portfolio
positioning. To summarize key themes, we are looking for companies that
are less dependent on the economy. In addition, it seems to us that
there are more opportunities in large-cap stocks than there have been in
a long time. As a result, the portfolio's average market capitalization
is higher than usual for us. The portfolio has a greater emphasis on
quality companies than it might typically have. We are also striving to
keep valuations relatively low as a risk control measure. At the same
time, we see very little valuation difference between traditional value
and growth stocks, so we don't have to pay too much to expose the
portfolio to growth. For that reason, the portfolio currently has a bit
more of a growth tilt but remains firmly in the large-cap value space.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 9
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
RiverSource Large Cap Value Fund
JAN. 31, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
- -------------------------------------------------------------------------------
COMMON STOCKS (97.7%)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (4.1%)
Boeing 6,652 $ 454,398
Empresa Brasileira de Aeronautica ADR 5,211(c) 211,827
General Dynamics 3,565 414,823
Goodrich 11,919 469,251
Honeywell Intl 28,168 1,082,215
Lockheed Martin 14,838 1,003,791
Northrop Grumman 20,175 1,253,472
United Technologies 9,148 533,969
------------
Total 5,423,746
- -------------------------------------------------------------------------------
AUTOMOBILES (0.1%)
General Motors 7,757 186,633
- -------------------------------------------------------------------------------
BEVERAGES (1.0%)
Coca-Cola 8,232 340,640
PepsiCo 16,025 916,310
------------
Total 1,256,950
- -------------------------------------------------------------------------------
BIOTECHNOLOGY (0.1%)
Biogen Idec 4,020(b) 179,895
- -------------------------------------------------------------------------------
BUILDING PRODUCTS (0.4%)
American Standard Companies 4,734 170,424
Masco 12,558 372,345
------------
Total 542,769
- -------------------------------------------------------------------------------
CAPITAL MARKETS (4.7%)
Bank of New York 30,093 957,258
Franklin Resources 3,336 328,596
Investors Financial Services 5,722 268,591
Legg Mason 661 85,732
Lehman Brothers Holdings 9,146 1,284,556
Merrill Lynch & Co 14,054 1,055,034
Morgan Stanley 27,752 1,705,360
State Street 9,764 590,331
------------
Total 6,275,458
- -------------------------------------------------------------------------------
CHEMICALS (1.4%)
Dow Chemical 27,237 1,152,126
Eastman Chemical 5,156 248,571
Lyondell Chemical 13,048 313,282
RPM Intl 7,657 144,717
------------
Total 1,858,696
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
COMMERCIAL BANKS (8.5%)
Bank of America 117,602 $5,201,535
Commerce Bancorp 7,051 235,785
PNC Financial Services Group 13,839 897,598
US Bancorp 40,199 1,202,352
Wachovia 24,197 1,326,722
Wells Fargo & Co 38,922 2,427,176
------------
Total 11,291,168
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Avery Dennison 3,457 206,521
Cendant 29,382 491,855
Total 698,376
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.8%)
CBS Cl B 21,276 555,942
Cisco Systems 43,400(b) 805,939
Corning 7,521(b) 183,136
Nokia ADR 29,295(c) 538,442
Scientific-Atlanta 6,191 264,727
------------
Total 2,348,186
- -------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.9%)
Dell 18,740(b) 549,269
EMC 24,608(b) 329,747
Hewlett-Packard 46,120 1,438,022
Intl Business Machines 17,968 1,460,799
------------
Total 3,777,837
- -------------------------------------------------------------------------------
CONSUMER FINANCE (1.0%)
American Express 9,091 476,823
Capital One Financial 10,717 892,726
------------
Total 1,369,549
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.6%)
Temple-Inland 16,102 755,184
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (5.0%)
Citigroup 92,364 4,302,315
JPMorgan Chase & Co 57,786 2,296,994
------------
Total 6,599,309
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (6.4%)
ALLTEL 3,590 215,508
AT&T 62,518 1,622,341
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DIVERSIFIED TELECOMMUNICATION SERVICES (CONT.)
BellSouth 47,014 $1,352,593
Chunghwa Telecom ADR 19,198(c) 357,467
Citizens Communications 10,968 134,577
Qwest Communications Intl 42,228(b) 254,213
Sprint Nextel 84,918 1,943,772
Telewest Global 9,555(b,c) 222,632
Verizon Communications 76,019 2,406,761
------------
Total 8,509,864
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES (2.6%)
Entergy 10,048 698,436
Exelon 20,652 1,185,838
FPL Group 3,976 166,157
PPL 12,968 390,726
Southern 20,996 730,661
Xcel Energy 13,865 269,258
------------
Total 3,441,076
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%)
Flextronics Intl 24,328(b,c) 254,471
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (2.4%)
Cooper Cameron 9,026(b) 436,768
Halliburton 12,723 1,012,114
Schlumberger 2,347 299,125
TODCO Cl A 1,606 71,628
Transocean 8,911(b) 723,128
Weatherford Intl 14,015(b) 627,592
------------
Total 3,170,355
- -------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.2%)
CVS 6,701 186,020
Safeway 23,318 546,574
Wal-Mart Stores 17,258 795,766
------------
Total 1,528,360
- -------------------------------------------------------------------------------
FOOD PRODUCTS (1.1%)
Cadbury Schweppes 13,430(c) 131,869
Campbell Soup 6,792 203,285
General Mills 9,719 472,441
Kellogg 14,947 641,225
------------
Total 1,448,820
- -------------------------------------------------------------------------------
GAS UTILITIES (0.3%)
ONEOK 13,706 387,332
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.9%)
Baxter Intl 18,132 668,165
Boston Scientific 8,041(b) 175,857
Guidant 1,500 110,400
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HEALTH CARE EQUIPMENT & SUPPLIES (CONT.)
Hospira 4,767(b) $213,323
PerkinElmer 2,937 66,787
------------
Total 1,234,532
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (1.2%)
Cardinal Health 9,238 665,505
HCA 6,988 342,971
Magellan Health Services 4,233(b) 154,420
Medco Health Solutions 3,438(b) 185,996
WellPoint 3,447(b) 264,730
------------
Total 1,613,622
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.4%)
McDonald's 16,567 580,011
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (1.7%)
Colgate-Palmolive 7,894 433,302
Procter & Gamble 18,771 1,111,806
Spectrum Brands 36,189(b) 684,334
------------
Total 2,229,442
- -------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.4%)
General Electric 66,915 2,191,466
Tyco Intl 38,875(c) 1,012,694
------------
Total 3,204,160
- -------------------------------------------------------------------------------
INSURANCE (5.6%)
ACE 20,668(c) 1,131,573
American Intl Group 55,523 3,634,535
Aon 11,069 378,781
Aspen Insurance Holdings 13,810(c) 320,116
Chubb 6,680 630,258
Endurance Specialty Holdings 6,280(c) 206,800
Hartford Financial Services Group 8,572 704,876
Max Re Capital 5,126(c) 135,890
Prudential Financial 3,637 274,012
------------
Total 7,416,841
- -------------------------------------------------------------------------------
IT SERVICES (1.0%)
Accenture Cl A 4,250(c) 134,003
Affiliated Computer Services Cl A 12,688(b) 794,268
Computer Sciences 2,276(b) 115,393
First Data 5,905 266,316
Patni Computer Systems ADR 1,491(b,c) 34,517
------------
Total 1,344,497
- -------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.1%)
Mattel 7,166 118,239
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 11
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MACHINERY (1.2%)
Caterpillar 8,898 $604,173
Deere & Co 4,536 325,503
Illinois Tool Works 2,958 249,330
Ingersoll-Rand Cl A 6,691(c) 262,756
ITT Inds 1,835 188,088
------------
Total 1,629,850
- -------------------------------------------------------------------------------
MEDIA (6.2%)
Clear Channel Communications 4,303 125,949
Comcast Cl A 21,145(b) 588,254
Comcast Special Cl A 29,446(b) 816,243
EchoStar Communications Cl A 4,107(b) 113,353
Liberty Global Cl A 9,980(b) 213,572
Liberty Global Series C 9,980(b) 201,796
Liberty Media Cl A 135,262(b) 1,130,790
News Corp Cl A 43,276 682,030
NTL 23,684(b) 1,498,012
Time Warner 57,774 1,012,778
Viacom Cl B 21,276(b) 882,529
Vivendi Universal ADR 13,937(c) 436,367
Walt Disney 19,444 492,128
------------
Total 8,193,801
- -------------------------------------------------------------------------------
METALS & MINING (0.5%)
Alcan 10,466(c) 510,636
Alcoa 5,217 164,336
------------
Total 674,972
- -------------------------------------------------------------------------------
MULTILINE RETAIL (1.0%)
Federated Dept Stores 4,522 301,301
JC Penney 6,982 389,596
Target 11,346 621,193
------------
Total 1,312,090
- -------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER (0.7%)
Dominion Resources 12,366 934,004
- -------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.1%)
Xerox 10,192(b) 145,848
- -------------------------------------------------------------------------------
OIL & GAS (11.5%)
Amerada Hess 2,134 330,343
Anadarko Petroleum 12,520 1,349,906
BP ADR 11,993(c) 867,214
Chevron 38,618 2,293,137
ConocoPhillips 43,109 2,789,152
Devon Energy 8,661 590,767
Exxon Mobil 95,274 5,978,443
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
OIL & GAS (CONT.)
Newfield Exploration 7,786(b) $407,986
Royal Dutch Shell ADR 6,105(c) 415,812
------------
Total 15,022,760
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.8%)
Bowater 8,087 221,099
Intl Paper 12,475 407,059
Weyerhaeuser 6,837 476,949
------------
Total 1,105,107
- -------------------------------------------------------------------------------
PHARMACEUTICALS (4.9%)
Bristol-Myers Squibb 21,654 493,495
GlaxoSmithKline ADR 6,769(c) 346,844
Merck & Co 15,659 540,236
Novartis ADR 7,650(c) 421,974
Pfizer 134,900 3,464,231
Schering-Plough 33,295 637,598
Wyeth 11,146 515,503
------------
Total 6,419,881
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST (0.5%)
Apartment Investment & Management Cl A 4,673 198,696
Equity Office Properties Trust 12,551 399,373
HomeBanc 9,340 77,802
------------
Total 675,871
- -------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.6%)
Broadcom Cl A 1,740(b) 118,668
Credence Systems 9,012(b) 78,855
Cypress Semiconductor 21,240(b) 359,593
Freescale Semiconductor Cl A 9,982(b) 251,147
Freescale Semiconductor Cl B 3,276(b) 82,719
Infineon Technologies ADR 8,400(b,c) 79,212
Intel 17,604 374,437
MEMC Electronic Materials 17,433(b) 498,236
Texas Instruments 8,423 246,204
------------
Total 2,089,071
- -------------------------------------------------------------------------------
SOFTWARE (2.6%)
Cadence Design Systems 33,231(b) 586,859
Computer Associates Intl 4,636 126,563
Compuware 33,757(b) 278,158
Microsoft 53,151 1,496,200
Oracle 53,736(b) 675,462
Symantec 3,450(b) 63,411
TIBCO Software 18,429(b) 147,248
------------
Total 3,373,901
- -------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
SPECIALTY RETAIL (0.4%)
Home Depot 12,482 $506,145
- -------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (3.6%)
Countrywide Financial 42,863 1,433,339
Fannie Mae 34,634 2,006,694
Freddie Mac 15,649 1,061,941
Washington Mutual 6,616 279,989
------------
Total 4,781,963
- -------------------------------------------------------------------------------
TOBACCO (2.2%)
Altria Group 40,034 2,896,060
- -------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
Vodafone Group ADR 19,137(c) 403,982
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $118,160,212) $129,210,684
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHORT-TERM SECURITIES (2.3%)
- -------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Windmill Funding
02-01-06 4.48% $3,000,000(d) $2,999,627
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $3,000,000) $2,999,627
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $121,160,212)(e) $132,210,311
===============================================================================
- -------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- -------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At Jan. 31, 2006,
the value of foreign securities represented 6.4% of net assets.
(d) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At Jan. 31, 2006, the value
of these securities amounted to $2,999,627 or 2.3% of net assets.
(e) At Jan. 31, 2006, the cost of securities for federal income tax purposes
was approximately $121,160,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $13,446,000
Unrealized depreciation (2,396,000)
----------------------------------------------------------
Net unrealized appreciation $11,050,000
----------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling
1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form
N-Q, can be found at www.riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 13
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource Large Cap Value Fund
JAN. 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value (Note 1)
(identified cost $121,160,212) $132,210,311
Cash in bank on demand deposit 18,732
Capital shares receivable 25,685
Dividends and accrued interest receivable 116,526
Receivable for investment securities sold 1,308,924
- -------------------------------------------------------------------------------
Total assets 133,680,178
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Capital shares payable 4,710
Payable for investment securities purchased 1,360,271
Unrealized depreciation on foreign currency contracts held,
at value (Note 5) 94
Accrued investment management services fee 2,189
Accrued distribution fee 1,189
Accrued transfer agency fee 275
Accrued administrative services fee 219
Other accrued expenses 37,400
- -------------------------------------------------------------------------------
Total liabilities 1,406,347
- -------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $132,273,831
===============================================================================
- -------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------
Capital stock -- $.01 par value (Note 1) $ 231,517
Additional paid-in capital 115,832,866
Undistributed net investment income 35,963
Accumulated net realized gain (loss) 5,123,403
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (Note 5) 11,050,082
- -------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $132,273,831
===============================================================================
Net assets applicable to outstanding
shares: Class A $ 68,836,947
Class B $ 24,612,332
Class C $ 1,218,791
Class I $ 37,483,562
Class Y $ 122,199
Net asset value per share of
outstanding capital stock: Class A shares 12,045,339 $ 5.71
Class B shares 4,333,143 $ 5.68
Class C shares 214,720 $ 5.68
Class I shares 6,537,184 $ 5.73
Class Y shares 21,324 $ 5.73
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
RiverSource Large Cap Value Fund
SIX MONTHS ENDED JAN. 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Income:
Dividends $1,864,995
Interest 80,529
Less foreign taxes withheld (11,228)
- -------------------------------------------------------------------------------
Total income 1,934,296
- -------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 399,620
Distribution fee
Class A 90,609
Class B 129,858
Class C 6,528
Transfer agency fee 87,304
Incremental transfer agency fee
Class A 6,243
Class B 4,251
Class C 252
Service fee -- Class Y 62
Administrative services fees and expenses 41,373
Compensation of board members 4,934
Custodian fees 19,400
Printing and postage 25,860
Registration fees 16,820
Audit fees 10,250
Other 4,242
- -------------------------------------------------------------------------------
Total expenses 847,606
Earnings credits on cash balances (Note 2) (2,873)
- -------------------------------------------------------------------------------
Total net expenses 844,733
- -------------------------------------------------------------------------------
Investment income (loss) -- net 1,089,563
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
- -------------------------------------------------------------------------------
Net realized gain (loss) on:
Security transactions (Note 3) 6,026,028
Foreign currency transactions (23)
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments 6,026,005
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies (991,190)
- -------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 5,034,815
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $6,124,378
===============================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 15
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource Large Cap Value Fund
JAN. 31, 2006 JULY 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
- -------------------------------------------------------------------------------
OPERATIONS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
Investment income (loss) -- net $ 1,089,563 $ 1,378,478
Net realized gain (loss) on investments 6,026,005 8,924,943
Net change in unrealized appreciation
(depreciation) on investments and on
translation of assets and liabilities
in foreign currencies (991,190) 7,691,556
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 6,124,378 17,994,977
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (878,948) (546,048)
Class B (101,979) (10,205)
Class C (5,946) --
Class I (815,837) (382,906)
Class Y (1,721) (1,186)
Net realized gain
Class A (3,373,386) (3,015,777)
Class B (1,215,159) (1,148,832)
Class C (63,394) (57,627)
Class I (2,287,588) (1,527,915)
Class Y (5,789) (5,242)
- -------------------------------------------------------------------------------
Total distributions (8,749,747) (6,695,738)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
- -------------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 5,674,898 17,758,111
Class B shares 1,165,547 7,075,931
Class C shares 71,431 380,110
Class I shares 9,153,808 35,295,804
Class Y shares -- 81,000
Reinvestment of distributions at net asset
value
Class A shares 4,159,571 3,502,995
Class B shares 1,301,176 1,145,619
Class C shares 67,763 56,012
Class I shares 3,103,080 1,910,566
Class Y shares 6,763 5,863
Payments for redemptions
Class A shares (13,831,719) (20,411,526)
Class B shares (Note 2) (5,943,172) (7,218,949)
Class C shares (Note 2) (293,894) (563,631)
Class I shares (11,656,289) (18,207,821)
Class Y shares (22,232) (17,206)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions (7,043,269) 20,792,878
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets (9,668,638) 32,092,117
Net assets at beginning of period 141,942,469 109,850,352
- -------------------------------------------------------------------------------
Net assets at end of period $132,273,831 $141,942,469
===============================================================================
Undistributed net investment income $ 35,963 $ 750,831
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
RiverSource Large Cap Value Fund (formerly AXP Large Cap Value Fund)
(Unaudited as to Jan. 31, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Growth Series, Inc. and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP Growth Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board. The Fund invests primarily in equity
securities of companies with a market capitalization greater than $5
billion.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o 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.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares have no sales charge and are
made available through a separate prospectus supplement provided to
investors eligible to purchase the shares. At Jan. 31, 2006, Ameriprise
Financial, Inc. (Ameriprise Financial) and the RiverSouce Portfolio Builder
Funds owned 100% of Class I shares, which represents 28.34% of the Fund's
net assets.
At Jan. 31, 2006, Ameriprise Financial and the RiverSource Portfolio Builder
Funds owned approximately 28% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee, transfer agency fees and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Pursuant to procedures adopted by the Board of
Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing
(FVP). FVP determinations are made in good faith in accordance with these
procedures. If a development or event is so significant that there
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 17
- --------------------------------------------------------------------------------
is a reasonably high degree of certainty that the effect of the development
or event has actually caused the closing price to no longer reflect the
actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the New York Stock Exchange.
Significant events include material movements in the U.S. securities markets
prior to the opening of foreign markets on the following trading day. FVP
results in an estimated price that reasonably reflects the current market
conditions in order to value the portfolio holdings such that shareholder
transactions receive a fair net asset value. Short-term securities maturing
in more than 60 days from the valuation date are valued at the market price
or approximate market value based on current interest rates; those maturing
in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market
where completing the obligation depends upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured
put options. The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases. The
risk in writing a put option is that the Fund may incur a loss if the market
price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
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 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
- --------------------------------------------------------------------------------
18 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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 exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such
claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue
Code that applies to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. No provision for
income or excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due
to "wash sale" transactions. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end
of the calendar year, when available, is reinvested in additional shares of
the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
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.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 19
- --------------------------------------------------------------------------------
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.48% annually
as the Fund's assets increase. On Feb. 15, 2006, shareholders approved a
change to the Investment Management Services Agreement. Effective March 1,
2006, the management fee percentage of the Fund's average daily net assets
will decline from 0.60% to 0.375% annually as the Fund's assets increase.
The fee may be adjusted upward or downward by a performance incentive
adjustment based on a comparison of the performance of Class A shares of the
Fund to the Lipper Large-Cap Value Funds Index. In certain circumstances,
the Board may approve a change in the index. The maximum adjustment is 0.12%
per year. If the performance difference is less than 0.50%, the adjustment
will be zero. The adjustment decreased the fee by $29,580 for the six months
ended Jan. 31, 2006.
Under the current Administrative Services Agreement, the Fund pays
Ameriprise Financial a fee for administration and accounting services at a
percentage of the Fund's average daily net assets that declines from 0.06%
to 0.03% annually as the Fund's assets increase. Prior to Oct. 1, 2005, the
fee percentage of the Fund's average daily net assets declined from 0.05% to
0.02% annually as the Fund's assets increased. A minor portion of additional
administrative service expenses paid by the Fund are consultants' fees and
fund office expenses. Under this agreement, the Fund also pays taxes, audit
and certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the Board.
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.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund
pays the Transfer Agent an annual fee per shareholder account for this
service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement
of operations.
The Transfer Agent charges an annual closed account 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.
- --------------------------------------------------------------------------------
20 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The Fund has agreements with Ameriprise Financial Services, Inc. (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 up to 0.25% of the Fund's average daily net assets attributable
to Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee
for service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$46,142 for Class A, $16,324 for Class B and $35 for Class C for the six
months ended Jan. 31, 2006.
The Investment Manager and its affiliates agreed to waive certain fees and
expenses through Sept. 30, 2005. Beginning Oct. 1, 2005 a new agreement to
waive certain fees and expenses is effective until July 31, 2006, such that
net expenses, before giving effect to any performance incentive adjustment,
will not exceed 1.29% for Class A, 2.05% for Class B, 2.06% for Class C,
0.94% for Class I and 1.12% for Class Y of the Fund's average daily net
assets.
During the six months ended Jan. 31, 2006, the Fund's custodian and transfer
agency fees were reduced by $2,873 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise
Trust Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $38,860,553 and $50,222,366,
respectively, for the six months ended Jan. 31, 2006. Realized gains and
losses are determined on an identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
SIX MONTHS ENDED JAN. 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------------------
Sold 983,407 204,121 12,544 1,569,076 --
Issued for reinvested distributions 742,781 233,604 12,166 552,149 1,204
Redeemed (2,394,504) (1,039,593) (51,366) (2,037,267) (3,827)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) (668,316) (601,868) (26,656) 83,958 (2,623)
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------------------
Sold 3,185,715 1,283,395 69,124 6,285,074 14,833
Issued for reinvested distributions 628,904 206,791 10,111 341,783 1,049
Redeemed (3,634,034) (1,298,146) (101,928) (3,228,175) (3,074)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) 180,585 192,040 (22,693) 3,398,682 12,808
- -------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 21
- --------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Jan. 31, 2006, the Fund has a forward foreign currency exchange contract
that obligates it to deliver currency at a specified future date. The
unrealized depreciation on this contract is included in the accompanying
financial statements. See "Summary of significant accounting policies." The
terms of the open contract are as follows:
EXCHANGE DATE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------
Feb. 2, 2006 6,559 11,573 $-- $94
British Pound U.S. Dollar
- --------------------------------------------------------------------------------
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed
by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the
Federal Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial
Lending Rate. Borrowings are payable within 60 days after such loan is
executed. The Fund also pays a commitment fee equal to its pro rata share of
the amount of the credit facility at a rate of 0.07% per annum. Prior to
this agreement, the Fund had a revolving credit agreement that permitted
borrowings up to $500 million with The Bank of New York. The Fund had no
borrowings outstanding during the six months ended Jan. 31, 2006.
7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement
agreements with the Securities and Exchange Commission (SEC) and Minnesota
Department of Commerce (MDOC) related to market timing activities.In
connection with these matters, the SEC and MDOC issued orders (the Orders)
alleging that AEFC violated certain provisions of the federal and Minnesota
securities laws by failing to adequately disclose market timing activities
by allowing certain identified market timers to continue to market time
contrary to disclosures in mutual fund and variable annuity product
prospectuses. The Orders also alleged that AEFC failed to implement
procedures to detect and prevent market timing in 401(k) plans for employees
of AEFC and related companies and failed to adequately disclose that there
were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its
employees.
- --------------------------------------------------------------------------------
22 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of$7 million. AEFC
also agreed to make presentations at least annually to its board of
directors and the relevant mutual funds' board that include an overview of
policies and procedures to prevent market timing, material changes to these
policies and procedures and whether disclosures related to market timing are
consistent with the SEC order and federal securities laws. AEFC also agreed
to retain an independent distribution consultant to assist in developing a
plan for distribution of all disgorgement and civil penalties ordered by the
SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a
summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration 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 or arbitration 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
mattersthat 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.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 23
- --------------------------------------------------------------------------------
8. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
Class A
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.83 $5.34 $4.98 $4.52 $4.90
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .06 .04 .03 --
Net gains (losses) (both realized and unrealized) .20 .70 .59 .44 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .24 .76 .63 .47 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.04) (.03) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.27) (.27) (.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.71 $5.83 $5.34 $4.98 $4.52
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $69 $74 $67 $31 $4
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.17%(d) 1.29% 1.24%(e) 1.25%(e) 1.19%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.54%(d) 1.07% .95% 1.01% .23%(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 29% 57% 59% 77% 9%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 4.28%(g) 14.52% 12.85% 10.52% (7.75%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.54%, 2.64% and 20.50% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- --------------------------------------------------------------------------------
24 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.77 $5.29 $4.95 $4.52 $4.90
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .01 -- .01 --
Net gains (losses) (both realized and unrealized) .20 .70 .59 .43 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .22 .71 .59 .44 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- (.01) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.31) (.23) (.25) (.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.68 $5.77 $5.29 $4.95 $4.52
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $25 $28 $25 $13 $1
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.94%(d) 2.05% 2.00%(e) 2.00%(e) 1.95%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .77%(d) .30% .16% .25% (.49%)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 29% 57% 59% 77% 9%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.95%(g) 13.66% 12.00% 9.66% (7.75%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 2.30%, 3.40% and 21.26% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 25
- --------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.77 $5.29 $4.94 $4.52 $4.9
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .01 -- .01 --
Net gains (losses) (both realized and unrealized) .20 .70 .60 .42 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .22 .71 .60 .43 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- (.01) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.31) (.23) (.25) (.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.68 $5.77 $5.29 $4.94 $4.52
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $1 $1 $1 $1 $--
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) 1.94%(d) 2.06% 2.00%(e) 2.00%(e) 1.95%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .76%(d) .30% .19% .26% (.45%)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 29% 57% 59% 77% 9%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 4.00%(g) 13.62% 12.19% 9.50% (7.75%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund
for certain expenses. Had they not done so, the annual ratios of
expenses for Class C would have been 2.30%, 3.40% and 21.26% for the
periods ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- --------------------------------------------------------------------------------
26 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
CLASS I
- -----------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -----------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004(b)
Net asset value, beginning of period $5.86 $5.36 $5.57
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .07 .03
Net gains (losses) (both realized and unrealized) .20 .72 (.24)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .26 .79 (.21)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.06) --
Distributions from realized gains (.29) (.23) --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.39) (.29) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.73 $5.86 $5.36
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $37 $38 $16
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .73%(d) .86% .93%(d),(e)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.97%(d) 1.50% 1.33%(d)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 29% 57% 59%
- -----------------------------------------------------------------------------------------------------------
Total return(f) 4.57%(g) 14.97% (3.77%)(g)
- -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class I would have been 1.02% for the period ended July 31, 2004.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 27
- --------------------------------------------------------------------------------
CLASS Y
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006(h) 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.85 $5.36 $4.99 $4.52 $4.90
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05 .07 .04 .03 --
Net gains (losses) (both realized and unrealized) .20 .70 .61 .45 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .25 .77 .65 .48 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.05) (.04) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.37) (.28) (.28) (.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.73 $5.85 $5.36 $4.99 $4.52
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $-- $-- $-- $-- $--
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .99%(d) 1.11% 1.06%(e) .95%(e) 1.01%(d),(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.70%(d) 1.25% 1.12% 1.30% .31%(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 29% 57% 59% 77% 9%
- ----------------------------------------------------------------------------------------------------------------------------------
Total return(f) 4.45%(g) 14.67% 13.14% 10.76% (7.75%)(g)
- ----------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class Y would have been 1.36%, 2.46% and 20.32% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
(h) Six months ended Jan. 31, 2006 (Unaudited).
- --------------------------------------------------------------------------------
28 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 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, including management fees; distribution and service (12b-1) fees; and
other Fund 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.
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, 2006.
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 LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 29
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
AUG. 1, 2005 JAN. 31, 2006 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,042.80 $6.09 1.17%
Hypothetical (5% return before expenses) $1,000 $1,019.52 $6.02 1.17%
Class B
Actual(b) $1,000 $1,039.50 $10.08 1.94%
Hypothetical (5% return before expenses) $1,000 $1,015.59 $9.96 1.94%
Class C
Actual(b) $1,000 $1,040.00 $10.08 1.94%
Hypothetical (5% return before expenses) $1,000 $1,015.59 $9.96 1.94%
Class I
Actual(b) $1,000 $1,045.70 $3.81 .73%
Hypothetical (5% return before expenses) $1,000 $1,021.76 $3.76 .73%
Class Y
Actual(b) $1,000 $1,044.50 $5.16 .99%
Hypothetical (5% return before expenses) $1,000 $1,020.43 $5.10 .99%
(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 186/365 (to reflect the one-half year period).
(b) -Based on the actual return for the six months ended Jan. 31, 2006:
+4.28% for Class A, +3.95% for Class B, +4.00% for Class C, +4.57% for
Class I and +4.45% for Class Y.
- --------------------------------------------------------------------------------
30 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC (RiverSource), a wholly-owned subsidiary of
Ameriprise Financial, Inc. (Ameriprise Financial, formerly American Express
Financial Corporation), serves as the investment manager to the Fund. Under
an investment management services agreement (the IMS Agreement), the
investment manager provides investment advice and other services to the
Fund. Throughout the year, the Fund's Board of Directors (the Board) and the
Board's Investment Review and Contracts Committees monitor these services.
Ameriprise Financial had served as investment manager to the Fund until
Sept. 29, 2005. On that date, and pursuant to the consent of the Board,
Ameriprise Financial transferred its rights, title, and interest and its
burdens and obligations under the IMS Agreement to RiverSource, its
wholly-owned subsidiary.
Each year, the Board determines whether to continue the IMS Agreement by
evaluating the quality and level of services received and the costs
associated with those services. To assist the Board in making this
determination, the investment manager prepares detailed reports for the
Board and its Contracts Committee in March and April and provides data
prepared by independent organizations. The Board gives considerable weight
to the work, deliberations and conclusions of the Contracts and Investment
Review Committees in determining whether to continue the IMS Agreement.
BACKGROUND
This past year, prior to the Board's annual review process, on Feb. 1, 2005,
American Express Company, the former parent of Ameriprise Financial,
announced its intention to pursue a spin-off of Ameriprise Financial by
distributing shares of the common stock of Ameriprise Financial to
shareholders of American Express Company. Following this announcement, the
Board determined to proceed with its annual review process and, after
thorough review of the reports and data provided, at a meeting held in
person on April 14, 2005, the Board, including all of its independent
members, determined that the quality and level of advisory services provided
pursuant to the IMS Agreement were satisfactory and that fees were fair and
reasonable. However, in light of the announced plans of the spin-off, the
Board approved continuation of the IMS Agreement with Ameriprise Financial
for only an interim period ending on the later of (i) the effective date of
the spin-off; or (ii) the approval of a new IMS Agreement with Ameriprise
Financial (or its subsidiary) by the shareholders of the Fund, but in no
event for a period longer than one year.
During the course of the six-month period following the April 2005 meeting,
the Board evaluated whether to approve new investment management services
agreements for each of the funds within the Ameriprise Financial fund
complex (together, the Funds) with post-spin Ameriprise Financial (or
RiverSource). Independent counsel, Schulte Roth & Zabel LLP (Schulte),
assisted the Boards in fulfilling their statutory and other responsibilities
associated with the spin-off and the resulting consideration of new
contracts, including the new IMS Agreement. The Board and its committees
were provided with a wealth of written and oral information in this regard.
Furthermore, in connection with the Board's considerations as to whether
post-spin Ameriprise Financial, as an entity independent from American
Express Company, would be capable of continuing to provide a high quality of
services to the Funds,
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 31
- --------------------------------------------------------------------------------
the Board's independent members retained their own financial adviser, Credit
Suisse First Boston LLC (CSFB), to assist them in analyzing the capital
adequacy of post-spin Ameriprise Financial. (The costs of independent
counsel and CSFB and of additional meetings of the Boards were borne by
Ameriprise Financial as part of the commitment of the American Express
Company to ensure a complete and thorough review of the proposed spin-off
and its effect on the services provided by Ameriprise Financial and its
subsidiaries.) At a meeting of the Board held on Sept. 8, 2005, the Board,
including all of its independent members, approved, and recommended that
shareholders approve, a proposed new IMS Agreement with RiverSource (the New
IMS Agreement). At a meeting of the Fund's shareholders held on Feb. 15,
2006, shareholders approved the New IMS Agreement. The following section,
"Board Considerations Related to the New IMS Agreement," provides a detailed
discussion of the Board's considerations and determinations respecting the
New IMS Agreement.
BOARD CONSIDERATIONS RELATED TO THE NEW IMS AGREEMENT
In carrying out its legal responsibilities associated with the consideration
of the New IMS Agreement, the Board evaluated the following factors:
Nature, Extent and Quality of Services to be Provided by Post-Spin
Ameriprise Financial (and Its Subsidiaries)
The Board recognized that only a few months had passed since its April 2005
conclusion that the nature, extent and quality of services provided by
Ameriprise Financial were satisfactory and consistent with those that would
be expected for a fund family of the size of the Funds and its determination
to renew the IMS Agreement for the interim period. However, the Board also
recognized the need to supplement this assessment with an evaluation of
whether the spin-off or other factors would result in changes to the
advisory services being provided under the current IMS Agreement.
The Board focused its evaluation on the following factors potentially
impacting the nature, extent and quality of advisory services to be provided
by Ameriprise Financial: (i) Ameriprise Financial's projected capital
structure and capital adequacy as a stand-alone entity; (ii) its legal and
regulatory risks; (iii) its ability to retain and attract personnel; and
(iv) its ability to successfully re-brand its products and services. Based
on extensive presentations and reports by Ameriprise Financial, CSFB and
Schulte, the Board concluded that the proposed capital structure (which
includes certain indemnification commitments made by American Express
Company) should enable RiverSource to continue to provide a high quality and
level of advisory services to the Fund. In making this determination, the
Board took into account representations by management of Ameriprise
Financial that projected capital levels would allow Ameriprise Financial and
RiverSource to meet legal and compliance responsibilities, build their
distribution network, pursue technological upgrades, make capital
commitments necessary to retain and attract key personnel devoted to legal
and compliance responsibilities, portfolio management and distribution, and
pursue smaller asset management acquisitions to help grow the asset
management business. The Board accorded significant weight to CSFB's
confirmation as to the reasonableness of the proposed capital structure. The
Board also considered the fact that there were no expected departures of key
personnel involved in the portfolio management, operations and marketing of
the Funds as a result of the announcement of the spin-off.
- --------------------------------------------------------------------------------
32 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
The Board concluded that, based on all of the materials and information
provided, post-spin Ameriprise Financial (including RiverSource) would be in
a position to continue to provide a high quality and level of advisory
services to the Fund.
Investment Performance
The Board next focused on investment performance. The Board reviewed reports
documenting the Fund's performance over one-, three- and/or five-year
periods, as well as the entire period during which its current portfolio
manager has managed the Fund, and compared to relevant Lipper and market
indices. The Board took into account its determination in April 2005 that
although investment performance in 2004 was below median, it was consistent
with the management style of the Fund in light of market conditions in 2004.
The Board also considered that it had been receiving monthly performance
reports for the Fund and that there had been no significant deviations from
April's overall performance data.
Cost of Services Provided
The Board evaluated comparative fees and the costs of services under the
current IMS Agreement and the New IMS Agreement, including fees charged by
Ameriprise Financial (including RiverSource and other subsidiaries) to
institutional clients. The Board studied RiverSource's effort (i.e., its
"pricing philosophy") to set substantially all Funds' total expense ratios
at or below the median expense ratio of comparable mutual funds (as compiled
by Lipper). The Board observed that the proposed advisory fee changes are
designed to work in tandem with proposed changes to administrative services
fees. It also noted that RiverSource has agreed to voluntarily impose
expense caps or waivers to achieve this pricing objective whenever the
expense ratio exceeded the median expense ratio by more than three basis
points (unless the higher ratio was due to the impact of the performance fee
adjustment). The Board considered that advisory fees under the New IMS
Agreement would stay the same. The Board also took into account the effect
of the proposed performance incentive adjustment on the advisory fee. In
this regard, the Board recalled its past determinations regarding the
appropriateness of (i) the use of the relevant index for the performance
comparison; (ii) the methodology for determining when the Board may change
an index used to calculate the performance incentive adjustment; (iii) the
periods used for averaging the Fund's assets and computing investment
performance; and (iv) the length of the period over which performance is
computed.
The Board next considered the expected profitability to Ameriprise Financial
and RiverSource derived from their relationship with the Fund, recalling the
April 2005 determination that the profitability level was appropriate. The
Board noted that projected profitability of Ameriprise Financial would allow
it to operate effectively and, at the same time, reinvest in RiverSource and
its other asset management businesses. The Board also considered that the
proposed changes in advisory fees and the mergers of certain other Funds
would result in revenue gains to Ameriprise Financial, but that these
increases would not materially alter profit margins due to expected
increases in costs associated with the spin-off, particularly re-branding
and separation. CSFB also reported that Ameriprise Financial's projected
level of return on equity was generally reasonable in light of the returns
on equity of its industry competitors. In evaluating profitability, the
Board also considered the benefits Ameriprise Financial obtains through the
use of commission dollars paid on portfolio transactions for the Fund and
from
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 33
- --------------------------------------------------------------------------------
other business relationships that result from managing the Fund. The Board
also considered the fees charged by Ameriprise Financial (and its
subsidiaries) to institutional clients as well as the fees paid to, and
charged by, subadvisers, noting the differences in services provided in each
case. In light of these considerations, the Board concluded that projected
profitability levels were appropriate.
Economies of Scale
The Board also considered the "breakpoints" in fees that would be triggered
as Fund net asset levels grew and the extent to which shareholders would
benefit from such growth. The Board observed that the revised fee schedules
under the proposed New IMS Agreement would continue to provide breakpoints
similar to those in place pursuant to the current IMS Agreement.
Accordingly, the Board concluded that the proposed New IMS Agreement
provides adequate opportunity for shareholders to realize benefits as Fund
assets grow
Other Considerations
In addition, the Board accorded weight to the fact that, under the New IMS
Agreement, RiverSource Investments is held to a higher standard of care than
under the current IMS Agreement. The Board also noted Ameriprise Financial's
commitment to a culture that adheres to ethical business practice, assigns
accountability to senior management and seeks to identify conflicts and
propose appropriate action to minimize the risks posed by the conflicts.
Furthermore, the Board recognized that it was not limited to considering
management's proposed New IMS Agreement. In this regard, the Board evaluated
the circumstances under which it would consider the retention of an
investment adviser different from RiverSource Investments. The Board
concluded, based on its consultation with independent counsel, that pursuing
the retention of a different adviser was not necessary, primarily because,
in its best judgment, Ameriprise Financial continues to be basically the
same organization (from a functional and managerial standpoint), as it was
prior to the spin-off. The Board reasoned that shareholders purchased shares
of the Fund with an expectation that the current investment advisory
organization would be servicing the Fund.
- --------------------------------------------------------------------------------
34 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling (800) 862-7919; by looking at the website
www.riversource.com/funds; or by 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 during the most
recent 12-month period ended June 30 is available without charge by calling
the Fund's administrator, Board Services Corporation, collect at (612)
330-9283; by looking at the website www.riversource.com/funds; or by
searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 35
- --------------------------------------------------------------------------------
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE LARGE CAP VALUE FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and the votes
cast for, against or withheld, as well as the number of abstentions and
broker non-votes as to each proposal is set forth below. A vote is based on
total dollar interest in a fund.
1. ELECTION OF BOARD MEMBERS
KATHLEEN BLATZ
Affirmative 115,509,497.10
Withhold 3,367,597.54
Abstain 0.00
TOTAL 118,877,094.64
ARNE H. CARLSON
Affirmative 115,045,986.04
Withhold 3,831,108.60
Abstain 0.00
TOTAL 118,877,094.64
PATRICIA M. FLYNN
Affirmative 115,665,095.43
Withhold 3,211,999.21
Abstain 0.00
TOTAL 118,877,094.64
ANNE P. JONES
Affirmative 115,001,743.79
Withhold 3,875,350.85
Abstain 0.00
TOTAL 118,877,094.64
JEFFREY LAIKIND
Affirmative 114,732,791.01
Withhold 4,144,303.63
Abstain 0.00
TOTAL 118,877,094.64
- --------------------------------------------------------------------------------
36 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STEPHEN R. LEWIS, JR.
Affirmative 115,281,612.45
Withhold 3,595,482.19
Abstain 0.00
TOTAL 118,877,094.64
CATHERINE JAMES PAGLIA
Affirmative 115,529,555.00
Withhold 3,347,539.64
Abstain 0.00
TOTAL 118,877,094.64
VIKKI L. PRYOR
Affirmative 115,667,637.87
Withhold 3,209,456.77
Abstain 0.00
TOTAL 118,877,094.64
ALAN K. SIMPSON
Affirmative 114,173,016.72
Withhold 4,704,077.92
Abstain 0.00
TOTAL 118,877,094.64
ALISON TAUNTON-RIGBY
Affirmative 115,640,728.62
Withhold 3,236,366.02
Abstain 0.00
TOTAL 118,877,094.64
WILLIAM F. TRUSCOTT
Affirmative 115,172,707.81
Withhold 3,704,386.83
Abstain 0.00
TOTAL 118,877,094.64
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 37
- --------------------------------------------------------------------------------
2. AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE
MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
Affirmative 114,338,695.34
Against 2,513,956.95
Abstain 2,024,442.35
Broker Non-votes 0.00
TOTAL 118,877,094.64
3. APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE
INVESTMENTS, LLC
Affirmative 113,721,733.09
Against 2,862,066.64
Abstain 2,293,294.91
Broker Non-votes 0.00
TOTAL 118,877,094.64
4. APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
A. DIVERSIFICATION
Affirmative 114,087,870.16
Against 2,617,639.63
Abstain 2,171,584.85
Broker Non-votes 0.00
TOTAL 118,877,094.64
B. LENDING
Affirmative 112,546,349.02
Against 4,250,080.22
Abstain 2,080,665.40
Broker Non-votes 0.00
TOTAL 118,877,094.64
C. BORROWING
Affirmative 114,431,355.66
Against 2,309,834.97
Abstain 2,135,904.01
Broker Non-votes 0.00
TOTAL 118,877,094.64
- --------------------------------------------------------------------------------
38 -- RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
THIS PAGE LEFT BLANK INTENTIONALLY
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND -- 2006 SEMIANNUAL REPORT -- 39
- --------------------------------------------------------------------------------
[RIVERSOURCE(SM) INVESTMENTS logo]
RIVERSOURCE INVESTMENTS
200 AMERIPRISE FINANCIAL CENTER
MINNEAPOLIS, MN 55474
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC
and distributed by Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
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) AXP Growth Series, Inc.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date April 3, 2006
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/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date April 3, 2006
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date April 3, 2006