UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-1629
RIVERSOURCE DIMENSIONS SERIES, INC.
(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
Date of fiscal year end: 7/31
Date of reporting period: 7/31
Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
DISCIPLINED SMALL AND MID CAP EQUITY FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2008
(Prospectus also enclosed)
RIVERSOURCE DISCIPLINED SMALL AND
MID CAP EQUITY FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH
LONG-TERM CAPITAL GROWTH.
<Table>
This annual report includes a prospectus that
describes in detail the Fund's objective, investment
strategy, risks, sales charges, fees and other
matters of interest. Please read the prospectus
carefully before you invest or send money. (SINGLE STRATEGY FUNDS ICON)
</Table>
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance............... 2
Manager Commentary.................. 5
The Fund's Long-term Performance ... 12
Fund Expenses Example............... 14
Portfolio of Investments............ 16
Financial Statements................ 23
Notes to Financial Statements....... 27
Report of Independent Registered
Public Accounting Firm........... 46
Federal Income Tax Information...... 48
Board Members and Officers.......... 49
Approval of Investment Management
Services Agreement............... 53
Proxy Voting........................ 55
</Table>
(DALBAR LOGO)
The RiverSource mutual fund
shareholder reports have been
awarded the Communications Seal
from Dalbar Inc., an independent
financial services research firm.
The Seal recognizes communications
demonstrating a level of
excellence in the industry.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) Class A
shares declined 11.94% (excluding sales charge) for the 12-month period ended
July 31, 2008.
> The Fund underperformed its benchmark, the Russell 2500(R) Index, which fell
8.42% during the annual period.
> The Fund also underperformed the Lipper Mid-Cap Core Funds Index, representing
the Fund's peer group, which declined 8.83%, for the same period.
ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Since
1 year inception(a)
- -----------------------------------------------------------------------------
RiverSource Disciplined Small and Mid Cap
Equity Fund Class A (excluding sales
charge) -11.94% -5.12%
- -----------------------------------------------------------------------------
Russell 2500(R) Index (unmanaged) -8.42% +1.16%
- -----------------------------------------------------------------------------
Lipper Mid-Cap Core Funds Index -8.83% +2.47%
- -----------------------------------------------------------------------------
</Table>
(a) Fund data is from May 18, 2006. Russell 2500 Index and Lipper peer group
data is from June 1, 2006.
(See "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses. See the Average Annual Total Returns table for performance of other
share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
STYLE MATRIX
- ----------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
LARGE
X MEDIUM SIZE
X SMALL
</Table>
Shading within the style matrix indicates areas in which the Fund is designed to
generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- ----------------------------------------
<Table>
<Caption>
Net
Total Expenses(a)
- -----------------------------------------------------
Class A 1.32% 1.23%
- -----------------------------------------------------
Class B 2.09% 2.00%
- -----------------------------------------------------
Class C 2.08% 1.99%
- -----------------------------------------------------
Class I 0.91% 0.79%
- -----------------------------------------------------
Class R4 1.23% 1.09%
- -----------------------------------------------------
Class W 1.34% 1.24%
- -----------------------------------------------------
</Table>
(a) The Investment Manager and its affiliates
have contractually agreed to waive certain fees and to absorb certain
expenses until July 31, 2009, unless sooner terminated at the discretion of
the Fund's Board. Any amounts waived will not be reimbursed by the Fund.
Under this agreement, net fund expenses (excluding fees and expenses of
acquired funds), before giving effect to any performance incentive
adjustment (that decreased the management fee by 0.13% for the year ended
July 31, 2008), will not exceed 1.36% for Class A, 2.13% for Class B, 2.12%
for Class C, 0.92% for Class I, 1.22% for Class R4 and 1.37% for Class W.
Investments in small- and mid-capitalization companies often involve greater
risks and potential volatility than investments in larger, more established
companies.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT JULY 31, 2008
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 5/18/06) -11.94% -5.12%
- ------------------------------------------------------------
Class B (inception 5/18/06) -12.67% -5.86%
- ------------------------------------------------------------
Class C (inception 5/18/06) -12.67% -5.88%
- ------------------------------------------------------------
Class I (inception 5/18/06) -11.63% -4.83%
- ------------------------------------------------------------
Class R4 (inception 5/18/06) -11.48% -4.83%
- ------------------------------------------------------------
Class W (inception 12/1/06) -12.13% -8.63%
- ------------------------------------------------------------
WITH SALES CHARGE
Class A (inception 5/18/06) -16.98% -7.65%
- ------------------------------------------------------------
Class B (inception 5/18/06) -17.04% -7.58%
- ------------------------------------------------------------
Class C (inception 5/18/06) -13.54% -5.88%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
AT JUNE 30, 2008
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 5/18/06) -19.79% -5.64%
- ------------------------------------------------------------
Class B (inception 5/18/06) -20.43% -6.35%
- ------------------------------------------------------------
Class C (inception 5/18/06) -20.43% -6.38%
- ------------------------------------------------------------
Class I (inception 5/18/06) -19.57% -5.34%
- ------------------------------------------------------------
Class R4 (inception 5/18/06) -19.46% -5.39%
- ------------------------------------------------------------
Class W (inception 12/1/06) -20.05% -9.49%
- ------------------------------------------------------------
WITH SALES CHARGE
Class A (inception 5/18/06) -24.43% -8.25%
- ------------------------------------------------------------
Class B (inception 5/18/06) -24.40% -8.13%
- ------------------------------------------------------------
Class C (inception 5/18/06) -21.22% -6.38%
- ------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I, Class R4 and Class W shares. Class I and Class R4 are
available to institutional investors only. Class W shares are offered through
qualifying discretionary accounts.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
At July 31, 2008, approximately 38% of the Fund's shares were owned in the
aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC
(RiverSource). As a result of asset allocation decisions by RiverSource, it is
possible that RiverSource Disciplined Small and Mid Cap Equity Fund may
experience relatively large purchases or redemptions from affiliated
funds-of-funds (see page 36, 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 Small and Mid Cap Equity Fund may experience
increased expenses as it buys and sells securities as a result of purchases or
redemptions by affiliated funds-of-funds. For more information of the Fund's
expenses, see the discussions beginning on pages 14 and 32.
Dear Shareholder,
RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) Class A shares
declined 11.94% (excluding sales charge) for the 12-month period ended July 31,
2008. The Fund underperformed its benchmark, the Russell 2500(R) Index (Russell
Index), which fell 8.42%, as well as the Lipper Mid-Cap Core Funds Index,
representing the Fund's peer group, which declined 8.83%, for the same period.
SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets)
- -----------------------------------------------------------------
<Table>
Consumer Discretionary 13.8%
- --------------------------------------------------------------
Consumer Staples 2.4%
- --------------------------------------------------------------
Energy 13.0%
- --------------------------------------------------------------
Financials 14.4%
- --------------------------------------------------------------
Health Care 13.1%
- --------------------------------------------------------------
Industrials 19.5%
- --------------------------------------------------------------
Information Technology 10.8%
- --------------------------------------------------------------
Materials 9.1%
- --------------------------------------------------------------
Telecommunication Services 0.3%
- --------------------------------------------------------------
Utilities 1.8%
- --------------------------------------------------------------
Other(2) 1.8%
- --------------------------------------------------------------
</Table>
(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
(2) Cash & Cash Equivalents.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
SIGNIFICANT PERFORMANCE FACTORS
The annual period was a most challenging one, characterized by heightened
concerns about weakness in the economy, ongoing turmoil in the housing and
financial markets, a credit crunch and soaring commodity prices. As a result,
equity volatility increased as the year progressed, peaking in March with the
collapse of Bear Stearns and rearing its head again in June. Given the extreme
pressure on the financial system, it makes sense, then, that the financials
sector performed worst. The resulting equity market decline was only partially
mitigated by the impressive double-digit gains generated by the energy sector,
as crude oil prices surged past $140 per barrel before falling back a bit to end
July at just over $124 per barrel.
The Fund's performance resulted from the quantitative investment models we
employ in selecting stocks for the Fund's portfolio. Early in the annual period,
we decided that the quality-adjusted value model would not be able to manage the
extremely volatile market conditions caused by the subprime mortgage market
upheaval, surging oil prices, credit market troubles and recessionary fears that
dominated the equity market during these months, especially within the small-
and mid-cap segments of the market. Thus, we eliminated the Fund's use of the
quality-adjusted value model, which had been designed to select undervalued
securities by adjusting the valuations of stocks to take into account each
stock's historical earnings stability and
TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets)
- -----------------------------------------------------------------
<Table>
Helmerich & Payne 1.4%
- --------------------------------------------------------------
Axis Capital Holdings 1.3%
- --------------------------------------------------------------
NVR 1.1%
- --------------------------------------------------------------
PartnerRe 1.0%
- --------------------------------------------------------------
Patterson-UTI Energy 1.0%
- --------------------------------------------------------------
SAIC 1.0%
- --------------------------------------------------------------
Commercial Metals 1.0%
- --------------------------------------------------------------
Arch Capital Group 0.9%
- --------------------------------------------------------------
Ashland 0.9%
- --------------------------------------------------------------
RenaissanceRe Holdings 0.8%
- --------------------------------------------------------------
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
debt load. We correspondingly increased the Fund's weighting allotted to the
value model, which selects undervalued stocks based on proprietary estimates of
future corporate earnings. We also continued to use the momentum model, which
singles out groups of companies that appear to be having improving prospects
based on the pattern of stock returns observed over history. Under the Fund's
investment process, the models choose the small- and mid-cap stocks for the
portfolio. We then weight the models and determine the exposure to sectors and
industries.
During the 12-month period, the momentum model outperformed the Russell Index,
but not enough to offset the underperformance of the value model. Such variance
in performance supports our research, indicating that the style diversification
provided by the very different quantitative models is a significant investment
advantage over the long term, even though the Fund may experience
underperformance in the short term.
Following a specific, disciplined process, we do not make sector or industry
bets based on economic or equity market outlooks. That said, the Fund's
quantitative models led to a bias toward smaller-cap stocks within the Russell
Index and toward the cheapest P/E stocks, both of which detracted from results.
Most of the small-cap value-oriented stocks were financials, a group that
struggled significantly during most of the period.
Overall, sector allocation contributed to the Fund's performance, with sizable
weightings in energy and materials and only a modest position in financials
particularly helpful. Partially offsetting these positives was the detracting
effect of significant exposure to the weakly-performing consumer discretionary
and utilities sectors.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
Because we use a bottom-up approach, it is not surprising that most of the
Fund's underperformance came from stock selection. Specifically, stock selection
in the financials, industrials and consumer discretionary sectors detracted
most. This more than offset the combined effect of positive stock selection in
materials and information technology.
Among individual holdings, the stocks that detracted most from the Fund's
results were three financials companies and two airlines, each selected by the
value model. These were mortgage insurers PMI GROUP and RADIAN GROUP, student
loan provider FIRST MARBLEHEAD, and airlines UAL (parent company of United
Airlines) and US AIRWAYS.
On the positive side, stocks that contributed favorably to the Fund's return
included metals and mining company CLEVELAND-CLIFFS (selected by both models),
chemical company CF INDUSTRIES HOLDINGS (both models), computer manufacturer
WESTERN DIGITAL (value model), and energy company HELMERICH & PAYNE (both
models).
At the end of July 2008, the Fund's largest individual stock holdings included
oil and gas company HELMERICH & PAYNE, financials company AXIS CAPITAL HOLDINGS
(selected by the value model), consumer discretionary firm NVR (value model),
energy company PATTERSON-UTI ENERGY (momentum and value models), and insurance
company PARTNERS RE (value model).
CHANGES TO THE FUND'S PORTFOLIO
As mentioned, the biggest change we made during the period was the elimination
of our use of the quality-adjusted value model and the increased Fund weighting
to the value model. Also, as a result of quantitative models-driven stock
selection during the period, the Fund's sector allocations changed somewhat. For
example, the Fund's exposure to consumer discretionary telecommunications and
utilities relative to the Russell Index decreased. Conversely, the Fund's
relative positions in energy and industrials increased.
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
We believe our use of multiple investment disciplines serves the Fund well in
all investment environments over the long term, and the diversified portfolio is
well positioned for most potential market conditions.
In managing risk associated with small- and mid-cap
investing, we use a proprietary risk management
system that allows us to manage the Fund's exposure
to several key factors, including industry, sector,
market capitalization and portfolio turnover. During
the period, we used these and other techniques
attempting to reduce the expected risk of the
portfolio and to avoid large deviations in exposure
from the Index.
OUR FUTURE STRATEGY
We believe our use of multiple investment
disciplines serves the Fund well in all investment
environments over the long term, and the diversified
portfolio is well positioned for most potential
market conditions. Whether there is a surge in
small- and mid-cap stocks or a downturn, the
combination of models should, in our view, help us
deliver value relative to the Russell Index over
extended periods of time. We are convinced of the
merit of our multifaceted, disciplined approach to
managing risk in the Fund. We believe this
combination of style diversification
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 9
MANAGER COMMENTARY (continued) -------------------------------------------------
and rigorous risk management will allow us to maintain the high quality of the
Fund's portfolio in whatever market conditions lie ahead.
<Table>
(PHOTO - DIMITRIS (PHOTO - STEVE (PHOTO - GINA
BERTSIMAS) KOKKOTOS) MOURTZINOU)
Dimitris Bertsimas, Ph.D. Steve Kokkotos, Ph.D. Gina Mourtzinou, Ph.D.
Senior Portfolio Manager Portfolio Manager Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource fund.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Disciplined Small and Mid Cap Equity Fund Class A
shares (from 6/1/06 to 7/31/08)* as compared to the performance of two widely
cited performance indices, the Russell 2500 Index and the Lipper Mid-Cap Core
Funds Index. In comparing the Fund's Class A shares to these indices, you should
take into account the fact that the Fund's performance reflects the maximum
sales charge of 5.75%, while such charges are not reflected in the performance
of the indices. Returns for the Fund include the reinvestment of any
distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
* Fund data is from May 18, 2006. Russell 2500 Index and Lipper peer group data
is from June 1, 2006.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
Results at July 31, 2008 1 YEAR INCEPTION(3)
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND (INCLUDES SALES
CHARGE)
Class A Cumulative value of $10,000 $8,302 $8,395
- -------------------------------------------------------------------------
Average annual total return -16.98% -7.65%
- -------------------------------------------------------------------------
RUSSELL 2500 INDEX(1)
Cumulative value of $10,000 $9,158 $10,254
- -------------------------------------------------------------------------
Average annual total return -8.42% +1.16%
- -------------------------------------------------------------------------
LIPPER MID-CAP CORE FUNDS INDEX(2)
Cumulative value of $10,000 $9,117 $10,544
- -------------------------------------------------------------------------
Average annual total return -8.83% +2.47%
- -------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
(GRAPH)
<Table>
<Caption>
RIVERSOURCE DISCIPLINED
SMALL AND MID CAP EQUITY
FUND CLASS A (INCLUDES SALES LIPPER MID-CAP CORE
CHARGE RUSSELL 2500 INDEX(1) FUNDS INDEX(2)
---------------------------- --------------------- ------------------------
6/1/06 $ 9,425 $10,000 $10,000
7/31/06 8,898 9,690 9,777
1/31/07 10,191 11,226 11,156
7/31/07 9,533 11,197 11,564
1/31/08 8,505 10,405 10,815
7/31/08 8,395 10,254 10,544
</Table>
(1) The Russell 2500 Index, an unmanaged index, measures the performance of the
2,500 smallest companies in the Russell 3000 Index, which represents
approximately 16% of the total market capitalization of the Russell 3000
Index. The index reflects reinvestment of all distributions and changes in
market prices.
(2) The Lipper Mid-Cap Core Funds Index includes the 30 largest mid-cap core
funds tracked by Lipper Inc. The index's returns include net reinvested
dividends. The Fund's performance is currently measured against this index
for purposes of determining the performance incentive adjustment.
(3) Fund data is from May 18, 2006. Russell 2500 Index and Lipper peer group
data is from June 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2008.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A) EXPENSE RATIO
- ------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 987.10 $5.58(c) 1.13%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,019.24 $5.67(c) 1.13%
- ------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 983.40 $9.37(c) 1.90%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,015.42 $9.52(c) 1.90%
- ------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 983.40 $9.37(c) 1.90%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,015.42 $9.52(c) 1.90%
- ------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 988.30 $3.66(c) .74%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,021.18 $3.72(c) .74%
- ------------------------------------------------------------------------------------------
Class R4
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 989.40 $5.00(c) 1.01%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,019.84 $5.07(c) 1.01%
- ------------------------------------------------------------------------------------------
Class W
- ------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 985.90 $5.93(c) 1.20%
- ------------------------------------------------------------------------------------------
Hypothetical
(5% return before
expenses) $1,000 $1,018.90 $6.02(c) 1.20%
- ------------------------------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 182/366 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2008: -1.29%
for Class A, -1.66% for Class B, -1.66% for Class C, -1.17% for Class I,
-1.06% for Class R4 and -1.41% for Class W.
(c) The Investment Manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until July 31, 2009,
unless sooner terminated at the discretion of the Fund's Board, such that
net expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment, will not exceed 1.36% for
Class A, 2.13% for Class B, 2.12% for Class C, 0.92% for Class I, 1.22% for
Class R4 and 1.37% for Class W. Any amounts waived will not be reimbursed
by the Fund. This change was effective Aug. 1, 2008. Had this change been
in place for the entire six month period ended July 31, 2008, the actual
expenses paid would have been $3.46 for Class I, $4.95 for Class R4 and
$5.68 for Class W; the hypothetical expenses paid would have been $3.52 for
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 15
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
Class I, $5.02 for Class R4 and $5.77 for Class W. The actual and
hypothetical expenses paid for Class A, Class B and Class C would have been
the same as those expenses presented in the table above.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JULY 31, 2008
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (98.7%)
ISSUER SHARES VALUE(A)
AEROSPACE & DEFENSE (0.7%)
Axsys Technologies 2,006(b) $147,321
Ceradyne 1,610(b) 74,624
DRS Technologies 773 60,912
---------------
Total 282,857
- ------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.2%)
Pacer Intl 2,617 62,128
- ------------------------------------------------------------------------------------
AIRLINES (3.1%)
Alaska Air Group 11,296(b) 201,972
AMR 22,832(b) 206,173
Continental Airlines Cl B 12,329(b) 169,277
Delta Air Lines 14,412(b) 108,666
Hawaiian Holdings 17,028(b) 150,187
Northwest Airlines 25,346(b) 232,170
SkyWest 5,564 84,684
UAL 11,061 91,917
---------------
Total 1,245,046
- ------------------------------------------------------------------------------------
AUTO COMPONENTS (1.3%)
Exide Technologies 5,970(b) 94,326
Goodyear Tire & Rubber 4,076(b) 80,012
Lear 4,728(b) 68,130
Modine Mfg 5,490 95,746
Stoneridge 3,571(b) 47,030
TRW Automotive Holdings 7,790(b) 144,505
---------------
Total 529,749
- ------------------------------------------------------------------------------------
BEVERAGES (0.4%)
Central European Distribution 1,992(b) 145,336
- ------------------------------------------------------------------------------------
BIOTECHNOLOGY (2.6%)
AVANT Immunotherapeutics 3,652(b) 59,308
BioMarin Pharmaceutical 4,478(b) 145,758
Cepheid 6,527(b) 111,742
Idenix Pharmaceuticals 7,495(b) 62,134
Idera Pharmaceuticals 6,711(b) 99,256
Incyte 12,900(b) 119,454
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
BIOTECHNOLOGY (CONT.)
Isis Pharmaceuticals 6,313(b) $108,142
Martek Biosciences 2,955(b) 111,138
Momenta Pharmaceuticals 6,611(b) 109,610
Savient Pharmaceuticals 4,220(b) 112,168
---------------
Total 1,038,710
- ------------------------------------------------------------------------------------
BUILDING PRODUCTS (0.8%)
Armstrong World Inds 1,834 61,824
Owens Corning 6,304(b) 163,968
USG 2,762(b) 79,269
---------------
Total 305,061
- ------------------------------------------------------------------------------------
CAPITAL MARKETS (1.0%)
BGC Partners Cl A 7,678(b) 54,514
Knight Capital Group Cl A 4,423(b) 72,493
SWS Group 6,798 128,618
Waddell & Reed Financial Cl A 4,174 139,412
---------------
Total 395,037
- ------------------------------------------------------------------------------------
CHEMICALS (5.5%)
Ashland 8,440 352,538
Calgon Carbon 8,989(b) 170,791
CF Inds Holdings 1,658 271,017
Eastman Chemical 2,309 138,448
FMC 1,218 90,583
Innophos Holdings 2,413 70,870
NewMarket 2,183 134,822
Olin 5,175 153,905
PolyOne 7,060(b) 52,950
ShengdaTech 12,352(b,c) 120,308
Solutia 5,194(b) 79,312
Stepan 1,592 91,317
Terra Inds 5,131 277,074
Westlake Chemical 3,216 56,312
WR Grace & Co 4,848(b) 124,933
---------------
Total 2,185,180
- ------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
COMMERCIAL BANKS (1.3%)
Community Bank System 2,001 $47,224
First Citizens BancShares Cl A 437 61,836
Oriental Financial Group 6,094(c) 105,853
Republic Bancorp Cl A 2,242 69,367
Southside Bancshares 2,333 46,263
UMB Financial 3,617 199,188
---------------
Total 529,731
- ------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (2.9%)
CBIZ 12,258(b) 100,393
Clean Harbors 1,259(b) 98,252
Copart 2,977(b) 130,571
FTI Consulting 2,290(b) 162,957
GeoEye 6,038(b) 130,723
Hill Intl 7,286(b) 123,498
Metalico 9,686(b) 149,164
Standard Parking 5,413(b) 116,704
TrueBlue 3,843(b) 58,029
Watson Wyatt Worldwide Cl A 1,323 76,655
---------------
Total 1,146,946
- ------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (0.7%)
EMS Technologies 3,965(b) 82,115
InterDigital 3,270(b) 75,897
Tellabs 12,753(b) 65,550
UTStarcom 11,257(b) 53,133
---------------
Total 276,695
- ------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (1.6%)
Lexmark Intl Cl A 8,561(b) 300,320
Synaptics 3,860(b) 186,129
Western Digital 5,653(b) 162,750
---------------
Total 649,199
- ------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.6%)
Granite Construction 1,398 44,219
Jacobs Engineering Group 2,326(b,d) 179,893
---------------
Total 224,112
- ------------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.5%)
Greif Cl A 763 46,421
Owens-Illinois 3,871(b) 163,511
---------------
Total 209,932
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
DISTRIBUTORS (0.4%)
LKQ 6,974(b) $142,967
- ------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.1%)
Regis 1,978 55,364
- ------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (0.2%)
Ampal-American Israel Series A 12,033(b,c) 67,024
- ------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
CenturyTel 1,823 67,797
- ------------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.1%)
ITC Holdings 839 43,729
- ------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.8%)
American Superconductor 4,901(b) 193,541
Capstone Turbine 39,358(b) 120,435
Encore Wire 2,277 41,510
Ener1 18,733(b) 131,880
Energy Conversion Devices 997(b) 69,720
II-VI 1,443(b) 55,498
Powell Inds 995(b) 52,238
Superior Essex 1,610(b) 72,482
---------------
Total 737,304
- ------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (3.2%)
Arrow Electronics 6,521(b) 210,107
Avnet 5,756(b) 156,909
Benchmark Electronics 9,918(b) 145,200
FLIR Systems 4,992(b) 203,374
Ingram Micro Cl A 14,900(b) 274,606
Plexus 5,898(b) 168,093
SYNNEX 2,326(b) 54,335
Vishay Intertechnology 9,810(b) 87,996
---------------
Total 1,300,620
- ------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (5.9%)
BASiC Energy Services 4,738(b) 127,547
Grey Wolf 18,999(b) 162,251
Helmerich & Payne 9,278 548,608
Hercules Offshore 4,898(b) 122,303
IHS Cl A 1,098(b) 68,329
Oil States Intl 2,457(b) 134,840
Patterson-UTI Energy 14,410 409,532
SEACOR Holdings 1,992(b) 166,671
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 17
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ENERGY EQUIPMENT & SERVICES (CONT.)
Tidewater 5,302 $317,802
Unit 4,334(b) 292,762
---------------
Total 2,350,645
- ------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (0.6%)
Great Atlantic & Pacific Tea 3,757(b) 59,774
PriceSmart 3,208 75,228
Winn-Dixie Stores 6,159(b) 97,866
---------------
Total 232,868
- ------------------------------------------------------------------------------------
FOOD PRODUCTS (1.5%)
Cal-Maine Foods 3,835 145,347
Chiquita Brands Intl 2,131(b) 32,711
Darling Intl 16,258(b) 263,053
Fresh Del Monte Produce 4,883(b,c) 102,934
Sanderson Farms 1,236 49,119
---------------
Total 593,164
- ------------------------------------------------------------------------------------
GAS UTILITIES (1.3%)
EnergySouth 1,892 114,636
Laclede Group 2,584 109,587
New Jersey Resources 2,958 100,838
Nicor 4,668 185,881
---------------
Total 510,942
- ------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.6%)
Exactech 4,863(b) 139,763
Meridian Bioscience 6,387 166,126
Merit Medical Systems 4,906(b) 99,150
Neogen 2,476(b) 68,016
NuVasive 3,253(b) 182,720
Somanetics 5,234(b) 114,729
Vision-Sciences 17,885(b) 76,369
Wright Medical Group 3,220(b) 101,398
ZOLL Medical 2,797(b) 88,106
---------------
Total 1,036,377
- ------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.6%)
AMERIGROUP 5,474(b) 139,039
Chindex Intl 5,156(b) 79,970
CorVel 3,460(b) 113,315
Health Net 2,720(b) 76,051
HealthSpring 5,024(b) 97,717
HMS Holdings 3,820(b) 95,042
Kindred Healthcare 4,044(b) 109,067
Magellan Health Services 1,155(b) 48,221
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
HEALTH CARE PROVIDERS & SERVICES (CONT.)
Molina Healthcare 4,676(b) $139,531
WellCare Health Plans 3,532(b) 138,914
---------------
Total 1,036,867
- ------------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY (0.2%)
TriZetto Group 2,761(b) 60,217
- ------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.5%)
Bally Technologies 3,057(b) 97,182
Rick's Cabaret Intl 3,299(b) 50,475
WMS Inds 2,280(b) 64,250
---------------
Total 211,907
- ------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (2.1%)
DR Horton 5,115 56,879
MDC Holdings 1,798 74,653
Meritage Homes 4,426(b) 79,889
Natl Presto Inds 847 60,544
NVR 819(b) 452,350
Ryland Group 5,137 105,771
---------------
Total 830,086
- ------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.7%)
Seaboard 75 135,000
Walter Inds 1,508 158,144
---------------
Total 293,144
- ------------------------------------------------------------------------------------
INSURANCE (9.1%)
Allied World Assurance Holdings 5,123(c) 213,168
American Financial Group 8,496 246,129
Arch Capital Group 5,199(b,c) 362,526
Aspen Insurance Holdings 8,887(c) 225,641
Axis Capital Holdings 15,881(c) 503,110
Endurance Specialty Holdings 5,748(c) 175,889
Fidelity Natl Financial Cl A 12,412 165,824
First American 6,354 160,121
HCC Insurance Holdings 9,945 225,254
IPC Holdings 5,894(c) 189,197
Odyssey Re Holdings 2,302 89,939
Old Republic Intl 8,346 87,633
PartnerRe 5,936(c) 417,420
Platinum Underwriters Holdings 5,084(c) 183,532
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
INSURANCE (CONT.)
RenaissanceRe Holdings 6,623(c) $336,912
Transatlantic Holdings 1,844 106,841
---------------
Total 3,689,136
- ------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.7%)
NetFlix 2,960(b) 91,434
priceline.com 1,725(b) 198,289
---------------
Total 289,723
- ------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (0.7%)
CMGI 5,938(b) 72,681
RealNetworks 7,279(b) 50,007
Sohu.com 2,256(b,c) 170,283
---------------
Total 292,971
- ------------------------------------------------------------------------------------
IT SERVICES (1.9%)
Hewitt Associates Cl A 1,142(b) 42,083
Integral Systems 1,348 63,396
ManTech Intl Cl A 2,645(b) 147,697
SAIC 20,574(b) 388,643
TNS 5,868(b) 133,790
---------------
Total 775,609
- ------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.8%)
Brunswick 14,232 183,593
JAKKS Pacific 5,484(b) 120,538
---------------
Total 304,131
- ------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (2.1%)
Bio-Rad Laboratories Cl A 1,215(b) 108,257
Covance 1,419(b) 130,264
Illumina 2,153(b) 200,746
Kendle Intl 2,035(b) 83,740
Luminex 6,315(b) 138,930
PAREXEL Intl 6,530(b) 190,872
---------------
Total 852,809
- ------------------------------------------------------------------------------------
MACHINERY (4.6%)
AGCO 4,167(b) 249,395
Badger Meter 1,692 95,310
Bucyrus Intl 2,598 181,886
FreightCar America 3,790 144,361
Gorman-Rupp 2,220 98,879
K-Tron Intl 793(b) 110,060
LB Foster Cl A 4,169(b) 160,381
Lindsay 1,528 140,989
Lydall 3,315(b) 51,581
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
MACHINERY (CONT.)
Mueller Inds 5,155 $132,329
NACCO Inds Cl A 640 64,640
Nordson 1,313 92,777
Robbins & Myers 3,139 159,367
Timken 5,049 166,718
---------------
Total 1,848,673
- ------------------------------------------------------------------------------------
MARINE (0.8%)
Genco Shipping & Trading 2,700 184,086
TBS Intl Series A 3,775(b,c) 137,939
---------------
Total 322,025
- ------------------------------------------------------------------------------------
MEDIA (0.2%)
Marvel Entertainment 1,767(b) 61,315
- ------------------------------------------------------------------------------------
METALS & MINING (3.1%)
AK Steel Holding 2,433 154,496
Cleveland-Cliffs 2,215 240,128
Coeur d'Alene Mines 23,585(b) 68,161
Commercial Metals 12,827 382,885
Compass Minerals Intl 1,768 133,661
Kaiser Aluminum 517 27,272
Olympic Steel 2,314 117,667
Schnitzer Steel Inds Cl A 1,404 126,697
---------------
Total 1,250,967
- ------------------------------------------------------------------------------------
MULTILINE RETAIL (0.6%)
Big Lots 3,015(b) 91,837
Dillard's Cl A 15,928 161,032
---------------
Total 252,869
- ------------------------------------------------------------------------------------
MULTI-UTILITIES (0.4%)
Integrys Energy Group 3,473 177,331
- ------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (7.2%)
Alpha Natural Resources 2,489(b) 246,287
Arena Resources 2,366(b) 96,793
Callon Petroleum 6,274(b) 144,239
Carrizo Oil & Gas 1,145(b) 57,639
Cimarex Energy 5,685 296,245
Clayton Williams Energy 1,407(b) 131,132
Forest Oil 712(b) 40,605
Frontier Oil 9,759 178,102
Frontline 2,930(c) 188,018
Holly 2,455 70,164
James River Coal 3,939(b) 170,756
Overseas Shipholding Group 1,918 151,043
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 19
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
OIL, GAS & CONSUMABLE FUELS (CONT.)
St. Mary Land & Exploration 3,688 $156,961
Stone Energy 2,888(b) 147,346
Swift Energy 4,215(b) 214,206
Tesoro 15,153 233,962
W&T Offshore 2,602 115,165
Whiting Petroleum 2,732(b) 255,906
---------------
Total 2,894,569
- ------------------------------------------------------------------------------------
PHARMACEUTICALS (3.2%)
Ardea Biosciences 5,653(b) 73,546
Auxilium Pharmaceuticals 5,275(b) 195,702
CPEX Pharmaceuticals 1(b) 15
Durect 26,082(b) 115,804
King Pharmaceuticals 24,950(b) 287,174
Medicines 3,955(b) 87,841
Perrigo 4,327 152,440
POZEN 7,706(b) 93,859
ViroPharma 10,447(b) 128,603
XenoPort 2,800(b) 128,296
---------------
Total 1,263,280
- ------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (2.6%)
Annaly Capital Management 12,437 187,426
Anworth Mtge Asset 20,898 124,343
Capstead Mtge 10,954 119,618
HCP 1,606 57,928
Health Care REIT 1,151 57,400
LTC Properties 2,956 86,404
MFA Mtge Investments 10,145 65,435
Nationwide Health Properties 3,397 126,063
Omega Healthcare Investors 4,379 75,625
Senior Housing Properties Trust 3,551 74,749
Ventas 1,677 75,230
---------------
Total 1,050,221
- ------------------------------------------------------------------------------------
ROAD & RAIL (2.7%)
Arkansas Best 6,828 253,591
Con-way 4,045 204,515
Ryder System 3,198(d) 210,940
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ROAD & RAIL (CONT.)
Werner Enterprises 6,633 $157,932
YRC Worldwide 14,525(b) 245,473
---------------
Total 1,072,451
- ------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%)
Actel 5,554(b) 76,368
Amkor Technology 11,032(b) 96,640
MKS Instruments 2,242(b) 46,185
OmniVision Technologies 9,915(b) 108,569
Pericom Semiconductor 8,539(b) 121,766
---------------
Total 449,528
- ------------------------------------------------------------------------------------
SOFTWARE (1.5%)
ANSYS 2,247(b) 103,092
BMC Software 1,415(b) 46,539
Concur Technologies 4,842(b) 199,588
Ebix 963(b) 96,801
Salesforce.com 806(b) 51,415
TiVo 12,696(b) 97,505
---------------
Total 594,940
- ------------------------------------------------------------------------------------
SPECIALTY RETAIL (6.5%)
Aeropostale 1,894(b) 61,082
American Eagle Outfitters 4,243 59,402
AnnTaylor Stores 2,490(b) 56,150
Asbury Automotive Group 7,026 69,628
AutoNation 13,765(b) 142,055
Barnes & Noble 9,010 213,176
Blockbuster Cl A 52,068(b) 145,270
Cato Cl A 8,358 149,525
Children's Place Retail Stores 1,564(b) 59,510
Collective Brands 7,639(b) 98,390
Finish Line Cl A 7,291(b) 79,107
Foot Locker 13,960 210,237
GameStop Cl A 2,974(b) 120,477
Group 1 Automotive 2,962 58,203
Men's Wearhouse 2,121 42,229
New York & Co 5,398(b) 52,253
Office Depot 25,627(b) 174,263
OfficeMax 3,506 44,737
RadioShack 9,662 161,162
Rent-A-Center 7,914(b) 167,777
Ross Stores 1,599 60,698
Sonic Automotive Cl A 8,936 89,986
Stage Stores 9,845 145,903
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
SPECIALTY RETAIL (CONT.)
Urban Outfitters 3,004(b) $99,162
Wet Seal Cl A 11,429(b) 50,173
---------------
Total 2,610,555
- ------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.7%)
Hanesbrands 3,887(b) 83,337
Jones Apparel Group 10,812 180,993
---------------
Total 264,330
- ------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.1%)
Capitol Federal Financial 1,345 54,392
- ------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.7%)
Rush Enterprises Cl A 3,239(b) 36,568
United Rentals 6,444(b) 104,264
WESCO Intl 3,606(b) 135,766
---------------
Total 276,598
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
Syniverse Holdings 3,986(b) $64,573
- ------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $42,842,271) $39,509,737
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (1.8%)
SHARES VALUE(A)
RiverSource Short-Term Cash Fund, 2.54% 716,797(e) $716,797
- ------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $716,797) $716,797
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $43,559,068)(f) $40,226,534
====================================================================================
</Table>
INVESTMENTS IN DERIVATIVES
FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2008
<Table>
<Caption>
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION/
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
E-Mini S&P MidCap 400 Index 2 $160,780 Sept. 2008 $1,045
Mini Russell 2000 Index 5 357,750 Sept. 2008 4,568
- ---------------------------------------------------------------------------------------------------
Total $5,613
- ---------------------------------------------------------------------------------------------------
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the
value of foreign securities represented 8.7% of net assets.
(d) At July 31, 2008, investments in securities included securities valued at
$64,745 that were partially pledged as collateral to cover initial margin
deposits on open stock index futures contracts.
(e) Affiliated Money Market Fund - See Note 5 to the financial statements. The
rate shown is the seven-day current annualized yield at July 31, 2008.
(f) At July 31, 2008, the cost of securities for federal income tax purposes
was $43,614,099 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $ 3,960,158
Unrealized depreciation (7,347,723)
- ------------------------------------------------------------------------------
Net unrealized depreciation $(3,387,565)
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 21
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
FINANCIAL STATEMENTS -----------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2008
<Table>
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $42,842,271) $ 39,509,737
Affiliated money market fund (identified cost $716,797) 716,797
- --------------------------------------------------------------------------
Total investments in securities (identified cost
$43,559,068) 40,226,534
Capital shares receivable 244,092
Dividends receivable 19,699
- --------------------------------------------------------------------------
Total assets 40,490,325
==========================================================================
LIABILITIES
Capital shares payable 396,690
Variation margin payable 5,485
Accrued investment management services fees 773
Accrued distribution fees 195
Accrued transfer agency fees 79
Accrued administrative services fees 66
Other accrued expenses 59,072
- --------------------------------------------------------------------------
Total liabilities 462,360
- --------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 40,027,965
==========================================================================
REPRESENTED BY
Capital stock -- $.01 par value $ 47,715
Additional paid-in capital 60,661,394
Excess of distributions over net investment income (483)
Accumulated net realized gain (loss) (17,353,740)
Unrealized appreciation (depreciation) on investments (3,326,921)
- --------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $ 40,027,965
==========================================================================
</Table>
<Table>
NET ASSET VALUE PER SHARE
Net assets Shares outstanding Net asset value per share
Class A $16,737,687 1,995,771 $8.39(1)
Class B $ 1,001,638 121,121 $8.27
Class C $ 162,845 19,685 $8.27
Class I $15,280,626 1,816,335 $8.41
Class R4 $ 10,136 1,204 $8.42
Class W $ 6,835,033 817,433 $8.36
- ------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $8.90. The offering
price is calculated by dividing the net asset value by 1.0 minus the
maximum sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 23
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2008
<Table>
INVESTMENT INCOME
Income:
Dividends $ 726,208
Income distributions from affiliated money market fund 116,391
Less foreign taxes withheld (1,466)
- ----------------------------------------------------------------------------
Total income 841,133
- ----------------------------------------------------------------------------
Expenses:
Investment management services fees 365,578
Distribution fees
Class A 44,049
Class B 12,319
Class C 1,632
Class W 54,372
Transfer agency fees
Class A 23,992
Class B 1,870
Class C 239
Class R4 5
Class W 43,498
Administrative services fees 38,114
Plan administration services fees -- Class R4 29
Compensation of board members 1,089
Custodian fees 51,010
Printing and postage 35,574
Registration fees 52,879
Professional fees 26,429
Other 5,725
- ----------------------------------------------------------------------------
Total expenses 758,403
Expenses waived/reimbursed by the Investment Manager and
its affiliates (46,967)
Earnings and bank fee credits on cash balances (94)
- ----------------------------------------------------------------------------
Total net expenses 711,342
- ----------------------------------------------------------------------------
Investment income (loss) -- net 129,791
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (16,983,785)
Futures contracts (300,632)
- ----------------------------------------------------------------------------
Net realized gain (loss) on investments (17,284,417)
Net change in unrealized appreciation (depreciation) on
investments 4,376,682
- ----------------------------------------------------------------------------
Net gain (loss) on investments (12,907,735)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(12,777,944)
============================================================================
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED JULY 31, 2008 2007
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 129,791 $ 236,927
Net realized gain (loss) on investments (17,284,417) 1,725
Net change in unrealized appreciation (depreciation) on
investments 4,376,682 (6,728,788)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (12,777,944) (6,490,136)
- ---------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (34,283) (51,227)
Class B -- (1,714)
Class C -- (180)
Class I (113,611) (86,805)
Class R4 (45) (57)
Class W (63,669) (25)
Tax return of capital
Class A (10,260) --
Class I (34,002) --
Class R4 (13) --
Class W (19,056) --
- ---------------------------------------------------------------------------------------
Total distributions (274,939) (140,008)
- ---------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 25
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
2008 2007
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 5,314,007 $ 9,526,024
Class B shares 524,710 1,559,049
Class C shares 84,450 186,778
Class I shares 5,433,998 41,657,381
Class R4 shares -- 4,169
Class W shares 36,417,280 74,596,249
Reinvestment of distributions at net asset value
Class A shares 23,307 12,334
Class B shares -- 1,637
Class C shares -- 133
Class I shares 147,564 86,753
Class R4 shares 14 12
Class W shares 82,712 --
Payments for redemptions
Class A shares (4,596,964) (602,001)
Class B shares (699,446) (163,893)
Class C shares (81,500) (1,577)
Class I shares (24,982,300) (1,367,934)
Class R4 shares (3,611) --
Class W shares (80,368,252) (12,494,015)
- ---------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (62,704,031) 113,001,099
- ---------------------------------------------------------------------------------------
Total increase (decrease) in net assets (75,756,914) 106,370,955
Net assets at beginning of year 115,784,879 9,413,924
- ---------------------------------------------------------------------------------------
Net assets at end of year $ 40,027,965 $115,784,879
=======================================================================================
Undistributed (excess of distributions over) net
investment income $ (483) $ 88,863
- ---------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
NOTES TO FINANCIAL
STATEMENTS ---------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Disciplined Small and Mid Cap Equity Fund (the Fund) is a series of
RiverSource Dimensions Series, Inc. and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. RiverSource Dimensions Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board of Directors (the Board). The Fund invests
primarily in equity securities of companies with market capitalizations of up to
$5 billion or that fall within the range of companies that comprise the Russell
2500(TM) Index at the time of investment.
The Fund offers Class A, Class B, Class C, Class I, Class R4 and Class W shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I and Class R4 shares are sold without a front-end sales charge or CDSC
and are offered to qualifying institutional investors.
- - Class W shares are sold without a front-end sales charge or CDSC and are
offered through qualifying discretionary accounts.
At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager) and the RiverSource affiliated funds-of-funds owned 100% of
Class I shares.
At July 31, 2008, the Investment Manager and the RiverSource affiliated
funds-of-funds owned approximately 38% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 27
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. The procedures adopted by the Board
generally contemplate the use of fair valuation in the event that price
quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the New York Stock Exchange and therefore the closing prices for securities
in such markets or on such exchanges may not fully reflect events that occur
after such close but before the close of the New York Stock Exchange, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New
York Stock Exchange.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
Cash collateral may be collected by the Fund to secure certain over-the-counter
options trades. Cash collateral held by the Fund for such option trades must be
returned to the counterparty upon closure, exercise or expiration of the
contract. The Fund also may buy and sell put and call options and write covered
call options on portfolio securities as well as write cash-secured put options.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that the Fund pays a premium whether or not the
option is exercised. The Fund also has the additional risk of being unable to
enter into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid. At
July 31, 2008, and for the year then ended, the Fund had no outstanding option
contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Futures are valued daily based upon the last sale price at the close of market
on the principal exchange on which they are traded. Upon entering into a futures
contract, the Fund is required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund recognizes a realized
gain or loss when the contract is closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 29
using foreign currency exchange rates from an independent pricing service. The
Fund is subject to the credit risk that the other party will not complete its
contract obligations. At July 31, 2008, the Fund had no outstanding forward
foreign currency contracts.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize
and measure a tax position taken or expected to be taken in a tax return. The
first step is to determine whether a tax position has met the more-likely-than-
not recognition threshold and the second step is to measure a tax position that
meets the threshold to determine the amount of benefit to recognize. Management
of the Fund has concluded that there are no significant uncertain tax positions
that would require recognition in the financial statements. Generally, the tax
authorities can examine all the tax returns filed for the last three years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures contracts, re-
characterization of REIT distributions, post-October losses and losses deferred
due to wash sales. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $7,529
and accumulated net realized loss has been decreased by $7,529.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2008 2007*
- ---------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income................................ $34,283 $51,227
Long-term capital gain......................... -- --
Tax return of capital.......................... 10,260 --
CLASS B
Distributions paid from:
Ordinary income................................ -- 1,714
Long-term capital gain......................... -- --
Tax return of capital.......................... -- --
CLASS C
Distributions paid from:
Ordinary income................................ -- 180
Long-term capital gain......................... -- --
Tax return of capital.......................... -- --
CLASS I
Distributions paid from:
Ordinary income................................ 113,611 86,805
Long-term capital gain......................... -- --
Tax return of capital.......................... 34,002 --
CLASS R4
Distributions paid from:
Ordinary income................................ 45 57
Long-term capital gain......................... -- --
Tax return of capital.......................... 13 --
CLASS W
Distributions paid from:
Ordinary income................................ 63,669 25
Long-term capital gain......................... -- --
Tax return of capital.......................... 19,056 --
</Table>
* Class W is for the period from Dec. 1, 2006 (inception date) to July 31, 2007.
At July 31, 2008, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income........................... $ --
Undistributed accumulated long-term gain................ $ --
Accumulated realized loss............................... $(17,293,096)
Unrealized appreciation (depreciation).................. $ (3,388,048)
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 31
Activities - an amendment of FASB Statement No. 133," which requires enhanced
disclosures about a fund's derivative and hedging activities. Funds are required
to provide enhanced disclosures about (a) how and why a fund uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect a fund's financial
position, financial performance, and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of
SFAS 161 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards
No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. The application of SFAS 157
will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The
adoption of SFAS 157 is not anticipated to have a material impact on the Fund's
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value and the effect of certain
measurements reported in the Statement of Operations for a fiscal period.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.70%
to 0.475% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper Mid-Cap Core Funds Index. In certain circumstances,
the Board may approve a change in the Index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment decreased the management fee by $79,088 for the year ended
July 31, 2008. The management fee for the year ended July 31, 2008, was 0.57% of
the Fund's average daily net assets, including the adjustment under the terms of
the performance incentive arrangement.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.06% to 0.03% annually as the
Fund's assets increase. The fee for the year ended July 31, 2008 was 0.06% of
the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended July 31,
2008, other expenses paid to this company were $445.
COMPENSATION OF BOARD MEMBERS
Compensation of board members includes, for a former Board Chair, compensation
as well as retirement benefits. Certain other aspects of a former Board Chair's
compensation, including health benefits and payment of certain other expenses,
are included under other expenses.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. The Fund pays the Transfer
Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50
for Class B and $20.00 for Class C for this service. The Fund also pays the
Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's
average daily net assets attributable to Class R4 shares and an annual
asset-based fee at a rate of 0.20% of the Fund's average daily net assets
attributable to Class W shares.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 33
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R4 shares for the provision of various administrative,
recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor)
for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise
Financial Services, Inc. also served as a principal underwriter and distributor
to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1,
the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily
net assets attributable to Class A and Class W shares and a fee at an annual
rate of up to 1.00% of the Fund's average daily net assets attributable to Class
B and Class C shares. For Class B and Class C shares, up to 0.75% of the fee is
reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed expense") was approximately $44,000 and $1,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of July 31, 2008 and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$24,965 for Class A, $1,244 for Class B and $19 for Class C for the year ended
July 31, 2008.
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended July 31, 2008, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*) were as follows:
<Table>
Class A..................................................... 1.20%
Class B..................................................... 1.97
Class C..................................................... 1.96
Class I..................................................... 0.84
Class R4.................................................... 0.84
Class W..................................................... 1.31
</Table>
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class R4.................................................... $ 3
Class W..................................................... 211
</Table>
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R4.................................................... $29
</Table>
The management fees waived/reimbursed at the Fund level were $46,724.
Under an agreement which was effective until July 31, 2008, the Investment
Manager and its affiliates contractually agreed to waive certain fees and
expenses such that net expenses (excluding fees and expenses of acquired
funds*), before giving effect to any performance incentive adjustment, would not
exceed the following percentage of the Fund's average daily net assets:
<Table>
Class A..................................................... 1.36%
Class B..................................................... 2.12
Class C..................................................... 2.12
Class I..................................................... 0.96
Class R4.................................................... 1.23
Class W..................................................... 1.41
</Table>
Effective Aug. 1, 2008, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and expenses until July 31, 2009,
unless sooner terminated at the discretion of the Board, such that net expenses
(excluding fees and expenses of acquired funds*), before giving effect to any
performance incentive adjustment, will not exceed the following percentage of
the Fund's average daily net assets:
<Table>
Class A..................................................... 1.36%
Class B..................................................... 2.13
Class C..................................................... 2.12
Class I..................................................... 0.92
Class R4.................................................... 1.22
Class W..................................................... 1.37
</Table>
* In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
funds in which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
EARNINGS AND BANK FEE CREDITS
During the year ended July 31, 2008, the Fund's custodian and transfer agency
fees were reduced by $94 as a result of earnings and bank fee credits from
overnight cash balances. The Fund pays custodian fees to Ameriprise Trust
Company, a subsidiary of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 35
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $34,481,277 and $93,642,813, respectively, for the year
ended July 31, 2008. Realized gains and losses are determined on an identified
cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2008
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 598,899 2,670 (530,197) 71,372
Class B 60,646 -- (83,716) (23,070)
Class C 9,742 -- (9,464) 278
Class I 619,508 16,884 (2,871,475) (2,235,083)
Class R4 -- 2 (384) (382)
Class W 3,946,189 9,475 (9,117,650) (5,161,986)
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED JULY 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 943,472 1,246 (59,415) 885,303
Class B 155,478 166 (15,613) 140,031
Class C 18,543 14 (150) 18,407
Class I 4,167,297 8,763 (131,451) 4,044,609
Class R4 421 1 -- 422
Class W* 7,145,709 -- (1,166,290) 5,979,419
- ----------------------------------------------------------------------------------------------
</Table>
* For the period from Dec, 1, 2006 (inception date) to July 31, 2007.
5. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-term
Cash Fund aggregated $40,412,808 and $41,455,798, respectively, for the year
ended July 31, 2008. The income distributions received with respect to the
Fund's investment in RiverSource Short-Term Cash Fund can be found on the
Statement of Operations and the Fund's invested balance in RiverSource
Short-Term Cash Fund at July 31, 2008, can be found in the Portfolio of
Investments.
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
6. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or emergency
purposes. The credit facility became effective on Oct. 18, 2007, replacing a
prior credit facility. The credit facility agreement, which is a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permits collective borrowings up to $500 million. Interest is
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.06% per annum. Under the prior credit facility, a Fund paid interest on its
outstanding borrowings at a rate equal to either the higher of the federal funds
effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund
had no borrowings during the year ended July 31, 2008.
7. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, the Fund had a capital loss carry-over of
$2,301,857 at July 31, 2008, that if not offset by capital gains will expire as
follows:
<Table>
<Caption>
2014 2015 2016
$93,125 $21,904 $2,186,828
</Table>
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
tax distributions. As a result, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2007 and its fiscal year end ("post-October
loss") as occurring on the first day of the following tax year. At July 31, 2008
the Fund had a post-October loss of $14,991,239 that is treated for income tax
purposes as occurring on Aug. 1, 2008.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 37
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota. In response to defendants' motion to dismiss the
complaint, the Court dismissed one of plaintiffs' four claims and granted
plaintiffs limited discovery. Defendants moved for summary judgment in April
2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The
plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on
August 8, 2007.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
ability of Ameriprise Financial or its affiliates to perform under their
contracts with the Funds, these proceedings are subject to uncertainties and, as
such, we are unable to estimate the possible loss or range of loss that may
result. An adverse outcome in one or more of these proceedings could result in
adverse judgments, settlements, fines, penalties or other relief that could have
a material adverse effect on the consolidated financial condition or results of
operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 39
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007 2006(B)
Net asset value, beginning of
period $9.55 $8.95 $9.48
- ---------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss) .00(c),(d) .05(c) --
Net gains (losses) (both
realized and unrealized) (1.14) .59 (.53)
- ---------------------------------------------------------------------------------------------------------------
Total from investment
operations (1.14) .64 (.53)
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.02) (.04) --
Tax return of capital (.00)(d) -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions (.02) (.04) --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $8.39 $9.55 $8.95
- ---------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $17 $18 $9
- ---------------------------------------------------------------------------------------------------------------
Gross expenses prior to
expense
waiver/reimbursement(e),(f) 1.32% 1.67% 5.83%(g)
- ---------------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(f),(h),(i) 1.20% 1.29% 1.26%(g)
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) .05%(d) .52% .01%(g)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84% 14%
- ---------------------------------------------------------------------------------------------------------------
Total return(j) (11.94%) 7.12% (5.59%)(k)
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(i) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(j) Total return does not reflect payment of a sales charge.
(k) Not annualized.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007 2006(B)
Net asset value, beginning of period $9.47 $8.93 $9.48
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.06)(c) (.04)(c) (.01)
Net gains (losses) (both realized and
unrealized) (1.14) .62 (.54)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.20) .58 (.55)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (.04) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.27 $9.47 $8.93
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1 $1 $--
- -----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.09% 2.12% 6.64%(f)
- -----------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(e),(g),(h) 1.97% 2.06% 2.07%(f)
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) (.71%) (.41%) (.37%)(f)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84% 14%
- -----------------------------------------------------------------------------------------------------------
Total return(i) (12.67%) 6.43% (5.80%)(j)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 41
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007 2006(B)
Net asset value, beginning of period $9.47 $8.93 $9.48
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.06)(c) (.04)(c) (.01)
Net gains (losses) (both realized and
unrealized) (1.14) .61 (.54)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.20) .57 (.55)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (.03) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.27 $9.47 $8.93
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.08% 2.16% 6.61%(f)
- -----------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(e),(g),(h) 1.96% 2.06% 2.04%(f)
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) (.72%) (.40%) (.78%)(f)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84% 14%
- -----------------------------------------------------------------------------------------------------------
Total return(i) (12.67%) 6.37% (5.80%)(j)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007 2006(B)
Net asset value, beginning of period $9.57 $8.95 $9.48
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(c) .08(c) --
Net gains (losses) (both realized and
unrealized) (1.16) .59 (.53)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.11) .67 (.53)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.05) --
Tax return of capital (.01) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.05) (.05) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.41 $9.57 $8.95
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $15 $39 $--
- -----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) .91% .95% 5.58%(f)
- -----------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(e),(g),(h) .84% .95% 1.01%(f)
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) .50% .80% .19%(f)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84% 14%
- -----------------------------------------------------------------------------------------------------------
Total return (11.63%) 7.48% (5.59%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 43
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007 2006(B)
Net asset value, beginning of period $9.56 $8.95 $9.48
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04(c) .07(c) --
Net gains (losses) (both realized and
unrealized) (1.14) .58 (.53)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.10) .65 (.53)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) (.04) --
Tax return of capital (.01) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.04) (.04) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.42 $9.56 $8.95
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $-- $--
- -----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.23% 1.68% 5.69%(f)
- -----------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(e),(g),(h) .84% 1.15% 1.12%(f)
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) .42% .71% .21%(f)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84% 14%
- -----------------------------------------------------------------------------------------------------------
Total return (11.48%) 7.30% (5.59%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2008 2007(B)
Net asset value, beginning of period $9.54 $9.79
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .01 --
Net gains (losses) (both realized and
unrealized) (1.17) (.20)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.16) (.20)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) (.05)
Tax return of capital (.01) --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.02) (.05)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.36 $9.54
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $7 $57
- -----------------------------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.34% 1.60%(f)
- -----------------------------------------------------------------------------------------------------------
Net expenses after
waiver/reimbursement(e),(g),(h) 1.31% 1.32%(f)
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) .08% .03%(f)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 84%
- -----------------------------------------------------------------------------------------------------------
Total return (12.13%) (2.06%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 1, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
acquired funds in which it invests. Such indirect expenses are not included
in the above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Disciplined Small and Mid Cap
Equity Fund (the Fund) (one of the portfolios constituting the RiverSource
Dimensions Series, Inc.) as of July 31, 2008, and the related statement of
operations for the year then ended, the statements of changes in net assets and
the financial highlights for each of the two years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights of the Fund for the period presented through July 31, 2006, were
audited by other auditors whose report dated September 20, 2006, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of July 31, 2008, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of RiverSource Disciplined Small and Mid Cap Equity Fund of the
RiverSource Dimensions Series, Inc. at July 31, 2008, the results of its
operations for the year then ended, and changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
September 22, 2008
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 47
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended July 31, 2008
<Table>
<Caption>
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
Qualified Dividend Income for individuals............. 100%
Dividends Received Deduction for corporations......... 100%
U.S. Government Obligations........................... 0.00%
</Table>
The Fund also designates as distributions of long-term gains, to the extent
necessary to fully distribute such capital gains, earnings and profits
distributed to shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board.
The following is a list of the Fund's Board members. Each member oversees 104
RiverSource funds. Board members serve until the next regular shareholders'
meeting or until he or she reaches the mandatory retirement age established by
the Board. Under the current Board policy, members may serve until the end of
the meeting following their 75th birthday, or the fifteenth anniversary of the
first Board meeting they attended as members of the Board, whichever occurs
first. This policy does not apply to Ms. Jones who may retire after her 75th
birthday.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------
Kathleen Blatz Board member Chief Justice, Minnesota Supreme None
901 S. Marquette Ave. since 2006 Court, 1998-2006; Attorney
Minneapolis, MN 55402
Age 54
- -----------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, RiverSource Funds, None
901 S. Marquette Ave. since 1999 1999-2006; former Governor of
Minneapolis, MN 55402 Minnesota
Age 73
- -----------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member President, Springboard -- Partners None
901 S. Marquette Ave. since 2007 in Cross Cultural Leadership
Minneapolis, MN 55402 (consulting company)
Age 53
- -----------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and None
901 S. Marquette Ave. since 2004 Management, Bentley College; former
Minneapolis, MN 55402 Dean, McCallum Graduate School of
Age 57 Business, Bentley College
- -----------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant None
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 73
- -----------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive
901 S. Marquette Ave. since 2005 Asset Management Insurance
Minneapolis, MN 55402
Age 72
- -----------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries,
901 S. Marquette Ave. since 2002 and Economics, Carleton College Inc. (manufactures
Minneapolis, MN 55402 Chair of the irrigation systems)
Age 69 Board since 2007
- -----------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 49
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------
Catherine James Paglia Board member Director, Enterprise Asset None
901 S. Marquette Ave. since 2004 Management, Inc. (private real
Minneapolis, MN 55402 estate and asset management
Age 55 company)
- -----------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Chief Executive Officer and Idera
901 S. Marquette Ave. since 2002 Director, RiboNovix, Inc. since Pharmaceutical, Inc.
Minneapolis, MN 55402 2003 (biotechnology); former (biotechnology);
Age 64 President, Forester Biotech Healthways, Inc.
(health management
programs)
- -----------------------------------------------------------------------------------------------------
</Table>
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------
William F. Truscott Board member President -- U.S. Asset Management None
53600 Ameriprise since 2001, and Chief Investment Officer,
Financial Center Vice President Ameriprise Financial, Inc. and
Minneapolis, MN 55474 since 2002 President, Chairman of the Board
Age 47 and Chief Investment Officer,
RiverSource Investments, LLC since
2005; Director, President, and
Chief Executive Officer, Ameriprise
Certificate Company since 2006;
Chairman of the Board, Chief
Executive Officer and President,
RiverSource Distributors, Inc.
since 2006; Senior Vice
President -- Chief Investment
Officer, Ameriprise Financial, Inc.
and Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
- -----------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------
Patrick T. Bannigan President since Director and Senior Vice President, Asset
172 Ameriprise 2006 Management, Products and Marketing,
Financial Center RiverSource Investments, LLC since 2006;
Minneapolis, MN 55474 Director and Vice President -- Asset
Age 42 Management, Products and Marketing,
RiverSource Distributors, Inc. since 2006;
Managing Director and Global Head of Product,
Morgan Stanley Investment Management,
2004-2006; President, Touchstone Investments,
2002-2004
- ------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President -- Equity and Fixed
172 Ameriprise since 2004 Income, Ameriprise Financial, Inc. and
Financial Center RiverSource Investments, LLC since 2006; Vice
Minneapolis, MN 55474 President -- Investments, Ameriprise
Age 44 Certificate Company since 2003; Senior Vice
President -- Fixed Income, Ameriprise
Financial, Inc., 2002-2006 and RiverSource
Investments, LLC, 2004-2006
- ------------------------------------------------------------------------------------------
Amy K. Johnson Vice President Vice President -- Asset Management and Trust
5228 Ameriprise since 2006 Company Services, RiverSource Investments, LLC
Financial Center since 2006; Vice President -- Operations and
Minneapolis, MN 55474 Compliance, RiverSource Investments, LLC,
Age 42 2004-2006; Director of Product
Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
- ------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since Vice President -- Investment Accounting,
105 Ameriprise 2002 Ameriprise Financial, Inc. since 2002; Chief
Financial Center Financial Officer, RiverSource Distributors,
Minneapolis, MN 55474 Inc. since 2006
Age 53
- ------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset
5228 Ameriprise General Counsel Management, Ameriprise Financial, Inc. since
Financial Center and Secretary 2005; Chief Counsel, RiverSource Distributors,
Minneapolis, MN 55474 since 2006 Inc. since 2006; Vice President, General
Age 49 Counsel and Secretary, Ameriprise Certificate
Company since 2005; Vice President -- Asset
Management Compliance, Ameriprise Financial,
Inc., 2004-2005; Senior Vice President and
Chief Compliance Officer, USBancorp Asset
Management, 2002-2004
- ------------------------------------------------------------------------------------------
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance
172 Ameriprise Officer since Officer, RiverSource Investments, LLC since
Financial Center 2006 2006; Director -- Mutual Funds, Voyageur Asset
Minneapolis, MN 55474 Management, 2003-2006; Director of Finance,
Age 47 Voyageur Asset Management, 2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 51
FUND OFFICERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering
2934 Ameriprise Prevention Officer, Ameriprise Financial, Inc. since
Financial Center Officer since 2004; Manager Anti-Money Laundering,
Minneapolis, MN 55474 2004 Ameriprise Financial, Inc., 2003-2004;
Age 44 Compliance Director and Bank Secrecy Act
Officer, American Express Centurion Bank,
2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement") RiverSource Investments
provides investment advice and other services to the Fund and all RiverSource
funds (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
the IMS Agreement. RiverSource Investments prepared detailed reports for the
Board and its Contracts Committee in March and April 2008, including reports
based on data provided by independent organizations to assist the Board in
making this determination. In addition, throughout the year, the Board (or its
committees) reviews information prepared by RiverSource Investments addressing
the services RiverSource Investments provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts, Investment Review and Compliance Committees in determining whether to
continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved renewal
of the IMS Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services performed by RiverSource Investments, as well as its expertise,
resources and capabilities. The Board specifically considered many developments
during the past year concerning the services provided by RiverSource
Investments, including, in particular, the continued investment in, and
resources dedicated to, the Fund's operations, particularly in the areas of
trading systems, new product initiatives, legal and compliance. Further, in
connection with the Board's evaluation of the overall package of services
provided by RiverSource Investments, the Board considered the quality of the
administrative and transfer agency services provided by RiverSource Investments'
affiliates to the Fund. The Board also reviewed the financial condition of
RiverSource Investments (and its affiliates) and each entity's ability to carry
out its responsibilities under the IMS Agreement. The Board also discussed the
acceptability of the terms of the IMS Agreement (including the relatively broad
scope of services required to be performed by RiverSource Investments). The
Board concluded that the services being performed under the IMS Agreement were
of a reasonably high quality, particularly in light of recent market conditions.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 53
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates were in a position to continue to provide a high quality and
level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods (including since inception), recent Fund
inflows (and outflows) and a comparison of the Fund's net assets from December
2006 to December 2007. The Board observed that the Fund's investment
performance, although weaker than the previous year, reflected the
interrelationship of particularly volatile market conditions with the investment
strategies employed by the portfolio management team. Further, the Board noted
that appropriate measures have been taken to adjust certain proprietary models.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability.
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund, with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was slightly below the peer group's median expense ratio shown in
the reports. The Board also considered the Fund's performance incentive
adjustment and noted its continued appropriateness. Based on its review, the
Board concluded that the Fund's management fee was fair and reasonable in light
of the extent and quality of services that the Fund receives.
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability since inception. The Board also
considered the services acquired by the investment manager through the use of
commission dollars paid by the Funds on portfolio transactions. The Board noted
that the fees paid by the Fund should permit the investment manager to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. The Board concluded that profitability
levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 10, 2008, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement.
PROXY VOTING
- -------------------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed
with the SEC by August 31 for the most recent 12-month period ending June 30 of
that year, and is available without charge by visiting riversource.com/funds; or
searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2008 ANNUAL REPORT 55
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by
the Fund's current prospectus. RiverSource(R)
mutual funds are distributed by RiverSource
Distributors, Inc., Member FINRA, and managed by
RiverSource Investments, LLC. These companies are
part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6505 E (9/08)
</Table>
Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE
DISCIPLINED SMALL CAP VALUE FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2008
(Prospectus also enclosed)
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH.
<Table>
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges,
fees and other matters of interest. Please
read the prospectus carefully before you
invest or send money. (SINGLE STRATEGY FUNDS ICON)
</Table>
TABLE OF CONTENTS --------------------------------------------------------------
<Table>
Your Fund at a Glance.............. 2
Manager Commentary................. 5
The Fund's Long-term Performance... 10
Fund Expenses Example.............. 12
Portfolio of Investments........... 15
Financial Statements............... 22
Notes to Financial Statements...... 28
Report of Independent Registered
Public Accounting Firm........... 49
Federal Income Tax Information..... 51
Board Members and Officers......... 52
Approval of Investment Management
Services Agreement............... 55
Proxy Voting....................... 57
</Table>
(DALBAR LOGO)
The RiverSource mutual fund shareholder reports have
been awarded the Communications Seal from Dalbar Inc.,
an independent financial services research firm. The
Seal recognizes communications demonstrating a level
of excellence in the industry.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
- --------------------------------------------------------------------------------
> RiverSource Disciplined Small Cap Value Fund (the Fund) Class A shares
declined 9.67% (excluding sales charge) for the 12-month period ended July 31,
2008.
> The Fund outperformed its benchmark, the unmanaged Russell 2000(R) Value
Index, which fell 9.95% for the annual period.
> The Fund also outperformed the Lipper Small-Cap Value Funds Index,
representing the Fund's peer group, which declined 12.36% for the same period.
ANNUALIZED TOTAL RETURNS (for period ended July 31, 2008)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Since
1 year inception(a)
- ------------------------------------------------------------------
RiverSource Disciplined
Small Cap Value Fund
Class A (excluding sales charge) -9.67% -4.19%
- ------------------------------------------------------------------
Russell 2000(R) Value Index (unmanaged) -9.95% -1.03%
- ------------------------------------------------------------------
Lipper Small-Cap Value Funds Index -12.36% -1.07%
- ------------------------------------------------------------------
</Table>
(a) Fund data is from Feb. 16, 2006. Russell 2000 Value Index and Lipper peer
group data is from March 1, 2006.
(See "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the table above. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses. See the Average Annual Total Returns table for performance of other
share classes of the Fund.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
<Table>
<Caption>
STYLE
VALUE BLEND GROWTH
LARGE
MEDIUM SIZE
X SMALL
</Table>
Shading within the style matrix indicates areas in which the Fund is designed to
generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and may serve as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
ANNUAL OPERATING EXPENSE RATIO
(as of the current prospectus)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Net Fund and
Acquired Fund
Total Net (Underlying
Fund Expenses(a) Fund)(b)
- ------------------------------------------------
Class A 1.54% 1.24% 1.29%
- ------------------------------------------------
Class B 2.29% 2.00% 2.05%
- ------------------------------------------------
Class C 2.29% 2.00% 2.05%
- ------------------------------------------------
Class I 1.22% 0.92% 0.97%
- ------------------------------------------------
Class R2 2.03% 1.72% 1.77%
- ------------------------------------------------
Class R3 1.79% 1.47% 1.52%
- ------------------------------------------------
Class R4 1.52% 1.22% 1.27%
- ------------------------------------------------
Class R5 1.28% 0.97% 1.02%
- ------------------------------------------------
</Table>
(a) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until July 31, 2009, unless
sooner terminated at the discretion of the Fund's Board. Any amounts waived
will not be reimbursed by the Fund. Under this agreement, net fund expenses
(excluding fees and expenses of acquired funds), before giving effect to any
performance incentive adjustment (that decreased the management fee by 0.10%
for the year ended July 31, 2008), will not exceed 1.43% for Class A, 2.19%
for Class B, 2.19% for Class C, 1.04% for Class I, 1.84% for Class R2, 1.59%
for Class R3, 1.34% for Class R4 and 1.09% for Class R5.
(b) In addition to the Fund's total annual operating expenses that the Fund
bears directly, the Fund's shareholders indirectly bear the expenses of
acquired funds (affiliated and unaffiliated funds) in which the Fund
invests. The Fund's "Acquired fund fees and expenses," based on its
investment in the acquired funds, was 0.05% for the year ended July 31,
2008.
Investments in small- and mid-capitalization companies often involve greater
risks and potential volatility than investments in larger, more established
companies.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 3
YOUR FUND AT A GLANCE (continued) ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AT JULY 31, 2008
SINCE
Without sales charge 1 YEAR INCEPTION
Class A (inception 2/16/06) -9.67% -4.19%
- -----------------------------------------------------------------
Class B (inception 2/16/06) -10.47% -4.98%
- -----------------------------------------------------------------
Class C (inception 2/16/06) -10.43% -4.97%
- -----------------------------------------------------------------
Class I (inception 2/16/06) -9.46% -3.90%
- -----------------------------------------------------------------
Class R2 (inception 12/11/06) -9.82% -10.44%
- -----------------------------------------------------------------
Class R3 (inception 12/11/06) -9.65% -10.22%
- -----------------------------------------------------------------
Class R4 (inception 2/16/06) -9.27% -3.97%
- -----------------------------------------------------------------
Class R5 (inception 12/11/06) -9.50% -9.96%
- -----------------------------------------------------------------
With sales charge
Class A (inception 2/16/06) -14.86% -6.46%
- -----------------------------------------------------------------
Class B (inception 2/16/06) -14.84% -6.48%
- -----------------------------------------------------------------
Class C (inception 2/16/06) -11.30% -4.97%
- -----------------------------------------------------------------
</Table>
<Table>
<Caption>
AT JUNE 30, 2008
SINCE
Without sales charge 1 YEAR INCEPTION
Class A (inception 2/16/06) -21.64% -6.06%
- -----------------------------------------------------------------
Class B (inception 2/16/06) -22.19% -6.79%
- -----------------------------------------------------------------
Class C (inception 2/16/06) -22.23% -6.78%
- -----------------------------------------------------------------
Class I (inception 2/16/06) -21.35% -5.77%
- -----------------------------------------------------------------
Class R2 (inception 12/11/06) -21.70% -13.36%
- -----------------------------------------------------------------
Class R3 (inception 12/11/06) -21.46% -13.13%
- -----------------------------------------------------------------
Class R4 (inception 2/16/06) -21.29% -5.84%
- -----------------------------------------------------------------
Class R5 (inception 12/11/06) -21.40% -12.93%
- -----------------------------------------------------------------
With sales charge
Class A (inception 2/16/06) -26.13% -8.37%
- -----------------------------------------------------------------
Class B (inception 2/16/06) -25.98% -8.32%
- -----------------------------------------------------------------
Class C (inception 2/16/06) -22.99% -6.78%
- -----------------------------------------------------------------
</Table>
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I, Class R2, Class R3, Class R4 and Class R5 shares. Class I,
Class R2, Class R3, Class R4 and Class R5 are available to institutional
investors only.
- --------------------------------------------------------------------------------
4 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
MANAGER COMMENTARY -------------------------------------------------------------
At July 31, 2008, approximately 63% of the Fund's shares were owned in the
aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC
(RiverSource). As a result of asset allocation decisions by RiverSource, it is
possible that RiverSource Disciplined Small Cap Value Fund may experience
relatively large purchases or redemptions from affiliated funds-of-funds (see
page 37, 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 Small Cap Value Fund may experience increased expenses as it buys
and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds. For more information of the Fund's expenses, see the discussions
beginning on pages 12 and 33.
Dear Shareholders:
RiverSource Disciplined Small Cap Value Fund (the Fund) Class A shares declined
9.67% (excluding sales charge) for the 12-month period ended July 31, 2008. The
Fund outperformed its benchmark, the unmanaged Russell 2000(R) Value Index
(Russell Index), which fell 9.95%, as well as the Lipper Small-Cap Value Funds
Index, representing the Fund's peer group, which declined 12.36%, for the same
period.
SECTOR DIVERSIFICATION(1) (at July 31, 2008; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Consumer Discretionary 12.9%
- ------------------------------------------------
Consumer Staples 5.1%
- ------------------------------------------------
Energy 8.6%
- ------------------------------------------------
Financials 28.8%
- ------------------------------------------------
Health Care 6.0%
- ------------------------------------------------
Industrials 18.9%
- ------------------------------------------------
Information Technology 8.3%
- ------------------------------------------------
Materials 8.2%
- ------------------------------------------------
Telecommunication Services 0.5%
- ------------------------------------------------
Utilities 2.7%
- ------------------------------------------------
</Table>
(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing. No single
industry exceeds 25% of portfolio assets.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
SIGNIFICANT PERFORMANCE FACTORS
The annual period was a most challenging one, characterized by heightened
concerns about weakness in the economy, ongoing turmoil in the housing and
financial markets, a credit crunch and soaring commodity prices. As a result,
equity volatility increased as the year progressed, peaking in March with the
collapse of Bear Stearns and rearing its head again in June. Given the extreme
pressure on the financial system, it makes sense, then, that the financials
sector performed worst. Clearly, the resulting equity market decline was only
partially mitigated by the impressive double-digit gains generated by the energy
sector, as crude oil prices surged past $140 per barrel before falling back a
bit to end July at just over $124 per barrel.
The Fund's performance resulted from the three quantitative investment models we
employ in selecting stocks for the Fund's portfolio: momentum, value and
quality. The momentum model identifies stocks that we believe will experience
improving investor sentiment over the next six to nine months. The value model
uses a proprietary earnings estimate and selects stocks with low price-to-
predicted-earnings ratios. The quality model selects companies that we feel
possess strong and stable fundamentals, adjusted for value. Under the Fund's
investment process, the three models choose the small-cap value stocks for the
TOP TEN HOLDINGS (at July 31, 2008; % of portfolio assets)
- ---------------------------------------------------------------------
<Table>
<Caption>
Aspen Insurance Holdings 2.0%
- ------------------------------------------------
Platinum Underwriters Holdings 1.5%
- ------------------------------------------------
IPC Holdings 1.4%
- ------------------------------------------------
Swift Energy 1.3%
- ------------------------------------------------
Montpelier Re Holdings 1.2%
- ------------------------------------------------
Max Capital Group 1.1%
- ------------------------------------------------
Zenith Natl Insurance 1.0%
- ------------------------------------------------
Odyssey Re Holdings 1.0%
- ------------------------------------------------
Grey Wolf 0.9%
- ------------------------------------------------
Rent-A-Center 0.9%
- ------------------------------------------------
</Table>
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
portfolio. We then weight the models and determine the exposure to sectors and
industries.
During the reporting period, the momentum and value models outperformed the
Russell Index, more than offsetting the lagging performance of the quality
model. The variance in performance supports our research, indicating that the
style diversification provided by the very different quantitative models is a
significant investment advantage over the long term.
Following a specific, disciplined process, we do not make sector or industry
bets based on economic or equity market outlooks. That said, the Fund's
quantitative models led to a bias toward smaller-cap stocks within the Russell
Index and toward the cheapest price-to-earnings stocks, both of which detracted
from results.
Overall, sector allocation contributed to the Fund's performance, with sizable
weightings in energy and materials and only modest positions in financials and
information technology particularly helpful. Partially offsetting these
positives was the detracting effect of having a significant exposure to the
weakly-performing consumer discretionary sector.
Because we use a bottom-up approach, it is not surprising that most of the
Fund's outperformance was driven by stock selection. Stock selection was
especially effective in the consumer discretionary, telecommunications, consumer
staples and materials sectors. Stock selection in the energy and health care
sectors detracted somewhat from performance.
Individual stocks that contributed most favorably to the Fund's return were
consumer staples
During the reporting period, the momentum and value models outperformed the
Russell Index, more than offsetting the lagging performance of the quality
model.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 7
MANAGER COMMENTARY (continued) -------------------------------------------------
company CAL-MAINE FOODS (selected by the momentum and value models),
telecommunications company GOLDEN TELECOM (all three models), energy company
WHITING PETROLEUM (value and quality models), and insurance company IPC HOLDINGS
(value and quality models).
Among individual holdings, the stocks that detracted most from the Fund's
results were financials company LANDAMERICA FINANCIAL GROUP (selected by the
value and quality models), energy company USEC (value and quality models),
consumer discretionary firm STANDARD PACIFIC (quality model), and financials
company THORNBURG MORTGAGE (momentum model).
At the end of July, the Fund's individual stock holdings included four
financials companies: ASPEN INSURANCE HOLDINGS (selected by all three models),
PLATINUM UNDERWRITERS HOLDINGS (value and quality models), IPC HOLDINGS (value
and quality models) and MONTPELIER RE HOLDINGS (value and quality models).
Another top holding at the end of the period was energy company SWIFT ENERGY
(all three models).
CHANGES TO THE FUND'S PORTFOLIO
As a result of quantitative models-driven stock selection during the period, the
Fund's sector allocations changed somewhat. For example, the Fund's exposure to
consumer discretionary and financials decreased relative to the Russell Index,
while its positions in health care, telecommunications and industrials
increased.
In managing risk associated with small-cap investing, we use a proprietary risk
management system that allows us to manage the Fund's exposure to several key
factors, including industry, sector, market capitalization and portfolio
turnover. During the period, we used these and other techniques to reduce the
expected risk of the portfolio and to avoid large deviations in exposure from
the Russell Index.
OUR FUTURE STRATEGY
We believe our use of multiple investment disciplines serves the Fund well in
all investment environments over the long term, and the portfolio is well
positioned for most potential market conditions. Whether there is a surge in
small-cap stocks or a downturn, the combination of models should, in our view,
help us deliver value relative to the Russell Index
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
over extended periods of time. We are convinced that our multifaceted,
disciplined approach may assist in managing risk in the portfolio. We believe
this combination of style diversification and rigorous risk management will
allow us to maintain the high quality of the Fund's portfolio in whatever market
conditions lie ahead.
<Table>
(PHOTO - DIMITRIS BERTSIMAS) (PHOTO - STEVE KOKKOTOS) (PHOTO - GINA MOURTZINOU)
Dimitris Bertsimas, Ph.D. Steve Kokkotos, Ph.D. Gina Mourtzinou, Ph.D.
Senior Portfolio Manager Portfolio Manager Portfolio Manager
</Table>
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities that have increased or decreased in value. The
views expressed in this statement reflect those of the portfolio manager(s) only
through the end of the period of the report as stated on the cover and do not
necessarily represent the views of RiverSource Investments, LLC (RiverSource) or
any subadviser to the Fund or any other person in the RiverSource or subadviser
organizations. Any such views are subject to change at any time based upon
market or other conditions and RiverSource disclaims any responsibility to
update such views. These views may not be relied on as investment advice and,
because investment decisions for a RiverSource fund are based on numerous
factors, may not be relied on as an indication of trading intent on behalf of
any RiverSource fund.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 9
THE FUND'S LONG-TERM PERFORMANCE -----------------------------------------------
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Disciplined Small Cap Value Fund Class A shares (from
3/1/06 to 7/31/08)* as compared to the performance of two widely cited
performance indices, the Russell 2000 Value Index and the Lipper Small-Cap Value
Funds Index. In comparing the Fund's Class A shares to these indices, you should
take into account the fact that the Fund's performance reflects the maximum
sales charge of 5.75%, while such charges are not reflected in the performance
of the indices. Returns for the Fund include the reinvestment of any
distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
* Fund data is from Feb. 16, 2006. Russell 2000 Value Index and Lipper peer
group data is from March 1, 2006.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
Results at July 31, 2008
SINCE
1 YEAR INCEPTION(3)
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $8,514 $8,485
- --------------------------------------------------------------------------
Average annual total return -14.86% -6.46%
- --------------------------------------------------------------------------
RUSSELL 2000 VALUE INDEX(1)
Cumulative value of $10,000 $9,005 $9,754
- --------------------------------------------------------------------------
Average annual total return -9.95% -1.03%
- --------------------------------------------------------------------------
LIPPER SMALL-CAP VALUE FUNDS INDEX(2)
Cumulative value of $10,000 $8,764 $9,743
- --------------------------------------------------------------------------
Average annual total return -12.36% -1.07%
- --------------------------------------------------------------------------
</Table>
Results for other share classes can be found on page 4.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED SMALL CAP
VALUE FUND LINE GRAPH)
<Table>
<Caption>
RIVERSOURCE DISCIPLINED
SMALL CAP
VALUE FUND
CLASS A LIPPER SMALL-CAP
(INCLUDES SALES RUSSELL 2000 VALUE FUNDS
CHARGE) VALUE INDEX(1) INDEX(2)
----------------------- -------------- -----------------
3/1/06 $9,425 $10,000 $10,000
7/31/06 9,010 10,059 9,793
1/31/07 10,326 11,576 11,173
7/31/07 9,405 10,831 11,116
1/31/08 8,389 9,868 9,988
7/31/08 8,485 9,754 9,743
</Table>
(1) The Russell 2000 Value Index, an unmanaged index, measures the performance
of those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values. The index reflects reinvestment of all
distributions and changes in market prices.
(2) The Lipper Small-Cap Value Funds Index includes the 30 largest small-cap
value funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured against
this index for purposes of determining the performance incentive adjustment.
(3) Fund data is from Feb. 16, 2006. Russell 2000 Value Index and Lipper peer
group data is from March 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 11
FUND EXPENSES EXAMPLE ----------------------------------------------------------
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, which may include management fees; distribution and service (12b-1) fees;
and other Fund fees and expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
In addition to the ongoing expenses which the Fund bears directly, the Fund's
shareholders indirectly bear the expenses of the funds in which it invests (also
referred to as "acquired funds"), including affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange traded funds). The
Fund's indirect expense from investing in the acquired funds is based on the
Fund's pro rata portion of the cumulative expenses charged by the acquired funds
using the expense ratio of each of the acquired funds as of the acquired fund's
most recent shareholder report.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended July 31, 2008.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
DIRECT AND
DIRECT INDIRECT
BEGINNING ENDING EXPENSES EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING
FEB. 1, 2008 JULY 31, 2008 THE PERIOD(A),(B) THE PERIOD(B),(C)
- --------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,011.50 $ 6.45 $ 6.60
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.45 $ 6.47 $ 6.62
- --------------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,007.00 $10.23 $10.38
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,014.67 $10.27 $10.42
- --------------------------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,007.00 $10.23 $10.38
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,014.67 $10.27 $10.42
- --------------------------------------------------------------------------------------------------
Class I
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,012.70 $ 4.55 $ 4.70
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.34 $ 4.57 $ 4.72
- --------------------------------------------------------------------------------------------------
Class R2
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,010.40 $ 8.55 $ 8.70
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,016.36 $ 8.57 $ 8.72
- --------------------------------------------------------------------------------------------------
Class R3
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,011.50 $ 7.30 $ 7.45
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,017.60 $ 7.32 $ 7.47
- --------------------------------------------------------------------------------------------------
Class R4
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,013.90 $ 6.06 $ 6.21
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,018.85 $ 6.07 $ 6.22
- --------------------------------------------------------------------------------------------------
Class R5
- --------------------------------------------------------------------------------------------------
Actual(d) $1,000 $1,012.70 $ 4.80 $ 4.95
- --------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.09 $ 4.82 $ 4.97
- --------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 13
FUND EXPENSES EXAMPLE (continued) ----------------------------------------------
ANNUALIZED EXPENSE RATIOS
<Table>
<Caption>
FUND'S ACQUIRED FUND
ANNUALIZED FEES AND NET FUND
EXPENSE RATIO EXPENSES EXPENSES
- ----------------------------------------------------------------------
Class A 1.29% .03% 1.32%
- ----------------------------------------------------------------------
Class B 2.05% .03% 2.08%
- ----------------------------------------------------------------------
Class C 2.05% .03% 2.08%
- ----------------------------------------------------------------------
Class I .91% .03% .94%
- ----------------------------------------------------------------------
Class R2 1.71% .03% 1.74%
- ----------------------------------------------------------------------
Class R3 1.46% .03% 1.49%
- ----------------------------------------------------------------------
Class R4 1.21% .03% 1.24%
- ----------------------------------------------------------------------
Class R5 .96% .03% .99%
- ----------------------------------------------------------------------
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio for each class,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
(b) The Investment Manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until July 31, 2009, unless
sooner terminated at the discretion of the Fund's Board, such that net
expenses (excluding fees and expenses of acquired funds), before giving
effect to any performance incentive adjustment, will not exceed 1.43% for
Class A, 2.19% for Class B, 2.19% for Class C, 1.04% for Class I, 1.84% for
Class R2, 1.59% for Class R3, 1.34% for Class R4 and 1.09% for Class R5. Any
amounts waived will not be reimbursed by the Fund. This change was effective
Aug. 1, 2008. Had this change been in place for the entire six month period
ended July 31, 2008, the actual direct expenses paid would have been: $6.60
for Class A, $10.38 for Class B, $10.38 for Class C, $4.65 for Class I,
$8.65 for Class R2, $7.40 for Class R3, $6.16 for Class R4 and $4.90 for
Class R5; the hypothetical direct expenses paid would have been: $6.62 for
Class A, $10.42 for Class B, $10.42 for Class C, $4.67 for Class I, $8.67
for Class R2, $7.42 for Class R3, $6.17 for Class R4 and $4.92 for Class R5.
Additionally, had this change been in place for the entire six month period
ended July 31, 2008, the actual direct and indirect expenses paid would have
been: $6.75 for Class A, $10.53 for Class B, $10.53 for Class C, $4.80 for
Class I, $8.80 for Class R2, $7.55 for Class R3, $6.31 for Class R4 and
$5.05 for Class R5; the hypothetical direct and indirect expenses paid would
have been: $6.77 for Class A, $10.57 for Class B, $10.57 for Class C, $4.82
for Class I, $8.82 for Class R2, $7.57 for Class R3, $6.32 for Class R4 and
$5.07 for Class R5.
(c) Expenses are equal to the Fund's annualized expense ratio for each class
plus the acquired fund fees and expenses, multiplied by the average account
value over the period, multiplied by 182/366 (to reflect the one-half year
period).
(d) Based on the actual return for the six months ended July 31, 2008: +1.15%
for Class A, +0.70% for Class B, +0.70% for Class C, 1.27% for Class I,
+1.04% for Class R2, +1.15% for Class R3, +1.39% for Class R4 and +1.27% for
Class R5.
- --------------------------------------------------------------------------------
14 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
PORTFOLIO OF INVESTMENTS -------------------------------------------------------
JULY 31, 2008
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
<Table>
<Caption>
COMMON STOCKS (97.8%)
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (0.4%)
Ceradyne 2,052(b) $95,111
Triumph Group 989 52,377
---------------
Total 147,488
- -------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.2%)
Hub Group Cl A 1,975(b) 76,749
- -------------------------------------------------------------------------------------
AIRLINES (1.9%)
Alaska Air Group 12,301(b) 219,942
Hawaiian Holdings 20,121(b) 177,467
SkyWest 14,529 221,131
UAL 9,225 76,660
---------------
Total 695,200
- -------------------------------------------------------------------------------------
AUTO COMPONENTS (1.4%)
ArvinMeritor 3,968 54,798
Cooper Tire & Rubber 6,030 55,536
Dana Holding 5,655(b) 36,079
Lear 8,509(b) 122,614
Modine Mfg 6,309 110,029
Stoneridge 6,462(b) 85,105
Superior Inds Intl 1,858 31,382
---------------
Total 495,543
- -------------------------------------------------------------------------------------
BEVERAGES (0.5%)
Central European Distribution 2,369(b) 172,842
- -------------------------------------------------------------------------------------
BIOTECHNOLOGY (0.4%)
Celera 3,202(b) 43,707
Emergent BioSolutions 6,419(b) 86,464
---------------
Total 130,171
- -------------------------------------------------------------------------------------
BUILDING PRODUCTS (1.1%)
American Woodmark 2,700 63,693
Ameron Intl 718 92,830
Gibraltar Inds 3,490 55,177
Griffon 5,100(b) 51,255
Insteel Inds 2,763 48,822
Universal Forest Products 3,172 85,644
---------------
Total 397,421
- -------------------------------------------------------------------------------------
CAPITAL MARKETS (2.6%)
Apollo Investment 4,108 65,440
BGC Partners Cl A 11,278(b) 80,074
Epoch Holding 3,670 43,379
Knight Capital Group Cl A 8,897(b) 145,822
MCG Capital 7,447 35,597
Penson Worldwide 1,930(b) 35,551
Piper Jaffray Companies 1,798(b) 63,829
SWS Group 9,559 180,856
Waddell & Reed Financial Cl A 5,017 167,568
Westwood Holdings Group 2,887 134,188
---------------
Total 952,304
- -------------------------------------------------------------------------------------
CHEMICALS (5.4%)
Calgon Carbon 10,210(b) 193,990
CF Inds Holdings 1,041 170,162
Innophos Holdings 3,056 89,755
Koppers Holdings 5,007 216,352
NewMarket 2,489 153,721
Olin 2,569 76,402
OM Group 4,425(b) 148,680
PolyOne 17,163(b) 128,723
Quaker Chemical 3,627 108,375
Sensient Technologies 4,893 152,270
Solutia 1,479(b) 22,584
Stepan 3,999 229,382
Westlake Chemical 4,435 77,657
WR Grace & Co 6,970(b) 179,617
---------------
Total 1,947,670
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 15
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
COMMERCIAL BANKS (6.4%)
BancFirst 3,648 $172,368
Capitol Bancorp 7,257 96,446
Chemical Financial 5,999 159,393
Community Bank System 4,934 116,442
Community Trust Bancorp 5,313 163,747
First BanCorp 9,385(c) 82,119
First Community Bancshares 2,534 90,793
First Financial Bankshares 1,038 47,634
First Merchants 3,564 74,844
Glacier Bancorp 3,678 79,702
Oriental Financial Group 4,721(c) 82,004
Renasant 3,531 62,534
Republic Bancorp Cl A 5,111 158,134
Security Bank 12,265 64,391
Simmons First Natl Cl A 3,875 115,281
Southside Bancshares 3,684 73,054
Tompkins Financial 2,414 103,102
Trustmark 7,144 129,021
UMB Financial 3,946 217,307
Umpqua Holdings 9,459 128,453
W Holding 86,156(c) 67,632
---------------
Total 2,284,401
- -------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (3.6%)
ABM Inds 5,312 127,116
Exponent 5,809(b) 177,407
GeoEye 6,526(b) 141,288
IKON Office Solutions 14,446 206,578
Kelly Services Cl A 7,100 130,711
Kimball Intl Cl B 9,948 106,543
MPS Group 4,866(b) 56,056
Spherion 6,173(b) 30,186
Standard Parking 4,249(b) 91,608
Viad 968 29,505
Volt Information Sciences 3,851(b) 53,413
Watson Wyatt Worldwide Cl A 2,425 140,505
---------------
Total 1,290,916
- -------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.0%)
ARRIS Group 13,724(b) 131,339
Black Box 2,326 69,082
DG FastChannel 1,214(b) 20,638
EMS Technologies 4,796(b) 99,325
Loral Space & Communications 1,769(b) 29,242
---------------
Total 349,626
- -------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (0.6%)
Adaptec 14,051(b) 51,286
Electronics for Imaging 4,798(b) 67,220
Imation 4,278 81,539
---------------
Total 200,045
- -------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.8%)
Dycom Inds 2,219(b) 35,216
Granite Construction 1,917 60,635
Northwest Pipe 2,279(b) 132,523
Perini 2,050(b) 56,088
---------------
Total 284,462
- -------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.4%)
Headwaters 10,089(b) 132,267
- -------------------------------------------------------------------------------------
CONSUMER FINANCE (0.6%)
Advanta Cl B 7,813 61,801
Cash America Intl 3,489 147,096
---------------
Total 208,897
- -------------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.3%)
Rock-Tenn Cl A 3,224 114,613
- -------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.3%)
Regis 3,785 105,942
- -------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (0.5%)
Ampal-American Israel Series A 21,423(b,c) 119,326
PHH 3,814(b) 59,079
---------------
Total 178,405
- -------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
Alaska Communications Systems Group 3,197 40,730
Atlantic Tele-Network 1,584 48,454
---------------
Total 89,184
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
ELECTRIC UTILITIES (0.8%)
Portland General Electric 4,379 $102,863
UIL Holdings 4,169 130,406
Westar Energy 1,916 42,305
---------------
Total 275,574
- -------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (2.8%)
AZZ 3,453(b) 158,044
Encore Wire 3,604 65,701
GrafTech Intl 10,250(b) 240,363
Powell Inds 4,196(b) 220,290
Superior Essex 3,724(b) 167,654
Woodward Governor 3,235 145,575
---------------
Total 997,627
- -------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.7%)
Anixter Intl 1,196(b) 81,364
Benchmark Electronics 14,489(b) 212,118
Insight Enterprises 5,122(b) 65,357
Methode Electronics 2,508 28,065
Plexus 3,602(b) 102,657
SYNNEX 4,564(b) 106,615
---------------
Total 596,176
- -------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (3.7%)
Bristow Group 2,580(b) 116,074
Bronco Drilling 6,667(b) 116,673
Dawson Geophysical 1,368(b) 89,782
Grey Wolf 37,848(b) 323,221
GulfMark Offshore 2,500(b) 125,450
Hornbeck Offshore Services 1,274(b) 56,795
Oil States Intl 2,769(b) 151,963
Parker Drilling 12,843(b) 103,643
Pioneer Drilling 11,920(b) 189,409
Trico Marine Services 1,172(b) 29,909
Union Drilling 1,933(b) 37,230
---------------
Total 1,340,149
- -------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.6%)
Andersons 3,883 176,483
Great Atlantic & Pacific Tea 5,729(b) 91,148
Ruddick 5,189 160,651
Village Super Market Cl A 1,517 64,093
Winn-Dixie Stores 4,977(b) 79,085
---------------
Total 571,460
- -------------------------------------------------------------------------------------
FOOD PRODUCTS (2.2%)
Cal-Maine Foods 6,843 259,350
Chiquita Brands Intl 4,560(b) 69,996
Flowers Foods 3,363 101,125
Fresh Del Monte Produce 2,598(b,c) 54,766
Imperial Sugar 3,311 46,288
Omega Protein 9,141(b) 142,965
Sanderson Farms 2,977 118,306
---------------
Total 792,796
- -------------------------------------------------------------------------------------
GAS UTILITIES (1.6%)
EnergySouth 3,336 202,129
Laclede Group 2,109 89,443
New Jersey Resources 4,802 163,700
South Jersey Inds 3,348 124,880
---------------
Total 580,152
- -------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.3%)
Datascope 2,548 118,941
- -------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (4.0%)
Alliance Imaging 14,153(b) 134,170
AMERIGROUP 11,107(b) 282,118
HealthSpring 6,255(b) 121,660
Kindred Healthcare 9,294(b) 250,659
Magellan Health Services 2,729(b) 113,936
Molina Healthcare 5,604(b) 167,223
Owens & Minor 2,095 96,202
RehabCare Group 3,980(b) 65,909
ResCare 6,119(b) 112,345
Universal American Financial 9,379(b) 98,386
---------------
Total 1,442,608
- -------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.4%)
Bob Evans Farms 3,264 93,480
O'Charley's 4,974 55,958
---------------
Total 149,438
- -------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (1.9%)
American Greetings Cl A 3,828 56,731
Beazer Homes USA 11,104 69,178
Furniture Brands Intl 5,195 61,665
Hovnanian Enterprises Cl A 5,816(b) 40,886
M/I Homes 3,063 58,044
Meritage Homes 3,926(b) 70,864
Natl Presto Inds 1,413 101,001
Standard Pacific 17,865 59,669
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 17
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
HOUSEHOLD DURABLES (CONT.)
Tupperware Brands 4,412 $172,069
---------------
Total 690,107
- -------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.8%)
Seaboard 106 190,800
Tredegar 5,483 89,812
---------------
Total 280,612
- -------------------------------------------------------------------------------------
INSURANCE (11.6%)
American Physicians Capital 804 40,023
Aspen Insurance Holdings 27,062(c) 687,104
Employers Holdings 5,104 90,953
Infinity Property & Casualty 1,206 53,739
IPC Holdings 15,864(c) 509,234
LandAmerica Financial Group 3,062 35,182
Max Capital Group 16,716(c) 392,325
Montpelier Re Holdings 27,647(c) 434,058
Natl Western Life Insurance Cl A 369 87,398
Odyssey Re Holdings 8,747 341,745
Platinum Underwriters Holdings 14,487(c) 522,981
Presidential Life 6,153 98,694
Safety Insurance Group 5,174 219,740
Selective Insurance Group 12,577 271,663
Stewart Information Services 2,559 44,680
Zenith Natl Insurance 10,693 367,946
---------------
Total 4,197,465
- -------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.6%)
CMGI 13,156(b) 161,030
InfoSpace 10,999 103,831
Interwoven 7,901(b) 111,246
RealNetworks 19,066(b) 130,983
SonicWALL 13,937(b) 81,392
---------------
Total 588,482
- -------------------------------------------------------------------------------------
IT SERVICES (1.2%)
Perot Systems Cl A 7,536(b) 126,002
SAIC 8,441(b) 159,450
TNS 6,981(b) 159,167
---------------
Total 444,619
- -------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.6%)
JAKKS Pacific 8,259(b) 181,533
RC2 2,065(b) 47,412
---------------
Total 228,945
- -------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.1%)
PharmaNet Development Group 1,149(b) 27,725
- -------------------------------------------------------------------------------------
MACHINERY (4.5%)
Ampco-Pittsburgh 1,452 63,133
Badger Meter 4,294 241,881
CIRCOR Intl 4,130 245,983
Commercial Vehicle Group 3,154(b) 30,499
FreightCar America 1,629 62,049
LB Foster Cl A 3,904(b) 150,187
Lydall 7,346(b) 114,304
Miller Inds 8,759(b) 75,327
Mueller Inds 4,815 123,601
NACCO Inds Cl A 1,424 143,824
Robbins & Myers 5,328 270,502
Twin Disc 4,553 91,561
---------------
Total 1,612,851
- -------------------------------------------------------------------------------------
MARINE (0.8%)
Genco Shipping & Trading 2,694 183,677
TBS Intl Series A 2,771(b,c) 101,252
---------------
Total 284,929
- -------------------------------------------------------------------------------------
MEDIA (0.1%)
Scholastic 1,513 39,020
- -------------------------------------------------------------------------------------
METALS & MINING (1.8%)
AM Castle & Co 2,574 52,098
AMCOL Intl 2,990 95,441
Compass Minerals Intl 2,704 204,422
Kaiser Aluminum 411 21,680
Olympic Steel 2,861 145,482
Schnitzer Steel Inds Cl A 1,533 138,338
---------------
Total 657,461
- -------------------------------------------------------------------------------------
MULTILINE RETAIL (0.8%)
Dillard's Cl A 16,892 170,778
Fred's Cl A 8,050 103,523
---------------
Total 274,301
- -------------------------------------------------------------------------------------
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
MULTI-UTILITIES (0.3%)
NorthWestern 2,756 $68,266
PNM Resources 2,956 34,615
---------------
Total 102,881
- -------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (4.7%)
Berry Petroleum Cl A 2,980 128,259
Bill Barrett 3,567(b) 146,746
Brigham Exploration 4,519(b) 63,266
Callon Petroleum 6,989(b) 160,677
EXCO Resources 4,670(b) 121,654
Golar LNG 1,158(c) 21,296
PetroQuest Energy 7,156(b) 149,346
Stone Energy 3,687(b) 188,111
Swift Energy 8,753(b) 444,826
USEC 20,945(b) 109,333
Whiting Petroleum 1,656(b) 155,118
---------------
Total 1,688,632
- -------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.1%)
Schweitzer-Mauduit Intl 1,130 21,029
- -------------------------------------------------------------------------------------
PERSONAL PRODUCTS (0.5%)
Chattem 2,682(b) 172,909
- -------------------------------------------------------------------------------------
PHARMACEUTICALS (1.1%)
Par Pharmaceutical Companies 3,737(b) 64,650
Perrigo 4,759 167,659
ViroPharma 13,273(b) 163,391
---------------
Total 395,700
- -------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (5.2%)
Annaly Capital Management 7,854 118,360
Anworth Mtge Asset 22,989 136,785
BRT Realty Trust 3,773 45,087
Capstead Mtge 12,700 138,684
EastGroup Properties 1,612 74,797
Entertainment Properties Trust 2,281 122,353
Extra Space Storage 3,097 43,884
Inland Real Estate 3,299 49,320
LTC Properties 5,508 160,999
MFA Mtge Investments 22,287 143,751
Nationwide Health Properties 4,557 169,109
Natl Health Investors 5,004 154,574
NorthStar Realty Finance 3,020 25,308
Omega Healthcare Investors 8,276 142,927
Redwood Trust 2,266 49,467
Saul Centers 2,347 113,759
Senior Housing Properties Trust 7,888 166,042
---------------
Total 1,855,206
- -------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.1%)
Avatar Holdings 1,620(b) 51,273
- -------------------------------------------------------------------------------------
ROAD & RAIL (1.4%)
Arkansas Best 7,055 262,023
Saia 3,835(b) 67,113
Werner Enterprises 7,719 183,789
---------------
Total 512,925
- -------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.9%)
Amkor Technology 10,109(b) 88,555
Brooks Automation 6,585(b) 51,429
MKS Instruments 9,771(b) 201,282
OmniVision Technologies 10,734(b) 117,537
Silicon Storage Technology 9,903(b) 31,591
Skyworks Solutions 10,620(b) 100,465
Spansion Cl A 24,847(b) 56,900
Zoran 3,933(b) 32,526
---------------
Total 680,285
- -------------------------------------------------------------------------------------
SOFTWARE (0.1%)
Blackbaud 2,165 38,667
- -------------------------------------------------------------------------------------
SPECIALTY RETAIL (6.8%)
Asbury Automotive Group 10,056 99,655
Blockbuster Cl A 42,737(b) 119,236
Borders Group 5,556 27,224
Brown Shoe 7,589 122,486
Cato Cl A 3,358 60,075
Charming Shoppes 23,124(b) 126,026
Children's Place Retail Stores 3,739(b) 142,269
Collective Brands 9,274(b) 119,449
Conn's 6,515(b) 102,286
Dress Barn 4,475(b) 72,182
Finish Line Cl A 13,512(b) 146,605
Group 1 Automotive 6,948 136,528
Haverty Furniture Companies 4,131 47,176
Hot Topic 10,579(b) 66,542
Jo-Ann Stores 4,007(b) 88,034
MarineMax 3,266(b) 21,490
</Table>
See accompanying Notes to Portfolio of Investments.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 19
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SPECIALTY RETAIL (CONT.)
Men's Wearhouse 5,680 $113,089
Rent-A-Center 14,162(b) 300,235
Shoe Carnival 2,763(b) 42,274
Sonic Automotive Cl A 8,562 86,219
Stage Stores 10,999 163,005
Systemax 6,489 106,484
Zale 6,388(b) 141,303
---------------
Total 2,449,872
- -------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
Perry Ellis Intl 4,870(b) 105,923
- -------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (1.1%)
Abington Bancorp 7,585 75,697
Corus Bankshares 12,404 48,500
Flushing Financial 2,510 44,251
MASSBANK 1,894 75,419
Ocwen Financial 6,989(b) 42,214
PMI Group 18,121 45,484
Westfield Financial 7,148 70,408
---------------
Total 401,973
- -------------------------------------------------------------------------------------
TOBACCO (0.3%)
Universal 1,777 91,729
- -------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
Rush Enterprises Cl A 6,739(b) 76,083
- -------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
Rural Cellular Cl A 599(b) 26,931
USA Mobility 5,544(b) 45,017
---------------
Total 71,948
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $38,903,001) $35,162,619
- -------------------------------------------------------------------------------------
<Caption>
MONEY MARKET FUND (--%)
ISSUER SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 2.54% 1(d) $1
- -------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1) $1
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $38,903,002)(e) $35,162,620
=====================================================================================
</Table>
INVESTMENTS IN DERIVATIVES
At July 31, 2008, $37,800 was held in a margin deposit account as collateral to
cover initial margin deposits on open stock index futures contracts.
FUTURES CONTRACTS OUTSTANDING AT JULY 31, 2008
<Table>
<Caption>
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL EXPIRATION APPRECIATION
CONTRACT DESCRIPTION LONG (SHORT) MARKET VALUE DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------
Mini Russell 2000 Index 10 $715,500 Sept. 2008 $6,156
</Table>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Securities are valued by using procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2008, the
value of foreign securities represented 8.6% of net assets.
(d) Affiliated Money Market Fund -- See Note 5 to the financial statements. The
rate shown is the seven-day current annualized yield at July 31, 2008.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(e) At July 31, 2008, the cost of securities for federal income tax purposes
was $38,936,246 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $2,754,439
Unrealized depreciation (6,528,065)
- ----------------------------------------------------------
Net unrealized depreciation $3,773,626
- ----------------------------------------------------------
</Table>
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 21
FINANCIAL STATEMENTS -----------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2008
<Table>
<Caption>
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $38,903,001) $35,162,619
Affiliated money market fund (identified cost $1) 1
- --------------------------------------------------------------------------
Total investments in securities (identified cost $38,903,002) 35,162,620
Capital shares receivable 14,997
Dividends and accrued interest receivable 29,283
Receivable for investment securities sold 2,565,357
Margin deposits on futures contracts 37,800
- --------------------------------------------------------------------------
Total assets 37,810,057
- --------------------------------------------------------------------------
LIABILITIES
Bank overdraft 503
Capital shares payable 26,927
Payable for investment securities purchased 1,777,178
Variation margin payable 2,070
Accrued investment management services fees 841
Accrued distribution fees 98
Accrued transfer agency fees 24
Accrued administrative services fees 79
Other accrued expenses 50,365
- --------------------------------------------------------------------------
Total liabilities 1,858,085
- --------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $35,951,972
- --------------------------------------------------------------------------
REPRESENTED BY
Capital stock -- $.01 par value $ 40,997
Additional paid-in capital 43,267,724
Undistributed net investment income 248,710
Accumulated net realized gain (loss) (3,871,233)
Unrealized appreciation (depreciation) on investments (3,734,226)
- --------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $35,951,972
- --------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JULY 31, 2008
<Table>
<Caption>
NET ASSET VALUE PER SHARE
NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE
Class A $12,703,109 1,450,722 $8.76(1)
Class B $ 347,557 40,165 $8.65
Class C $ 54,959 6,351 $8.65
Class I $22,825,612 2,600,072 $8.78
Class R2 $ 3,982 455 $8.75
Class R3 $ 3,987 455 $8.76
Class R4 $ 8,777 1,000 $8.78
Class R5 $ 3,989 455 $8.77
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A is $9.29. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 23
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2008
<Table>
<Caption>
INVESTMENT INCOME
Income:
Dividends $ 616,548
Interest 245
Income distributions from affiliated money market fund 34,221
Less foreign taxes withheld (1,734)
- --------------------------------------------------------------------------
Total income 649,280
- --------------------------------------------------------------------------
Expenses:
Investment management services fees 286,759
Distribution fees
Class A 31,837
Class B 4,226
Class C 546
Class R2 20
Class R3 11
Transfer agency fees
Class A 8,441
Class B 329
Class C 40
Class R2 3
Class R3 3
Class R4 4
Class R5 3
Administrative services fees 30,592
Plan administration services fees
Class R2 11
Class R3 11
Class R4 23
Compensation of board members 720
Custodian fees 31,410
Printing and postage 21,490
Registration fees 65,191
Professional fees 26,189
Other 4,246
- --------------------------------------------------------------------------
Total expenses 512,105
Expenses waived/reimbursed by the Investment Manager and
its affiliates (115,376)
Earnings and bank fee credits on cash balances (2)
- --------------------------------------------------------------------------
Total net expenses 396,727
- --------------------------------------------------------------------------
Investment income (loss) -- net 252,553
- --------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
STATEMENT OF OPERATIONS (CONTINUED)
JULY 31, 2008
<Table>
<Caption>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions $(3,845,656)
Futures contracts (18,579)
- --------------------------------------------------------------------------
Net realized gain (loss) on investments (3,864,235)
Net change in unrealized appreciation (depreciation) on
investments (418,356)
- --------------------------------------------------------------------------
Net gain (loss) on investments (4,282,591)
- --------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(4,030,038)
- --------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 25
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED JULY 31, 2008 2007
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 252,553 $ 346,396
Net realized gain (loss) on investments (3,864,235) 943,233
Net change in unrealized appreciation (depreciation) on
investments (418,356) (2,467,303)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (4,030,038) (1,177,674)
- ---------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (83,613) (22,789)
Class C (16) --
Class I (249,572) (22,690)
Class R2 (12) (17)
Class R3 (23) (17)
Class R4 (77) (58)
Class R5 (38) (18)
Net realized gain
Class A (316,596) (234,913)
Class B (9,723) (7,684)
Class C (1,289) (463)
Class I (625,909) (106,528)
Class R2 (99) (84)
Class R3 (99) (84)
Class R4 (216) (337)
Class R5 (99) (84)
- ---------------------------------------------------------------------------------------
Total distributions (1,287,381) (395,766)
- ---------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
YEAR ENDED JULY 31, 2008 2007
CAPITAL SHARE TRANSACTIONS
Proceeds from sales
Class A shares $ 2,340,112 $ 3,183,242
Class B shares 151,479 600,360
Class C shares 43,142 23,355
Class I shares 4,520,154 23,678,701
Class R2 shares -- 5,000
Class R3 shares -- 5,000
Class R4 shares -- 8,003
Class R5 shares -- 5,000
Reinvestment of distributions at net asset value
Class A shares 127,449 55,291
Class B shares 9,506 7,499
Class C shares 1,086 278
Class I shares 875,178 128,993
Class R4 shares -- 178
Payments for redemptions
Class A shares (1,630,280) (1,077,624)
Class B shares (300,352) (269,435)
Class C shares (26,754) (4,930)
Class I shares (4,247,823) (115,893)
Class R4 shares -- (9,200)
- ---------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 1,862,897 26,223,818
- ---------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,454,522) 24,650,378
Net assets at beginning of year 39,406,494 14,756,116
- ---------------------------------------------------------------------------------------
Net assets at end of year $35,951,972 $39,406,494
- ---------------------------------------------------------------------------------------
Undistributed net investment income $ 248,710 $ 333,335
- ---------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Financial Statements are an integral part of this
statement.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RiverSource Disciplined Small Cap Value Fund (the Fund) is a series of
RiverSource Dimensions Series, Inc. and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. RiverSource Dimensions Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board of Directors (the Board). The Fund invests
primarily in small capitalization equity securities of companies with market
capitalizations that fall within the range of companies that comprise the
Russell 2000 Value Index at the time of investment.
The Fund offers Class A, Class B, Class C, Class I, Class R2, Class R3, Class R4
and Class R5 shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I, Class R2, Class R3, Class R4 and Class R5 shares are sold without a
front-end sales charge or CDSC and are offered to qualifying institutional
investors.
At July 31, 2008, RiverSource Investments, LLC (RiverSource Investments or the
Investment Manager), and the affiliated funds-of-funds owned 100% of Class I
shares, and the Investment Manager owned 100% of Class R2, Class R3, Class R4
and Class R5 shares. The Investment Manager and the affiliated funds-of-funds
owned approximately 63% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
Class specific expenses (e.g., distribution and service fees, transfer agency
fees, plan administration services fees) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized gains or losses
on investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. The procedures adopted by the Board
generally contemplate the use of fair valuation in the event that price
quotations or valuations are not readily available, price quotations or
valuations from other sources are not reflective of market value and thus deemed
unreliable, or a significant event has occurred in relation to a security or
class of securities (such as foreign securities) that is not reflected in price
quotations or valuations from other sources. A fair value price is a good faith
estimate of the value of a security at a given point in time.
Many securities markets and exchanges outside the U.S. close prior to the close
of the New York Stock Exchange and therefore the closing prices for securities
in such markets or on such exchanges may not fully reflect events that occur
after such close but before the close of the New York Stock Exchange, including
significant movements in the U.S. market after foreign exchanges have closed.
Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise
Financial), parent company of the Investment Manager, as administrator to the
Fund, will fair value foreign securities pursuant to procedures adopted by the
Board, including utilizing a third party pricing service to determine these fair
values. These procedures take into account multiple factors, including movements
in the U.S. securities markets, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New
York Stock Exchange.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
Cash collateral may be collected by the Fund to secure certain over-the-counter
options trades. Cash collateral held by the Fund for such option trades must be
returned to the counterparty upon closure, exercise or expiration of the
contract. The Fund also may buy and sell put and call options and write covered
call options on portfolio securities as well as write cash-secured put options.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of 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.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 29
The risk in buying an option is that the Fund pays a premium whether or not the
option is exercised. The Fund also has the additional risk of being unable to
enter into a closing transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid. At
July 31, 2008, and for the year then ended, the Fund had no outstanding option
contracts.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Futures are valued daily based upon the last sale price at the close of market
on the principal exchange on which they are traded. Upon entering into a futures
contract, the Fund is required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day. The
variation margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund recognizes a realized
gain or loss when the contract is closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the Statement of Operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The net U.S.
dollar value of foreign currency underlying all contractual commitments held by
the Fund and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
service. The Fund is subject to the credit risk that the other party will not
complete its contract obligations. At July 31, 2008, the Fund had no outstanding
forward foreign currency contracts.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Financial Accounting Standards Board (FASB) Interpretation 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes," clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB Statement 109,
"Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize
and measure a tax position taken or expected to be taken in a tax return. The
first step is to determine whether a tax position has met the more-likely-than-
not recognition threshold and the second step is to measure a tax position that
meets the threshold to determine the amount of benefit to recognize. Management
of the Fund has concluded that there are no significant uncertain tax positions
that would require recognition in the financial statements. Generally, the tax
authorities can examine all the tax returns filed for the last three years.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of futures, re-
characterization of REIT distributions, post-October losses and losses deferred
due to wash sales. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $3,827
and accumulated net realized loss has been decreased by $3,771 resulting in a
net reclassification adjustment to increase paid-in capital by $56.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 31
The tax character of distributions paid for the years indicated is as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2008 2007*
- ---------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income....................... $329,192 $232,895
Long-term capital gain................ 71,017 24,807
CLASS B
Distributions paid from:
Ordinary income....................... 7,542 6,873
Long-term capital gain................ 2,181 811
CLASS C
Distributions paid from:
Ordinary income....................... 1,016 414
Long-term capital gain................ 289 49
CLASS I
Distributions paid from:
Ordinary income....................... 735,081 117,968
Long-term capital gain................ 140,400 11,250
CLASS R2
Distributions paid from:
Ordinary income....................... 89 92
Long-term capital gain................ 22 9
CLASS R3
Distributions paid from:
Ordinary income....................... 100 92
Long-term capital gain................ 22 9
CLASS R4
Distributions paid from:
Ordinary income....................... 244 359
Long-term capital gain................ 49 36
CLASS R5
Distributions paid from:
Ordinary income....................... 115 93
Long-term capital gain................ 22 9
</Table>
* Class R2, Class R3 and Class R5 are for the period from Dec. 11, 2006
(inception date) to July 31, 2007.
At July 31, 2008, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income................... $ 249,138
Undistributed accumulated long-term gain........ $ --
Accumulated realized loss....................... $(3,831,834)
Unrealized appreciation (depreciation).......... $(3,774,053)
</Table>
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging
Activities -- an amendment of FASB Statement No. 133," which requires enhanced
disclosures about a fund's derivative and hedging activities. Funds are required
to provide enhanced disclosures about (a) how and why a fund uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect a fund's financial
position, financial performance, and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
Nov. 15, 2008. As of July 31, 2008, management does not believe the adoption of
SFAS 161 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
On Sept. 20, 2006, the FASB released Statement of Financial Accounting Standards
No. 157 "Fair Value Measurements" (SFAS 157). SFAS 157 establishes an
authoritative definition of fair value, sets out a hierarchy for measuring fair
value, and requires additional disclosures about the inputs used to develop the
measurements of fair value and the effect of certain measurements reported in
the Statement of Operations for a fiscal period. The application of SFAS 157
will be effective for the Fund's fiscal year beginning Aug. 1, 2008. The
adoption of SFAS 157 is not anticipated to have a material impact on the Fund's
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value and the effect of certain
measurements reported in the Statement of Operations for a fiscal period.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 33
is a percentage of the Fund's average daily net assets that declines from 0.85%
to 0.725% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment determined monthly by
measuring the percentage difference over a rolling 12-month period between the
annualized performance of one Class A share of the Fund and the annualized
performance of the Lipper Small-Cap Value Funds Index. In certain circumstances,
the Board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The adjustment decreased the fee by $38,280 for the year ended July 31,
2008. The management fee for the year ended July 31, 2008, was 0.75% of the
Fund's average daily net assets, including the adjustment under the terms of the
performance incentive arrangement.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.08% to 0.05% annually as the
Fund's assets increase. The fee for the year ended July 31, 2008 was 0.08% of
the Fund's average daily net assets.
OTHER FEES
Other expenses are for, among other things, certain expenses of the Fund or the
Board including: Fund boardroom and office expense, employee compensation,
employee health and retirement benefits, and certain other expenses. Payment of
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the year ended July 31,
2008, other expenses paid to this company were $212.
COMPENSATION OF BOARD MEMBERS
Compensation of Board members includes, for a former Board Chair, compensation
as well as retirement benefits. Certain other aspects of a former Board Chair's
compensation, including health benefits and payment of certain other expenses,
are included under other expenses.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
TRANSFER AGENCY FEES
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. The Fund pays the Transfer
Agent an annual account-based fee at a rate equal to $19.50 for Class A, $20.50
for Class B and $20.00 for Class C for this service. The Fund also pays
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
the Transfer Agent an annual asset-based fee at a rate of 0.05% of the Fund's
average daily net assets attributable to Class R2, Class R3, Class R4 and Class
R5 shares.
The Transfer Agent charges an annual fee of $5 per inactive account, charged on
a pro rata basis for 12 months from the date the account becomes inactive. These
fees are included in the transfer agency fees on the Statement of Operations.
PLAN ADMINISTRATION SERVICES FEES
Under a Plan Administration Services Agreement with the Transfer Agent, the Fund
pays an annual fee at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares for the provision of
various administrative, recordkeeping, communication and educational services.
DISTRIBUTION FEES
The Fund has an agreement with RiverSource Distributors, Inc. (the Distributor)
for distribution and shareholder services. Prior to Oct. 1, 2007, Ameriprise
Financial Services, Inc. also served as a principal underwriter and distributor
to the Fund. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1,
the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily
net assets attributable to Class A and Class R3 shares, a fee at an annual rate
of up to 0.50% of the Fund's average daily net assets attributable to Class R2
shares and a fee at an annual rate of up to 1.00% of the Fund's average daily
net assets attributable to Class B and Class C shares. For Class B and Class C
shares, up to 0.75% of the fee is reimbursed for distribution expenses.
The amount of distribution expenses incurred by the Distributor and not yet
reimbursed ("unreimbursed expense") was approximately $13,000 and $1,000 for
Class B and Class C shares, respectively. These amounts are based on the most
recent information available as of July 31, 2008 and may be recovered from
future payments under the distribution plan or CDSC. To the extent the
unreimbursed expense has been fully recovered, the distribution fee is reduced.
SALES CHARGES
Sales charges received by the Distributor for distributing Fund shares were
$5,847 for Class A, $792 for Class B and $8 for Class C for the year ended July
31, 2008.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 35
EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES
For the year ended July 31, 2008, the Investment Manager and its affiliates
waived/reimbursed certain fees and expenses such that net expenses (excluding
fees and expenses of acquired funds*) were as follows:
<Table>
Class A............................................. 1.24%
Class B............................................. 2.00
Class C............................................. 2.00
Class I............................................. 0.92
Class R2............................................ 1.46
Class R3............................................ 1.21
Class R4............................................ 0.97
Class R5............................................ 0.97
</Table>
The waived/reimbursed fees and expenses for the transfer agency fees at the
class level were as follows:
<Table>
Class R2............................................. $1
Class R3............................................. 2
Class R5............................................. 1
</Table>
The waived/reimbursed fees and expenses for the plan administration services
fees at the class level were as follows:
<Table>
Class R2............................................ $11
Class R3............................................ 11
Class R4............................................ 22
</Table>
The management fees waived/reimbursed at the Fund level were $115,328.
Under an agreement which was effective until July 31, 2008, the Investment
Manager and its affiliates contractually agreed to waive certain fees and
expenses such that net expenses (excluding fees and expenses of acquired
funds*), before giving effect to any performance incentive adjustment, would not
exceed the following percentage of the Fund's average daily net assets:
<Table>
Class A............................................. 1.40%
Class B............................................. 2.16
Class C............................................. 2.15
Class I............................................. 1.02
Class R2............................................ 1.82
Class R3............................................ 1.57
Class R4............................................ 1.32
Class R5............................................ 1.07
</Table>
Effective Aug. 1, 2008, the Investment Manager and its affiliates have
contractually agreed to waive certain fees and expenses until July 31, 2009,
unless sooner terminated at the discretion of the Board, such that net expenses
(excluding fees and expenses of acquired funds*), before giving effect to any
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
performance incentive adjustment, will not exceed the following percentage of
the Fund's average daily net assets:
<Table>
Class A............................................. 1.43%
Class B............................................. 2.19
Class C............................................. 2.19
Class I............................................. 1.04
Class R2............................................ 1.84
Class R3............................................ 1.59
Class R4............................................ 1.34
Class R5............................................ 1.09
</Table>
()* In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the funds in
which it invests (also referred to as "acquired funds"), including
affiliated and non-affiliated pooled investment vehicles (including mutual
funds and exchange traded funds). Because the acquired funds have varied
expense and fee levels and the Fund may own different proportions of
acquired funds at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
EARNINGS CREDITS AND CUSTODIAN FEES
During the year ended July 31, 2008, the Fund's custodian fees were reduced by
$2 as a result of earnings credits from overnight cash balances. The Fund pays
custodian fees to Ameriprise Trust Company, a subsidiary of Ameriprise
Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $32,656,834 and $32,391,306, respectively, for the year
ended July 31, 2008. Realized gains and losses are determined on an identified
cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
<Table>
<Caption>
YEAR ENDED JULY 31, 2008
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
Class A 257,256 14,450 (182,613) 89,093
Class B 16,842 1,085 (33,441) (15,514)
Class C 4,661 124 (3,091) 1,694
Class I 474,035 99,227 (482,981) 90,281
- ---------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 37
<Table>
<Caption>
YEAR ENDED JULY 31, 2007
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ---------------------------------------------------------------------------------
Class A 299,874 5,134 (99,517) 205,491
Class B 56,474 700 (25,366) 31,808
Class C 2,131 26 (466) 1,691
Class I 2,182,119 11,966 (10,620) 2,183,465
Class R2* 455 -- -- 455
Class R3* 455 -- -- 455
Class R4 822 17 (839) --
Class R5* 455 -- -- 455
- ---------------------------------------------------------------------------------
</Table>
()* For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
5. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. The cost of the
Fund's purchases and proceeds from sales of shares of the RiverSource Short-Term
Cash Fund aggregated $11,229,092 and $12,735,343, respectively, for the year
ended July 31, 2008. The income distributions received with respect to the
Fund's investment in RiverSource Short-Term Cash Fund can be found on the
Statement of Operations and the Fund's invested balance in RiverSource Short-
Term Cash Fund at July 31, 2008, can be found in the Portfolio of Investments.
6. BANK BORROWINGS
The Fund has entered into a revolving credit facility with a syndicate of banks
headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or emergency
purposes. The credit facility became effective on Oct. 18, 2007, replacing a
prior credit facility. The credit facility agreement, which is a collective
agreement between the Fund and certain other RiverSource funds, severally and
not jointly, permits collective borrowings up to $500 million. Interest is
charged to each Fund based on its borrowings at a rate equal to the federal
funds rate plus 0.30%. Each borrowing under the credit facility matures no later
than 60 days after the date of borrowing. The Fund also pays a commitment fee
equal to its pro rata share of the amount of the credit facility at a rate of
0.06% per annum. Under the prior credit facility, a Fund paid interest on its
outstanding borrowings at a rate equal to either the higher of the federal funds
effective rate plus 0.40% or the JPMCB Prime Commercial Lending Rate. The Fund
had no borrowings during the year ended July 31, 2008.
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
7. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, the Fund had a capital loss carry-over of
$554,680 at July 31, 2008, that if not offset by capital gains will expire in
2016.
Because the measurement periods for a regulated investment company's income are
different for excise tax purposes versus income tax purposes, special rules are
in place to protect the amount of earnings and profits needed to support excise
tax distributions. As a result, the Fund is permitted to treat net capital
losses realized between Nov. 1, 2007 and its fiscal year end ("post-October
loss") as occurring on the first day of the following tax year. At July 31,
2008, the Fund had a post-October loss of $3,277,154 that is treated for income
tax purposes as occurring on Aug. 1, 2008.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
8. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota. In response to defendants' motion to dismiss the
complaint, the Court dismissed one of plaintiffs' four claims and granted
plaintiffs limited discovery. Defendants moved for summary judgment in April
2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The
plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on
August 8, 2007.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), entered into settlement agreements with the Securities
and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC)
related to market timing activities. As a result, AEFC was censured and ordered
to cease and desist from committing or causing any violations of certain
provisions of the Investment Advisers Act of 1940, the Investment Company Act of
1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million
and civil money penalties of $7 million. AEFC also agreed to retain an
independent distribution consultant to assist in
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 39
developing a plan for distribution of all disgorgement and civil penalties
ordered by the SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its
affiliates have cooperated with the SEC and the MDOC in these legal proceedings,
and have made regular reports to the RiverSource Funds' Boards of
Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
9. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
CLASS A
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007 2006(b)
Net asset value, beginning of period $10.00 $9.77 $10.22
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04(c) .14(c) .02
Net gains (losses) (both realized and
unrealized) (1.01) .29 (.47)
- ------------------------------------------------------------------------------------
Total from investment operations (.97) .43 (.45)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.01) --
Distributions from realized gains (.22) (.19) --
- ------------------------------------------------------------------------------------
Total distributions (.27) (.20) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.76 $10.00 $9.77
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $13 $14 $11
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.54% 1.73% 3.27%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.24% 1.35% 1.40%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .44% 1.30% .55%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127% 40%
- ------------------------------------------------------------------------------------
Total return(i) (9.67%) 4.29% (4.40%)(j)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Feb. 16, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 41
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007 2006(b)
Net asset value, beginning of period $9.90 $9.73 $10.22
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02)(c) .05(c) --
Net gains (losses) (both realized and
unrealized) (1.01) .31 (.49)
- ------------------------------------------------------------------------------------
Total from investment operations (1.03) .36 (.49)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains (.22) (.19) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.65 $9.90 $9.73
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $1 $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.29% 2.38% 4.05%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 2.00% 2.11% 2.18%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) (.27%) .49% (.17%)(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127% 40%
- ------------------------------------------------------------------------------------
Total return(i) (10.47%) 3.51% (4.79%)(j)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Feb. 16, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Total return does not reflect payment of a sales charge.
(j) Not annualized.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007 2006(b)
Net asset value, beginning of period $9.90 $9.73 $10.22
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.03)(c) .05(c) --
Net gains (losses) (both realized and
unrealized) (1.00) .31 (.49)
- ------------------------------------------------------------------------------------
Total from investment operations (1.03) .36 (.49)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.00)(d) -- --
Distributions from realized gains (.22) (.19) --
- ------------------------------------------------------------------------------------
Total distributions (.22) (.19) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.65 $9.90 $9.73
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(e),(f) 2.29% 2.47% 4.05%(g)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(f),(h),(i) 2.00% 2.11% 2.18%(g)
- ------------------------------------------------------------------------------------
Net investment income (loss) (.29%) .43% (.22%)(g)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127% 40%
- ------------------------------------------------------------------------------------
Total return(j) (10.43%) 3.51% (4.79%)(k)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Feb. 16, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Rounds to zero.
(e) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(f) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(g) Adjusted to an annual basis.
(h) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(i) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(j) Total return does not reflect payment of a sales charge.
(k) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 43
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007 2006(b)
Net asset value, beginning of period $10.03 $9.78 $10.22
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07(c) .15(c) .03
Net gains (losses) (both realized and
unrealized) (1.02) .32 (.47)
- ------------------------------------------------------------------------------------
Total from investment operations (.95) .47 (.44)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) --
Distributions from realized gains (.22) (.19) --
- ------------------------------------------------------------------------------------
Total distributions (.30) (.22) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.78 $10.03 $9.78
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $23 $25 $3
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.22% 1.19% 3.00%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) .92% 1.05% 1.13%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .79% 1.43% .91%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127% 40%
- ------------------------------------------------------------------------------------
Total return (9.46%) 4.69% (4.31%)(i)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Feb. 16, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007(b)
Net asset value, beginning of period $9.97 $10.99
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .02 .06
Net gains (losses) (both realized and
unrealized) (1.00) (.86)
- ------------------------------------------------------------------------------------
Total from investment operations (.98) (.80)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.03)
Distributions from realized gains (.22) (.19)
- ------------------------------------------------------------------------------------
Total distributions (.24) (.22)
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.75 $9.97
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 2.03% 1.85%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.46% 1.80%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .23% .77%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127%
- ------------------------------------------------------------------------------------
Total return (9.82%) (7.40%)(i)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 45
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007(b)
Net asset value, beginning of period $9.99 $10.99
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .04 .07
Net gains (losses) (both realized and
unrealized) (1.00) (.85)
- ------------------------------------------------------------------------------------
Total from investment operations (.96) (.78)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.03)
Distributions from realized gains (.22) (.19)
- ------------------------------------------------------------------------------------
Total distributions (.27) (.22)
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.76 $9.99
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.79% 1.58%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) 1.21% 1.55%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .48% 1.02%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127%
- ------------------------------------------------------------------------------------
Total return (9.65%) (7.21%)(i)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
CLASS R4
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007 2006(b)
Net asset value, beginning of period $10.00 $9.77 $10.22
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07(c) .17(c) .02
Net gains (losses) (both realized and
unrealized) (1.00) .28 (.47)
- ------------------------------------------------------------------------------------
Total from investment operations (.93) .45 (.45)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.03) --
Distributions from realized gains (.22) (.19) --
- ------------------------------------------------------------------------------------
Total distributions (.29) (.22) --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.78 $10.00 $9.77
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $-- $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.52% 1.83% 3.12%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) .97% 1.26% 1.25%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .73% 1.60% .69%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127% 40%
- ------------------------------------------------------------------------------------
Total return (9.27%) 4.42% (4.40%)(i)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Feb. 16, 2006 (when shares became publicly available) to
July 31, 2006.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 47
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended July 31, 2008 2007(b)
Net asset value, beginning of period $10.02 $10.99
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) .07 .11
Net gains (losses) (both realized and
unrealized) (1.02) (.86)
- ------------------------------------------------------------------------------------
Total from investment operations (.95) (.75)
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03)
Distributions from realized gains (.22) (.19)
- ------------------------------------------------------------------------------------
Total distributions (.30) (.22)
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.77 $10.02
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- ------------------------------------------------------------------------------------
Gross expenses prior to expense
waiver/reimbursement(d),(e) 1.28% 1.09%(f)
- ------------------------------------------------------------------------------------
Net expenses after expense
waiver/reimbursement(e),(g),(h) .97% 1.05%(f)
- ------------------------------------------------------------------------------------
Net investment income (loss) .72% 1.53%(f)
- ------------------------------------------------------------------------------------
Portfolio turnover rate 87% 127%
- ------------------------------------------------------------------------------------
Total return (9.50%) (6.93%)(i)
- ------------------------------------------------------------------------------------
</Table>
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Per share amounts have been calculated using the average shares outstanding
method.
(d) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro rata share of the fees and expenses of the acquired
funds in which it invests. Such indirect expenses are not included in the
above reported expense ratios.
(f) Adjusted to an annual basis.
(g) The Investment Manager and its affiliates have agreed to waive/reimburse
certain fees and expenses (excluding fees and expenses of acquired funds),
before giving effect to any performance incentive adjustment.
(h) Includes the impact of a performance incentive adjustment, if any. Expense
ratio is before reduction for earnings and bank fee credits on cash
balances. Earnings and bank fee credits for the year ended July 31, 2008
were less than 0.01% of average net assets.
(i) Not annualized.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RiverSource Disciplined Small Cap Value Fund
(the Fund) (one of the portfolios constituting the RiverSource Dimensions
Series, Inc.) as of July 31, 2008, and the related statement of operations for
the year then ended, the statements of changes in net assets, and the financial
highlights for each of the years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights of the Fund for the period presented through July 31, 2006, were
audited by other auditors whose report dated September 20, 2006, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of July 31, 2008, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audits provide a reasonable basis for our
opinion.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 49
In our opinion, the financial statements and financial highlights audited by us
as referred to above present fairly, in all material respects, the financial
position of RiverSource Disciplined Small Cap Value Fund of the RiverSource
Dimensions Series, Inc. at July 31, 2008, the results of its operations for the
year then ended, and changes in its net assets and the financial highlights for
each of the two years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
September 22, 2008
- --------------------------------------------------------------------------------
50 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended July 31, 2008
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for
distributions:
<Table>
<Caption>
Qualified Dividend Income for individuals.................... 100.00%
Dividends Received Deduction for corporations................ 100.00%
U.S. Government Obligations.................................. 0.00%
</Table>
CAPITAL GAIN DISTRIBUTION - the Fund designates $214,002 to be taxed as long-
term capital gain.
The Fund also designates as distributions of long-term gains, to the extent
necessary to fully distribute such capital gains, earnings and profits
distributed to shareholders on the redemption of shares.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 51
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Shareholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board.
The following is a list of the Fund's Board members. Each member oversees 104
RiverSource funds. Board members serve until the next regular shareholders'
meeting or until he or she reaches the mandatory retirement age established by
the Board. Under the current Board policy, members may serve until the end of
the meeting following their 75th birthday, or the fifteenth anniversary of the
first Board meeting they attended as members of the Board, whichever occurs
first. This policy does not apply to Ms. Jones who may retire after her 75th
birthday.
INDEPENDENT BOARD MEMBERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2006 Attorney
Minneapolis, MN 55402
Age 54
- ------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Funds, 1999-2006; former Governor of None
901 S. Marquette Ave. 1999 Minnesota
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2007 Leadership (consulting company)
Minneapolis, MN 55402
Age 53
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Business, Bentley College
Age 57
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 1985
Minneapolis, MN 55402
Age 73
- ------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2005 Insurance
Minneapolis, MN 55402
Age 72
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member since President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. 2002 and Chair of College Inc. (manufactures
Minneapolis, MN 55402 the Board since 2007 irrigation systems)
Age 69
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2004 real estate and asset management company)
Minneapolis, MN 55402
Age 55
- ------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Forester Pharmaceutical, Inc.
Minneapolis, MN 55402 Biotech (biotechnology);
Age 64 Healthways, Inc.
(health management
programs)
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. and President,
Financial Center Vice President since Chairman of the Board and Chief Investment Officer,
Minneapolis, MN 55474 2002 RiverSource Investments, LLC since 2005; Director,
Age 47 President and Chief Executive Officer, Ameriprise
Certificate Company since 2006; Chairman of the Board,
Chief Executive Officer and President, RiverSource
Distributors, Inc. since 2006; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc. and Chairman of the Board and Chief
Investment Officer, RiverSource Investments, LLC, 2001-
2005
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 53
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers serve at the
pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the
Fund's other officers are:
FUND OFFICERS
<Table>
<Caption>
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center since 2006; Director and Vice President -- Asset
Minneapolis, MN 55474 Management, Products and Marketing, RiverSource
Age 42 Distributors, Inc. since 2006; Managing Director and
Global Head of Product, Morgan Stanley Investment
Management, 2004-2006; President, Touchstone
Investments, 2002-2004
- --------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 44 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
- --------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Vice President -- Asset Management and Trust Company
5228 Ameriprise Financial 2006 Services, RiverSource Investments, LLC since 2006; Vice
Center President -- Operations and Compliance, RiverSource
Minneapolis, MN 55474 Investments, LLC, 2004-2006; Director of Product
Age 42 Development -- Mutual Funds, Ameriprise Financial,
Inc., 2001-2004
- --------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006
Minneapolis, MN 55474
Age 53
- --------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2006 RiverSource Distributors, Inc. since 2006; Vice
Minneapolis, MN 55474 President, General Counsel and Secretary, Ameriprise
Age 49 Certificate Company since 2005; Vice President -- Asset
Management Compliance, Ameriprise Financial, Inc.,
2004-2005; Senior Vice President and Chief Compliance
Officer, USBancorp Asset Management, 2002-2004
- --------------------------------------------------------------------------------------------------------
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer,
172 Ameriprise Financial Officer since 2006 RiverSource Investments, LLC since 2006;
Center Director -- Mutual Funds, Voyageur Asset Management,
Minneapolis, MN 55474 2003-2006; Director of Finance, Voyageur Asset
Age 47 Management, 2000-2003
- --------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Financial Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti-
Center since 2004 Money Laundering, Ameriprise Financial, Inc., 2003-
Minneapolis, MN 55474 2004; Compliance Director and Bank Secrecy Act Officer,
Age 44 American Express Centurion Bank, 2000-2003
</Table>
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT ----------------------------------------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement") RiverSource Investments
provides investment advice and other services to the Fund and all RiverSource
funds (collectively, the "Funds").
On an annual basis, the Fund's Board of Directors (the "Board"), including the
independent Board members (the "Independent Directors"), considers renewal of
the IMS Agreement. RiverSource Investments prepared detailed reports for the
Board and its Contracts Committee in March and April 2008, including reports
based on data provided by independent organizations to assist the Board in
making this determination. In addition, throughout the year, the Board (or its
committees) reviews information prepared by RiverSource Investments addressing
the services RiverSource Investments provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts, Investment Review and Compliance Committees in determining whether to
continue the IMS Agreement. At the April 9-10, 2008 in-person Board meeting,
independent legal counsel to the Independent Directors reviewed with the
Independent Directors various factors relevant to the Board's consideration of
advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved renewal
of the IMS Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services performed by RiverSource Investments, as well as its expertise,
resources and capabilities. The Board specifically considered many developments
during the past year concerning the services provided by RiverSource
Investments, including, in particular, the continued investment in, and
resources dedicated to, the Fund's operations, particularly in the areas of
trading systems, new product initiatives, legal and compliance. Further, in
connection with the Board's evaluation of the overall package of services
provided by RiverSource Investments, the Board considered the quality of the
administrative and transfer agency services provided by RiverSource Investments'
affiliates to the Fund. The Board also reviewed the financial condition of
RiverSource Investments (and its affiliates) and each entity's ability to carry
out its responsibilities under the IMS Agreement. The Board also discussed the
acceptability of the terms of the IMS Agreement (including the relatively broad
scope of services required to be performed by RiverSource Investments). The
Board concluded that the services being performed under the IMS Agreement were
of a reasonably high quality, particularly in light of recent market conditions.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 55
APPROVAL OF INVESTMENT MANAGEMENT SERVICES
AGREEMENT (continued) ----------------------------------------------------------
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board concluded that RiverSource Investments and
its affiliates were in a position to continue to provide a high quality and
level of services to the Fund.
Investment Performance: For purposes of evaluating the nature, extent and
quality of services provided under the IMS Agreement, the Board carefully
reviewed the investment performance of the Fund. In this regard, the Board
considered: (i) detailed reports containing data prepared by an independent
organization showing, for various periods, the performance of the Fund, the
performance of a benchmark index, the percentage ranking of the Fund among its
comparison group and the net assets of the Fund; and (ii) a report detailing the
Fund's performance over various periods (including since inception), recent Fund
inflows (and outflows) and a comparison of the Fund's net assets from December
2006 to December 2007. The Board observed that the Fund's investment
performance, although somewhat weaker than previous years, reflected the
interrelationship of particularly volatile market conditions with the investment
strategies employed by the portfolio management team. Further, the Board noted
that appropriate measures have been taken to adjust certain proprietary models.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliates from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. The Board members considered detailed
comparative information set forth in an annual report on fees and expenses,
including, among other things, data (prepared by an independent organization)
showing a comparison of the Fund's expenses with median expenses paid by funds
in its peer group, as well as data showing the Fund's contribution to
RiverSource Investments' profitability.
The Board accorded particular weight to the notion that the level of fees should
reflect a rational pricing model applied consistently across the various product
lines in the Funds' family, while assuring that the overall fees for each fund
are generally in line with the "pricing philosophy" (i.e., that the total
expense ratio of each fund, with few exceptions, is at or below the median
expense ratio of funds in the same comparison group). The Board took into
account that the Fund's total expense ratio (after considering proposed expense
caps/waivers) was slightly below the peer group's median expense ratio shown in
the reports. The Board also considered the Fund's performance incentive
adjustment and noted its continued appropriateness.
- --------------------------------------------------------------------------------
56 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT
- --------------------------------------------------------------------------------
Based on its review, the Board concluded that the Fund's management fee was fair
and reasonable in light of the extent and quality of services that the Fund
receives.
The Board also considered the expected profitability of RiverSource Investments
and its affiliates in connection with RiverSource Investments providing
investment management services to the Fund. In this regard, the Board referred
to a detailed profitability report, discussing the profitability to RiverSource
Investments and Ameriprise Financial from managing and operating the Fund,
including data showing comparative profitability since inception. The Board also
considered the services acquired by the investment manager through the use of
commission dollars paid by the Funds on portfolio transactions. The Board noted
that the fees paid by the Fund should permit the investment manager to offer
competitive compensation to its personnel, make necessary investments in its
business and earn an appropriate profit. The Board concluded that profitability
levels were reasonable.
Economies of Scale to be Realized: The Board also considered the economies of
scale that might be realized by RiverSource Investments as the Fund grows and
took note of the extent to which Fund shareholders might also benefit from such
growth. The Board considered that the IMS Agreement provides for lower fees as
assets increase at pre-established breakpoints and concluded that the IMS
Agreement satisfactorily provided for sharing these economies of scale.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the investment management service fees were fair and reasonable
in light of the extent and quality of services provided. In reaching this
conclusion, no single factor was determinative. On April 10, 2008, the Board,
including all of the Independent Directors, approved the renewal of the IMS
Agreement.
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
RiverSource Funds at (888) 791-3380; contacting your financial institution;
visiting riversource.com/funds; or searching the website of the Securities and
Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the
Fund voted proxies relating to portfolio securities during the 12-month period
ended June 30, 2006 is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2008 ANNUAL REPORT 57
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
<Table>
This report must be accompanied or preceded by the Fund's
current prospectus. RiverSource(R) mutual funds are
distributed by RiverSource Distributors, Inc., Member FINRA,
and managed by RiverSource Investments, LLC. These companies
are part of Ameriprise Financial, Inc.
(RIVERSOURCE INVESTMENTS LOGO) (C) 2008 RiverSource Distributors, Inc. S-6397 E (9/08)
</Table>
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Pamela G. Carlton, Jeffrey Laikind and Anne P. Jones, each
qualify as audit committee financial experts.
Item 4. Principal Accountant Fees and Services
Fund - Related Fees
(a) Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP for
professional services rendered for the audits of the annual financial
statements for RiverSource Dimensions Series, Inc. were as follows:
2008 - $39,530 2007 - $37,300
(b) Audit - Related Fees. The fees for the year ended July 31, to Ernst & Young
LLP for additional professional services rendered in connection with the
registrant's security count pursuant to Rule 17f-2 and the semiannual
financial statement reviews for RiverSource Dimensions Series, Inc. were as
follows:
2008 - $1,750 2007 - $1,590
(c) Tax Fees. The fees for the year ended July 31, to Ernst & Young LLP for tax
compliance related services for RiverSource Dimensions Series, Inc. were as
follows:
2008 - $6,360 2007 - $6,000
(d) All Other Fees. The fees for the year ended July 31, to Ernst & Young LLP
for additional professional services rendered for RiverSource Dimensions
Series, Inc. were as follows:
2008 - $0 2007 - $0
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by Ernst & Young
LLP for the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant must be
pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above during
2008 and 2007 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees for the year ended July 31, to Ernst & Young LLP
by the registrant for non-audit fees and by the registrant's investment
adviser, and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant were as
follows:
2008 - $621,310 2007 - $239,670
(h) 100% of the services performed in item (g) above during 2008 and 2007 were
pre-approved by the Ameriprise Financial Audit Committee and/or the
RiverSource Mutual Funds Audit Committee.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. 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) Code of ethics as applies to the Registrant's principal
executive officer and principal financial officer, as required to be
disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal executive
officer and principal financial officer, as required by Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) RiverSource Dimensions Series, Inc.
By /s/ Patrick T. Bannigan
-----------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date October 3, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
-----------------------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date October 3, 2008
By /s/ Jeffrey P. Fox
-----------------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date October 3, 2008